Is your company’s ethics strong enough to keep you on the right side of the cost-benefit divide?

Much as ethics is the “right thing to do”, it is nonetheless true that being ethical can incur a cost for the organisation. The challenge this poses is whether the benefits of being ethical are outweighed by the costs of being ethical, or not.

The argument in favour of ethics being the “right thing to do” is supported by the many benefits being ethical delivers. This includes, among others, high trust relationships with employees and external stakeholders, greater investor and market confidence, a sound reputation and increased brand equity. Supporting these factors is the growing extent to which ethics is a criteria for consumer choices - generally based on question such as “Can I trust the company to deliver what they say they will?” and “Will the company treat me fairly?”. What these benefits collectively translate into is that ethics can (and should) be a unique source of competitive advantage.

And ethics does not only make good sense for the organisation. An important fact that is rarely recognised is that ethics also makes great sense for employees and other stakeholders, such as customers and suppliers. Ask these stakeholders if they would prefer to work for or deal with an ethical or an unethical organisation, and the answer will be predictably the former for a multitude of obvious reasons.

But much as these factors reflect the value of ethics, is this value enough to ensure that employees behave ethically? Is it sufficient for organisations to consistently support an ethical path?

The challenge is that there are many examples where ethics can represent a cost. When an organisation loses a tender because they refused to pay a bribe, being ethical has effectively cost them the benefits that the work could have delivered. And these benefits are not only the financial returns for the company. They can extend to being able to retain the company’s full staff complement. The company that uses genuine parts or the contractor who uses the correct quality of materials specified for the job may make less profit than the company that charges for, but does not use, genuine parts or the contractor who uses cheaper, lower quality materials.

Larger organisations are generally less vulnerable to these pressures as their cash flow would more easily allow them to carry the cost. But smaller organisations are very susceptible to the negative repercussions of being the “losing” company. For them ethics can come to be seen as a luxury - something that is desirable but which is simply not affordable.

A counter argument is that organisations should not only focus on financial returns. The triple bottom line and the concept of corporate citizenship strongly support extending financial goals to encompass positive social and environmental impacts. However, when ethical principles mean that the company loses business, it is mostly not in a position to deliver further value.

It may be understandable if these situations tempt the response that “if you can’t beat them, join them”. But the increase in misconduct which this would entrain makes it a very negative outcome, which warrants attention to ensure it is avoided.

The challenges inherent in these situations support the argument that organisations need to do more than create an ethical environment internally. While that alone is a challenge for many organisations, the optimal goal should be that organisations also work towards creating a more level ethical playing field where ethics is valued and rewarded by all stakeholders. Querying and exposing fraudulent tenders, supporting smaller organisations in their fight to be ethical, engaging in forums to build a better understanding of the importance of ethics – all these actions would help to create an ethical environment that favours the most ethical organisations.

But, as the late night TV advert says, “that’s not all: there’s more!”. What can be added to the benefits of promoting ethics widely is the impact on people beyond the scope of the workplace. The concluding chapter of my book, Ethics Can, noted the following:

    So, is changing ethics within each workplace really impossible? Can it be done?

    Granted, transforming one organisation ethically may not change the industry, the region or the country, but it can make a difference – and not only in the workplace. Wouldn’t it be wonderful if the positive impact of ethics on employees was such that they took those ethical lessons back to their homes and communities? What a great achievement it would be to hear an employee standing up for what is right on the basis that “it is not the way we do things at my work”.

by Cynthia Schoeman