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ethical business
26/09/2018

Ethical business - what now?

In the run up to OUTLOOK™ Pierre Wiertz caught up with guest speaker Ruth Steinholtz, founder of ethical business advisors AretéWork.

You are joining us in Dubrovnik to look at changes in ethical business practices and ethical business regulation. What do you think is the biggest single driver of change in this sphere? And is the current demand for a more transparent and ethical approach to business new or something more cyclical? Are there historical precedents?

My career spans decades and I have not seen anything like the current focus on ethics and values in the corporate world as I have recently. 

I don’t think it has happened all at once. Rather, it has been gathering speed as a result of the different types of corporate scandals that we have experienced. Scandals which have undermined trust and confidence in large companies. 

Globalisation, the media, and social media in particular have no doubt contributed to the number of people who are aware of issues.  An early example would be Bhopal for example (remember that?!) but since then there are plenty more. The financial crisis of 2008 was the most significant recent event but the demand for a more ethical approach has been growing for a long time.

As for historical precedents, you could look at the Muckrackers in the US, and the reactions to the Triangle Shirtwaist Factory fire in 1911. That was the worst industrial disaster in the history of New York at the time. Sadly we have seen similar events in Bangladesh and elsewhere in more recent times.

There were other incidents in the early 1900s that led to unionisation in the US which I think can be seen as coming from a similar distrust of industry. Upton Sinclair wrote books such as The Jungle exposing conditions in the Chicago stockyards. He worked to raise awareness of the condition of working people and that helped to bring about changes in a range of industries.

What is considered ethical evolves constantly and this is another reason why companies and industries have to look at trends and ensure they heed early warning signs. Attitudes about single use plastic are a good example of this - we can see them changing at the moment.

The Foreign Corrupt Practices Act (FCPA) has been around since the late 1970s, and it has also contributed to the increased focus on ethics and compliance.  Bribery was considered a cost of doing business not so long ago. I don’t think we have fully realised the costs of corruption and how much damage it does, so there is still room for more hardening of attitudes. And an even greater demand for transparency.

To what degree is it consumer led?

There are many forces that have contributed.  In addition to the above, laws and regulations have contributed as well. I suspect that media of all types exposing and publicising unethical behaviour may do more than consumers to effect change.  But they are linked of course.

We see growth rates measured and compared ad infinitum, and business models are changing quicker than ever before. Can the application of ethical business practices , and the standards that measure them, keep up? Is there in fact a common agreed metric to monitor or measure the implementation of ethical practices?  How can a company define success in their efforts?

This question goes to the heart of what we wrote about in Ethical Business Practice and Regulation  My co-author Professor Hodges and I do not believe there can ever be only one definition or one standard, so there cannot be one metric.  We believe that the one thing that is key is that leaders must consciously focus on their purpose, culture and values; and be able to produce evidence that shows that they have a strong ethical culture; and are genuinely living their values. 

We particularly recommend measuring culture using the Barrett Values Centre’s Cultural Transformation Tools. Yet, we would never say that it is the only measurement.  Companies currently mistake compliance reporting - that is reporting on activities without considering outcomes - as sufficient.

ethical business
Ethical Business Practice and Regulation: A Behavioural and Values-Based Approach to Compliance and Enforcement (Civil Justice Systems)

As companies expand internationally, how easy is it to export ethical business practices? What role do partnerships with NGOs play here?

It is very easy to discuss ethical business practices internationally. I have been doing it since about 1981!  Your question seems to assume that there is one country that is the source of all ethical practices ( I know you don’t mean that!) but of course that isn’t the case. There are ethical and unethical people and organisations everywhere, even in the most “corrupt” countries.  

But the main point is that it is very easy to discuss ethical practices internationally if you base it on values.  It is far more difficult if you try to base it on rules and that is how compliance has developed in the past.  Everyone in the world has values and knows what they are, so you already have a starting point!  People may have different values, or interpret values differently, but there are universal values and therefore you can engage people and develop a common understanding, no matter where they are.

What innovation or new business models excite you most? 

Personally I am very interested in the concept of self managed teams and B corporations.  I think that we have to find a way to empower people in organisations.  I also think there needs to be a greater investment in education and training from governments and also from companies.  They cannot expect that people leave school with all of the skills that they need for their entire career, even if they are an accountant or a lawyer or other professional.  I’m not talking just about technical skills - but also leadership skills, critical thinking, interpersonal skills etc. 

Ruth will be at OUTLOOK™ 2018  to discuss ethical business practice and regulation as a panellist in a workshop on Building Stakeholder Trust in Absorbent Hygiene Products. 
The conference programme offers a range of high-level presentations, panel discussions and networking activities.

You can follow Ruth @ruthsteinholtz, connect with her on LinkedIn - and read her regular blog on Ethical Business Practice at aretework.com

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