Ethical Performance
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Right now, business needs more walk and less talk

November 2008

The financial crisis has shown that reporting is no substitute for firm action on ethics, says Leo Martin

The rise and rise of corporate responsibility reports might make the casual observer think there has been a revolution in responsible business behaviour. But the storm in the financial markets suggests otherwise, and the curve of the graph showing the number of scandals involving mis-selling, bribery, corruption, and greenwash is rising strongly.

These events might be connected if we imagine that companies, in a determination to show they have put clear green water between themselves and these scandals, had written these reports to show their superior credentials. However, the same financial institutions and companies that are caught up in the scandals are also writing corporate responsibility reports –  and even winning awards for them.

This must challenge our industry to question the value of these documents and, more importantly, to find a way of measuring genuinely ethical behaviour that is unmistakable for employees, customers, shareholders, regulators and suppliers alike. The danger is that these reports, and by default CSR itself, are becoming discredited because of the disparity between reported and actual behaviour.

No doubt efforts to own up to difficult issues and to tackle them head on now mark out the better reports. However, we need to move towards measurement of ethical behaviour that is easy to understand, differentiates good from bad and – crucially – limits irresponsible behaviour. We therefore need to move away from reports that are too much ‘after the fact’ and rarely link to improvements in behaviour and culture.

One key problem comes from the disconnect between communications people, who control reporting, and ethics officers and others who worry about behaviour. In the current crisis it is clear that the approach to reporting, with its emphasis sometimes on gloss rather than a real appraisal of responsible behaviour, should become obsolete. On the other hand, activities that embed responsible behaviour should now become the heart of our industry. Reports, if any, should focus on a small set of indicators that allow a reader to judge whether this embedding is working.

At GoodCorporation we have ploughed a sometimes lonely furrow trying to measure how well business practices work in reality and turning qualitative feedback and intelligent investigation into a quantified ‘grade’ of how well a business practice works. What is the real value in an honest assessment of business ethics? Hopefully the events of recent weeks spell out the answer in bold letters. Business ethics is at the heart of sustainable business and is most clearly in the interest of the shareholder.

Leo Martin is director of GoodCorporation       leo.martin@goodcorporation.com




GoodCorporation | Global | Reporting

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