Comment: David Grayson of Cranfield School of Management says the coronavirus crisis has highlighted that to be truly sustainable, businesses must live their purpose
Ethical Corporation readers of a certain vintage and/or who are political junkies, may recall the famous report by Michael (now Lord) Heseltine after the urban riots in the UK in 1981. The report to Margaret Thatcher and her cabinet began with the arresting sentence: “It took a riot!”
I have been thinking about those words a lot in recent days. Just as it took civil unrest to focus attention on the problems of Merseyside and other depressed regions, and to provoke more societal action to tackle urban decay and youth unemployment, will it similarly take a virus to spur transformative action for ethical business and towards a fairer, more inclusive and sustainable society?
Right now, the focus, quite rightly, is on tackling the immediate crisis, dealing with the pandemic and trying to mitigate economic meltdown.
It has been very noticeable how public pressure has quickly forced several organisations, deemed to be behaving unreasonably during the crisis, to do U-turns
As Martin Wolf, chief economics commentator at the Financial Times, has noted, the switching off of economic activity, partly through people’s fear of contact, and partly because governments have told people to stay at home, could result in a reduction in gross domestic product in G7 countries of 20-30%.
In such unprecedented circumstances, responsible businesses will be concentrating – where they can – on serving customers. Personally, I have been impressed by the communications from the supermarket chains that I regularly shop with and, therefore, have loyalty cards with. Senior executives have been emailing regularly to explain what they are doing, especially, to protect vulnerable customers and to look after their employees.
Responsible employers are carefully considering how best to protect their workforce, and especially those who are the lowest paid. Sadly, as is always the case in crises, this crisis is already showing the best – and the worst.
I am particularly impressed by those organisations who are speeding up, rather than slowing down, payments to suppliers – especially small businesses; and extending credit terms to small business customers. This is about building long-term shared destiny relationships.
It has already been very noticeable how public pressure has quickly forced several organisations, deemed to be behaving unreasonably during the crisis, to do U-turns – whether that was the owners of the ExCel Exhibition Centre renting their premises for the first Nightingale Hospital, or Liverpool Football Club proposing to furlough non-playing staff.
The bigger question remains: will we revert to “business as usual” post-crisis? As an idealistic pragmatist, I do not subscribe either to the view that “nothing will be the same again” nor to the opposite idea that nothing will change. I am excited by the mantra of the film-maker and SDG advocate Richard Curtis and others that we should “build back better”. I have already joined a number of online conversations on this theme – not least one organised under the auspices of Imperative21. This is a joint initiative of B Lab, The B Team, CECP, Coalition for Inclusive Capitalism, Conscious Capitalism and JUST Capital: united under the banner that “capitalism must work for all of us and for the long-term”. A nascent UK coalition, loosely affiliated to Imperative21, is looking at what a new economic system that is inclusive, sustainable and fair, would entail.
It starts with rethinking the purpose of business: it needs to be an authentic, inspiring and a practical description of why a business exists
Each of us will have our own ideas about the priorities in building back better. For me, it starts with rethinking the purpose of business: what a company exists for. This purpose needs to be an authentic, inspiring and a practical description of why a business exists, which can be used to help take the really tough business decisions.
What a company exists to do cannot be seen in a vacuum. We also have to consider how it goes about carrying out its purpose. And one thing this virus has thrown into the spotlight is the need to act ethically.
Does a company treat its employees, its customers, its suppliers fairly? Does it behave responsibly in all its activities? As the late Sir Adrian Cadbury first articulated in his hugely influential 1992 Report on Corporate Governance: “It is important that all employees should know what standards of conduct are expected of them. We regard it as good practice for boards of directors to draw up codes of ethics or statements of business practice and to publish them both internally and externally.”
A new report from the Institute of Business Ethics looks at the largest publicly quoted companies in the UK, France, Spain, Germany and Italy and concludes that published codes of ethics are now the norm.
A business does not need to have defined a societal purpose to have a code of ethics and to operate ethically. However, a genuine, lived societal purpose should motivate employees and make it much likelier that they will follow their company’s ethical code.
Conversely, a business could have adopted a societal purpose but not operate ethically. Take, for example, the hypothetical case of a company established to produce sustainable packaging. It may operate with zero-net emissions, no plastic use etc. It may be seen as a “sustainable business” but it may still fail in “doing business ethically” if employees do not feel they can speak up or suppliers are continuously paid late, without just cause etc. You cannot do “ethical business” without doing business ethically.
It is hard to see how an organisation can really aspire to do business ethically if it is not also trying to become sustainable
Purpose and ethics are not alternative approaches but instead reinforce each other. Purpose-led businesses are more likely to be challenged by their employees and other stakeholders for any perceived ethical lapses, because they will hold their employer to higher standards. Businesses that take responsibility for their impacts (social, environmental and economic) are more likely to be attentive to their organisational culture and aim to do business ethically.
Nowadays, with the climate emergency and hyper-global inequalities, which will be exacerbated in the economic fallout from Covid-19, it is hard to see how an organisation can really aspire to do business ethically if it is not also trying to become sustainable, which means having a comprehensive sustainability plan that will be increasingly aligned with the overall strategy of the business.
In order to achieve this, any business, however large and famous, will need to be humble enough to recognise that it does not have all the answers. It needs to work in partnership with many others. Hopefully, that will be another enduring lesson from Covid-19: the need to collaborate with a wide variety of different actors from different sectors.
Even as this crisis proceeds, we should be resolved to build back better.
David Grayson is chair of the Institute of Business Ethics, Emeritus Professor of Corporate Responsibility at Cranfield School of Management and a member of the Ethical Corporation international advisory council.
This commentary is part of our in-depth briefing Building back better: Ethical Corporation examines what Covid-19 will mean for sustainability
Covid-19 pandemic responsible employers ExCel Nightingale Hospital LFC compassionate capitalism Institute of Business Ethics