For corporate leaders looking to avoid reputational and business failures, Ethisphere, a global leader in defining and advancing the standards of ethical business practices, has released a new report titled: Future-proofing your Ethics & Compliance Program: Insights & Data from the World’s Most Ethical Companies.
The report looks at five recent case studies in which the lack of ethics and compliance controls and practices has resulted in damaged reputations and business losses. It then highlights the data and practices of the World’s Most Ethical Companies and provides practical steps to embed business integrity throughout a business.
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“Every time a company makes headlines for the wrong reasons, it has a tremendous ripple effect that is felt by innocent people,” says Ethisphere CEO Erica Salmon Byrne. “By pulling the pragmatic from the theoretical and making it accessible and attainable, this report proves how robust governance, ethics, and compliance programs foster environments in which businesses succeed and all stakeholders benefit.”
The report covers the five key areas featured in the Ethics Quotient, the 200-point evaluation framework used in the World’s Most Ethical Companies application process. Data highlights include:
- Ethics and Compliance Program: 79% of the World’s Most Ethical Companies have a Chief Ethics and/or Compliance Officer. This is particularly relevant to the recent Silicon Valley Bank collapse, in which the organization was without a Chief Risk Officer for eight key months before its demise.
- Culture of Ethics: 59% of World’s Most Ethical Companies honorees provide results of culture measurement to all employees. Transparency and a focus on ethical culture could have mitigated Major League Soccer team Real Salt Lake’s (RSL) player and fan boycotts in 2020.
- Environmental and Societal Impact: 93% of World’s Most Ethical Companies honorees regularly communicate with their third-party business partners about ESG. Setting clear guidelines and expectations with vendors about working conditions – and enforcing them – could have helped UK-based fast-fashion manufacturer Boohoo avoid a customer boycott in 2020, which caused a share price drop by 46% within a week, wiping out nearly $1.9 billion in Boohoo’s market value.
- Governance: 87% of World’s Most Ethical Companies honorees provide some form of standalone training to their Board. Instituting a Board of Directors, and ensuring it is fully equipped to provide meaningful guidance on matters such as corporate culture, business strategy, and risk management, could have been instrumental for avoiding the recent downfall of FTX-a cryptocurrency exchange run by Sam Bankman-Fried.
- Leadership and Reputation: An organizational reputation for ethical behavior depends on three things: clear and unambiguous mission, vision, and values; values-based leadership that puts words into actions; and clearly communicated proof points to uphold its social license. Following these tenets could have avoided some of the negative impacts to business at Twitter-increased service outages, sharp drops in advertising revenue, and a valuation decrease by more than half-that has taken since its new leadership in October 2022.
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