As a Latin American myself, I was particularly interested by the debate triggered by the results of this year’s Trust study:

- Perfect Decade: The 2000’s moved a large amount of the population into the lower-middle and middle classes, which has consequently generated a growing sense of civic organization
- Shift: The continued growth of civic organization and adoption of social media are challenging traditional institutions vertical approach
- Interpretation: Trust showed that Latin Americans are asking for more regulation – despite the fact that the region is by far over-regulated – an audience member commented that most likely people are asking for more rule of law and enforcement in a region where corruption and crime are rampant
- Concern: Economic growth has given more political girth to governments, generating fears of new nationalization in the natural resources sector. This is especially true as the global economy remains uncertain and governments are forced to look for additional revenue centers

As the region continues to grow (even at a slower pace) and a more mature and larger middle class builds a stronger sense of civil society, the public will be increasingly hungry for more independent and trustable sources of information. This will ultimately force organizations from government, the private sector and the non-for-profit world to review the ways in which they engage with stakeholders.

The following video summarizes some of the most interesting points discussed during the breakfast. Also check The Wall Street Journal Americas coverage of the discussion in Portuguese and Spanish.

In addition to Edelman President and CEO Richard Edelman, featured panelists included Daniel Diermeier, Ph.D., IBM professor of Regulation and Competitive Practice at the Kellogg School of Management; Gretchen Hamel, executive director of Public Notice; and Steve Schmidt, vice chairman of Edelman Public Affairs.

A key finding this year illuminated a precipitous drop in CEO trust – the lowest we’ve recorded since the inception of the Trust study in 2001. Dr. Diermeier provided his behind-the-scenes insights on this trend line and the emerging importance of values-based leadership.  

The latest data also reconfirmed that trust in the private and public sectors intertwine; people expect both businesses and government to have equal responsibility for solving tough socio-economic issues. Finally, an interesting dichotomy also emerged – even though trust in government registers at historically low levels, people still want government to enact more regulations on business. In short, people do not trust business to execute effectively and transparently important policies that preserve and protect stakeholder trust. The question remains: If not government, then who? We believe this signals an opportunity for business to seize on what we term the new “license to lead.”       

Deb Fiddelke, Chicago Public Affairs senior vice president, sat down with panelist Gretchen Hamel to gain her views on how the lack of trust in government will impact the upcoming U.S. elections.

The final video attempts to answer three key questions that surfaced during the Feb. 7 luncheon.          

From the data and our many deliberations over the past month, it’s clear that there is a direct correlation between the paralysis of leadership across EMEA and the decline of Trust. Government is not trusted to provide the leadership the region craves. The failure to end the Euro crisis or even signal the beginning of the end is an enduring sore, producing a significant decline in trust in Government. As we hosted Trust events in Spain, Italy and France discussions amplified the data. The anger at the recent downgrades is real; the failure to lead generates cynicism and discontent. In EMEA, we now generally view governments as liars. Not a happy story. Yet perhaps there is a happy ending to this grim tale.

Encouragingly, as we take Trust from the podium into the boardroom there is an appetite to engage. Our message to the CEOs is clear: trust is not just about business core competencies. Yes, produce good products; yes innovate and generate profits; but do more. As business leaders you have an opportunity to lead. The bar is much higher now than pure operational performance. Trust comes from operations “plus”. A new level of societal engagement is required: helping the environment, partnering for good, treating employees fairly. The early response has been encouraging and there is certainly an intent to close the gap between delivery and expectations. Business perhaps can genuinely deliver values based leadership.

But there are no guarantees here and the year ahead will neither be pleasant or easy. However, values -based business leaders with the vision and the stamina to get the internal dynamics of their business right can become the new “political” leaders by engaging in the real issues of our society and delivering against the demands of an ever-democratising public.

At first glance of the 2012 Trust Barometer, one can’t help but be struck by the dramatic decline of trust in Brazil, representing not only the largest drop in the region, but according to the Global Trust Index, the largest of any country we surveyed.

When looking beyond the numbers, however, we see that Brazil’s massive trust decline actually had far more to do with last year, than with this one. You see, the 2011 Trust Barometer survey was conducted during a particularly jubilant time for the country, following a series of announcements that can only be referred to as a global trifecta: the awarding of both the Olympics and the World Cup coming to Brazil, as well as the election of a new president. The environment then was nothing short of euphoria when Brazil’s trust in business, government and media increased significantly.

What we now see in our 2012 survey – as budgets were cut, inflation rose and corruption ran rampant in the Brazilian government – is the return of numbers to the country’s historical normal.

Coming off a year in which the country recorded its highest growth in a quarter century, the country is now facing rising inflation. Yet despite Brazil’s notable decline in trust, only in Latin America could such a dramatic decrease still leave the region among the countries with the highest levels of trust in business.

Investment in the region, economic growth, better employment prospects, the rise of the working class are all clear indicators that business is the region’s driving force. Although down slightly from last year, business is still seen as taking a leading role in the region’s time on the global stage. Mexico, for example, is virtually tied with Indonesia for having the highest levels of trust in our global survey.

