Why are busi­ness ethics a ne­ces­sity?

Financial Mirror (Cyprus) - - FRONT PAGE -

Re­cently, I wrote about the dif­fer­ence be­tween cor­po­rate phi­lan­thropy and cor­po­rate so­cial re­spon­si­bil­ity (CSR). I specif­i­cally men­tioned that all cor­po­rate phi­lan­thropy ac­tions are beau­ti­ful so­cial ac­tiv­i­ties that are wel­come, but cer­tainly are not core CSR ac­tions.

A con­crete ex­am­ple of the dif­fer­ence be­tween the two, we can draw from the lat­est court case against ex­ec­u­tive mem­bers of the for­mer Cyprus Pop­u­lar Bank. With­out dis­put­ing the cri­te­rion of in­no­cence of th­ese ex­ec­u­tives and their right to a fair trial, there is no doubt that cer­tain bank ex­ec­u­tives and the or­gan­i­sa­tion over­all, vi­o­lated in a num­ber of cases the busi­ness ethics and the prin­ci­ples of re­spon­si­ble en­trepreneur­ship. This case and its tragic im­pact of vi­o­lated busi­ness ethics, high­light the ex­tended re­spon­si­bil­i­ties of ex­ec­u­tives work­ing in large or­gan­i­sa­tions, or in or­gan­i­sa­tions im­por­tant to so­ci­ety (such as banks).

Why do I sug­gest that the ex­am­ple of the for­mer Pop­u­lar Bank serves to bet­ter un­der­stand the dif­fer­ences be­tween cor­po­rate phi­lan­thropy and CSR? I use this ex­am­ple be­cause the bank had been per­haps the pi­o­neer of cor­po­rate phi­lan­thropy in the years of its boom. They en­gaged in a se­ries of ac­tions, of­fered con­tri­bu­tions to var­i­ous so­cial groups, em­braced and ex­panded the ra­dio-marathon, the largest char­ity ac­tion in Cyprus and made their name largely syn­ony­mous with or­gan­ised char­ity. I am sure if we go back to the me­dia com­mu­ni­ca­tions of the bank at the time, we will find se­ries of re­ports that th­ese ac­tions were in the frame­work of the bank’s CSR. This demon­strates that the ex­ec­u­tives of the bank had a com­pletely wrong un­der­stand­ing of their obli­ga­tions to the com­mu­nity. They con­sid­ered th­ese as an obli­ga­tion to re­turn some­thing to so­ci­ety in the form of char­ity, but did not ap­pre­ci­ate that their fore­most obli­ga­tion was to pro­tect the com­mu­nity from poor and ir­re­spon­si­ble busi­ness prac­tices.

The CSR con­cept has been in the last few years an is­sue of stan­dard­i­s­a­tion by var­i­ous or­gan­i­sa­tions around the world. In 2004, af­ter dis­cus­sions for two years, the In­ter­na­tional Stan­dards Or­gan­i­sa­tion, the well-known ISO, de­cided to pro­ceed with the pub­li­ca­tion of an in­ter­na­tional stan­dard for CSR.

The con­sul­ta­tion was the long­est and the most pop­u­lous from any pre­vi­ous stan­dard and lasted un­til Novem­ber 2010, when the ISO 26000 stan­dard was is­sued. The stan­dard was la­beled “Guide on So­cial Re­spon­si­bil­ity” and has a sub­stan­tial dif­fer­ence from pre­vi­ous stan­dards is­sued by the ISO.

The ISO 26000 is an ad­vi­sory and not manda­tory stan­dard. It is a guid­ing frame­work and not a man­age­ment sys­tem that can be cer­ti­fied. This stan­dard, at­tempts to clar­ify what con­sti­tutes CSR and how it can be­come part (in­te­gra­tion) of ev­ery­day busi­ness prac­tice, what de­fines the stake­hold­ers of the or­gan­i­sa­tion and what is the re­la­tion­ship of CSR to sus­tain­able de­vel­op­ment. It re­sults in the res­o­lu­tion of seven core prin­ci­ples for the ef­fec­tive as­sump­tion of so­cial re­spon­si­bil­ity by or­gan­i­sa­tions. Th­ese prin­ci­ples are: 1. Ac­count­abil­ity 2. Trans­parency 3. Eth­i­cal be­hav­iour 4. Re­spect for stake­holder in­ter­ests 5. Re­spect for the rule of law 6. Re­spect for in­ter­na­tional norms be­hav­iour 7. Re­spect for hu­man rights. As part of defin­ing the lim­its of its so­cial re­spon­si­bil­ity, each un­der­tak­ing is re­quired to con­jure on the fol­low­ing key is­sues: a. Or­gan­i­sa­tional gov­er­nance b. Hu­man rights c. Labour prac­tices d. The en­vi­ron­ment e. Fair op­er­at­ing prac­tices f. Con­sumer is­sues, and g. Com­mu­nity in­volve­ment de­vel­op­ment

It is clear that the stan­dard is broad and touches in a co­her­ent man­ner upon the need to re­spect both the fi­nan­cial re­sults of firms, the in­ter­ests of peo­ple (em­ploy­ees, part­ners, cus­tomers, con­sumers, lo­cal com­mu­ni­ties and so­ci­ety at large) and those of the planet (en­vi­ron­ment im­pact from the op­er­a­tion of the busi­ness, etc.).

If busi­nesses do not man­age to in­cor­po­rate the ba­sic prin­ci­ples of CSR in their daily op­er­a­tion, we will con­tinue to have ex­am­ples sim­i­lar to that of the for­mer Pop­u­lar Bank, where the show­case will be stun­ning, but the con­tent will be in­suf­fi­cient, so­cially anal­gesic and de­pend­ing on the ex­tent of the so­cial im­pact of a busi­ness fail­ure, po­ten­tially dan­ger­ous.

The use of the guid­ance stan­dard ISO 26000, as the ba­sis for iden­ti­fy­ing the re­spon­si­bil­i­ties of a busi­ness, but es­pe­cially for the de­sign of a co­her­ent strat­egy to un­der­take such re­spon­si­bil­i­ties, is a good start­ing point on the way to i mprove busi­ness ethics and de­velop more sus­tain­able en­trepreneur­ship.

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