The Courage of Our Convictions
Investing in Organizational Trust
You must be the change you wish to see in the world.”
The above quote emphasizes the idea that individual actions and attitudes can have a profound impact on the world around us. By being the change we wish to see, we can inspire others and set an example for positive change. For the titans of industry today—and more specifically, for global consumer products leaders—there is perhaps no better concept to embrace. Another way to say it is “practice what you preach.” And the change must start from within since it is the seed of trust that first grows internally before extending outward into the greater world.
Just as in individual change, we find that shifting to a new organizational model doesn’t just happen. Building this new currency of trust must entail an enterprise-wide strategy that is deliberately planned and executed, not unlike any other important business initiative.
When we think of trust, the question of where it begins often arises. Some might say in the boardroom, where big, complex decisions are being made. Others might suggest that it begins deep in the labs of research and development, where materials and concepts are being developed and tested. Still others might believe it starts with employees, the stakeholders who roll up their sleeves every day to ensure that safe, high-quality products make it to shelves. All of these answers are correct, yet there’s something much larger than these single components.
Organizational trust supersedes any one individual or group. It is best built from the inside out—into the very culture— through levers and actions that cut across the functional areas of a business, from product quality to data protection to financial integrity.6
There’s no single definition of organizational trust; much work has been done in this area by pioneers such as Roderick M. Kramer, Todd Zelkowitz, and others through research in the fields of management, organizational behavior, and human resource management. Organizational trust is commonly discussed in business schools and widely featured in academic journals, books, and articles in these fields. It has also become a topic of interest among research groups and professional services networks like Deloitte.
In fact, Deloitte has written that all stakeholders—shareholders, employees, suppliers, customers, and broader society—each have their own unique needs and perspectives on which organizational trust depends. Trust-building initiatives should be framed and seen through their eyes.7
Throughout 2020-2022, Deloitte consulted nearly 3,000 executives to gauge the significance of certain actions and operating areas in fostering trust within their organizations and industries and to compare their organization’s performance to others in their field. The goal was to gain insight into what drives trust in their organizations.
While the study spanned multiple industries, there is much that consumer products-related companies can glean when considering the operating areas—or domains—identified by specialists and corporate leaders.
6. Sandra Sucher and Shalene Gupta, The Power of Trust, How Companies Build It, Lose It, Regain It (Public Affairs, 2021), p. 20. 7. “Can you measure trust within your organization?” Deloitte, February 2022.
Each of these domains provided the opportunity for leaders to give tangible examples of where and how they could drive trust. For instance, in the area of Data integrity and protection, an organization that invests in this domain can effectively and quickly identify and remediate data breaches while also being transparent about its data policies and practices.
In the domain of Financial integrity and health, an organization that invests here is transparent in its financial communications and reporting, has a high degree of audit readiness, and employs tax compliance strategies that are responsible and aligned to business strategies.
What’s remarkable about this study is how it demonstrates that company leadership and researchers are recognizing the growing importance of trust as a currency and making it not only a central topic of discussion but an area of investment. They’re thinking about how each operating area can sow and grow trust among employees, suppliers, customers, and within broader society.
Each industry is unique in terms of how its companies are investing in trust domains—the Retail industry, for example, may be further along than Healthcare in areas like customer experience, but Healthcare may be more invested in compliance.
Building on the Deloitte research, we conducted our own survey of leaders from several consumer products companies—as well as consulting members of our team, many of whom have deep expertise in these industries—about where specifically they’re seeing market leaders investing in trust.
Compliance
Compliance is important for consumer products companies in building trust because it helps to ensure legal agreements, consumer safety, reputation, and sustainability. By prioritizing compliance, companies can establish a positive reputation and build trust among regulators and consumers, which can lead to increased sales and long-term success. Those we surveyed agreed that this is often easier said than done when there is an increasing burden of regulations on consumer products worldwide. In these industries, location matters when it comes to compliance—different regions have different regulations and are subject to change at all times.
A good example is the European Union’s (EU) 2018 regulation on acrylamide in foods. Research has shown that acrylamide can be carcinogenic in animals and may increase the risk of cancer in humans.
In response to these concerns, the EU introduced new regulations that set limits on the amount of acrylamide allowed in certain foods, such as potato chips, bread, and coffee. The regulations require food manufacturers to take steps to reduce acrylamide levels in their products, for example, by using different cooking methods or changing ingredients. When taking into account measures such as using specific raw materials, adjusting cooking times and temperatures, updating labeling and product information, and conducting regular testing to monitor acrylamide levels, the sudden change in regulatory laws around acrylamide has had a significant impact on food manufacturers, especially those that produce snacks and baked goods.
Product quality
From ingredients to packaging to enjoyment, quality is synonymous with a trusted brand or product and a critical factor in the success of consumer products companies. Quality is not only a matter of satisfying customers and meeting their expectations; it’s also a matter of avoiding unnecessary costs that can hurt the bottom line. Cost of Poor Quality, or COPQ, refers to the total amount lost in producing or delivering defective products or services and can take the form of appraisal costs, internal failure costs, and external failure costs, all of which can range from 15 to 40 percent of total sales.8
8. Cost of Quality, ASQ.
Authentic and resilient leadership
In a post-pandemic world that has forced remote work and caused a crisis of relationships, strong leadership has become more critical for consumer products companies. Many organizations in these industries have come to the realization that authentic leadership helps to attract and retain precious talent at a time when turnover is high. It also builds the new resiliency required to run a successful global business with many moving parts amidst a struggling supply chain.
CPG, F&B, and the Specialty Chemicals companies that supply them are among industries most often in the limelight in areas like regulations and social media. Strong leadership is vital to establishing consistency and resilience, which leads to increased trust.
