Globalisation has been influential in a lot of recent progresses, from promoting freedom of ideas, goods or persons to increasing human rights awareness and supporting democratic movements. Let’s say it: globalisation has been a significant source of economic development in many regions of the world. Still, you would have to fish in a very liberal pond to find somebody trusting this ‘movement’ to build equal opportunities for all. As it turns out, the gap between rich and poor is only getting bigger:

“In sub-Saharan Africa and Latin America, more people lived in poverty at the end of the 1990s than at the beginning of that decade.”

Why is that? Simple:

“ Economic rules and institutions prevail over social rules and social institutions, while the effectiveness of existing rules and institutions themselves are being tested by current global realities”.

Both quotes are taken from a recently published report from the International Labour Organisation (ILO [1]). A UN institution, the ILO cannot be mistaken for a foolish NGO blindly criticising globalisation as the new devil. Their remarks are motivated. They arise from serious studies and established facts.

“ The present process of globalization”, the report continues, “has no means to keep the balance between democracy and markets”. Nevertheless, the ILO understands open market economy as being a non-questionable reality, and even “generally recognized as the necessary foundation for development, growth and productivity”. In other words, globalisation has both good and bad influences. How does the ILO want to address this situation? The only way to change the current trend of development, they say, is to create “a stronger ethical framework”.

Which brings us to our last and most important quote from this report:

“We are at a critical juncture, and we need to urgently rethink our current policies and institutions... [We need] A process of globalization based on universally shared values, which require all actors - including States, international organizations, business, labour, civil society and the media - to assume their individual responsibilities.”

Here is, the golden nugget of ethics: ‘individual responsibilities’. Stated black on white in an international UN report, one of the most important and recognised institutions in the world. Let’s summarise the report: we’re doing great in the western world, although people are starting to get nervous about inequalities between regions. For this system to work better, we need to be more ethical: people have to become responsible! Assume their ‘individual responsibilities’. Note that ‘individual’ is here understood as ‘single entity’, not necessarily a human being but an independent legal entity. Actually, when you consider that, as mentioned before, “economic rules prevail over others”, then you realise that the request is openly directed to business: as entities, they need to assume their responsibility in the global development of this planet.

Well said! We all agree, don’t we? But, realistically, how likely is this to happen? Can businesses act ethically in the current environment? And how could we monitor them?

PR and ethical business decisions

To answer these questions, let’s start with two examples of ethically influenced strategic business decisions: British Petroleum (BP) and Interface. BP is the well-known oil company turned so-called protector of the environment at the end of the 90s. Interface is a less-known company which achieved a quasi-cult status within environmental protection groups as the symbol of complete integration of Sustainable Development principles in a business model.

BP first: this heavily polluting company acquired an image of environmentally friendly business during the last decade thanks to a clear strategic positioning dating form the 90s. The CEO foresaw the actual developments in energy business priorities and decided to turn the company into a real PR machine for environmentally friendly business. BP changed its logo for a ‘green’ flower and the world was to know that this company was doing its best to reduce the polluting aspect of oil business to more ‘acceptable’ levels. Some money started being spent on reducing waste and finding other sources of energy. But the business model remained the same: producing oil. Accessorily, it is interesting to learn that the company spent less money on developing solar energy than on the development of its new logo…

Interface is a carpet producer. In the 90s its CEO realised that most of the company’s production was being wasted before being actually used: office carpets were being changed every few years, before the product even began to wear off. A real waste of natural resources! He therefore decided to change the business model to get rid of the waste. From now Interface was only going to lease carpets and remain owner of the product: it was providing a service, the coated floor, but not giving away its possession. It doesn’t really change anything, you might think, but by remaining owner of the product the company becomes very interested in a long life and good quality. And it changes everything! The less often they have to renew it the better they are! The business changed from production oriented to service oriented with a real responsibility (that is, both moral and economical) towards good use of the material used to satisfy the clients.

