March 15, 2016
Today’s hyper-connected world means that questions of company values, corruption, and social responsibility are playing out in real time, and that companies can no longer easily control and manage their reputations. Whether it is the evolution of excuses and investigations at FIFA and Volkswagen, ongoing scrutiny of creative offshore tax structures, or responses to political debates about a living wage, the public is asking companies tough questions.
Public trust has never been more important—or more difficult to secure. But companies can achieve public trust by credibly demonstrating transparency, which requires a much broader focus on ethics, and on incorporating ethical considerations into business strategy. Sustainability teams have a critical role to play in driving this forward.
The narrow focus on “ethics and compliance” at many companies has helped them respond to practical concerns and regulatory challenges, such as the U.S. Foreign Corrupt Practices Act, sanctions, and money laundering. This focus on documentation processes, however, also often results in audit and compliance being treated as a box-ticking cost center, subsuming wider considerations of corporate culture and values. Corporate ethics becomes a matter of obeying company codes of conduct, avoiding bribes, adhering to approval processes for spending and expenses, and rolling out an online training program. These measures are all necessary and important, but they ignore more fundamental questions, such as how performance-based incentives can affect business development teams, how to grow market share responsibly in countries where human rights and corruption concerns are pervasive, or how companies can drive social responsibility in their supply chains.
Meanwhile, CSR or sustainability teams are focused on responding to stakeholder concerns and giving back to society, but can also find their work is at odds with core business practices. Sustainability teams design and execute innovative responses to community engagement, inclusive growth, sustainable social investment, and environmental responsibility. But this often raises uncomfortable contradictions. Living wage programs might be undermined by the use of offshore tax vehicles. Efforts to reduce the company carbon footprint by environmental teams might take place while government affairs departments lobby quietly for laxer environmental regulations. Focused efforts at engaging and responding to stakeholder concerns should be integrated across the business, not left to one department.
Sustainable companies understand that both CSR and compliance teams have a critical role to play in driving ethical behavior and embedding values throughout the organization. These teams need to coordinate more with each other and across the business to design more effective ways to do so.
There are a number of bold new solutions that companies are using to address these questions. Some companies are using emerging tools to measure corporate culture and understand behavioral cues and team dynamics that might undermine compliance processes. Other companies are integrating their stakeholder engagement activities across business units, so that they are well placed to respond to emerging political and community concerns in a more holistic and consistent way. Others are considering whether growth targets in new, high-risk markets can really be met without undermining commitments to anticorruption, and are adjusting financial goals accordingly. Others are looking at the incentives set by human resource teams, and how they might support or weaken commitments to integrity or diversity.
Questions of corporate ethics are fascinating, multi-dimensional, and complex. They are all primarily questions about sustainability and social purpose, not legal compliance. As we noted with the introduction of this year's BSR Conference theme, 2016 is the year to be bold and bring issues of sustainability into core business strategy. Companies that can do so will be much more resilient and fit to operate in today’s era of radical transparency.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.