Doing right, for a company, now goes beyond earning shareholders a fat dividend. Increasing scrutiny is now being cast on the ethical practices of businesses, with drastic results on their image and reputation – and long-term profitability. Environmental sustainability forms a component of business ethics, and its advocacy has received significant investments – though without much payback, according to a report by Verdantix. Businesses will have to incorporate sustainability as part of their branding, an approach that will lead to revenue growth. Read more

The role of ethics in everyday business

Why does it matter? What effect does it have on business success/reputation? What can businesses do to be more ethical?

By Rebecca Doodson in The Economic Voice (12 April 2013):

Ethics is fast becoming an essential aspect of business in the modern world. We see ethical practices promoted in advertising, and the lack of ethical behaviour condemned in the media. From scandals focused on The BBC to Barclays and Tesco Beef Lasagnes; business ethics are being increasingly scrutinized.

But why does this matter? Ethical scandals in the food, health, journalism and banking sectors have made the (already discerning) public more aware of these issues of ethics and, as consumers, we consider ethics when choosing a brand, supplier or service. Having a good ethical reputation can be what sets a business apart, and when it comes to ethics, reputation is everything.

If asked to think about companies that have lost public trust, what names would spring to mind? Amazon? Starbucks? Both have been the focus of media scrutiny following revelations of tax avoidance. But the interesting thing is tax avoidance is not illegal; instead the public were outraged at the departure from ethical standards. And it doesn’t stop there – ‘tax shaming’ is increasingly becoming an outlet for public anger at tax avoidance practices. Both Vodafone and  Barclays have been victims of protest against tax avoidance and, more recently, protestors have utilised social media ‘trending’ the hashtag #boycottstarbucks.

Whilst some do boycott brands, the impact this has is relatively low. It is difficult to measure the direct impact of public anger on profits of companies but branding experts agree the reputational repercussions are key.

The 13th Annual Edelman Trust Barometer clearly demonstrates the impact financial scandals have had on public trust. When asked about the banking industry, the UK scored just 29% in overall trust – a number considerably lower than the US, Canada, China and Australia.

Once a company’s brand is damaged by ethical scandals, it can be very difficult to re-build the trust of existing consumers and even more challenging to attract new ones. Additionally, a lapse in reputation can leave a business open to attack from competition.

So what can businesses do to be more ethical? Implementing a code of ethics is a good start. A recent survey conducted by IBE revealed 73% of UK employees say their organisation provides written standards of ethical business conduct. However, only half said they would report misconduct if they saw it occur. Employees are at the ‘front line’ of customer service and often have the most influence over the customer’s perception of the business. Training and development is therefore essential. This can be done internally or through workshops by ethics training providers. Some companies also offer free updates and information, such as AAT’s ethics microsite which has interactive dilemmas, case studies and articles about the most recent ethics news.

The many scandals that have affected businesses, companies and entire industries are cautionary tales with the moral being that the role of ethics in business must take centre stage.

Rebecca Doodson has been Senior Conduct and Compliance Officer at AAT (Association of Accounting Technicians) since January 2011. She is responsible for content on AAT’s ethics microsite, and gives ethical advice to AAT members. Rebecca has worked at AAT for four years, managing disciplinary cases of non-compliance with the Regulations.

Read more: www.economicvoice.com

Environmental  Leader (11 April 2013):

Link Sustainability to Corporate Branding, Verdantix Says

The bulk of companies that invest in sustainability communications are unable to drive revenue growth or reap any business benefits from their efforts because they fail integrate them into the corporate brand, according to a report from independent analyst firm Verdantix.

Rethinking Sustainability: Brand Risks and Opportunities is based on an analysis of how 80 firms link sustainability with corporate branding. Verdantix identifies five communications strategies companies typically take: purists, explorers, advocates, reactionists and nothingists.

The majority of firms are categorized as advocates, a strategy where companies actively communicate on sustainability issues, but keep these separate from the corporate brand and push them out to a limited audience. Advocates target their communications to employees and sustainability opinion leaders and use the company’s sustainability report as a central tool.

Despite pressure to do more, Verdantix found spending for sustainability communications is typically flat.

The number of companies managing and reporting performance on environmental, social and governance (ESG) issues is on the rise, more than doubling from 2010 to 2011, according to an analysis by Governance & Accountability Institute.

However, companies are often stuck on using traditional CSR communication strategies focused on reports, ratings and not-for-profits, Verdantix says. Chief marketing officers can add strategic value by integrating the company’s sustainability ethic and messages into the corporate brand, an approach that will lead to revenue growth.

CMOs need to take charge of sustainability communications in order to reap brand benefits. Once CMOs assess their current sustainability communications strategy and determine what their company spends in this area, they should benchmark their approach versus industry leaders, Verdantix says.

The firm also says CMOs should collaborate closely with management responsible for sustainability within the company to devise a strategic approach and then craft future-looking messaging to avoid greenwash accusations.

Source: www.environmentalleader.com  and www.verdantix.com