In the dynamic and uncertain world these industry segments face, leaders play a crucial role in helping their teams acquire new skills and abilities that will enable them to thrive in changing markets. Leaders also have to engage their teams by pointing out both the challenges they face and the opportunities they have to make a difference. Leaders should support their teams by defining the problems they need to solve and the goals they need to achieve.
Environmental, Social, and Governance
All stakeholders, especially consumers, employees, and broader society, are demanding that their CPG, F&B, and chemical brands and products be environmentally and health-friendly. As a result of this trend, regulators are not far behind, and new legislation around the world is driving these industries to comply. Executive leadership has taken note and is wisely treating Environmental, Social, and Governance-related (ESG) initiatives as business imperatives. Delivering on ESG commitments provides the opportunity for a double win for trust: doing what’s right by the world and its communities sows trust among all stakeholders while also making shareholders content by providing a new path to profitability. One-third of consumers are willing to pay a premium for sustainable products, and companies should prepare for sustainability to become the expectation, not the exception, in the future.9
In consumer products-related industries—which have an enormous, worldwide impact on multiple ESG areas—it’s not just about sustainability. Positive nutrition, animal rights and treatment, responsible sourcing, and ethical workplaces and practices are also on the list and driving consumer perceptions and purchasing behaviors.
Diversity, Equity, and Inclusion
Some consumer products organizations are investing in Diversity, Equity, and Inclusion (DEI) to embrace diversity and ensure that more people are included and have their lived experiences acknowledged so they can bring their best selves to work. Like the domain of Authentic and resilient leadership, the domain of DEI helps to attract and retain talent. It also reflects the diversity of consumers and drives innovation and creativity. Many consumer products organizations are not only practicing DEI within their own walls but also within their supply chains, taking steps to encourage their suppliers to adopt these practices. For example, Johnson & Johnson has a supplier diversity program that aims to increase the diversity of its supplier base. The company encourages its suppliers to adopt best practices in diversity and inclusion by promoting gender and ethnic diversity in their workforce and leadership.
Food safety
This domain is not included on the list provided by Deloitte but is of particular importance in the F&B industry when it comes to building and maintaining trust. Not only are regulators and consumers becoming more demanding when it comes to the safety of foods and beverages, product recalls can damage trust in an F&B organization and its supply chain. Overall, food safety is crucial to protect public health, prevent economic losses, build consumer confidence, and meet regulatory requirements. Many F&B companies are investing in food safety to ensure the quality and safety of their products. Examples include implementing food safety management systems, such as Hazard Analysis and Critical Control Points (HACCP) and ISO 22000, to identify and control food safety hazards and conducting regular internal and external audits and inspections to ensure facilities and processes meet food safety standards and regulations. Some also use technologies like blockchain, sensors, and artificial intelligence to improve food safety by tracking products, detecting contaminants, and automating processes. They also provide food safety training to employees to ensure they understand and follow food safety procedures and standards. Proactive companies are working closely with suppliers and regulators to ensure that ingredients and products meet food safety standards and regulations.
9. Global Sustainability Study, Simon-Kucher & Partners, 2021.
Cybersecurity
Trust is difficult to build when CPG and F&B companies are particularly at risk for cyberattacks. The CPG industry has experienced a surge in cyberattacks in recent years, which can have serious consequences for businesses and consumers alike, including financial losses, damage to reputations, and the compromise of sensitive data. In 2017, a cyberattack on Mondelēz International, a multinational confectionery, food, and beverage company, disrupted operations and caused significant financial losses. The attack affected the company’s ability to produce and distribute products, resulting in a reported loss of $150 million in revenue. Another example is the 2020 cyberattack on Campari, an Italian beverage company. This attack, attributed to the Ragnar Locker ransomware group, disrupted Campari’s operations and caused data loss. The attackers demanded a ransom payment of $15 million, and while the amount paid was not disclosed, it’s reported that Campari’s cybersecurity insurance policy covered only part of the cost. A third example: JBS, which supplies more than one-fifth of all beef in America, said all its US plants were pushed offline during a ransomware attack on the Brazilian-headquartered company’s networks. The attack also disrupted other operations across the US, as well as the company’s businesses in other countries, including Australia.
These incidents highlight the importance of cybersecurity for F&B and CPG companies, as cyberattacks can significantly impact operations and financial performance. To build and maintain trust, companies must invest in cybersecurity measures and establish robust incident response plans to prevent, detect, and mitigate cyber threats. Working with IT partners (e.g., building on Amazon Web Services infrastructure) that develop cloud-based solutions with a strong focus on security can bring several benefits, including rapid deployment, flexible protection, broad visibility, simplified management, and more.10
Data integrity and protection
Studies have shown that the CPG industry is a laggard when it comes to digital maturity, and data is part of this equation.11 Some consumer products companies have embarked on digital transformation with zeal but often without a sound data strategy. The problem is not only with the variety and cadence of data but also with the way the data is organized. Often, data is scattered in transaction systems, spreadsheets, even in documents, and pictures. There is much work to be done in consumer-related products industries when it comes to how companies manage and protect data.
10. “Cloud security benefits: staying protected as digital boundaries expand,” Cisco, 2021.
11. “Building a Resilient Consumer Goods Industry,” Accenture, 2021.
When you look across these trust domains, ask yourself which ones you and your organization are doubling down on, which ones you’re holding your cards on, and why.
Among the trust domains, where is your organization investing the most?
Are you maximizing the full potential of your IT vendors as partners vs. suppliers?
How do your trust investments line up with your brand and product strategies and your organization’s mission and vision?
Making sure your domain investments are clear and in lock step with your objectives—and identifying places where work needs to be done—can help consumer products companies deliver on trust and grow it across their ecosystem of stakeholders.
Are company leaders communicating these investments to employees, suppliers, customers, and society?
