Ethics – crucial building block for sustainable business

Blog
30 March 2022

Tags: Ethical Values

In our latest blog Prof David Grayson CBE, co-author of the Sustainable Business Handbook and Chair of the Trustees at the IBE, reflects on the importance of creating and maintaining a sustainable culture.

As well as my volunteering role as chair of the Institute of Business Ethics, I teach at Cranfield University School of Management as Emeritus Professor of Corporate Responsibility. I also write and speak and advise about corporate sustainability. Unsurprisingly, therefore, I am often asked about how business ethics relates to corporate responsibility – and how both relate to sustainability.

Definitions and terminology can be dangerous territory – especially for someone who tries to span the boundary zone between practice and management education/academia! Nevertheless, donning my hard hat, let me try!

Corporate responsibility / responsible business is about a business taking responsibility for its social, environmental and economic impacts.  

Corporate sustainability or sustainable business is a business commitment to sustainable development and an approach that creates long-term shareholder and societal value by embracing the opportunities and managing the risks associated with social, environmental and economic impacts. Hence why, personally, rather than the Milton Friedman idea of the purpose of business being to maximise profits, I prefer the more modern definition promoted by the Purpose of the Corporation project: “Producing profitable solutions from the problems of people and planet, and not profiting from creating problems.” Note, this still emphasises profits and value-creation – but as the consequence of a well-run business, not its core raison d’etre. There is then the crucial matter of whether the culture of the business helps or hinders the purpose and the goal of sustainability.

As the IBE and many others have long emphasised: all organisations have a culture. The question is whether this is one that is desired and positive and helps to drive desired behaviours – or one that is left to chance and may become toxic. And this is where business ethics are so important. Are boards and leaders at all levels of an organisation promoting business ethics, insisting on “fair dealing” with fellow employees, customers, suppliers, competitors, communities, investors and so on?

A recent headline in The Times newspaper, over an OpEd by Iain Martin ran: “When bosses discover ethics, we all suffer.” I will be charitable and reflect that writers rarely choose their headlines, leaving that to sub-editors. Nevertheless, I think it should have read, “When bosses discard ethics, we all suffer.” From Robert Maxwell raiding the Mirror pension funds, through Enron to Theranos and Purdue Pharma today, unethical behaviour, sooner or later, makes a business unsustainable.

This is why in our new Sustainable Business Handbook, Chris Coulter, Mark Lee and I include a chapter on how to create and maintain a sustainable culture. We argue that such a culture has several interlinking and mutually reinforcing dimensions. It is engaging and empowering of its employees and other stakeholders, which means that it consciously promotes diversity, equity and inclusion. Empowering means also that an organisation equips people with the skills and the tools to do their job, so they feel confident as well as encouraged to take the initiative and speak up. People are much more likely to do this in organisations that are open and receptive to ideas and suggestions, and which are innovative. We are also convinced that organisations which are responsible and ethical create more loyalty, build more trust and thereby reinforce engagement and a wish to use empowerment. All of this is easier in cultures which are transparent and accountable. Accountability especially is also about being humble as well as courageous enough to show vulnerability and admit that the organisation does not have all the answers. I was struck by the words of the BP CEO in an interview with The Financial Times recently: “Those days where the boss was the hero and the boss knew everything and just seemed impervious to anything... I think those days are over. It’s just not me.”

As Chris, Mark and I write in The Sustainable Business Handbook:
“Sustainably successful organisations, therefore, need an open culture that is receptive to new ideas as opposed to a “not-invented here” mentality. They need to create a situation where internal and external stakeholders want to propose and champion innovations for them. So sustainable cultures are not rigid. On the contrary, they are flexible, agile, and continuously improving. Leaders, in particular, need to have not just an innovative mindset, but also one that can envisage what the company’s sustainability practices will look like a decade or more ahead as well as the ability to conceive more sustainable business models.”

Our handbook is designed to be very practical and offer step-by-step, how-to guidance. So, in the culture chapter, we suggest – and I suspect regular readers of IBE blogs and webinar attendees will recognise – 

Step 1. Understand the current culture
Step 2. Define the desired future culture
Step 3. Map actual versus desired culture and agree an action plan to achieve this new culture 
Step 4. Implement action plan 
Step 5. Regularly review culture and adjust as appropriate.

My thanks to IBE colleagues for wise counsel on the culture chapter. And I am looking forward to discussing further how business ethics is a fundamental building block for building a sustainable business, in a forthcoming IBE webinar.

Prof David Grayson CBE is chair of the IBE and co-author of the new Sustainable Business Handbook (Kogan Page – Feb 2022). www.amazon.com/author/davidgrayson

Related event...

Ethical Culture: critical foundation for sustainable business

Mike Tuffrey, event chair and Co-founder of Corporate Citizenship will be in conversation with IBE chair David Grayson, and fellow trustees Louise Terry and Loren I Shuster. David is a co-author of The Sustainable Business Handbook. Louise was previously corporate affairs director for L’Oréal and Coca-Cola and Deputy Chair of Save the Children, and Loren is Chief People Officer & Head of Corporate Affairs at The LEGO Group. They will discuss how ethics and culture help businesses be sustainable.

 

Author

Professor David Grayson CBE
Professor David Grayson CBE

Chair

David is Emeritus Professor of Corporate Responsibility at Cranfield School of Management. From 2007-2017, he was director of the Doughty Centre for Corporate Responsibility and Professor of Corporate Responsibility.

David became Chair of the Trustees Board on 01 April 2019.

He joined Cranfield in April 2007, after a thirty year career as a social entrepreneur and campaigner for responsible business, diversity, and small business development. This included founding Project North East which has now worked in nearly 60 countries around the world; being the founding CEO of the Prince's Youth Business Trust and serving as a managing-director of Business in the Community.

David has an Honorary Doctorate of Law from London South Bank University and was a visiting Senior Fellow at the CSR Initiative of the Kennedy School of Government, Harvard (2005-10).

He has served on various charity and public sector boards over the past 30 years. These have included the boards of the National Co-operative Development Agency, The Prince of Wales' Innovation Trust and the Strategic Rail Authority. He chaired the National Disability Council and the Business Link Accreditation Board; in each case appointed by the Major Government and re-appointed by the Blair administration.

He is currently chairman of the national charity Carers UK championing the role of 6.5million Britons caring for a loved one. He is a former chairman of one of the UK's larger social enterprises and largest eldercare providers, Housing & Care 21 during which the organisation made corporate history by becoming the first-ever not-for-profit successfully to acquire a publicly quoted group of companies. David received an OBE for services to industry in 1994 and a CBE for services to disability in 1999.

David has written a number of books on responsible business and corporate sustainability including most recently: ‘All in - The Future of Business Leadership’ with Chris Coulter and Mark Lee. He is part of the faculty of the Forward Institute and of the Circle of Advisers for Business Fights Poverty

The Guardian has named David as one of ten top global tweeters on sustainable leadership alongside Al Gore, Tim Cook - CEO of Apple, and Facebook's COO Sheryl Sandberg

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