Good Business Makes Sense
Corporate responsibility is a very hot topic. As the implications of the global credit crisis unwind around us, it becomes clear that the irresponsible actions of a few have had a previously unimagined impact on the many.
Responsibility in business had become an important topic prior to the financial crisis and will be even more so after it. Corporations are increasingly held to account by the media and activist organisations who scrutinise their operations. Regulation has increased substantially over the last few years and it now seems most likely we will face more of the same in the future. Supply chains are more global and complex and corporations are being held responsible - by their customers - for their activities across the supply chain; you can not outsource or off-shore responsibility in today's business world. And the cost of getting things wrong, considering all the different components, has multiplied many times.
Corporate responses to the challenge of social responsibility to date have been varied. For many, the response has been somewhat cosmetic: public relations exercises and glossy reports proclaiming companies' social and environmental good deeds. Others have worked hard to develop the mechanisms for compliance with regulations, ethical values and responsible choices. However, responsible business is still seen as an add-on - it is often centrally driven and somewhat detached from a company's core operations.
Recent data confirms that the challenge of behaving ethically in business is very real, at least in the US (and we do not for one moment believe the situation is materially different in Europe or elsewhere). The 2007 National Business Ethics Survey* reveals some interesting facts:
- 38% of employees believe their companies have comprehensive ethics and compliance programmes in place
- 56% of employees surveyed saw ethical misconduct of some kind
- 42% who saw misconduct did not report it
- 12% of employees who reported misconduct experienced some form of retaliation
- 24% of employees observe misconduct in environments with a strong ethical culture compared to 98% in those with a weak culture
{ * The National Business Ethics Survey is conducted every two years' by the Ethics Resource Center in the US. At the time of writing, 2007 is the most recent data available. }
Yet despite what this, and other data, suggests, as economic pressures mount, some organisations are tempted to see responsibility as discretionary. They must operate within the law, but question the business case for doing more than the minimum. So responsibility gets de-emphasised and marginalised. At best, this adds up to a huge lost opportunity; at worst, it leaves organisations exposed to significant risks.
At i2a we talk about Good Business. A Good Business is one that can meet its regulatory requirements, has embedded its ethical values, makes responsible choices and is operationally effective at getting the right things done. This definition integrates business ethics, compliance and corporate responsibility together in a single concept. It incorporates environmental and social responsibility, but is not limited to this. It extends to include the safety and security of people and physical assets.
We see becoming a Good Business as an evolutionary process, as illustrated in Figure 1. Today, most companies, at least those that accept their responsibility extends beyond the minimum required by law, are in the first phase: we call it Engagement. Typically an engaged company will have a code of conduct endorsed by senior management, will actively report its environmental and social performance, and will try to manage ethical, regulatory and compliance risks. However, behaviours are still inconsistent and responsiveness is low because of the limitations of its organisation, culture and communication. In contrast, the enlightened company sees Good Business as a strategic priority and a source of competitive advantage. Good Business is synonymous with good management, based on a very strong values culture. Performance management is enabled by excellent exchange of information and any incidents, of which there are few, are resolved rapidly.
Figure 1 - The Evolutionary Model of Good Business
So how do you create a Good Business? The key is to link corporate values with processes, metrics and systems in ways that influence how people behave. This needs to be done for a given strategic context and external environment. If this sounds obvious, we find that it is rarely achieved. It is still easy to find policies that no one understands or follows, training that no one remembers and lessons that no one learns.
The process can start with small steps by, for example, looking at one aspect of Good Business. However, in all cases, i2a's approach tries to alter the corporate DNA - the means by which values are converted into behaviours - so that change can replicate quickly across the organisation.
We see Good Business as inextricably linked with performance - a truly responsible business never loses sight of the commercial imperative. Increasingly, Good Business is what leads to commercial success - this is why The enlightened company sees competitive advantage. Good businesses are operationally very efficient, because culturally and organisationally they can make necessary decisions faster. Responsibility is increasingly embedded in the best companies' brands; cause-related marketing is growing and customers are loyal to products and services which they perceive as good. Good companies are finding common ground with NGOs where each can contribute their respective competencies to create new businesses that have positive impacts.
In former times, it was easy to see corporate responsibility as secondary to strong commercial competence. However, today Good Business is interlinked with the commercial success of most businesses; ignoring it is no longer an option, Good Business makes good sense.
About i2a Consulting
i2a consulting helps clients improve performance through Good Business. Good Business means meeting regulatory requirements and making responsible choices. Good Business is about developing the right leadership and culture; using processes, metrics and systems to influence how people behave; and being operationally effective in getting the right things done.
We focus on issues related to corporate responsibility, compliance and business ethics. We combine expertise in key risk areas with proven delivery capability to embed effective solutions. Our approach brings people together enabling knowledge, skills and experience to be used effectively to achieve positive results.
i2a Consulting LLP, 22a Leathermarket Street, London, SE1 3HP.
T: +44 (0) 20 7260 2930
