The consequences of the financial and economic crisis that started in 2008 with the bankruptcy of the financial giant Lehman Brothers and sub-prime mortgages in the USA, and subsequently spread to the European markets – is making a clearly negative impact on the level of trust in institutions and businesses reported by people on the global level (institutions include governments and even NGOs, which are still the most trusted institutions but are for the first time losing their positions in the Netherlands, Sweden and Russia).

The immediate circle of individuals – their friends and families – as well as experts on different subjects, such as scientists and academics are the ones who inspire confidence and enjoy credibility. This phenomenon is probably reinforced by the advance of social networks and the digital boom 2.0.

It is noteworthy that the sector of the mass media – when the results of all countries are viewed aggregately – has also improved its positions in the trust rating. According to Alan VanderMolen, President and CEO of Edelman’s Global Practices, this change may be due to the contribution made by the mass media in the analysis and education of the general public about the causes of the current crisis as well as reporting important cases of corruption, such as in India. These merits evidently outweighed the scandals around the mass media, such as the Murdoch case in the United Kingdom.

Major fall of trust in governments since the launch of the ratingThe North American communication and PR consulting firm Edelman launched its global study

The crisis is eroding the credibility of the system. Interestingly, only trust in the mass media is still growing and gaining higher positions in the global trust barometer rating, prepared annually by Edelman. NGOs are regarded as the institutions that enjoy the maximum level of approval on the part of citizens. However, even their positions in the rating are declining.

Strategy DocumentsI16/2012

Global Trust in Institutions and Businesses Down, but Trust in Peers and Experts Up

Reputation

Insights

This document was prepared by Corporate Excellence and contains references, among other sources, to the statements made by the President and CEO of Edelman’s Global Practices Alan VanderMolen and Edelman’s CEO for Spain Miguel Ángel Aguirre during the presentation of the Edelman Trust Barometer 2012 in Madrid, on January 26, 2012.

Insights 2

Global Trust in Institutions and Businesses Down, but Trust in Friends and Experts Up

“The imme-diate circle

of individu-als – their

friends and families – as well as

experts on different subjects,

such as sci-entists and academics

are the ones who inspire confidence and enjoy

credibility”

in 2000. The study covers 25 countries and is based on online interviews with the sample of 1000 people in each country, and an additional sample of 700 people regarded as informed public (500 in the USA and China, and 200 in other countries).

The study analyses, for example, the trust in governments in different countries at the times when governments do something that is regarded by the citizens as correct and good. In 2012, only the Netherlands, Sweden, Canada and some Asian countries managed to surpass 50% threshold of trust, which means that the citizens trust their governments. The most dramatic declines compared to the previous year have been observed in Brazil, Japan and Spain. On the global level, this is the most significant decline since the launch of the barometer. However, paradoxically, this distrust coexists with the reported need for greater regulation and control on the part of public administrations.

On the other hand, the study also analyses the trust in the business community: many developed economies report double-digit decline of trust in companies, mainly in the largest economies of the euro zone, such as Germany, France and Spain. However, on the global level trust in business is gradually recovering from the record low levels of 2008. And again, Asian economies are in a good shape – with an exception South Korea – as well as Anglo-Saxon non-European

countries, Nordic countries, Latin America, the Netherlands and Italy.

Finally, the level of trust in business leaders is higher than in politicians. Again, the leaders of distrust in public managers are European countries, with Italy and Spain on top of the list. Globally, distrust is the main motif of the general situation, with more and more countries finding themselves in the red zone (not trusted) of the list – including Sweden, South Korea, France, Japan and Spain. On the other extreme, still hanging on in the blue zone (trusted), are the emerging Asian economies, Latin America and the Netherlands.

More trust in the technological sector, less trust in the financial sectorBanks and financial entities are still the least trusted business area according to the respondents, with results even lower than in 2011. On the other hand, the technological sector has remained the most trusted industry for six years running. Former leader of this rating, telecommunications, fell to no.5, replaced by the car-making sector. Only the consumer goods sector managed to improve its position in 2012, becoming the fourth most trusted industry globally.

The power generation sector suffered a significant decline, especially in Japan in the wake of the nuclear

2011 Informed Public

2012 Informed Public

2012 General public

TRUST IN INSTITUTIONS

52 %

49 %

56 %

61 %

43 %

52 %

53 %

58 %

38 %

46 %

47 %

50 %

Government

Media

Business

NGOs

Globally, reduces confidence in three of the four institutions, only increases the confidence in the media

Source: Edelman Trust Barometer, 2011.

Insights 3

Global Trust in Institutions and Businesses Down, but Trust in Friends and Experts Up

“Traditional information

channels remain the

trust leaders.

However, they de-

monstrate the slowest

growth. The growth of

official and corporate

information sources has

slowed down as well”

catastrophe that also ricocheted off to Germany and caused a loss of trust the power generation industry there for the same reason. This decline, as well as the decline of the financial sector, is reported in all countries of the study. Pharmaceuticals lose positions as well, while the drinks sector managed to preserve its positions.

Overall, in terms of percentages, the global level of trust in the sectors remains in the same range between 45% and 80%, with the changes that have been discussed above. As for specific regions, the countries that report lowest trust levels in the most affected sectors (finance and power generation) are the same (Germany, France and South Korea).

