Ethics: How To Be Good – Do New Zealand Companies Measure Up?

It seems that the good ol’ Kiwi DIY gene is to the fore when it comes to answering that question. Of course we’re good. We behave in way that is responsible: to our shareholders, employees, communities, suppliers and the environment. We don’t need some external body checking us out, thank you.
In world increasingly conscious of the need to breed good corporate citizens, is that enough?
It all hinges on what ‘doing good’ means in today’s business environment. And there’s some suggestion that corporate ideas around goodness have matured.
Waikato Management School’s professor Juliet Roper pinpointed the change when she presented paper at Reputation Institute conference in Amsterdam earlier this year. In her address, Roper cited 2007 BusinessWeek Online article, ‘Beyond the Green Corporation’.
According to Roper, BusinessWeek had noted how big corporations have shifted both their practices and their attitudes regarding sustainability reports.
Significantly, these reports were said to have moved from “a concern with corporate image” to far greater understanding of the strategic advantage of improving both social and environmental practices.
That’s all very well but, given current economic belt-tightening, shouldn’t companies focus on financial survival first? And, realistically, how much dosh do some firms have left over for all this other stuff?
Maybe we are at cross-road. More and more companies know they need to pay serious attention to triple, or quadruple, bottom line reporting. Yet fewer of them can afford to do much more right now than fret over the financials.
Journalist and author Rushworth M Kidder turns this argument on its head. In his latest book, The Ethics Recession: Reflections on the moral underpinnings of the current economic crisis, he argues that, with each passing day, the current economic crisis is shifting from issues of money to issues of integrity.
As he sees it, behaving well – and being able to prove it – is more, not less, important now.
This line of logic is clearly close to Jane Arnott’s thinking. As the local country manager for GoodCorporation, Arnott is spearheading drive for New Zealand companies to adopt “straightforward and transparent” method to measure their impacts in credible way.
Unlike other organisations that may focus more narrowly on, say, customer relationships, environmental concerns or financial stakeholders, GoodCorporation runs across the whole range: pulling it all together into one holistic view.
“Imagine the beauty,” she says, “of putting your company up for sale and being able to say, ‘here are the annual accounts, and here is report which goes across 64 business practices straddling everything from ethics and social responsibility to sustainability’.”
Arnott draws direct link between the global financial crisis and the rise of corporate social responsibility. She argues that we need to be mindful and manage our business relationships in relation to two key global drivers.
“The first is what has happened with our financial markets and this has led to breakdown in trust,” she says. “Trusting relationships are critical for longevity of any relationship. To understand the level of trust in your relationships is to get better insight into the culture and values of your operation.
“The second driver is environmentalism. Green marketing has proved to be tool to differentiate companies and their products but we are getting more and more exaggerated claims and less and less clarity.”
There are obvious parallels between this scenario and increasing concerns that New Zealand is in danger of losing its ‘clean green’ image due to lack of systematic regulatory control.
In her conference paper, Roper warns that “without integrity”, New Zealand’s branding of itself as ‘100% Pure’ is high-risk strategy.
If, at both the national and organisational level, we are to move beyond rhetoric to practice, it makes sense to be able to prove our credentials. Here’s where the Kiwi DIY gene kicks in. At some organisational level, we’re baulking at the idea of calling in someone else to tell us how good we are.
For start, it’s not cheap. We’re now into serious ‘how long is piece of string?’ territory here. At GoodCorporation, for example, dollars are dependent on the number of employees and the extent to which company would need to tailor an existing survey to its own specific purposes.
Arnott says GoodCorporation audit and assessment of company with fewer than 50 people may cost around $5000 to $10,000. Scale that up for larger company and costs can grow to anything from $45,000 to $70,000 to over $100,000.
Ross McDonald lectures on ethical issues and the relation between business functioning and social outcomes at Auckland University’s Business School.
He agrees the Kiwi DIY gene is alive and kicking. But he questions the extent to which our organisations have thought through their reluctance to submit themselves to third-party verification of their goodness.
Rather than having any developed rationale against such move, says McDonald, most organisations still haven’t clicked to the idea that an external check would be important, or even relevant, to them.
McDonald reckons the fact that the notion isn’t yet on the table for discussion stems from lack of broad foresight. “We don’t appreciate how much the world is changing and how much these dimensions of organisational performance are becoming important issues overseas.”
Arnott points out that “with the best will in the world”, human nature still means we can be very “biased, self-selective and self-serving” in judging our own performance.
“We normalise things over time. If you’ve worked in company for years, you begin to accept certain styles of behaviour, patterns of interaction and ways of doing things. So having third party come in opens the way for more objective, dispassionate benchmarking to occur.”
Arnott sees “massive opportunity” for whole business sectors to re-establish trust and to repair reputational damage.
There’s our dairy industry, for starters, which took battering from negative publicity around Fonterra’s melamine debacle in China last year.
Then there’s the finance sector. “There’s no downside in being the first finance company to have an ethical audit and assessment,” says Arnott.
Gill Cox is well versed in the numbers side of the business. He has been member of the New Zealand Institute of Chartered Accountants (NZICA) for around 40 years and company director for some 18 years. He, too, sees clear and growing convergence between company’s financial performance and its ability to meet wider societal ethical standards. To his mind, any New Zealand company that wants to be long-term player must meet those standards.
He describes Kiwi corporations’ DIY approach as the “classic New Zealand way”. “We know we’re right. We know we do it well. We know we’re ethical and moral and have huge integrity,” he says.
“But the question I ask is, if we’re so right why would we have problem with someone else checking it? Other people in other countries will get higher level of assurance by someone else measuring us against some objective standards.”
Cox suggests pressure from international markets will drive some of our larger organisations to take the plunge: enticed, perhaps, by the possibility of gaining early adopter status here too.
McDonald sees the plethora of choice and lack of an absolute set of standards as both blessing and curse.
“In one sense, there’s problem. And the sort of work that Jane Arnott and GoodCorporation have been doing is very constructive in terms of putting good degree of well-thought-out structure around those things,” he says.
“But in other ways – particularly when it comes to responsibilities towards the community, for example, it’s difficult to set in stone certain set of outcomes that organisations must achieve.”
McDonald believes we’re setting ourselves up for trouble if we define desired