BEYOND BASIC COMPLIANCE
Sanjeewaka Kulathunga notes how biz ethics can provide a competitive edge
Goodwill is a vital asset in any business. So it’s natural to assume that organisations would avoid being involved in shady or unethical business practices. For instance, Apple is the most valuable brand in the world with a value of US$ 146.3 billion, according to Brand Finance.
However, the tech giant was accused of purposely slowing down older iPhone models to compensate for decaying batteries at the end of last year. The company has now been brought under the law for this alleged practice, which didn’t warn consumers in advance. In response, Apple apologised to consumers and offered to sell battery replacements for US$ 29 instead of the usual 79 dollars.
Just as Rome was not built in a day, a business cannot establish a credible reputation overnight. It could take years or even decades for a business to build goodwill. However, within a split second, the good name of a company may be destroyed due to an unethical business practice and cause irreparable damage.
For example, Arthur Andersen was among the ‘big five’ global audit firms for many decades since 1913 but by 2001, it was bankrupt due to its involvement in the Enron scandal.
Today, corporate ethics has become a broader concept going beyond traditional business and legal compliance.
As corporate citizens, companies cannot avoid their prime responsibilities, and accountability in relation to society, the environment and the world at large. This trend has exerted immense pressure on companies to provide value to society and the environment, and achieve sustainable growth in addition to adhering to minimum legal business practices.
The sustainable growth of future businesses will depend entirely on what they would give back to society and the environment.
Realising profits is the driving force behind businesses that grow their economic activities. If companies are only profit maximising in the execution of their businesses, and cause irreparable damage to or impose costs on society and the environment, their existence will be short term.
In the information age and amid rapid economic globalisation, businesses have to be more concerned with their economic, social and environmental commitment to the world at large.
Social media networks such as Facebook, Twitter and WhatsApp have become the most powerful weapons – they play the role that traditional print and electronic media has played for so long. If an unethical business activity of a company is reported, it might take only a few seconds to spread the news through social media – an unedited source reaching millions of viewers.
Furthermore, various corporate stakeholders including employees, consumers and investors are not tolerant today – they’re not willing to remain silent in the face of unethical behaviour. There’s a trend among those stakeholders to blow the whistle on unethical business practices using their personal social media accounts to alert society.
While global competition has increased dramatically due to the advancement of ICT, companies aren’t expected to adopt unethical business tactics with undue financial motives to overcome their rivals. The basic logic behind sustainable competition is that businesses can compete with each other without creating a social or environmental cost.
Businesses cannot be isolated from the physical or social environments in which they operate as they’re also a major component of the social and environmental system. Accordingly, there should be an augmented purpose within companies going beyond the pursuit of financial profit, which is a socially accepted concept albeit defined in a narrowed way.
It is high time we reached a globally accepted consensus among nations to identify the limitations of financial profit motives, and take necessary steps to broaden the definition of how to calculate financial profits with the inclusion of social and environmental costs.
In practising business ethics, companies should have the capability to voluntarily participate to safeguard and promote social values, and environmentally-friendly operations, to a greater extent than minimum legal compliance. They should be proactive in becoming the role models of business for the society from which they garner profits.
Moreover, business ethics could be managed to gain competitive advantages in the market. Business ethics has an external impact on the market. In this sense, business ethics is concerned with the gap between ethical behaviour and perceptions held by the market regarding a company’s operations.
It is also a fact that business ethics has a significant internal impact, which could be managed to offer a unique competitive edge as a distinctive employee service to consumers – and this in turn will lead to a sustainable competitive advantage.