Corporate Responsibility - A Look at Leading Edge Issues

A Look At Leading Edge Issues

Bob Shoemake
Center for Ethical Business Cultures

What are the leading edge corporate responsibility issues now confronting Minnesota business leaders?

When the Minnesota Center for Corporate Responsibility (MCCR) was founded in 1978, corporate responsibility focused on “stakeholder management,” the then–new idea that a corporation is part of a network of responsibility that includes not only a company’s stockholders but also its employees, customers, suppliers, the environment, the communities in which it does business and all others who have a “stake” in its actions.

In 1999 these concepts are known, if not uniformly embraced, by business leaders. They have learned that inattention to corporate responsibility can hurt a company’s reputation and bottom line. They are learning that increased awareness of ethical and responsible behavior can have a positive impact on every aspect of a company’s performance and can help attract and retain employees, customers and investors.

As MCCR turns 21, it has embarked on a joint initiative with the University of St. Thomas Graduate School of Business and the University of Minnesota Carlson School of Management. As part of that initiative, the Center commissioned a national survey of business ethics leaders from business, academia and the non-profit sector to identify emerging issues. This article draws from the data in that survey.

Emerging Issues

Globalization. Whether large or small, involvement in the globalization of business is becoming the norm for Minnesota businesses. Doing business globally raises many difficult corporate responsibility questions, for example:

• When a corporation works across cultural and political boundaries, whose ethical standards predominate? Should a company align its values and business practices with those of the countries in which it does business? Are there transcultural ethical norms which can be identified and practiced? The Caux Round Table Principles for Business, now translated into 12 languages, are one effort at creating a transcultural standard. Said a business respondent to our survey: “Corporations can have a tremendous impact on business ethics in developing countries by setting high standards on social issues and environmental policy….These companies account for up to 60% of a country’s economic base.”
• What about manufacturing conditions, product standards, employee pay, child labor, product standards that are vastly different from those utilized in Minnesota? From our survey: “The global nature of business requires a company to understand and take responsibility from the impact of the actions of their own people and facilities to those of their suppliers, manufacturers, distributors, and marketers.”

Reputation Management. A company’s reputation is a major business asset. A reputation that has taken decades to establish can be severely damaged overnight, particularly given the speed with which information is shared among various stakeholders.

• Criminal Liability & Litigation. The growing number of laws requiring company compliance as well as an increase in audits of company behavior can lead to an increased risk of litigation and criminal liability, including substantial financial penalties and prison.
• Managing Ethical Behavior. As the number of employees and locations increases, the task of managing, directing and training those employees to act ethically becomes more complex and difficult. A respondent noted the challenge, particularly internationally: “How to advance existing ethics programs internationally; how to get buy-in from other divisions that are being run by employees who may not even speak English; how to get them to understand the importance of the ethical culture of a company that’s located in the United States. This includes how to control suppliers and foreign agents that are doing business in your name.”
• Positive impact of acting ethically and responsibly. Reputation management is not only driven by fear of liability. There is a growing awareness that acting ethically creates a competitive advantage. From our survey: “I think ethics and corporate responsibility are now one of a collection of requirements for sustaining a successful enterprise. Companies that don’t address these issues fail to capitalize on opportunities for competitive advantage.”

Scope of Responsibility. Determining where a company’s responsibilities start and stop is going to become increasingly difficult. As one of our business respondents asked, “How far up and down the product line, upstream and downstream, do we have responsibility? If you are a major user of a raw material, do you have responsibility for the companies that provide you with that raw material?” The farther the supplier is from “headquarters,” whether geographically, linguistically or culturally, the more difficult the control becomes.

Employee Compact/Relationship. Both employers and employees are redefining the nature of the relationship between them, raising many ethical issues. Regular readers of this journal will know this list well. The issues are wide-ranging, from workplace conditions, wages, downsizing, sexual harassment, privacy, diversity, employee misbehavior and theft, to work/life concerns like flextime, telecommuting, child– and elder–care. What business opportunities are created by addressing these issues?

Fragmentation. Said a respondent, “American business organizes itself in this area in a ramshackle sort of way.” Said another, “American business is not organized well in this area. It’s fragmented. We deal with a lot of different people in different areas. There is not a clear reporting structure. It’s tackled on an issue by issue basis.” Each group works in its own business silos, with its own network of peers and professional colleagues. Given all of these disparate groups, efforts for an entire company to act responsibly become disjointed.

Other Issues. There are many other issues which can be named, for example, the environment, privacy, competitive business practices, communication technology and information management. According to our survey respondents, those above are the most important.

Emerging Questions

These emerging issues raise a number of challenging questions for leaders trying to create and sustain responsible, ethical businesses. At our Center, we look at the effect of these issues on three levels: 1) the enterprise or business; 2) the community and 3) globally.

Defining Benchmarks and Best Practices. What are the best practices in this area, the benchmarks that can be used to evaluate a company’s work? Profitability is essential to business success. What are the quantifiable relationships between corporate responsibility and the bottom line?

Building Ethical Business Cultures. How do we look at the company as an entire system and build an ethical business culture within that company that integrates all of the disparate functions across the silos, aligning the values and actions ethically throughout the entire organization? As one begins to look at a business in terms of building an ethical business culture, questions emerge for each of the business silos.

• In the area of work/life, for example, Carleton University researcher Linda Duxbury has shown that supportive managers are key to creating workplace cultures that yield both productivity on the job and work/life balance. How is a business culture created that regularly identifies, trains, nurtures, rewards supportive managers?
• The recruitment and retention of a diverse workforce is a critical business concern. Yet the just-published report No More “Business As Usual” from the Center for Women Policy Studies has found that although senior women of color tend to be proud of their work and company, a substantial number of them wouldn’t recommend it to a friend or colleague because of the diversity and work/life difficulties they have experienced. What are the key elements in creating a corporate culture that genuinely welcomes the contributions of all its employees
• In the area of ethics, training that goes well beyond familiarity with the corporate code of conduct is becoming essential. As one of our respondents notes, “You have to realize that if you’re going to have a successful ethics program, you have to develop ethical reasoning skills and competencies among all employees. If your training program doesn’t stress the fact that you can’t rely just on the code of business conduct to answer all your questions, then that program will run into trouble.” What does this kind of comprehensive training program look like? How will its effectiveness measured? How much will it cost? What are the potential costs of not doing it?

Community Involvement. What is the responsibility of a business or a business community in solving the large problems such as homelessness, racism, economic development, the growing gap between the rich and the poor, care for the environment that confront our communities and world? What is the relationship between corporate investment in a community as a branding strategy and corporate community investment as a contribution for the common good? What elements are necessary to build a community of ethical businesses? As H. B. Fuller Chairman Tony Andersen has said, “A responsible company is an asset, but a responsible community of companies is a far greater asset.”

Bob Shoemake is on the staff of the Center for Ethical Business Cultures in Minneapolis, Minnesota. The Center is affiliated with the University of St. Thomas’ Graduate School of Business and the University of Minnesota’s Carlson School of Management.