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What are the benefits of ethical business?

The fallout from corporate ethical breaches can be distressing. Just ask Ian Shepherd, chief executive of international engineering/architecture/construction company GHD.

In 2013, despite an otherwise exemplary 90-year history, the private company received a 12-month ban from tendering for World Bank aid projects after a senior staff member in GHD’s Indonesian office defrauded a fund that was to help rebuild areas after the 2004 tsunami and earthquake.

Rather than scurrying for cover, Shepherd and his executive team opted to shut their Jakarta office and openly discuss the experience to recalibrate their integrity management systems.

“We chose to actually talk about it rather than resile from it,” Shepherd says. “It reinforced to everybody across our company the importance of empowered leadership systems where you rely on each other’s integrity.”

Business ethics vs social responsibility

The 2015 Australian Centre for Corporate Social Responsibility (ACCSR) study, State of CSR in Australia and New Zealand, praises brands such as Arup, BHP Billiton, NAB, Westpac, Sydney Water, Telstra and Teachers Mutual Bank for their ethical approaches.

The report also suggests that innovative corporate social responsibility practices are helping more companies access new types of markets and value creation opportunities.

But what does ‘being ethical’ actually mean for a business? Dr Leeora Black, managing director of the ACCSR, says the notions of ethics and social responsibility are clearly intertwined, but quite distinct. Ethics are the principles and values that shape a company’s decision-making processes; social responsibility sees an organisation attending to the consequences of its activities.

Ethics are the principles and values that shape a company’s decision-making processes; social responsibility sees an organisation attending to the consequences of its activities.

“You want strong ethical principles and values to underpin your decision-making in order to manage your impacts on society and the environment,” she says.

Companies are putting ethics on the agenda for a variety of reasons. Corporate governance best practice has come to the fore as people and investors are expecting greater transparency from companies and financial institutions. Consumers are more aware of human rights issues involving the manufacture and supply of products.

“Managers and directors are more aware of the requirements for ethical business behaviour and also have much better skills and knowledge to manage that,” Black says.

Examples of ethical business in Australia

Corporations are lining up to show off their ethical credentials. Ford, for example, has embraced eco-technologies; Visa has been praised for its financial inclusion policies; and our own NAB has received praise for a code of conduct that encourages integrity and transparency.

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