The close and personal wins over the distant and officialOne of the most important changes took place in recent years in trusted channels of information. Television appears to be the big loser – especially in China – as a source of information that lost trust, followed by newspapers, radio and magazines.

On the whole, the traditional information channels remain the trust leaders, but their growth has slowed down, as well as the growth of official and corporate

information sources, says Miguel Ángel Aguirre, Edelman’s CEO in Spain.

It appears that top managers and official spokespersons of governments, institutions and companies are less credible according to the global public opinion, while technical experts, academics and scientists enjoy more trust. The close circle of an individual – his or her family members, colleagues and friends, grouped under the title “someone like you” – are the ones whose losses of trust have been minimal in the general context of distrust.

As for trust in advice and recommendations, the most credible sources of information for taking decisions are experts, who again top the rating of trust, followed by colleagues and friends (24%). Employees of companies (24%) are the ones who more than others have increased their trust capital in the eyes of respondents. CEOs (-18%) and politicians (-15%) have suffered the most dramatic fall in the history of the Edelman Barometer.

Coming back to information channels, microblogs such as Twitter and social networks like Facebook are the real trust stars (75% more trusted compared to the previous year), and to a lesser extent, other digital sources (forums, media, etc.), especially in countries like Spain and China.

Growing skepticism, almost twice as many countries are now skepticalMost EMEA countries are ‘skeptics’ in 2012

2011 2012

<

<

<

GLOBAL 55 GLOBAL 51

OPTIMISTIC

NEUTRAL

SKEPTICS

China 76

UAE 68

Singapore 67

India 65

Indonesia 63

Mexico 63

Netherlands 61

Canada 58

Italy 56

Argentina 54

Australia 53

Brazil 51

Sweden 49

U.S. 49

South Korea 44

Poland 44

United Kingdom 41

Ireland 41

France 40

Germany 39

Spain 37

Japan 34

Russia 32

<

Brazil 80 >

UAE 78

Indonesia 74

China 73

Netherlands 73

Mexico 69

Singapore 67

Argentina 62

India 56

Italy 56

Canada 55

South Korea 53

Sweden 52

Japan 51 >

Australia 51

Spain 51 >

France 50 >

Poland 49

Germany 44

U.S. 42

United Kingdom 40

Russia 40

Ireland 39

The combined result is the average trust of a country in the four institutions. Public informed of 25 to 64 years in an overall total of 20 countries (excluding Argentina, Hong Kong, Malaysia, Singapore and UAE) and in 23 countries.

Source: Edelman Trust Barometer, 2011.

Insights 4

Global Trust in Institutions and Businesses Down, but Trust in Friends and Experts Up

Skepticism requires repetition of messagesIn the moments such as this, due to a higher level of social skepticism, it is more important than ever that companies and governments make communications more frequently and establish a much more intensive relationship with their audiences. Edelman’s barometer shows that citizens need to hear the same message 3 to 5 times before they start treating this message as truthful.

The growing disparity of sources and media emphasizes this trend, showing that persistent communication leads to the consolidation of an idea in the public mind and overcomes the contradictions frequently caused by contrasting messages.

These messages should transmit leadership and visualize this leadership in order to contribute to overcoming the current crisis. This means that the messages should be devised in the form of specific ideas and projects rather than based solely on the economic and business results.

Conclusion: an opportunity to meet the expectationsOn the one hand, general distrust in companies and institutions is being translated into growing trust in channels and persons in the immediate circle of the individuals. On the other hand, companies may use this loss of trust as an opportunity to respond to the expectations – something that has not been seen as satisfactory by the stakeholders and the society in general.

The difference between what is considered important for companies to do and what is done in reality remains significant, especially when it comes to working conditions of the employees – an issue, the importance of which is second only to the massive

layoffs and growing unemployment. However, paying attention to the opinion of consumers and innovation are important issues as well.

The key to achieving recognition in future in order to launch initiatives and become market leaders seems to be in becoming the leader in the social context, which implies active listening, excellent treatment of the employees, valuing people as they are, protecting the environment and ethical behavior, in addition to offering great products or top-quality services, having access to great resources or getting the best positions in the rankings.

In this framework, companies are a potential platform for restoring trust. There is a big difference between attitudes towards companies with a good reputation and companies with a bad reputation. If one trusts a company, one will believe new positive information about it and will give the benefit of a doubt to new negative information. If a company is not trusted, negative information will be accepted as truthful immediately. According to the results of the 2011 Trust Barometer, in the case of a company with a bad reputation, 57% of people trust negative information after hearing it one or two times, and only 15% of people trust positive information after hearing it one or two times. In the case of a company with a good reputation, 51% believe positive information and 25% believe negative information about this company.

Companies with a good reputation may act as a launching pad for the process of restoring trust. In this sense, companies, being a part of the civil society, are in a better position than governments. The second stage will start when trust will transfer from the civil sector to governments and public institutions.

Reputation brings credibility

Company in the untrusted Company that is trusted

57%Believe a

negative informationafter hearing it

1 or 2 times

51%Believe a

positive informationafter hearing it

1 or 2 times

15%25%

Believe a positive feedback after hearing it 1 or 2 times

Believe negative information after hearing it 1 or 2 times

Reputation and trust are synonymous

Source: Edelman Trust Barometer, 2011.

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