Features

Merging the great business dilemma: profit v sustainability, responsibility and ethics

Published

12 years ago

November 19, 2012

Blue & Green Tomorrow

Alex Blackburne spoke with Michael Solomon, director of Profit Through Ethics, about how it is attempting to remodel the world of business into a more ethical, sustainable and responsible shape.

It was while working for a publishing company on Fleet Street that the idea for Profit Through Ethics came to Michael Solomon. Almost a decade later, you get the sense that the organisation is on the verge of something big.

It currently has 66 businesses signed up – each committed to answering 43 rigorous questions which examine important social, environmental and ethical issues. Some answers from some businesses are already available to view on its website.

Profit Through Ethics is building a new, bespoke online platform where all businesses will need to set out answers to a minimum number of questions. A guarantee that the answers are complete, accurate and verifiable will be required; and answers must also be available for scrutiny, comment and rating from the public.

This is, by design, not for the faint-hearted or the ‘greenwashers’. It is for businesses that wish to prove they are living their values and are committed to an ethical and sustainable approach in all they do.

Solomon outlines the key aspects of Profit Through Ethics’ journey to Alex Blackburne.

What problem is Profit Through Ethics trying to solve?

Business is not serving people and the planet. Trust in business is very low. We have not got the sort of protected environment and fair, happy and stable society that we might have if business was able to serve us better, and I think in recent decades it has been serving its own interest.

The idea of a social contract where prosperity is shared seems to be very much old hat. I don’t think that’s good enough, and believe a lot of people out there – and indeed thousands of businesses – would concur with that. A growing number of businesses want to do something about it and to show they are demonstrably part of the solution, not just going through the process of producing a glossy corporate social responsibility (CSR) report and presenting it as evidence that they are responsible or sustainable.

I think, too often, CSR comes across as trying to do a little bit of good to offset a whole lot of bad, and it’s just not working.

Is it easy to persuade businesses that being ethical, responsible, sustainable, honest and transparent is the best – and most profitable – way forward?

While it is not yet easy to persuade businesses to embrace a wholly ethical approach – large businesses certainly – it is definitely becoming much easier. A year ago I wrote an article which suggested Barclays’ then-CEO was likely to diminish his company’s reputation by proclaiming they were committed to good corporate citizenship when the evidence suggested this was not remotely the case. When a company’s words are wholly unaligned with its actions and with people’s experience of it, it is going to destroy public trust.

It’s always easy to bash banks but, very recently, Amazon, Starbucks and Google have all been greatly embarrassed by their inability to explain to parliament’s public accounts committee how their tax arrangements align with their brand images and purported values.

Unless you are truly values-driven in the future as a business, you’re going to be in trouble

What more and more businesses are starting to recognise, we believe, is that it is impossible to take the shortcuts to short-term profits without destroying trust and reputation over the medium- and longer-term. Those with the longest time horizons can see how real openness and honesty provides the solution.

Our analysis is pretty simple: offloading costs onto society and the environment, and exploiting customers, employees and suppliers is frequently the fastest route to greater profit – certainly in the short-term. Every business is measured on its ability to make profit, and big businesses are measured every quarter. We believe most businesses would rather not offload anything or exploit anyone but they fear their competitors have less scruples, will do these things and will make greater profit as a result.

So on the one hand, businesses want to have good reputations, talk about their values and be on the side of the customer, and on the other hand, they need to pursue at least some unfair and unsustainable practices or otherwise risk being less profitable than their competitors and risk ultimately going out of business. This is the dilemma that Profit Through Ethics is tackling head on.

This is the status quo. Businesses are in this Mexican stand off where they are all pointing guns at one another. We need to find a way to enable them to put their guns down at the same time. What Profit Through Ethics is offering is increasing commercial gain from a strategy of conspicuously ending any exploitation of consumers, employees, suppliers et al, and of conspicuously internalising costs otherwise offloaded onto society and the environment as quickly and completely as possible.

We offer a useful management tool that enables businesses to determine how they are doing on a range of responsibility issues, and to effectively communicate their credentials and involve their stakeholders in making more inclusive, more efficient decisions about future strategy and investment. We offer them the marketing benefit of differentiation – of proving to a cynical public they are truly open and honest, and are demonstrably ‘walking the talk’ rather than pretending to be something they are not.

How would you define responsible business?

A responsible business is one that acknowledges it cannot be perfect; that desists from painting warm, happy, friendly, on-your-side images when their behaviour is to the contrary; that is forthcoming about the challenges everyone knows it faces; that explains why profit without exploitation and offloading is so difficult but how, nonetheless, it is determined to transition from business-as-usual to something fairer and more sustainable.

We think it is now easier for businesses to do this than at any time before. And those that move first, and farthest, will be the businesses of the future. Our prescription is transparency. If a business is serious about its CSR output, and if the claims it makes are true, it should publish that information in a way that people can see it and trust it. To be credible, businesses should prove what they claim.

