The Only Way is Ethics
10 January 2012
Ed Miliband’s speech today re-emphasises the need to place fairness and business ethics at the centre of what has been called ‘good capitalism’. These sentiments have been echoed today by commentators like Polly Toynbee and, as far back as the mid-nineties, by our very own Will Hutton in his book The State We’re In. The debate on ‘good capitalism’ and corporate behaviour, which has been raging since the ‘credit crunch’, remains a pertinent issue today.
It is clear that, since the financial crisis, some of our basic assumptions about how the economy works and the purpose and conduct of organisations has been shaken. We have seen immediate economic consequences since the credit crunch and recession. Higher levels of business failure and unemployment across all developed economies have been followed by severe cuts in public spending and rising taxes. But the significance of the crisis in relation to the workplace reaches even further.
‘Good capitalism’ has exposed issues of business ethics, purpose and leadership, morality, transparency and trust. The values of work are in the dock. How can work which leads to such consequences be thought of as ‘good’ work? How can the judgement and integrity of business leadership be trusted again? These are questions which The Work Foundation has been asking for over a decade.
For example, in 2002, The Work Foundation and the Future Foundation conducted a study to examine the impact of business ethics on the employer ‘brand’. Conducted in 2001, ‘The Ethical Employee’ was based on 1050 interviews with economically active adults. It was aimed at testing whether an organisation’s standing in the field of business ethics and CSR could tangibly affect its reputation as an employer. The findings show that employees made a greater contribution towards their organisation if they saw it as being a more responsible employer, and this influenced their decision to remain with that employer.
In 2011 the final report of our Good Work Commission we asked how contemporary businesses could re-connect employees. A survey for the Commission showed that only 4 in 10 of employees believed that their senior leaders acted with integrity. While almost half of British employees felt that the level of trust between management and employees had worsened in the last year.
Concern about business ethics is not confined to employees as it affects customer behaviour too. In a review of the UK ethical purchasing picture, the Co-operative Bank and the New Economics Foundation found that consumer perceptions of ethical business practices, ethical products and services had a significant impact on spending and customer loyalty. It found that:
- Ethical business activity contributes £13.9 billion to the UK economy.
- Sales in the so-called ‘ethical marketplace’ rose by 19 per cent two years.
- The cost of consumers switching brands for ethical reasons was £2.6 billion.
- That 52 per cent of consumers have boycotted a product or service for ethical reasons, and two-thirds report that they never return to the product once it has been associated with unethical practice.
The data demonstrate that a growing proportion of consumers in the UK are recognising that their spending power can make a difference to the commercial success of businesses.
If companies are to go beyond so-called ‘Greenwashing’, in which over-exaggerated claims for ethical or ‘green’ activities are published to create a positive impression of their credentials, and if businesses are to build ethical practice into the fabric of the way they do business day-to-day, further discussions are required. We need a debate which goes beyond the partisanship of political point-scoring and tackles the fundamentals of business purpose and corporate governance.
The Work Foundation has always been a participant in these discussions. We recently held a debate entitled ‘Good Work or Any Work?’, in which Vicky Pryce and Katie Hopkins exchanged opposing views regarding the importance of ‘good work’ in the current economic climate. In 2012, we will continue to focus on ways in which ‘Good Work’ and ‘Good Capitalism’ can be woven into the way the UK’s economic recovery takes shape. Our future plans include launching a campaign so that every organisation in the UK can become a Good Work organisation, as well as working with experts and consumer groups to assess organisational commitment to Good Work.