The difficulties of driving companies towards more socially responsible behaviour has been illustrated this week by research revealing the corporate struggle over ethics.
After studying 750 companies in 90 countries around the globe the research finds that less than half have established “board oversight” of corporate ethics while only 42% undertake mandatory ethics training for employees.
Conducted by Principia Advisory, in partnership with law firm Clifford Chance, the International Chambers of Commerce, the Institute of Business Ethics, Involve and GlobeScan, the findings appear to show that while corporate leaders understand the importance of ethics—even their centrality to msocietal expectations—they struggle with implementation.
According to David Rodin, chief executive of Principia, while corporate leaders believe they must go “beyond the letter of the law” to embed purpose, ethics and value in their operations to ensure employees do the right thing.
The movement is driven by more stringent levels of disclosure, and public examples of poor ethical judgements leading to disaster.
“Leaders need to take action now to embed purpose, ethics and values across their companies and build new capabilities that ensure their people can do the right thing,” says Rodin.
Corporate leaders overwhelming told researchers that business ethics are fundamental, but many appear to be slow putting significant policies in place. Fewer than half of companies measure their performance beyond traditional financial metrics; and while three-quarters have a code of conduct, just 64% of companies have formal systems for reporting misconduct, and only 46% have processes to learn from ethical failure.
There is optimism. Corporate leaders feel they should be speaking out more on social issues. According to Rob Hayward, research leader for Principia, the pandemic has provided a “moment of clarity” on ethics and purpose for many companies. “Crucially they are no longer waiting for unambiguous signals from governments, regulators, consumers or investors: they know that integrating ethics into the core of their business will be essential to future success.”
Pressure on corporate ethics
Other reports have uncovered similar findings. Last year the Institute of Business Ethics (IBE) found that fewer than half—46%—of a group of 242 companies it examined say their boards received mandatory training in their ethics programmes.
More startling, the number of boards discussing ethics, values and culture on a regular basis had fallen from 86% in 2016, when the survey was first conducted, to 69%.
While the pandemic may have provided a wake-up call in some quarters, others report problems. A survey by the US-based Ethics and Compliance Initiative found Covid-19 may have created pressure that forced a deterioration in employee behaviour.
Respondents report witnessing more misconduct and coming under pressure to compromise ethical standards. According to ECI figures, only 14% of employees globally could say they worked in an ethical culture, with French workers reporting the worst environment.
“The workplace is a pressure cooker right now for employees in the US and around the world. While employees seem to be withstanding the pressure and reporting more than ever before, the situation is tenuous with increasing rates of misconduct and retaliation. There may be a breaking point,” the ECI report concludes.
With so much attention focused on companies playing a part in the pandemic and tacking the climate crisis, ethics and corporate purpose will continues to be headline issues—and perhaps deserving of more attention from boards.