Embedding Ethics and Sustainability in Business and the Differences Between The Two

Embedding  Ethics  and  Sustainability  Prague  College  Conference  

June  5th  2014  Tobias  Webb,  founder,  InnovaCon  Forum  

Tobiaswebb.blogspot.com    www.innovaCon-­‐forum.co.uk  

So  what  are  we  talking  about  here?  

It’s  important  to  disCnguish  between  ethics  and  sustainability  as  they  are  oLen  understood:    •  Ethics  are  how  your  people  act  every  day  beyond  what's  legally  required.  BUT  -­‐  Ethical  expectaCons  are  not  fixed,  they  evolve  over  Cme  

So  what  are  we  talking  about  here?  

 •  Sustainability  is  oLen  

seen  to  be  more  about  how  your  company  uses  resources  and  affects  the  environment  

•  Sustainability  is  evolving.  For  the  leaders  it  now  means  shiLing  towards  an  overall  posi2ve  impact  on  society  &  the  environment  

Interface  pic  here  

Interface’s  state  of  the  art  factory  in  Sherpenzeel,  the  Netherlands.      The  company  is  seen  as  a  leader  in  sustainability  thinking  and  pracCces.      But  ‘ethical  leadership’  is  seen  as  slightly  more  problemaCc.  Why  is  this?  Discuss…  

How  does  ethics  relate  to  sustainability?    

•  Well,  if  you  want  a  parCcular  agricultural  commodity  to  be  sustainable,  ethics  plays  a  role  in  how  you  treat  your  relaConships  with  farmers  of  that  crop  

 •  If  you  want  to  secure  supply  

you  need  long-­‐term  trust.  That’s  built  on  a  series  of  mutually  beneficial  ac2ons,  not  the  purely  transacConal  nature  of  most  purchasing  relaConships  

Social  Enterprises  such  as  Co\onConnect  are  now    being  set  up  to  bring  farmers  and  buyers  closer    together    

Ethical  Trading  means  different  things  to  different  people  

Labour  condiCons  for  many  EU  firms  

But  also  minimum  prices  for  commodiCes  

See:  h\p://www.nikeresponsibility.com/report/content/chapter/labor#infographic397  

See:  h\p://www.primark-­‐bangladesh.com/our-­‐work-­‐in-­‐summary/  

Sustainability  issues  are  oLen  misunderstood…  

Embedding  sustainability  is  easier  than  embedding  ethics  -­‐  Why?  

•  Sustainability  (as  most  companies  interpret  it)  is  more  easily  measured.  i.e.  Carbon  emissions,  chemicals  use,  waste  generated  or  saved  

 •  Ethics  can  be  ‘measured’  to  a  degree  

but  doing  so  is  more  complex    •  Why?  Because  we  are  dealing  with  

people.  People  are  highly  complex  beings.  There  are  so  many  variables  with  regard  to  why  people  do  what  they  do.  Ethics  are  highly  subjec1ve:  

•  E.g.  Edward  Snowden:  Ethical  or  not?  

Culture  audits:  A  useful  tool  (as  long  as  they  are  done  right!)  

Embedding  ethics  comes  from  both  leadership  and  culture  

•  AcCve  Leadership:  with  clear  simple  acCons  

•  Clear,  simple  expectaCons  •  Regular  re-­‐enforcement  of  

these    •  Accountability  mechanisms  •  Visible  consequences  

(reporCng,  firing)  •  Constant  celebraCons  of  

success    •  Regular  involvement  of  

everyone  in  “living  our  values”  •  But  this  is  not  easy…  

Ethics:  An  approach  or  a  standard?  

Fundamental  differences  between  compliance  and  ethics.  Companies  confuse  the  two  and  have  “Ethics  and  Compliance  Officers”.  They  are  almost  always  lawyers,  who  focus  on  rules  rather  than  values.  This  leads  to  problems…  i.e.  Banking:  Heavily  rules  based,  not  values  based  

If  ethics  is  a  standard  then  it  simply  becomes  compliance  with  a  set  of    wri\en  rules    The  problem  with  a  rules-­‐based  Approach?  People  immediately  look  for  ways  around  the  rules  rather  than  considering  what  meets  their  values  

Yvon  Chouinard:  Patagonia  founder.  Author:  “Let  My  People  Go  Surfing”      

