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Posted by Sarah Brown on 23 Sep '15

Why ethical business is no longer something nice to do but not for us

{img_title} Today as I sat and read the i, a great newspaper for people with limited time, and as I listened to the radio I realised the book I am just editing on ethical business is more and more relevant and timely. Our passion is to help organisations grow and our belief is that this can only be done if a company is ethical across the business and in all ways, not just in the Corporate Social Responsibility Department.

Falsifying results to get competitive advantage

Obviously the Volkswagen emission scandal which has wiped £18 billion off their market valuation in three days totally illustrates the reasons why being ethical is also good business sense. At some point in Volkswagen it must have become custom and practice to accept you would ‘fiddle’ the emission readings. New members of staff would have accepted this as “the way we do things round here”, whatever it takes to get saleable cars, even if the actual emissions might end up being up to 40x more than the legal limit. Customers of the company phoning the radio today felt betrayed and sounded hurt, they had trusted the company and now didn’t feel they could. Beyond that the ramifications are immense, the car tax paid depends on the emissions, will the cars be saleable on the second hand market, what about other car companies who didn’t get sales because their cars seemed to have worse emissions. All these people potentially could sue, and all the other brands owned by the group from Audi to Bugatti and Bentley are also tainted.

Speaking at the Passat launch, Michael Horn, CEO and president of the Volkswagen Group of America, said: "Our company was dishonest. We have totally screwed up. We must fix the cars to prevent this from ever happening again and we have to make this right. This kind of behaviour is totally inconsistent with our qualities. We are committed to do what must be done and to begin to restore your trust. We will pay what we have to pay."

The problem is that the staff have been regarding the pursuit of profit as more important than values of honesty, complying with the law or caring about the environment.

The ends don’t justify the means even if you want to change the world

But today also saw the publication of the REGULATING FUNDRAISING FOR THE FUTURE - Trust in charities, confidence in fundraising regulation report. It is not only big business that has had its ethics questioned, major charities and their fundraising methods have come under scrutiny as I have written about in two previous blogs. Like some businesses pursuing profit, charities have looked like they would do anything to raise funds.

Now their methods are to be curtailed, the ends do not justify the means. A new regulator and more bureaucracy has become necessary because organisations have not acted ethically.

Saving the world and making a profit

The third story I read in the i, newspaper today was about Goldman Sachs, Nike and Starbucks joining Fortune 500 companies like Proctor and Gamble and Johnson and Johnson, a total of 36 companies, in pledging to source all of their electricity from renewable energy.

The Climate Group, a non profit organisation has spearheaded this campaign and research shows that businesses with a low carbon footprint see higher returns of anything up to 27% on their investment. As the CEO of the Climate Group, Mark Kenber says “Lowering risk, protecting against price rises, saving millions and boosting brand is what shaping a low carbon economy is all about”.

This third story illustrates that “Being good” can also boost profits.

Conclusion

Short term breaking the rules, being ruthless and disregarding the impact of your actions can be financially beneficial whether you are a huge car company or a large charity but in the long run the impact is negative and can be fatal – we wait to see how Volkswagen will do.

Thinking longer term may reduce short term gain but is the only way to achieve sustainable growth. It’s not easy, it requires constant monitoring and difficult decisions across every element of the Responsible Organisation Charter(c), but if you want to really succeed and thrive then that is what you need to do.

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