The relationship between trust and regulation
One of the many benefits often associated with having a strong reputation is reduced regulatory risk. This can manifest in different ways, from less actual regulation in place to having a seat at the table with government and other stakeholders when regulation is being developed. Whatever form this reduced risk takes, it is usually based on the premise that companies with stronger reputations can be trusted to do the right thing rather than being driven purely by their interests. So, it follows that if we are to believe the narrative of trust being in crisis, we should be seeing large-scale concerns about levels of regulation around the globe and calls for greater government intervention.
Trust in regulation by sector
However, we know that trust is not necessarily in crisis - rather it is low and always has been - and like most things, the relationship between one thing (trust) and another (regulation) is not that simple. We explored these concepts in our latest Ipsos Reputation Council report where, from the perspective of senior communicators, businesses around the globe are generally operating in tighter regulatory environments than they were five years ago.
When we ask the public, rather than seeing significant concern about how businesses are regulated, we instead see a majority of citizens from 21 countries feeling companies across a range of sectors are being regulated appropriately. This is an important foundation for the discussion about regulation; at an overall level, the public is largely comfortable with how business is being regulated. Of the 10 sectors measured, the regulatory environment is seen to be most appropriate for retail, Food & Drink, Consumer Packaged Goods (CPG) and technology companies. These are also the sectors deemed most trustworthy by citizens.
Where there is some appetite for increased regulation is with social media, Oil & Gas, and energy companies; some of the least trusted sectors. And so, the data does suggest a relationship between being trusted and reduced regulatory risk.
We instead see a majority of citizens from 21 countries feeling companies across a range of sectors are being regulated appropriately.
The distinction between social media companies and technology companies is important. The tech sector is one of the strongest performers with 59% of citizens across markets feeling it is adequately regulated, compared to just 44% for social media companies which make up the poorest-performing sector. The rise of social media platforms as primary information channels, particularly during political elections, has added weight to calls for greater transparency about how these sites operate and increased accountability for the accuracy of the information published on them. The 2021 Reuters Institute Digital News Report found that more than half of Facebook and Twitter users consumed news on the sites in the previous week. A recent Ipsos study found that among internet users across 20 countries, just 63% trust it, down 11 points from 2019. Public concern is centred on privacy and governance, suggesting pressure on governments to better regulate the sector is rising. However, government attempts to enforce regulation on global social media companies have yielded limited success with many claiming these entities have become simply too large and too powerful to contain. Importantly though, the majority of Council members from our latest Reputation Council report don’t agree that globalisation in itself has rendered attempts to regulate futile, suggesting efforts to regulate social media behemoths to bring greater protection to the public should continue.
Two sectors under particular regulatory pressure at the moment are oil & gas, and energy with the war in Ukraine intensifying an already heavily challenging operating environment. Many criticisms are common across the two sectors and relate to poor transparency, a lack of environmental sustainability, and a belief that those operating in the sector would take advantage of others if given the opportunity.
Energy transition and the closely associated theme of climate change, are entrenched issues on the global agenda. While we often see concern about climate change usurped by emerging issues of the day like COVID-19 and rising inflation - something Ipsos refers to as the urgent trumping the important – absolute levels of concern about climate change has held constant and they are increasing in some countries, particularly those in Western Europe. Great Britain is the most likely of the 21 nations to feel the energy sector is under-regulated, but it is certainly not alone. As the energy crisis extends to more and more markets around the world, even greater pressure on governments to intervene and address plummeting affordability is highly likely. It is also likely this will incite debate about the role of regulation and government intervention, bringing the topic back into public discourse.
Trust in regulated sectors over time
Another point of contention in the regulatory discussion is the assumption that business does not want it. Again, we explored this with our Reputation Council members and found appetite from businesses for increased regulation in certain circumstances.
Multinational companies heavily favour stable and well-regulated markets in their growth planning having witnessed many endure reputational decline after failing to do so. As one Council member put it, “regulation brings certainty which is highly desirable in business planning”.
Further, the rise of stakeholder capitalism has seen businesses shift their focus from generating shareholder profits to making a genuine and positive contribution to its many stakeholders. In this process there have been large-scale changes to how businesses operate and legislative change has not necessarily kept pace with the market. It is in this context that increased regulation can be welcomed by businesses to ensure an even playing field and everyone operating to the same higher standard.
Indeed, it can be argued that the ultimate aim of the regulation is to ensure all companies and institutions operate to the same high standard; that they act responsibly. And so, it is useful to compare public attitudes toward regulation with attitudes toward responsible behaviour.
Each of the sectors or institutions tracked over time in the Ipsos Global Trustworthiness Monitor has seen improvement in the extent to which the public feels it behaves responsibly. The greatest gains are seen for the pharmaceutical, banking and oil & gas sectors as well as the government, all of which have been front and centre during the pandemic.
The data suggests we are perhaps in a relatively promising place where the bulk of the public feels most sectors are adequately regulated, business reports operating in an increased regulatory environment but also have an appreciation for the role of regulation, and sectors and institutions are seen as more responsible than they were four years ago. These positive trends may be the result of increasing stakeholder pressure on businesses and institutions to proactively change how they operate combined with the use of regulatory measures to ensure even the laggards do the right thing and act responsibly.