Why it is time for a new mindset when it comes to digital trust
Now that digital products and services affect so many aspects of the real world, digital sustainability should be a key aspect of all corporate social responsibility strategies. However, it is no longer enough to address digital challenges such as data protection, privacy, ethics and cybersecurity merely from a compliance or risk management perspective. Instead, it is time for organisations to adopt a new mindset and view their investments in digital trust as value enhancers rather than just risk mitigators.
Corporate social responsibility (CSR) has been a key boardroom topic for several decades, having originated in the book ‘Social Responsibilities of the Businessman’ by Howard R. Bowen in 1953. Over the years, many academics have argued that CSR is important for organisations because it improves customers’ perception and image of the organisation. That improved perception leads to an increase in organisational value.
In the past, CSR focused solely on offline activities. Today, the scope of CSR should extend beyond the offline world to include digital responsibility (‘digital CSR’ or ‘digital sustainability’) because digital products and services are interlinked with so many elements of the real world. While digitalisation offers numerous advantages, its potential downsides are also increasingly becoming apparent, such as data breaches at hospitals leading to patient deaths, artificial intelligence (AI) systems assessing mortgage eligibility and social media platforms influencing elections. Such incidents are damaging digital trust: the confidence that people and organisations have in other organisations (and platforms) to handle their data securely, reliably and honestly. According to research, 41% of consumers indicate that their trust in organisations to keep their personal data secure has decreased over the past five years.
DIGITAL SUSTAINABILITY AND DIGITAL TRUST ARE MORE IMPORTANT THAN EVER BEFORE
The same study suggests that 45% of consumers would stop using an organisation’s services after a serious data breach. This risk of reputational damage clearly makes digital trust more important than ever before. On top of this, the chance of a data breach happening at organisations has also increased significantly in the past years. Research shows that the number of data compromises (data breaches, data exposures and data leaks) in the US has risen by more than 300% over the past 10 years (see figure 1).
MOVE BEYOND THE RISK & COMPLIANCE PERSPECTIVE
It is perhaps understandable that organisations have tended to focus on digital trust from a compliance or risk management perspective. They only invest in digital trust because of current regulatory requirements (e.g. GDPR, CCPA) and upcoming legislation (e.g. Data Act, Data Governance Act, Digital Services Act) or because it protects them and their customers from the risks associated with cyberattacks (e.g. reputational damage, lawsuits, fines). Many organisations fail to see investments in digital trust as anything other than costs to minimise risks and as an order qualifier for consumers (see box). However, in today’s interconnected world, organisations can benefit from taking a different view of investments in digital trust.
Digital trust as an order qualifier for consumers: In today’s digital age, building trust with consumers is essential for any organisation. Without it, consumers are unlikely to do business with an organisation they don’t trust or that raises suspicion. However, once an organisation has established digital trust with its consumers, it becomes less of a conscious decision for consumers to choose them over competitors. Take online shopping, for instance: most consumers don’t stop to evaluate whether Amazon.com or Bol.com properly protect their personal data before making a purchase.
HOW SHOULD ORGANISATIONS LOOK AT INVESTMENTS IN DIGITAL TRUST?
Research has found evidence that investing in digital trust increases an organisation’s value because investors regard digital trust investments as long-term risk protection. This favourable long-term outlook attracts investors, and greater investor interest translates into higher organisational value (see figure 2).
Investors also realise that consumer awareness around digital trust is increasing, and that trustworthy organisations have more revenue potential, which further boosts their organisational value. For example, people are more likely to share their personal data with organisations that invest more in digital trust. In fact, 38% of consumers see trust as the most important condition for sharing data with organisations. Furthermore, digital trust investments allow organisations to better mitigate the damage of a potential data breach, and customers are less likely to stop using products and services of trustworthy organisations after a data breach.
THREE KEY CONSIDERATIONS WHEN INVESTING IN DIGITAL TRUST
Executives need to change their mindset when making investment decisions related to cybersecurity, data protection and privacy projects, but it is not easy to do so. Business leaders should try to accept that the digital environment is rapidly changing and that digital trust is crucial for almost all organisations. The following three insights can help when evaluating potential digital trust investments:
- Digital trust investments should be viewed as value-enhancing investments instead of risk-mitigating investments.
- Consumer awareness of digital trust is increasing, and the negative consequences of digital distrust are becoming more severe.
- Digital trust is essential for data exchange and many consumers see it as the most important prerequisite for sharing their data.
At INNOPAY, our mission is to support organisations by providing strategic yet pragmatic solutions. We help you to orchestrate digital trust and mitigate unwanted risks.
Do you want to find out more about the effect of digital trust on organisational value? Read the full paper in ‘Society and Business Review’.