The list is long: the Enron scandal in 2001, the WorldCom crisis in 2003, insider trading at EADS in 2007, fraud at Société Générale in January of this year, not to mention the many examples of excessive pay awards to company bosses. In recent years, companies have had to cope with a large number of ethics-related crises. “The challenges are much greater today than they were a few decades ago when companies were local,” says Luc Van Liedekerke, professor of business ethics at the University of Leuven and President of the European Business Ethics Network. “And there is a greater risk of being found out.” Along with globalisation came deregulation, especially in the banking sector, and a failure to respect human rights and provide decent working conditions, particularly in emerging countries.
“Ethics is the ‘in’ thing,” says Michel Le Net, President of the Cercle d'éthique des Affaires business ethics association. “Since the 1990s, there has been a worldwide aspiration to ‘do better’.” There are many reasons for this phenomenon. “The development of ethical considerations and their adoption by companies can be explained by both macro and micro factors,” continues Jean-Jacques Nillès, Professor in Philosophy, Lecturer in Management at the University of Savoy and Scientific Advisor for Socrates, an ethical consulting firm. “At the macro level, we observe the need to make social activities more meaningful, to consolidate ties and to develop trust in relationships. At the micro level, objectives vary according to the company involved; in-house, it may be about risk avoidance, team management or control; and outside the company, marketing or public relations.”
The keyword is exemplarity
Nowadays, a whole range of factors associated with corporate behaviour come in for intense scrutiny, including transparency, compliance with commitments, protection of employees’ rights, care shown for the quality of products and the health of consumers, avoidance of potential conflicts of interest, etc.. The public is becoming increasingly aware of such issues, particularly through NGOs, and no longer shies away from challenging companies. “Ethics is a move in the right direction,” says Michel Le Net. “It involves choosing acceptable behaviour without any negative impact, against a backdrop of intense scrutiny from NGOs. The key word is ‘exemplarity’.”
Above all, companies must now adopt a sustainable development approach to business, from both an environmental and a social standpoint. Behind this trend lies the philosophy of Hans Jonas, which invites us, on the one hand, to choose a form of development that meets the needs of existing generations without jeopardising the ability of future generations to meet theirs and, on the other hand, to adopt the principle of precaution in the absence of scientific certainty. The international community picked up on these issues during the Earth Summit in Rio in 1992, and at the Johannesburg summit in 2002, when the implementation of sustainable development was extended to companies.
In response to the public’s strong reaction to the scandals that regularly rock the business world and in the face of pressure from the general public and the international community on environmental issues, many aspects of corporate law have been tightened. The Sarbanes-Oxley Act of 2002 requires companies listed in the United States to disclose to the SEC (Securities and Exchange Commission) financial accounts that have been personally certified by company bosses, making them legally responsible for their company’s accounts. In France, the New Economic Regulations law, which was adopted in May 2001, requires listed companies to include information in their annual reports about their corporate social responsibility (CSR) policy.
“Nowadays, ethics is a real constraint for companies,” says Caroline Krauze, Managing Director of Coethic, a strategic consulting firm specializing in sustainable development. “Pressure can be seen within the wider community?NGOs, citizens, consumers, and investors with the development of SRI (Socially Responsible Investment, Ed.) funds, which demands accountability and calls for greater transparency. The development of social and environmental regulations has also increased the stringency of requirements in this regard.” Some companies have gone even further than is required of them by law. Such pro-active practices assume various forms, including the adoption of corporate ethical codes, ranging from straight-forward general persuasion to detailed instructions on the behaviour to adopt in specific situations, and the creation of “ethical manager” positions, even within SMEs. Although this ethical movement initially focused only on large corporations, it quickly gained ground among small and medium sized companies. “Nowadays, all major corporate clients include social and environmental requirements in their contract specifications,” says Caroline Krauze, “so SMEs have to comply with this situation.”
Trust and business
But companies can also expect benefits from adopting such behaviour. “In the long term, an ethical approach can protect a company from legal action,” says Michel Le Net. “It can also enable a company to present an image as a role model in sustainable development, thus enhancing its esteem, particularly among employees.” Jean-Jacques Nillès also sees the advantages: “Ethical behaviour provides the means of developing the trust that is needed in business, strengthening bonds with customers and partners, reinforcing the unity of teams, reducing stress in the workplace and pre-empting risks. Because a mistake can be expensive...”
And from there, it is only a small step towards accusing some companies of adopting an ethical approach with the sole purpose of managing risk and winning over the public, even if it means ignoring their commitments. “The intentions of companies that engage in a policy of sustainable development vary,” explains Caroline Krauze. “They may be genuinely convinced that such a policy will create value, reduce risks and encourage innovation. It may also be a way of attempting to reduce costs or perhaps merely a public relations exercise. But in this case, companies are caught out by the fact that they have to prove their commitment, and the stakeholders are there to remind them of this.” As Michel Le Net confirms: “Even if it sounds good and satisfies expectations to claim to be ethical, a commitment is made and it is difficult to act in any other way.”
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