David Grayson, incoming chair of the Institute of Business Ethics, says looking at business through an ethical lens has never been more crucial
For the last 16 years, the polling firm Ipsos Mori and the Institute of Business Ethics have been asking the British public whether they think British business is generally behaving ethically, or not. This longitudinal data-set provides a real-time indicator of changing public perceptions of big business.
Combine this survey with the global data from the annual Edelman Trust Barometer (published each January since the millennium), and the cumulative message to big business, in particular, is that there is no room for complacency.
So much of the market capitalisation of business is made up of what the economists call the intangibles, such as reputation and brand. Trust and reputation take years to build but, as the American investor Warren Buffet famously observed, can be lost in an instant.
This is why many of us have argued for decades that businesses need to take responsibility for their social, environmental and economic impacts. At the very least, this should involve reducing risks by minimising negative impacts, often characterised as “do no harm”. But if that is the extent of corporate responsibility, businesses are missing out on a huge potential upside.
As I tell my students, no entrepreneur built his or her business just on risk-mitigation. You also need opportunity-maximisation: taking responsibility for increasing the positive impacts. This is what is often now described as “net positive” or corporate sustainability: creating value for business and society through managing the risks and the opportunities of social, environmental and economic impacts.
Businesses can no longer be half-hearted or diffident about sustainability. They have to go all in. In my book of that title, co-authored with Chris Coulter of GlobeScan and Mark Lee of SustainAbility, we argue that going all in requires five essential, interlinking attributes.
1. A clear purpose, which is authentic and inspiring, explains why the business exists and how it creates value for itself and for society.
2. A comprehensive plan that minimises negative impacts; maximises positive impacts; covers all aspects of the business and extends into the supply chain.
3. A sustainable culture that is innovative, empowering and engaging, open and transparent, and with a core sense of ethics and responsibility.
4. A willingness to collaborate extensively with a range of business, civil society and public-sector partners.
5. See themselves as advocates: they speak out and speak up for social justice and sustainable development.
Not only does 'culture eat strategy for breakfast' but it drives whether purpose is truly lived
Culture has often been neglected in discussions about corporate responsibility and sustainability in the past. Yet not only does “culture eat strategy for breakfast” but it drives whether purpose is truly lived. Culture determines how successfully a sustainability strategy is implemented; shapes the openness or otherwise to collaborate; and is fundamental in establishing whether corporate advocacy is authentic and, therefore, credible.
A sustainable culture has several dimensions but at the heart of it are ethics and values. For more than 30 years the Institute of Business Ethics has been helping businesses to understand what they need to do in order to create and maintain an ethical culture. This has been captured in the framework illustrated.
Business, and the world of work generally, is facing massive changes. The US military defines this as a VUCA world: volatile, uncertain, complex, ambiguous.
Globalisation means that businesses have to be authentic across many different social cultures. Globalisation has also contributed to hyper global inequalities. The Edelman Trust Barometer UK 2019 showed that only 14% of the British public think the system is working for them.
This general lack of trust in business across world has ignited movements to renew capitalism, both from within business (for example conscious capitalism, sustainable capitalism, inclusive capitalism, and the focus on capital for long-term growth) and beyond (like the Occupy movement and successors such as the gilets jaunes).
This is an era of enforced transparency: the 'naked corporation', as Don Tapscott calls it
Global connectivity and social media, combined with this decline of deference and trust means this is an era of enforced transparency: the “naked corporation”, as Don Tapscott calls it, where “everything is ultimately for the record”.
Greater longevity, longer working lives, frequent career as well as job changes, more employees with a tour of duty mind-set with employers, and the gig economy means the workplace is fundamentally different today compared with 10, 20 years ago, as we enter the era of the 100-year life, as described in an excellent book of that title by Lynda Gratton and Andrew Scott.
And all of this is before we start to face up to ABC – artificial intelligence, big data, cloud computing – which are developing fast and creating urgent new ethical challenges not just for big tech, but for all businesses.
These trends and more mean that looking at how we do business through an ethical lens has never been more crucial. These trends also put pressure on those of us championing business ethics and sustainable values to be agile in our agenda and our own ways of engaging businesses, employees and future business leaders.
As I begin my new role as chairperson at the Institute of Business Ethics, I am very much looking forward to working with fellow trustees, staff, supporters and partners to help the IBE build on its heritage as we develop fresh approaches to meet the needs of businesses that aspire to be ethical, and thereby sustainable, in the 2020s and beyond.
David Grayson is Emeritus Professor of Corporate Responsibility at Cranfield School of Management and the incoming chair of the Institute of Business Ethics. He is a member of the international advisory board of Ethical Corporation.