Embedding  sustainability  is  more  process  driven    

A  six  stage  management  process:  (there  are  others)    Step  1:  Insight,  Research,  Benchmarking  Step  2:  Headline  goals:  Carbon,  safety  Step  3:  Establish  Baseline  for  Future  Progress  Step  4:  Allocate  Responsibility  for  AcCon  Step  5:  Public  ReporCng  of  Progress  Step  6:  Revisit  and  Challenge  Original  goals  

Lots  of  companies  now  have  headline  plans  to  help  them  mainstream  sustainability  

•  Unilever:  “Sustainable  Living  Plan”  

•  Nestle:  “CreaCng  Shared  Value”  

•  Coca-­‐Cola:  “Deliver  for  Today,  Inspire  for  Tomorrow”  

•  Marks  &  Spencer:  “Plan  A”  •  Sainsbury’s  “Twenty  by  

Twenty”  •  Interface:  “Mission  Zero”  •  Asia  Pulp  &  Paper  /  Wilmar  /  

Cargill…  

And  here  is  a  typical  set  of  headline  targets  to  embed  corporate  sustainability    

Industrial  companies  find  it  harder  to  come  up  with  ‘catchy’  names  for  their  sustainability  work.  Why?    

•  Their  direct  footprint  is  much  higher  i.e.  carbon,  safety  

•  Tackling  these  challenges  oLen  involves  serious  money    

•  Their  names  are  less  known  to  the  public  /  consumers  

•  However,  many  are  at  the  forefront  of  embedding  innovaCon:  Siemens,  GE,  Interface,  SKF,  Skanska,  BMW,  Dow,  DuPont,  Anglo  American  etc…  

•  Even  large  B2B  Asian  firms  (APP)  ‘get’  sustainability  

Sustainability  requires  vision  and  strategy,  Ethics  are  oLen  more  tacCcal  (but  not  always)  

•  Ethics  CAN  be:  “This  is  the  way  we  do  things  around  here,  every  day”  

•  But  only  if  those  things  are  ethical  •  TradiConal  sustainability  

paradigm:  “We  must  reduce  our  energy  use,  minimise  waste,  recycle,  and  help  our  employees/suppliers  be  greener  

•  Modern  sustainability  paradigm:  “Our  Vision  is  to  be  the  world's  most  sustainable  company  in  our  sector”    

•  But  few  would  say  “we  will  be  the  most  ethical  company  in  the  world”  –  Why  is  this?  Discuss…  

Plan  A  pic  Marks  &  Spencer:  Simple  name  for  180  commitments  on  sustainable  business  

In  conclusion  (1)  •  Ethics  and  sustainability  ARE  different  •  Ethics  is  an  approach,  not  a  standard  set  of  behaviours  •  But  they  work  together  very  well  in  some  cases  •  You  can  be  a  company  that  works  on  sustainability  without  

being  believed  to  be  ethical  (every  big  firm  has  a  plan)  •  But  you  can’t  be  ethical  in  the  long  term  without  being  

much  more  sustainable  in  the  modern  sense  •  The  two  together  create  both  significant  opportuniCes  and  

a  decision  making  framework  to  get  there,  and  stay  there  •  Large  companies  have  a  significant  challenges  given  ethics  

are  subjecCve:  RelaCve  (local)  vs.  Universal  (global)  

In  conclusion  (2)  

•  But:  It  is  not  easy.  The  bigger  a  company  is  the  harder  it  becomes  for  them  to  innovate,  embed  new  pracCces  and  be  consistently  ethical  in  their  day  to  day  work  –  and  to  keep  up  with  changing  expectaCons…  

•  Some  sectors  have  very  serious/complex  sustainability  and  ethical  challenges:  Banking  and  Finance,  Mining,  Fossil  Fuels  

In  conclusion  (3)    

•  The  BIG  challenge  is  scaling  smaller  company  pracCces  (Interface/Patagonia)  to  the  size  of  Unilever,  Nike  or  GE  etc  etc    

•  Technology  is  speeding  up  change.  But  improved  incenCves  for  investors,  boards,  managers,  consumers  are  the  key  

•  We’re  sCll  a  long  way  away  from  being  sustainable,  but  some  companies  have  made  great  progress  in  recent  years…  

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