Tags: Decision-making, Communication & Engagement, Employees, Ethical Values, Supportive Environment
This study, conducted by Principia in conjunction with Clifford Chance, the International Chamber of Commerce, GlobeScan, INvolve, and the Institute of Business Ethics, was designed to provide insights into how organisations are reacting to new ethical challenges and gauge leaders’ views on how best to build an ethical culture.
The researchers conducted one-to-one interviews with over 80 business leaders, as well as some academics and non-profit leaders. They also conducted a quantitative survey of 750 business leaders across 90 countries and a wide range of industry sectors. Survey respondents were drawn from the networks of partner organisations the International Chamber of Commerce, GlobeScan, Clifford Chance and the IBE, as well as clients of Principia.
Leaders reported that they are increasingly encountering difficult decisions driven by the pandemic, rising stakeholder expectations, and an era of ‘radical transparency’. They also showed a keen awareness of the importance of ethical values in making those decisions, and the vast majority believe that legal compliance is not enough; business can and must do more to translate positive intentions into meaningful social impact.
A new era of ethical business
- The vast majority (97%) of leaders feel a personal responsibility to ensure that their company does the right thing, while a similarly huge majority (96%) believe that doing the right thing means following their company’s own values and principles, as well as applicable laws and regulations.
- Doing things ethically is regarded not just as morally right, but an operational imperative; 93% of business leaders believe that integrating ethics will be essential to the future success of their business, and 84% believe that this integration will provide a route to competitive advantage in their industry.
- Interviews revealed that many believe the younger generation of business leaders rising to the top today is more comfortable discussing ethics and responsibility and integrating those conversations into forward-thinking, sustainable business strategies.
- The research revealed that leaders are dissatisfied with the pace of change and want to see quicker, stronger steps taken to intertwine business success and social impact.
- 79% are already planning to invest further in integrating ethics into their company’s operations.
Integrating ethics
- Respondents and interviewees acknowledge the difficulty of translating good intentions into meaningful, tangible change. Many report significant challenges in integrating statements of purpose and values into decision-making and embedding ethics into organisational culture.
- Respondents acknowledge a number of capabilities and practices they perceive as necessary to successfully make the leap from strategy and rhetoric to execution. The most cited was ‘shape, monitor, and track a culture that enables people to do the right thing’ (97%). Much less popularly cited was ‘take a public position on controversial societal issues’, identified as an important capability for being an ethical organisation by just 64%.
- 85% believe that tracking non-financial metrics of success and societal impact is essential; interviews revealed that leaders see this as providing critical information for assessing complex trade-offs within the ethical business agenda.
- 94% said there is a pressing need to ‘prevent products and services being used to cause harm’. The tech sector in particular was identified in conversations as having experienced a surge in employee activism over the use of their products and services in recent years.
Shifting systems, cultures and mindsets
- Across industries and regions, leaders believe that the new era of ethical and responsible business will be driven not only by investment in systems, processes, and capabilities, but also by a culture shift.
- Survey responses reveal significant room for improvement amongst the business community in terms of the systems they have in place to embed ethical conduct. Only 73% have fully implemented a code of conduct, while just 64% have a fully functioning, open reporting channel for misconduct or unethical behaviour.
- Just 49% of respondents expressed confidence that their organization values people who challenge superiors when necessary.
- Equipping employees to do the right thing is viewed as a clear area for improvement. Just 47% of respondents express confidence that people in their organization make the right decisions in ethical grey areas, while just 42% of leaders report providing mandatory ethics training for employees.
Driving transformative change
- Leaders consistently identify collaboration with other organisations as a catalyst for sustainable change, citing both industry-specific initiatives such as the Consumer Goods Forum and cross-sectoral initiatives like the World Benchmark Alliance’s Social Transformation Framework.
- Leaders also highlighted the responsibility for large, established companies to extend their commitment to ethics across their networks, including their expectations of suppliers, helping embed ethics-focused practices in the wider business community.
- Just 14% of publicly traded companies included in the survey cited investor pressure as an important factor in motivating them to build a more ethical organization; but the one-on-one interviews revealed a widespread acknowledgement amongst leaders that investor apathy towards ethics is no excuse for inaction.
Conclusions
The findings of this research indicate a reassuring widespread acceptance by business leaders of their organisations’ responsibilities to society, and their personal responsibilities to ensure their organisations deliver on their purpose and values.
There is also widespread acknowledgement amongst leaders of latent frustration amongst stakeholders and society at large at the perception that business is not acting quickly or robustly enough to transform social impact and conduct their business ethically.
It is also now commonly understood that there is a strong business case for ethical organisational culture, which holds up independently of the moral imperative. The vast majority of leaders see ethics and sustainability as key dimensions of their business strategy and conducive to competitive advantage.
There are significant challenges involved in turning good intentions into meaningful, tangible action, and embedding statements of purpose and values into day-to-day decision making. That said, this research demonstrates that leaders generally exhibit a clear-eyed awareness of these challenges, and, crucially, significant will to overcome them, particularly among the younger generation of leaders.
You may also be interested in the author Rob Hayward’s blog on the findings, available on the IBE website here.