Why good business ethics pays dividends

Poor business ethics can lead to a huge devaluation for both Tangibles and Intangibles, with stocks and brand values falling for those being singled out.

Outcomes from poor ethical decision-making have been hitting the headlines recently, and the subsequent backlash from the media, public, and legislators alike, have ignited interest in integrating value-added ethics with business processes. Earlier this year, I proposed a Corporate Services Structure that incorporated Environment and Ethics within an enhanced function alongside Finance and Human Resources. This is because responsible decision-making allows companies to sow the seeds early to reap appropriate rewards.

Clever but Not Smart

From the automotive industry’s CO2 scandal to investment banking’s toxic debt bundles to multi-national tax management and the more recent exposure of Panama paper’s tax avoidance schemes, there are a plethora of poor ethical decision-making examples. While financially advantageous to a few in the short term, it ultimately led to a huge devaluation in both tangible and intangible values for many in the long term.

Good Ethics Support Investments

According to the ethical investment company Castlefield, the total investment value of responsible funds has grown to £13.5Bn in the UK (around $19 billion in the US) with yields up 32% compared to FTSE all share at 28% over the same three-year period, according to The Guardian.

Last year, Terry Smith, CEO of Fundsmith LLP, wrote about choosing investments in companies based not on fads, ignorance or single digit KPIs, but on whether or not they were a well-run company. A well-run company being one of strong ethical values and an outlook that reaches past short-term profiteering.

Add to this a recent special report by the Financial Times on Corporate Longevity. The article suggests flexibility and sustainability as two key criteria for businesses wishing to outlast the competition, providing a strong business case for placing good, long-term ethical decision making at the heart of your processes.

With more scrutiny on ethics and environment, and a sound business case, it is no surprise that enabling technology is becoming available to assist in the information capture, data reporting and information for decision-making. I am pleased to say that for many years, we have had an ECO module in place at IFS to complement our ERP solutions and support in ethical decision-making, environmental reporting requirements, and cost reduction.

Good Ethics Drive Good Cultural Behavior

Raising the profile of ethics and environmental issues has another effect. Often what is measured drives cultural behaviors. Therefore, if employees are being asked and incentivized to actively consider the impact of their decisions, then improvement in ethical decision-making will follow.

Good Ethics Add Value

So there it is, responsible environmental and ethical standpoints, integrated within company culture, and enabled by technology, can help to improve the company’s share price, assist in a company’s longevity, and de-risk any future hiccups that might lower the goodwill.

Aside from all that, it’s just the right thing to do.

Share Your Thoughts

I welcome comments on this or any other topic concerning corporate services and business transformation. Please connect using: LinkedIn: https://www.linkedin.com/in/stevetreagust Twitter: @stevetreagust Instagram: @stevetreagust