Icertis: Why business needs to get serious about trust – and build it

With supply chains and business partners spread across the globe, and most transactions, trades and negotiations taking place remotely, building and maintaining trust have become more challenging —yet trust remains essential to profitable growth and mutual success. How do companies build and maintain trust in a far-flung and fragmented ecosystem? 

To answer this question, Bernadette Bulacan, Lead Evangelist at contract intelligence company Icertis provides some insights to PASA. 

In Part two, next week, Bernadette will explore ESG as the foundation for business trust.

Icertis partnered with Economist Impact on a survey to understand how business executives working across industry sectors uncover what defines trust in business relationships, and what companies can do to build the trust necessary to achieve their goals.

According to the report, A deeper understanding: Building trust in business partnerships, the notion of ‘trust” encompasses a cluster of behaviours, including “ability, benevolence, and integrity.” The more a company models behaviours in each of these areas, the more likely peers are to consider them highly trustworthy. Companies associated with high levels of trust enjoy long-term revenue growth and achieve sustainability goals.

 What defines Trust in Business Relationships?

Identifying and maintaining a trustworthy business partnership rated as either a high priority or a business-critical priority for more than 75% of respondents in the Economist Impact report. Clearly, trust is a business priority.

But what kind of behaviours do those executives who rated trustworthiness so highly want to see in their partners to consider them trustworthy?

Of six traits they could consider the most important in building trust in business relationships, more than half of those surveyed chose transparency as what they look for in a potential partner. Fully 82 percent of respondents said there could not be trust without transparency.

With transparency the clear frontrunner, it is interesting to note that each of the remaining five traits—collaboration, integrity, consistency, accountability, and competency—were selected by at least 40 percent of respondents. And an overwhelming majority of respondents (86 percent) said they would be more likely to work with a partner who demonstrated transparency, accountability, and integrity in their operations. Perhaps unsurprisingly, trust in business relationships has been strained during the pandemic.

One of the most disruptive events in recent history, executives cite the fact that professional relationships built on personal contact have been impossible during the pandemic combined with stressors like strategic decisions amid prolonged uncertainty (39 percent), unexpected changes in supply and demand (34 percent), and uncertainty around suppliers’ ability to delivering on existing agreements (28 percent), as factors that have eroded trust over the last several years, and forced a rethink of how companies build trust in their business relationships.

What Drives Organisations to Build Trust in Business Relationships?

Though there are many reasons companies prioritise efforts that build trust in their relationships with business partners, the primary reason is how beneficial trust is for achieving financial success.

Dr. Isabel Cane, head of the OECD’s Trust in Business initiative, cited in the Economist Impact report, points out that as recently as 20 years ago, business was seen as essentially a profit-seeking enterprise. Today, however, firms want to have social value, practicing inclusive growth and a responsible form of capitalism. “One of the ways to demonstrate that is through who you partner with and who you cooperate with,” said Cane.

To that end, more than 40 percent of respondents highlighted customer satisfaction and loyalty as key areas that benefit from working with partners that have a high level of trust.

A 2019 study by Edelman bore similar results. Looking at consumers in eight countries, the Edelman study found more than 80 percent of respondents indicated trust in a company was a major factor in purchasing decisions, and 60 percent would remain loyal to a trusted company if a competitor launched. Given that only a third of consumers in the survey trusted the companies they bought from and that less than 30 percent would remain loyal to a manufacturer they didn’t trust, there are clear dividends to both opportunity and customer loyalty in being a company buyers can trust.

And there are internal benefits to being a trusted company, too. A Claremont Graduate University study found that workers in the top 25 percent of most-trusted companies reported being 50 percent more productive than those in the bottom 25 percent of most-trusted companies.

What Challenges Do Companies Face When Building Trust?

The most significant challenge preventing trust-building between organisations cited in the Economist Impact study was limited supply-chain visibility. That is, the inability of a potential partner organisation to identify, collect, and relay data from across its supply chain.

Icertis’ own work with customers validates that supply chain visibility continues to be a major focus for improvement. Especially in times of major disruptions, like COVID or the Ukraine crisis, companies often realise they don’t have sufficient information about who their suppliers are, where they’re located, and what supply chains they rely on to deliver goods. Part of the issue we often confront with customers is that the contracts that contain much of this critical information are scattered across systems and continents, making data access difficult. This creates internal challenges, but it also makes it difficult for companies to be good, trustworthy partners, because they don’t have the data their partners need to have to pivot in reaction to emerging disruptions.

With only 25 percent of those surveyed indicating their company shared data with partners regularly, there remains much work between businesses to develop trust around the sharing of sensitive data to promote greater transparency.

What Progress Have Companies Made on Building Trust?

To this end, it is worth noting that more than half of those surveyed (53 percent) indicated their organisation had taken steps to increase the sharing of data and information with external partners. These included the addition of new technology or digital tools to enable high levels of trust.

Likewise, many companies have taken additional steps to improve their oversight. Nearly half of respondents (49 percent) have increased their assessments of business partners, with 36 percent requiring third-party evaluation of potential partners to measure their compliance. Roughly the same percentage (34 percent) had developed standard criteria for analysing partners.

As an example, in response to growing concerns about cybersecurity, Hewlett Packard has tightened security at their manufacturing plants and instituted background checks for both employees and, via their contractual rights, component suppliers.

Overall, 89 percent of the companies in the Economist Impact study believed it is “important that their business partners share their organisation’s values.”

Conclusion

While the last several years have been challenging, the pandemic has emphasised the importance of trust between businesses in uncertain times. Given the volatility of the global economy and supply chains, enterprises must establish trust—those qualities of ability, benevolence, and integrity—to ensure close working relationships with partners and dividends in both market opportunity and customer loyalty that come from being a company buyers can trust.

To read the full Economist Impact report, click here.