David Ryan is the managing director of Edelman Smithfield Canada
The stresses of the pandemic have frayed Canada’s social and economic fabric. We have seen an unravelling of trust in Canadian institutions, including business, that has pushed our faith in the free market to the breaking point.
In mid-February, the Edelman Trust Barometer revealed that almost half of Canadians believe that capitalism has failed, and a third of us are putting faith in a more centralized economy. Even by our more socialist standards, that’s a big admission and a sharp rebuke of Canadian business and the economic and political system that underpins it.
Is it fair? No, not really. Business hasn’t had an easy time of late either. Does it mean that we are toying with communism or on the brink of anarchy? Also, no.
It is, however, a stark warning that far too many Canadians believe the current system is failing them, and they want to see changes that address fundamental inequalities that have crept into our economy and our society, and have been exacerbated by the COVID-19 pandemic.
We can’t say we haven’t been warned. The red light on the dashboard has been flashing for a while. The same trust barometer has been telling us for years that our expectations of business and corporate leaders are evolving, and those expectations were not being met.
In early February, that red engine light gave way to a cacophony of truck horns, in Canada’s capital and at border crossings across the country. The “freedom convoy” may have started as a protest against vaccine mandates, but it became something much bigger and more belligerent, a lightning rod for pandemic frustration and a condemnation of the system many felt had left them behind.
Our governments will need to address this challenge. But the challenge is not theirs alone, and it’s not reasonable to think that government alone can rebuild trust in the system. The trust gap is a mile wide and just as deep.
Canadians expect our chief executive officers and the businesses they lead to step into that void and give them a reason to believe in the system again. They are now telling us – by questioning their faith in capitalism – that the price business could pay for not heeding this call is a rejection of the economic and political system that has allowed it to flourish.
While that sounds extreme, it is what Canadians are indeed telling us, in responding to pollsters or blowing their horns on Wellington Street in downtown Ottawa. Their trust has been shattered and they are questioning everything.
Is it fair to expect business to bridge this trust chasm and restore faith in the system? Maybe not. But it is fair to say that Canadians expect more from business beyond their direct economic contribution to society. They want to see business embrace the global shift to stakeholder capitalism, where the purpose of business has become much broader than the traditional definition, where employees and community are elevated in importance, and the interests of shareholders don’t always come first.
To their credit, many of our business leaders have been listening. They are responding to Canadians’ evolving expectations as well as changes in the free-market system that now place greater value on environmental, social and governance initiatives. We are seeing these changes surface in different ways: bigger and bolder ESG programs, more aggressive net-zero commitments, active campaigns to address wage disparity, more ambitious community investments, more generous corporate philanthropy, and CEOs using the power of their businesses to find innovative solutions to societal challenges, something that has truly made a difference during the pandemic.
Harvard economist Joseph Schumpeter coined the term “creative destruction” to describe how entrepreneurship and incessant innovation would eventually destroy elements of the status quo, forcing us to adopt a new way of doing things (or the latest iPhone). Prof. Schumpeter, despite being a staunch believer in the long-term benefits of the free market, also believed that capitalism was doomed to be replaced by socialism. The jury is still out on that.
That said, the notion that business has an insatiable appetite to innovate and evolve should give us hope. In different ways and with varying degrees of aggression and anger, Canadians are telling us that they fear the system is failing them and the status quo is no longer an option. Our governments are responding to that, and business will need to as well.
Business, far more so than government, was built for this kind of change.