On the right track

Dr Kevin Sludds of Ethics Consultancy & Training International examines the principles of good CSR behaviour.

In today’s economic and social environment, issues related to social responsibility within the business arena are gaining ever greater importance and relevance.

Business activities are inseparable from the communities, societies and wider global environment within which they operate. A reluctance, therefore, to manage these impacts will mean business practices, over time, becoming unsustainable and irrelevant.

CSR is a vital area of what has historically been rather vaguely called ‘business ethics’. As such, it relates to the situations, policies and activities in business where the issue of right and wrong action, good and bad behaviour must be considered. Various scandals over the last 15 years, from Enron to Satyam to Libor, have highlighted the unethical way some individuals and corporations have behaved.

Learning to do the right thing

Unquestionably, matters of an ethical nature confront all organisations, large or small, local, national or international and it is vital that an appreciation of it is gained for both practical commercial reasons as well as moral soundness.

Managing risk, for instance, is a central part of many corporate strategies, and reputations that have taken decades to build can be ruined in hours through corruption scandals or environmental accidents. These can also draw unsolicited attention from regulators, courts, governments and the media. Therefore, concretely building a sincere culture of doing the right thing within a company can help offset these very tangible risks.

In commercial business terms, CSR focuses on identifying and analysing business operations in relation to society and the various responsibilities a business owes to itself, its stakeholders, the public, its customers and the government.

It is worth emphasising that when CSR is taken seriously it is fundamentally about how companies make profits, rather than how they spend profits. A more profound and reflective examination of social responsibility issues must be established if these actions are to be, and are seen to be, genuine. CSR is about internal examination and external engagements.

Ethical behaviour

‘Ethics’ simply means a characteristic manner of acting, and can have an influence on a business’s key asset: its reputation. EY’s Global Fraud Survey 2012 makes sober reading for those companies who are keen to be differentiated from the 39% of respondents who reported that bribery or corruption were a frequent occurrence in doing business in their countries. In India the figure was 70%, the Czech Republic 80% and Brazil a whopping 84%. The survey found there had been a marked increase in respondents who were prepared to make cash payments to induce a favourable outcome and win business − up from 6% to 15%  in two years.

CSR is a key area of self-regulation that has historically fallen under the broad rubric of business ethics.”

Their overall sense was that boards of management felt swamped by the volume of material on risk management and control information they were expected to master. And one result of this was that misconduct very often went uncorrected, the message then being sent was that sharp practice was acceptable.

Ethics offers us a means of making business choices that can be promoted as having moral import, specifically if there is uncertainty about what ought to be done (e.g. balancing the pros and cons of mine exploration). It moves beyond sound-bite references to trust and integrity and allows for meaningful CSR planning.

Genuine ethical awareness in commerce enables businesses to question and analyse long-held presuppositions which they may unwittingly retain. It isolates and defines unethical and inappropriate behaviour within a business and on an inter-business basis, and it provides businesses with an appreciation of the character and nature of particular CSR situations or dilemmas.

Personal morality codes

When it comes to the topic of CSR, we must remember, that ethical choices in business only become ethical when the intentions behind them, their results and the values (individual, corporate or societal) they reflect are considered. Facts alone do not decide whether something is right or wrong.

Having well-defined and meaningful CSR policies means making commercial choices which can be promoted as moral and helps in positioning a business in a unique way. That is, genuine CSR is seen to be more than merely expedient and external, rather it has the tangible effect on a business of clearly defining its ethos and markedly increasing its reputational value.

A personal morality code (PMC) lays down the principles and values that guide an individual’s conduct and is an imperative, though very often overlooked, aspect of a company’s capacity to deliver on CSR issues. A PMC identifies and defines those fundamental moral concepts in business, such as, honesty, trust, fairness, integrity, and respect. PMCs for business people would, thus, include having the ability to discern the distinctions between these terms and to providing a rationale for their particular CSR policies.

CSR is a key area of self-regulation that has historically fallen under the broad rubric of business ethics. However, compartmentalising ethics as ‘business ethics’ alongside various other such categories, ‘business strategy,’ ‘business analysis,’ ‘business development’ and so on, wholly undermines its importance and dilutes its power to define an organisation. To enhance one’s business identity, one needs to engage with ethical matters beyond considering them simply aspects of a business and, rather, to seeing them as elemental to an entire business.

Driving force

Ethics Consultancy & Training International’s (ECTi) Ethics ‘in’ Business Principle moves across all dimensions within an organisation and can, when properly managed, act as its main driving focus. This principle provides businesses with a singular rather than generic identity, something which is a keen competitive advantage.

It should be noted, however, that PMCs are mutable, as it can and regularly does occur, that experiential insights necessitate the updating of one’s personal morality code in line with changing circumstances and new understandings. As a result, a company’s CSR policies may also need to be adjusted, to fall into line with the new motivations and/or the approaches that support them.

We must now ask how does one go about developing such ethically founded CSR policies? ECTi’s Organisational Ethics Pyramid succinctly sets out an organisation’s core values, the theories which support them and the bedrock on which they are built.

A clearly defined ethical scaffold to good CSR offers an opportunity for senior management to continue to steer their organisations forward in a manner which is defensible, principle-led and exclusive.

Dr Kevin Sludds, is managing director of Ethics Consultancy & Training International.