Member Article

Building trust in business: When words are not enough

Trade relations have historically been based on trust, and it is still an integral part of modern business. There, trust is perceived as a natural attribute simply because both traders and buyers need to be assured in the decency and high moral values of business partners, managers or leaders. But what happens when companies refuse to give pledge of confidence? Is trust possible when traceability is defective? These are questions some companies do not want to ask themselves when the crisis should force them to do so.

Trust does not come with words only

The world is facing a fall in the trust level. Even before the coronavirus COVID-19 pandemic, the Edelman Trust Barometer showed that trust in various societal institutions, including business, was sinking, although the economy as a whole was quite stable. Why? “The cause of this paradox can be found in people’s fears about the future and their role in it, which are a wake-up call for our institutions to embrace a new way of effectively building trust: balancing competence with ethical behavior”, explained Edelman.

So how do we restore and build trust? One of the keys to solving this problem may be standardization. For most, standards are associated with production needs and products unification, but this is not entirely true. In the modern industry, standardization has several goals: this is a kind of pledge of confidence given to customers, concern for the ethical side of business, as well as a way to efficiently build and manage business processes. “Trusted standards mean that industry doesn’t need to reinvent the wheel, that innovations will be compatible and work with existing technology, and that products and services will be trusted too”, former Acting Secretary-General of ISO Kevin McKinley says.

The quote from the ISO representative is not random. There are many different standards in the world, from internal standards that a company sets for itself to government standards applied in individual countries. Some of them can be good for small businesses that don’t have enough resources for the comprehensive certification yet. Nevertheless, for a large company with many clients and partners, which activities have impact on thousands of people, it is better to choose a tool that helps build trust and ensures confidence in proper quality.

In 2013, a horsemeat scandal flared up in Europe. An analysis of the DNA of meat contained in frozen fast-food revealed traces of horsemeat. This resulted in large-scale recall of a number of meat products, and the UK citizens revolted by the very idea of horsemeat and products associated with it.

One of the reasons for what happened was lack of reliable standards and regulation in the industry. The activity of meat cutting plants in UK at that time was regulated by the Food Standards Agency by the private company Eville & Jones. The agency had limited powers and largely relied on industry alerting it to the results of tests voluntarily. Besides, “most of the factories caught up in the scandal had accreditation with mainstream auditing schemes such as that run by the British Retail Consortium but it failed to spot the problem”, notes The Guardian.

It is obvious that the main issue was the insufficient level of responsibility for production, as well as shortcomings of the system, which allowed negligence in relation to supervision over quality and composition of products. A practical solution to the problem would be the ISO 22000 certificate, which ensures food safety and thus increases the level of confidence in the entire production chain, including the final product. This is critical in the food industry: “In the past it may have been enough to produce affordable food, but now only those companies that earn the trust of consumers will survive,” says Craig Armitage, Global Leader in Food Supply and Integrity Services at PwC, and the example above shows that it’s not a rhetorical stand.

Ethics must not be vain

The ethical side is another brick in building trust. Edelman notes that business is largely perceived as unethical. Nevertheless, the ethical approach is necessary for a trustworthy business, especially when one of the goals of the final product is prevention of various kinds of fraud. Speaking of ISO, here we apply the ISO 37001 certificate, aimed at combating corruption in organizations and developing an ethically sound business culture. But what happens when a company refuses to pledge its word?

In 2018, the Reserve Bank of Australia’s companies Note Printing Australia (NPA) and Securency, a maker of the plastic base for both Australian and foreign banknotes, entered pleas of guilty to charges of conspiracy to bribe foreign officials in connection with banknote-related business in 2011. One of the problems related to insufficient oversight: “The RBA accepts there were shortcomings in its oversight of these companies, and changes to controls and governance have been made to ensure that a situation like this cannot happen again,” the bank’s Governor noted later. A similar situation recently happened to the UK-based banknote printer De La Rue, which relies on principles of a small intra-industry association called the Banknote Ethics Initiative instead of choosing a reliable anti-corruption tool. The company was suspected in corruption in South Sudan, and proceeding are now underway.

Both companies did not pay enough attention to bringing the ethical side of the business in line with widely accepted and independent standards. It went against one of the main goals of the security printing industry, prevention of tampering, forgery or counterfeiting, resulted in broken trust and brought less than successful results: Securency lost an order from the Bank of England, and De La Rue’s shares slumped to their lowest since October 1998 once the news were published.

Often, low levels of trust is associated with doubts in competence, which Edelman defines as delivering on promises. In other words, sometimes consumers or partners don’t receive what they expect, and it has a devastating effect on trust in the company as a whole.

The dietary supplements industry is well-developed in the USA. Their watchdog, the FDA, is very strict, and the industry itself is governed by GMP standards. Companies have no choice but to comply with all the requirements, except for a grey area. The GMPs don’t state that manufacturers have to do finished product testing for potency if they have no methods for it – even if a company simply didn’t bother to develop these methods. Sometimes FDA steps in, but mostly to no avail: for instance, Beehive Botanicals company once received the FDA 483 Form, a notification on objectionable conditions. Nevertheless, the firm managed to get away using the loophole described above. As a result, many manufacturers actually claim unconfirmed information about composition and potency of their products, undermining credibility of the entire industry: “This industry is already under a lot of scrutiny, and when a media article comes out finding that a product isn’t what it claims to be, it tarnishes the whole industry’s reputation,” complaints James Neal-Kababick, director of Flora Research Laboratories.

However, it’s not a no-way-out situation, and an additional ISO IDMP series certification would help. The standard covers the entire medicinal product lifecycle, including products in development, investigational products, products under evaluation and authorized products. Due to its comprehensiveness and universality, the standard can become an additional confirmation of delivering on promises. This is critical for such a competence-sensitive industry as pharmaceuticals, where the trust rating is one of the lowest among all.

The importance of building trust in relations with partners and consumers is clear. Everyone has their own specific reasons for this, but not everyone is ready to go beyond bare promises. Such an attitude undermines credibility of the entire industry as a whole, turning reputation of companies into a wooden nickel. At the same time, use of practical tools for building trust, including ISO standards, induces consumers and partners to trust the company with which they deal, showing that it was recognized by independent experts and achieved an acknowledgement that others didn’t bothered to obtain.

This was posted in Bdaily's Members' News section by Sarah Shelter .