Happy 30th Birthday Institute of Business Ethics: 5 steps to ethical business leadership

Congratulations Institute of Business Ethics (IBE) on reaching 30. Born at the time of the City of London’s ‘Big Bang’ and the appearance of the phrase ‘greed is good’ IBE has played an important role in holding a mirror up to the face of business and asking ‘is that how you want to be known’?

As we celebrate this anniversary though we all need to reflect on whether we are doing enough to embrace ethics across the business world. Ever since the global financial crash of 2008 and the long, hard road of austerity began, more and more questions have been asked about the behaviour of companies and whether the totality of their efforts, globalisation, is working for the few or the many.

Questions about offshore tax havens, CEO pay, pension provision, pollution, corruption, privacy and modern day slavery have all been thrown at individual companies. And whilst others have been lauded for their effort in trying to build a better future you sense on balance society, NGOs and governments are becoming more sceptical, less trusting of the corporate world. You could argue that it’s been ever thus, a few ‘bad apples’ spoiling the reputation of capitalism. But larger forces seem to be at play currently. Whilst the rise of Trump and Brexit have had many complex causes, the sense that business ‘puts back less than it takes out of society’ is a contributory factor.

So how do we get many more companies to take ethics seriously not just for their own sake but also to demonstrate that capitalism serves the needs of the great majority of people? What does ethical leadership look like?

• Purpose and values – many a company has knocked out some decent phraseology in its Mission Statement or its Brand Purpose. But how many really understand that we are moving into a genuinely purpose driven marketplace, where having a raison d’etre beyond merely shifting ‘stuff’ to the consumer will define whether you have a business or not. The ability of a company to satisfy societal/planetary need at the same time as customer need will become existential. We need to more clearly align the right and proper, but potentially dry and distant, concept of business ethics with purpose and a company’s paramount focus on what it sells to whom. M&S has 4 corporate values, including integrity but this very obvious manifestation of our commitment to ethical behaviour needs to be also read alongside the other 3 – inspiration (ethics must connect emotionally); in-touch (it must be present in people’s day-to-day lives) and innovation (we need to strive for a new, more sustainable way of doing business).
• Continuous improvement – even when a company gets business ethics there’s a risk that it sees it as a fixed social (or environmental) norm to be complied with forever and a day, and therefore soon forgotten in a dusty office. Ethics are dynamic, they are constantly shifting (onwards!) as expectations grow and our ability to help people reach their potential improves. The best practice of the 1990s is not good enough today. Ethics demand that we constantly re-visit and re-challenge ourselves to move standards forward. At M&S all the food factories supplying us are on a sustainability ladder of improvement, progressively moving from a bronze, to silver and finally gold level of performance. Similarly this year we recognised that we needed to shift beyond social compliance and embrace a more ambitious approach to human rights.
• Governance – beneath the lofty heights of purpose we then need a clearer process for making ethics stick. They cannot be just words on paper. At M&S we’ve built a monthly management information system that allows us to track our detailed social and environmental performance. This is reviewed by the Plan A Operating Committee and bi-monthly any areas of particular concern taken to the Executive team. All this culminates in an annual, independently assured report that lays out transparently our performance.
• Business case – it’s not enough though to have strong corporate values and governance, ethics have to make business sense too. If people can see that doing the right thing socially and environmentally also makes a business stronger too they are even more likely to do it. We have worked hard to show that doing business in the right way brings us significant business benefits. For example, high levels of customer trust, employee engagement, more resilient supply chains and leaner operations (£180m saved in 2015-16). We should not apologise for assigning business benefit to operating responsibly.
• What happens when no one else is there – even in a medium sized business like M&S you cannot have a standard for every issue or eventuality, an auditor present in every one of 1000s of factories, farms and stores every day reviewing every decision. There are days when it’s ‘just you, alone in an office’ and even in a world of ever greater transparency no one will ever really know whether you did the right thing, just you and your conscience. And this is where we turn full circle and return to where we began, purpose driven business with strong values. A business where you instinctively do the right thing because its norm in your company. All the behaviours, big and small, in the board room and on the shop-floor are guided by a common understanding of what’s right.

So as IBE looks into the future we can be clear that there is significant disquiet about business behaviour; that this disquiet is contributing to our febrile times; that corporate behaviour needs to improve across the economy; and those companies who can see this as an opportunity not a threat will be the ones that prosper in the future. Stronger internally and externally. Better and more emotionally connected with their customers and employees leading to greater loyalty and participation in their businesses.

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