These two examples were chosen for two reasons: they are well-known “responsible business” icons, which are often used as example of big and small companies acting ethically. But there is a big difference that needs to be stressed out: they are opposite with regards to ethics! One, Interface, is acting ethically, as represented by the Kantian imperative not to use any other human being as a means (‘human being’ in this case is understood as humanity deprived of its natural resources). Having no ethical choice, the company then dared to change its business to stop unethical practices. The other company, BP, is merely using the available tools to maintain existing business process. In BP’s case the ethical decision is the acceptance of its current polluting activities as sufficiently compensated by ‘alternative’ measures. Following the same Kantian imperative, it is then acting unethically: other human beings are means to reach their goal. They are both doing ‘good’ things, but the intentions differ, based on the knowledge of both actors, which makes their actions opposite with regards to ethical principles.

These two cases seem to represent the options left to companies: on the one hand companies can participate in the excuse ‘good cause’ project of their industry. On the other hand they can accept their ethical responsibilities. The most common practice is clearly stated in a recent article in the Journal of Business Ethics where it declares that it is commercially important to pretend to be ethical (its politically correct statement is “we must ensure the appropriate alignment of suppliers with our own corporate values and ethics”[2]). Nothing is said about the actual corporate values (i.e. ethical or not), but just on how to preserve or maintain the economic value. Business has clearly chosen its side when it comes to ‘ethics’.

So, if it all comes down to the actual intention of the actors, do we have the tools to check underlying principles in new business practices for the required “individual responsibilities” expected by the ILO?

Tools to monitor business practices

There are two types of ethical monitoring possible: from the outside, external initiatives assessing the ethical value of a company, or from the inside, companies describing their values.

External tools are many, providing us with lists of companies more or less ethical (or environmental) friendly companies according to the institution’s more or less clearly defined principles. They obviously can teach us very little on the intentions of the companies.

Examples of external tools:

• The Committee of Inquiry (policy recommendations
• World Business Council for Sustainable Development (recommendations)
• Dow Jones Sustainability Index (financial index)
• London Benchmarking Group (financial index)
• Transparency International Corruption Perceptions Index (ethical/corruption index)
• Global 100 (ranking Sustainable Corporations)

Most of the internal tools are concerned with the presence of measurable data, such as “is there a chapter about Ethics in the Annual report?”

Examples of internal tools:

• AA1000 (ethical framework)
• Ethical Trading Initiative (ethical standards)
• The United Nations Global Compact (ethical standards)
• Global Reporting Initiative
• Global Sullivan Principles (ethical standards)
• SA 8000 (ethical framework)

Unfortunately, most instruments, especially the external ones, are only describing the existence of policies. They are not giving any measurement of the actual performance, which is what all should be about. This is for example the case of the very ambitious Global Reporting Initiative: very demanding on a theoretical level (which can be addressed by a good Public Relations department), it remains unsatisfying when it comes to checking the actual facts.

To use a medical image: these tools are concerned with symptoms, not with the causes of diseases. As a consequence, the influence of these tools at the moment is practically inexistent. The main reason for that is that they pretend to be measuring something they don’t, i.e. ethics of companies. A recent and questionable ‘new tool’, the Global 100 Most Sustainable Corporations, included BP in its ‘best of the class’ list. An oil company that spents less on renewable energy than on the creation of a new logo! Ethics relates to the intention of the actors, and in that case, the intention is clearly not ethical, but purely pragmatic. Still, it works perfectly on the current ‘best businesses’ lists.

In Western Europe, most companies nowadays include a ‘Sustainable’ chapter in their annual reports. Unfortunately, most of the ‘sustainability’ departments responsible for these new chapters usually are a single person trying to figure out what Sustainability is all about… Most of them have so little means to their disposition that there is absolutely no chance for them to have any significant influence on their businesses. The only influence they can have will be mere patches on structurally flawed processes. We are very far from the ethical choices susceptible of changing the structure of a business.

Companies can act ethically, but only through real commitment. Businesses need to start acting as ‘conscious’ entities, and not through the mere application of so-called standards. Ethics requires a radical approach considering all actors of society as well as environmental issues, and not only shareholders. It requires structural changes. It requires companies acting as responsible entities and not value enhancing machines. It requires a reflection on what stakeholders are. It requires a reflection on what ‘value’ is. In other words, it is nothing a ranking or any of the recently created so-called ethical tools can ever measure.