Restoring trust

From the February 2022 print edition

We live, as the curse goes, in interesting times. The COVID-19 pandemic has been with us for nearly two years. Consumers suffer the impact of supply chain interruptions and bottlenecks. Scarcities, the rising cost of goods and inflation affect a broad demographic and geographic profile.

These difficulties have been accompanied by an often-unfair mistrust of our institutions and their leaders, who are unable to deliver a quick and neat solution to a global problem. A pandemic of misinformation driven by social media drives a wedge between citizens who are served facts and fantasy in equal measure. Conflict threatens pandemic recovery, citizens are suspicious of one another’s intentions and critical of perspectives they don’t share. Trust in media news sources is at an all-time low. How can trust be restored?

Business has a pivotal role to play. The 2021 “Trust Barometer” report by global communications firm Edelman notes that people expect companies to overcome these challenges, and CEOs are expected to speak out and address societal issues. It is a mantle of responsibility thrust upon today’s business leaders, and a role for which the best executives and managers have been prepared through attention to practices of corporate social responsibility (CSR).

Studies show an overwhelming majority of consumers are more likely to trust organizations that support social or environmental issues and are prone to be more loyal. Over half of jobseekers consider a company’s social and environmental commitments and would choose to work for a socially responsible company even with a lower salary. Nearly two thirds of investors have integrated ESG (environmental social and governance) standards into their investment decisions.

ESG standards capture the practices and measurements by which a firm’s conscientiousness is judged. The concept shared by CSR and ESG is that organizations must ensure the sustainability of their enterprise, to consider those who they influence and affect, and to protect the environment in their actions. ESG should be integrated through all levels of the firm, at the board level where risks and opportunities are recognized, the executive where strategy is determined, and the operational, where supply chain management decisions are made.

Today’s supply chain professional appreciates that an ESG strategy is an obligation and predicator
of future business success. Supply chains are at the forefront of ESG, and decisions made by procurement have an enormous environmental impact. The transportation sector, for example, generates
14 per cent of GHG emissions worldwide. Supply chains employ an estimated 450 million people across the globe, and therefore bear enormous social responsibility.

If recognizing ESG standards has become an imperative for private-sector firms, they may yet become the measure by which stakeholders judge public sector organizations. Last January, the City of Toronto became the first government in Canada to issue an ESG report. Though other governments have yet to follow suit, I suspect that more will move to report using an ESG template, and procurement activities within departments and agencies will increasingly be called upon to include supplier ESG measurements in the proposal evaluation process.

Reciprocal trust is the currency that funds and sustains relationships, fosters individual and organizational success and issues an organization’s operating licence. Enduring and mutually beneficial relationships between public- and private-sector organizations and those they serve depend on trust.

It is in challenging times like these that trust becomes the foundation upon which the economy rebounds and the supply chain is restored.

Considering First Nations
In matters of trust, the relationship between Canada and First Nations peoples has been a strained one.
The consequences of colonialism are far reaching, and Canada has much work yet to do toward reconciliation with First Nations peoples. The inclusion of indigenous concerns within ESG standards
is not enough. Consultation alone is not enough. Now and in the future, major energy and infrastructure projects will be sustainable and ESG compliant when they are supported through Indigenous partnerships and include Indigenous equity stakes. ESG standards will best reflect social responsibility where the rights, interests and input of Canada’s Indigenous are recognized, where they are included as leaders and decision makers, sharing risk and receiving development benefits.

Governments and business can come together and join with First Nations to foster constructive alliances, improve economic and social conditions, support Canada’s commitment to Indigenous reconciliation and meet the spirit and intent of the United Nations Declaration on the Rights of Indigenous Peoples.

I urge executives and practitioners to review the paper commissioned by the First Nations Major Project coalition titled Indigenous Sustainable Investment Discussing Opportunities in ESG published in January 2021, and a complementary document issued at the Indigenous sustainable investment conference in March 2021, A Road Map to Investing in Canada: Indigenous Inclusion in ESG.

John Vandenberg is principal of ARC Advisory Services, Inc., Yellowknife, Northwest Territories.