How Clean is Your Business? How to Manage Responsibly
by Tanya Barman
Posted: 29 Jul 2015
A new CGMA global survey, Managing Responsible Business 2015, has found that 82% of respondents' organisations have a Code of Ethics in place. In the largest organisations of over 5,000 employees, this number is 93%. Year on year, it appears that employers are putting in place the ethical architecture to support responsible business, with an increase in hotlines and speak up lines to report misconduct and an increase on training on ethical standards. We also note a big jump in incentives, such as in performance review, to uphold the organisation's standards of ethical conduct from25% in 2012 to 46% today.
No doubt the spread of bad news via our ever increasing e-world and the catastrophic costs of reputational damage has created the impetus to produce such safeguards. How a business conducts itself and how it can impact wider society is high on the global agenda. Corruption is a critical area demanding a rise in attention across all markets. Record fines are being enforced under the US Foreign Corrupt Practices Act (FCPA) and the introduction of the UK Bribery Act has also led to tightening up of procedures globally as well as, importantly, a better understanding of the true cost to business and wider society. 57% of the survey respondents confirmed they had specific guidelines related to anti-corruption, and nearly half of them agreed they had well understood corruption risk assessment for entering new regions, markets or projects. Promisingly, 26% engage in collective action, where competitors and other key players join together to fight corruption at market level.
However, in the UK in particular we've seen a large rise in those who feel under pressure from colleagues or management to compromise their organisation's standards of ethical conduct. In 2012 this figure stood at 18% - amongst the very lowest of the countries surveyed - but it has risen to 30% in the recent study, drawing ahead of countries such as Ireland, Australia and the US. What this means in practice is open to interpretation, as it could be an indication that awareness of ethical issues and codes of conduct has risen and therefore people are more aware of when they are under pressure, but it's something worth keeping a very close eye on and thinking about how you might be able to actively counteract such pressures in your business.
There also has been a rise in awareness of human rights and business. The tragic Rana Plaza garment factory disaster in Bangladesh in 2013, cost over a thousand lives and injured more than 2,500. Child labour, first brought to the public consciousness though campaigns in the 1990s, is still a major issue in a number of sectors, most recently in the technical supply chain. How was your phone produced?
Whilst 68% of respondents recognised that human rights was a relevant ethical issue to their organisation, awareness of the UN Guiding Principles on Business and Human Rights stood at just 14%. These principles were introduced in 2011 as a global standard for addressing adverse impacts on human rights linked to business activity, wherever such impacts occur in the value chain. Positively, of those with awareness of the principles, nearly half were implementing the guidelines in order to proactively take steps to prevent, mitigate and where possible, remediate human rights impact.
Just as organisations now routinely conduct corruption due diligence, the need for human rights due diligence in higher-risk markets and sectors is likely to become more widespread. The UK, the Netherlands, Denmark and Italy are amongst those governments who have already set out guidance to companies on integrating human rights into operations.
There is little argument today against factoring issues that relate to governance, the environment and wider society into business operations. There are clear signs that those enlightened organisations that are already doing this understand the longer-term value and return. Investors, regulators, enforcement agencies, governments and non-governmental organisations (NGOs) and significantly, society at large as both customers and protestors (both outside the HQ and in potentially dramatic force online) all have expectations for responsible business.
In order to help organisations identify risks and also best practice, they must have not only the right data but also the ability to analyse it.
With only just over a third of respondents (36%) knowing their organisation collected ethical management information, we can see a gap in management using data that can lend valuable insight into both threats and opportunities. Often this may entail using an ethical "lens" to explore information that is already available. Ethical architecture alone cannot safeguard an organisation. What really makes a difference is investing resources and effort into embedding the values often articulated by the leadership, methodically assessing how they are being upheld, and understanding what are the barriers and risks to them being contravened.
With weekly reports of high-level cases of ethical transgressions, leadership teams need to identify what data will keep them better informed on what is going on deeper within both their organisation's operations and culture - and to quickly act upon it, before it becomes the next global news story of irresponsible business.
The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.