Ethics as a comparative advantage for business

– Ethics is growing as a comparative advantage is business.
– Yet many leaders are uncertain about their role as ethical leaders.

Here’s a note from Alison Taylor:

What are the best approaches investors can use to encourage companies to be more ethical and responsible? My second article on how ideas from social psychology and behavioral science can help with the shift to stakeholder capitalism, covers the relationship between investors and companies. I know I am just scratching the surface on this huge topic, but this is another instance where we are doing the same thing over and over again and expecting a different result.

All the energy dedicated to ESG investing is encouraging, but there is a pressing need to sort the signal from the noise. The overwhelming focus on correlating existing, highly imperfect ESG metrics with financial performance risks drowning out more promising avenues of research on how to meaningfully encourage ethical leadership, better risk-management, and a broader and longer-term approach to value creation.

Then, this “Ethics Study” by Principa, in partnership with Clifford Chance, GlobeScan, International Chamber of Commerce, Institute of Business Ethics and INvolve – The Inclusion People talks about a new era of ethics in business and a growing commitment of management and board to ethics in business. The study found that of executives surveyed:

– 97% feel a personal responsibility to ensure that their company does the right thing
– 96% believe that doing the right thing means following their company’s own values as well as applicable laws and regulations
– 92% believe that companies should follow their own values even when it means sacrificing financial returns

Here is an article by Dina Medland about the study – here’s an excerpt:

One of the most interesting aspects of the interviews here with 80 senior leaders of top global brands is the revelation that many corporate chiefs are uncertain of the scope of their own role as ethical leaders. It suggests that this aspect of leadership has been historically slow to evolve as a gold standard. It also correlates with the lack of gender diversity at the top of global leadership across the public and private sectors. In the pandemic, female leadership has stood out in governments and across science, research and healthcare. Diversity and inclusion is an integral part of all ethical leadership, and critical for its comparative advantage and success.

On the subject of being uncomfortable with the ethical responsibility of leadership, the 2021 Edelman Trust Barometer found that 86% of people surveyed worldwide now expect CEOs to speak out on controversial social issues, with almost two-thirds (66%) demanding that business leaders take the lead, rather than waiting for governments to act.

Also check out “Speak-Up and Call-Out Culture” from Ethical Systems. It contains list of ideas to apply and a list of studies to consider.