And like the euphoric effects of positive news on Brazil’s trust numbers in last year’s survey, this year we see that the reverse is also true. As a result, and like the majority of the countries we surveyed, trust in government in Latin America fell, most dramatically in Brazil, but also in Mexico and Argentina.

The lead of a Reuters’ article written last fall on Brazil perhaps says it best: “It lacks the fervor of the Arab Spring, but the resignation of six ministers from Brazil’s government, the approval of transparency laws and the emergence of an angry middle class show that Latin America’s giant is stumbling toward cleaner government.” And that is precisely what happened to the trust in government scores in the region: they stumbled.

Scandal also made its way into the sacred world of NGOs in Brazil, The country’s president had to implement a 30-day suspension of government payments to NGOs, some of  which were involved in several scandals as recipients of public funds subsequently distributed as kickbacks.

Elsewhere in the region, though – in Argentina and Mexico – trust in NGOs held steady. In fact, Mexico has the unique distinction of being a close second only to China in terms of trust in NGOs. Few amongst us could have predicted those two top spots just a few years ago, clearly a result of associating NGOs with the betterment of people’s live and the advancement of society.

Media is the only institution to see trust increase globally over the past year, which we believe is due to the changing view of media  and the perception that media is doing an excellent job in adding transparency to the financial crisis and government corruption.

Despite the drops in Brazil and Argentina of trust in media, it’s worth noting that media is far more trusted in the Latin American countries we surveyed than in many other parts of the world. In fact, even with the decrease, the region is still in the upper third of countries most trusting of media and is the most trusting of traditional and online sources than any other region we surveyed.

Media is likely also credited with elevating the story of the region and helping to shine the spotlight on Brazil around the world.

Evident in the survey results are the changes – and challenges – that a growing economy presents in that global spotlight. The sense of optimism in the region is as palpable as the signs of transformation.  Latin America, and Brazil in particular, is at a moment in time of which it has never witnessed. As a result, both government and businesses are trying to write the ‘rulebook’ as they go along – sometimes with better success than at others. I suppose the only question left is what will next year’s results look like?

However, I believe much of the power of the Edelman Trust Barometer is in local results, which is why I was excited to add two new APAC markets to the survey this year (Hong Kong and Malaysia). And while overall, the APAC markets remain bright, Japan is a case study in the fragility of trust. Japan was always one of our more stable trust markets, but this year in the wake of the earthquake, tsunami and the Fukashima fallout, trust has plummeted.

Japan is without doubt the toughest market in the world for any business to build trust right now explains Alan VanderMolen, Edelman’s President & CEO of Global Practices.

There could be no escaping the government issue, though. Despite a harsh focus on business in a series of packed-audience conferences and media interviews in Russia, there was a genuine thirst for data on trust in government, literally days after Muscovites had taken to the streets to protest. Impending elections provided a similar backdrop in France, although, as elsewhere, the business message came through loud and clear. In the UAE, interest was sparked by the surrounding Arab Spring, although here there were as many questions on the role of Social Media, as there were of Trust in Governments.

EMEA is not, of course, a homogeneous region. For this year’s data, the UAE and Russia were seen more as outliers to a core Eurozone story – which was, in itself, both coherent and impactful. The fact that the recently (S&P) downgraded countries suffered more than most demonstrated unequivocally the link between trust and economic wellbeing, while the narrower expectation gaps for business (versus government) highlighted not only the opportunity to lead but also the distance still required to travel. While Trust scores in the UK and the Netherlands may have been more stable than their plummeting equivalents in Germany (for business), France, Spain and Italy – there was never a cause for cockiness or over-confidence. This remains a region of distrusters – and, it would seem, with good reason.

The Trust Barometer data show that 76 percent of the broad public expects business to not only engage in ethical practices but also to connect with and listen to consumers directly. In other words, how a business engages with society is equally important to its operational functions, including financial returns and innovation. Yet, a chasm exists between what the public expects and what it believes it’s getting; only 42 percent of the public say business is delivering on its expectations.

This chasm is actually a huge opportunity. There are more channels than ever before for companies to connect directly with their stakeholders. Moreover, the rise of the employee and “a person like me” as a trusted source means that companies already have an army of ambassadors that can be empowered and deployed. In today’s communications world, engaging employees and activist consumers is no longer an optional sport. In order to earn the license to lead, businesses must be authentic, transparent and engage consistently with their stakeholders. These core steps are critical to rebuilding the state of trust in our nation.

Here are some notable figures. Based on a composite score of trust in all four institutions we measure, Brazil fell from the most trusting country in 2011 to the rank of twelfth out of twenty three countries surveyed both years. China’s trust score remained steady and high (from 73 points to 76), now listing it as the most trusting country. India went from the ninth most trusting country to the fourth, with a score of 65 points in 2012. Russia fell from the second least trusting country to the absolute last, trending down from 40 points to 32. It’s worth noting that globally the average trust score fell 55 points to 51.

According to Richard Edelman, the BRIC countries fall into two categories: the trusters and the skeptics.

