Business needs ethics and whistle-blowers

What can New Zealand leaders learn from a global leader in business ethics?

A world leader in the business of ethics, Emmanuel Lulin, L’Oreal’s senior vice-president and chief ethics officer, who was in New Zealand recently, has just been named as a SDG Pioneer for Advancing Business Ethics by the United Nations Global Compact. The UN noted he “has harnessed the power of a giant cosmetics company with more than 80,000 employees in 150 countries to develop an innovative ethics programme that is setting global standards while advancing the Sustainable Development Goals”. 

Management asked him what New Zealand companies could learn from L’Oréal, which is one of the few companies in the world to receive an AA+ rating from Swiss corporate graders Covalence. 

 

What led L’Oréal to decide it needed a chief officer of ethics?  

L’Oréal’s ethics programme is voluntary and proactive; it was not created in response to a scandal or because it was a legal requirement. 

Ethics was already on the group’s agenda decades before my role was created, showing that ethics was an early consideration at L’Oréal. 

It was L’Oréal’s current chairman and CEO, Jean-Paul Agon, who decided to create this role at the very start of his mandate because he recognised very early on the importance ethics would have for the leading companies of the 21st Century. 

My mission is to help management and staff understand and live up to the commitments we have made to the world and to ourselves in our ethics roadmap which we call “The L’Oréal Spirit”. This namely includes overseeing the respect for human rights within the group. 

 

L’Oréal is considered a world leader, what do you see as the major factor in the company attaining this level of ethical leadership?  

There is no magic solution. You need a shared conviction at all levels of the company. One of the success factors is staying close to our operations all over the world allowing a genuine dialogue at all levels of the company. 

This proximity also reflects in the documents we issue: our Code of Ethics and policies are bottom up and top down and we ensure that there is a broad consensus. 

Multilingualism and multiculturalism are systematically applied; it’s an illustration of respect. 

This can be attributed to the group’s ambition to be one of the most exemplary companies worldwide while being humble enough to recognise that ethics is about continuous progress. 

Nothing would have been possible without the conviction at the highest level of the group’s management that only companies that have integrated ethics in their culture, strategy and day-to-day practices will be sustainable. 

Also, L’Oréal’s ethics programme is based on conviction, not on obedience. If you get the ethical culture right, compliance with our ethical standards will follow. The key is to make ethics relevant and visible to staff in their day-to-day work. 

One of the myths is that having lots of staff and resources is necessary to be efficient. In fact, from the start I wanted to have a small team because this obliges us to concentrate on substance rather than form and to bring about change through influence rather than by coercion. 

 

What are the most common ethical dilemmas business leaders tend to come face-to-face with?  

Managerial decision-making is more complex than ever: there are many ways to address ethical issues, and consistency is not always easy to ensure in the decisions that are made. 

It is crucial for any business leader to understand that ethics goes beyond the law. Do I have the right to do something is only the beginning of the conversation. Is it the right thing to do, is an ethical question.  

Some business leaders also believe that they cannot get results while acting ethically. This is a very short-term view that can prove disastrous for an organisation. Often, they will find that with a little creativity and willingness to do things a bit differently, they can be just as successful and ethical too.  

 

And what are the most difficult aspects of these dilemmas?  

Having the courage to deal with them. Courage is at the heart of L’Oréal’s Ethical Principles. Acting ethically is not always easy: it sometimes means challenging the status quo or your own actions, and standing up for your ideas even if you are not heard the first time.  

 

Is there always a right answer to such dilemmas – if you go with what your instinct tells you is the right thing to do, is it that simple? 

Instinct can sometimes be misleading, even with the best of intentions. The human brain is very good at helping us rationalise why acting unethically is not so bad.   

This is why organisations need strong Ethical Principles and a Code of Ethics: to help employees at all levels understand what is expected of them and giving them practical advice through numerous day-to-day examples and decision-making tools. 

The group’s four Ethical Principles: – Integrity, Respect, Courage and Transparency – which is our universal language – serve as a practical decision-making tool which allows us to deal with most situations by making us ask ourselves four questions: Is it lying, cheating or stealing? Am I treating others the way I would like them to treat me? What if it was on the front page of tomorrow’s newspaper? If in doubt, have I been brave enough to admit I don’t know what to do and asked for advice? 

  

What sort of behaviours should ring alarm bells for leaders or anyone in business? If someone is being very underhand how is a leader likely to know? 

Good observation skills help make the difference between words and deeds. Personally, I am often skeptical when people proclaim a bit too loudly their ethical convictions. 

Of course, having strong internal control processes is a good way to avoid and detect misconduct but it is never enough. If a leader has created the right ethical culture in their team, the other members of the team will let them know because they will know if someone is “letting the team down”.  

 

Our Government is currently reviewing NZ’s whistle-blowing legislation. If you were giving advice to those drafting the legislation what would be the most important aspects they should address to protect whistle-blowers?  

The sincerity with which a mechanism to report serious violations is put in place is essential, and legal provisions should be taken without ambiguity. 

Whistle-blowers often take considerable personal, economic and social risks, so it is key to prevent and sanction potential retaliation. The stronger and more effective the protection mechanism, the more it should be dedicated to serious violations. 

Protection comes from a combination of items: social consensus, a rigorous education system, an independent justice, a public opinion that cares and, as the case may be, is supportive too. 

Whistle-blowing makes even more sense when transparency obligations are clearly established. 

 

What would you suggest legislators avoid as much as possible?  

A successful whistle-blowing system requires ensuring a good balance between the protection of the whistle-blower but also the protection of the person or the institution who may be unjustly accused.  

Organisations should come first in having the opportunity to address matters and take corrective measures, the counterpart meaning a strong protection of whistle-blowers against retaliation. 

It is clear that private parties don’t have the same means to investigate as public authorities, therefore the level of expectation can only be different. 

 

In your experience what does best practice internationally look like – why does it work?  

A whistle-blowing system only works if it is part of a larger ethics program which focuses on creating and maintaining the right culture and leadership. 

The best KPI of an effective whistle-blowing system is for a corporation to regularly survey staff on whether they feel comfortable speaking up about any issue, not just misconduct or problems. 

 If a corporation has a high score on this, then it does not need to worry so much about the number of reports it gets via its whistle-blowing system because matters will be addressed on a day-to-day basis by management. 

Another good KPI is the percentage of anonymous reports you receive. The lower the number, the more you see that people have trust in the system. 

A robust whistle-blowing system encourages management to take ownership of issues at an early stage. 

It is important to create an environment where potential whistle-blowers do not develop a culture of guilt and are not subjected to victimisation.  

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