We’ve gone to the non-governmental organisations (NGOs) and the campaign groups and said that we’ve got businesses that are willing to be transparent and accountable in a radical way. These partner organisation – including the likes of Christian Aid, ActionAid and Tax Justice Network – have helped us create this superb set of questions on community, environment, finance and governance, human rights, marketplace ethics and workforce. We’ve found businesses that are willing to provide decent, verifiable and complete answers and that are willing to put those answers into the public domain for scrutiny, comment and rating.

Big businesses tend to be fine on community impact and environmental stuff. Indeed, many of them are doing pretty amazing things in different parts of their organisations. Sometimes they’re clearly leaders in terms of the policies and practices they have developed. But the bigger they are, the more difficult it is to talk about marketplace ethics and how you look after millions of customers. Banking, insurance, mobile phones, utilities – quite a lot of them say one thing yet do the other when the deals, the service, the small print and the contracts come under close scrutiny. This certainly seems to be the common experience. And of course tax, executive pay and lobbying government are also very challenging topics for the largest firms.

Profit Through Ethics suggests a truly responsible business is one that is willing to answer any question, one that proves it has nothing to hide, right across its organisation.

Have you ever had to turn businesses down that aren’t willing to divulge all the information required?

We have had conversations with companies that have given the impression that all they want is a positive PR hit, to get their transparency mark and a nice warm glow by having a badge, but don’t want the hassle or inconvenience of being transparent in order to earn it. Our discussions with businesses like this happen now and again yet tend not to go very far.

To know that these are conversations that are being had, and that there is a desire at the top for business to truly serve people and planet, is great

Some with only a partial understanding of what we do may think Profit Through Ethics offers a great way of getting some ethical credentials easily, but this is not actually the case. You have to be committed as a business, work pretty hard and demonstrate honesty if you want to do this.

We’re asking businesses to answer a range of questions on a range of issues, to guarantee their information and then to put it in the public domain for anybody – including their competitors and disgruntled employees – to see it. If that information is challengeable on the online platform, then people can comment and rate. If people say certain bits are not true or not accurate, we will investigate those claims and test the business further to ensure the information is meeting the guarantee they provided. If it’s not, then they’re breaking our terms and conditions, removed from the platform and they’re embarrassed.

It is not a problem if a business hasn’t yet adopted many sustainability policies or practices and is starting from a low base. It is only a problem if they try to pretend to be something they are not. We want to work with businesses that are committed to doing as much as they can as soon as they can. The ones that are honest and open about where they are on their journey and willing to discuss all the challenges they face and everything they’re doing.

Have you witnessed a shift since Profit Through Ethics started?

I already mentioned Barclays, Amazon, Starbucks and Google. A year ago, Bob Diamond seemed wholly bullet-proof. It is not contentious to suggest that, in an increasingly connected age, profits must be earned legitimately.

We know that CEOs of many of the very biggest businesses are going around saying, certainly in private, that their purpose must go beyond just making profit and maximising shareholder returns. They are saying business must contribute; business must be part of the solution; business must be more sustainable and business must transform itself; and to their view, the primacy of profit-maximisation prevents this from happening.

We’ve been saying this for 10 years or so; we believe this. It’s really exciting and there’s really a great relief to hear that this is what CEOs of the biggest companies are saying as well. To know that these are conversations that are being had, and that there is a desire at the top for business to truly serve people and planet, is great.

When a company’s words are wholly unaligned with its actions and with people’s experience of it, it is going to destroy public trust

I think that there will come a point very soon where we can see that there is an alternative to saying one thing and doing another. There is an alternative to producing glossy CSR reports while ripping off customers, because we will find and identify businesses that are willing to be completely open and honest about where they are, what all the challenges are and how they are risking short-term profitability because they are no longer prepared to leave their values out of the decision-making process.

They’re going to take some risks in order to do the right thing, because unless you are truly values-driven in the future as a business, you’re going to be in trouble. Christophe de Margerie, the CEO of oil giant Total recently said that his company will not drill for oil in the Arctic because the risks to its reputation from a spill are so great that it just doesn’t make commercial sense. That’s the financial basis on which they’ve done it, but everyone else is drilling for oil in the Arctic, despite what all the campaigners and public opinion says. The CEO of Total is taking a much longer-term view of things, and that is something we believe we’ll see more and more from big companies. They’re the companies that will be around longest and be more profitable in the medium- and long-term.

Are you optimistic that business as a whole will become widely sustainable?

Yes. It’s not been easy because most big businesses are deeply invested in business-as-usual. Finding a way to persuade those big businesses that there’s actually a better way to do this has proven to be challenging.

But we’ve found is that there is a demand for it. We found very quickly that smaller businesses think it’d be great to have a transparency mark to show they’re open and honest – and that’s still what we’re seeking to deliver, and I think we’ll start showing people what that may look like in the next couple of months.

We have always known what we’re doing is very attractive for start-ups and SMEs but we’d like to have several of the biggest businesses here too, and have them participate from the start. It’s taken nearly all year to get the first two large corporations into the project but they are with us now and there are two or three others that are really very close to joining too. So these are really exciting times in that respect.

We are thinking in terms of several hundred leading businesses on our transparency platform using a transparency mark within a year, and in terms of thousands of businesses doing that within two years.