And yet, government and businesses, the very institutions that have traditionally been looked to for leadership in times of uncertainty, are experiencing their own crisis of sorts — a crisis of trust.

Edelman’s recently-released 2012 Trust Barometer, our 12th annual look at global trust and credibility, underscores just how far these institutions have fallen out of favor with the public. Not only is the government the least trusted institution (trailing business, media and NGOs), nearly one half of survey respondents do not believe government regulates businesses enough. 

Even more telling: The most credible spokesperson after an academic and technical expert is now a “person like me” followed by the employee. CEOs are now second to last.

So the burning question today is: How can businesses and their leaders regain the public’s trust?

To begin, many of the actions that stakeholders want most from government — “more consumer protec­tion” and “regulation ensuring responsible corporate behavior” — are tasks that businesses can handle on their own.

But, just executing on these reactive items will not be enough.. Rather than merely exercising their “license to operate,” as they have done for years, leading brands and organizations must move beyond the “don’t be evil” mentality As Richard Edelman explains: “It makes good business sense for business to broaden its definition of leadership. They must now earn their “license to lead.” It cannot be seen as acting solely in self interest, but rather executing on the fundamentals of profit and societal good.” In other words: profit needs to be joined with Purpose.

Not simply CSR, cause marketing or altruism, a company’s Purpose goes further; it’s a strategy for profit and growth based on improving people’s lives.

To further illustrate this this shift  from profits to profits + Purpose: the 2012 Trust Barometer finds that, out of the 16 factors shaping trust, those factors that will build future trust are centered around a company’s purpose (see the graphic below).

Note how profit-driven operational attributes, like “innovators of new products” and “delivers consistent financial returns,” that are responsible for current trust levels actually fell to the bottom of the rankings. In their place: societal factors like “listening to customer needs”, “treating employees well,” and “placing customers ahead of profits.” These factors — the human element – are considered more important to building future trust than those that deliver  on operational imperatives.

Consumers couldn’t be sending a clearer message to companies: by putting your company’s Purpose, or values, in action through a variety of engagements ranging from materiality and CSR to cause branding and ngo support,companies can build sustainable competitive advantage that will unite and motivate all the people you touch, from skeptical consumers to reticent employees.

How does this look in the real world? Standout examples include IBM’s Smarter Planet initiative and Levi’s (disclosure: Edelman client), which built their core purpose of environmental sustainability into their entire product lifecyle. From where they source their cotton to their clothing care tags that aim to divert billions of unwanted garments from landfills to Goodwill, Levi’s is perfect example of a company that has integrated its Purpose journey in a truly impactful way.

Another pace-setter is Starbucks (disclosure: Edelman client). With their three-tiered approach — Planet (sourcing fair trade coffee and environmental stewardship), people (policies they have for their baristas), community (their various social engagements) — the company demonstrates that purpose and profits can and do go hand-in-hand. Add CEO Howard Shultz’s non-coffee commitments to creating jobs and fighting political dysfunction in Washington, and it’s no wonder Shultz was selected as Fortune’s 2011 Businessperson of the Year.

Unilever CEO Paul Polman (disclosure: Edelman client) recently questioned whether capitalism had reached its expiration date.

So, how do we build future trust? By starting now, with Purpose.

The Edelman Trust Barometer has been reporting on trust in worldwide institutions for more than a decade. In the 2012 survey, we examine trust in four key institutions – media, NGOS, government and business – among both general consumers and informed publics in 25 countries.
 Click on the check boxes to activate/de-activate regions

The study has found that institutional trust, and specifically trust in business, is dependent on any number of national and regional conditions. Across the globe, where a person lives is a stronger predictor of institutional trust than age, gender or other demographic characteristics.

This year, we are seeing trust in business at its lowest point in the EU as compared to other regions, particularly in countries that are at the heart of the Eurozone economic crisis. Looking more closely at this region, we see that there is little variance in trust between demographic groups. For example, when looking at trust across generations, we see that a 3-point trust difference between consumers aged 45-64 (38%) and consumers 65 and older (41%) is the most significant difference that exists. Trust levels among Millennials and Gen Xers in this region fall somewhere in the middle (40% and 39%, respectively).
Click on the segments to the left to see them represented

However, if we compare generations across regions, we see that a 17-point difference in trust levels exist between Millennials in Latin America and their counterparts in the EU and a 24-point difference exists between Gen X consumers in these two regions.

When looking at other consumer segments, like parents, trust in business in each region is significantly different than trust levels in all other regions.  

This is not to say demographics are not impactful. But, it’s the social, cultural and economic climates at the country-level, rather than demographic differences, that are driving trust in major institutions, views on industries and impacting individual brands.

So, as global brands seek to develop strategies aimed at improving trust, they must be cognizant that levels of trust can vary depending on the region or country of their consumer. In this complex global consumer market, the belief that gaining the trust of a Mom in New York is the same as gaining the trust of a Mom in London is inherently dangerous for a brand. Instead, trust tends to follow national-level macro trends, making it necessary for brands to fully understand the Trust dynamics of geography in addition to demography.