In simple terms, Ethics are the processes, procedures and behaviours that a business adheres to in its daily dealings with its various stakeholders.
What is acceptable as moral behaviour in one country might not be accepted in another jurisdiction but nevertheless, a line should be drawn between what is wrong and what is not and a balance established.
During the last decade, we witnessed a host of multinational corporations crumble to their feet due to unethical business practices. The famously known ones are Enron, WorldCom and the accounting firm Arthur Andersen.
Recent casualties of unethical behaviour include Lehman Brothers and Bear Stearns, both former US Investment banks. These two financial institutions focused on short-term gains at the expense of their long-term survival.
With most businesses driven by profit motive, the manner in which those profits are obtained becomes a topical issue. Falsifying records and accepting a bribe has serious consequences and in most cases resulting in prolonged jail sentences.
A case in point is that of four Rio Tinto Executives who admitted to a Chinese Court that they accepted bribes.
Another example would be that of the disgraced Bernard Madoff, a former stock broker, who is serving 150 years imprisonment for defrauding investors.
With sustainability issues now on the main agenda of many Political leaders, businesses are under more scrutiny than before. They have to constantly monitor the level of their CO2 emissions and the impact their business activities has on society and the environment.
Lessons can be learnt from the recent BP oil spills in the Gulf of Mexico. According to the BBC, the cost per day to BP of containing the spill and securing the original well is approximately $6m (£3.9m).
Although BP refuses to accept responsibility and puts the blame on Transocean, the owner and operator of the failed equipment which caused the explosion, I strongly believe that the BP engineering team failed on their risk management.
They should have routinely assessed the nature and condition of the equipment to see if there were any problems.
From the above cases, it can be seen that there is need for integration between sustainability, ethics and strategy when it comes to business planning.
Failure to do that, the costs can be unbearable in the future. Sustainability & ethical issues should not be viewed as either compliance-driven activities or be regarded as a cost, but rather as part of how the business generates value. They are drivers of business performance.
As a leader, questions that you should be asking include:
- Where do we draw the line between ethical and unethical behaviour.
- The strategies we are pursuing today, what impact do they have, socially and environmentally?
- Is our sustainability strategy aligned to the overall business strategy?
- Is our sustainability reporting integrated with financial reporting?
- Are we investing enough in activities associated with ethical and sustainability issues?
- Are we only focusing on the short-term financial gains and ignoring long-term sustainability?
- How knowledgeable and skilled are our employees when it comes to ethics and sustainability? Do they need further education & training?
- How ethical is the nature in which we win contracts or business projects?
Answering these questions should provide a starting platform for your organisation to build a long-term sustainable and ethical business model.