Using global ethics as strategic advantage

The Language of Business

Executives often treat global ethics defensively— they follow internationally accepted rules of engagement to allow themselves to sleep better at night and as insurance against a prison sentence. Or they go through periodic ethics training to check off the box of completion.

When applied proactively, however, ethics also proves strategically effective and profitable.

The benefit emerges from closely tying global ethics to a broad-based social responsibility program—in short, analyzing a business holistically to see how every aspect of its operations, from services in the HR benefits office to shop-floor uniforms, can be optimized for strategic gain.

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One of my BU colleagues often uses a simple ballpoint pen to drive this point home. She’ll ask me: Who produces the ink and do those workers receive a living wage? If portions of the pen are imported, does each country subscribe to OSHA-quality international employment conventions? Is the pen’s mechanical assembly fully recyclable?

Though I’m the first to concede that viewing a company’s operations through a social responsibility lens originally took some getting used to, for a Millennial, it’s as commonplace as carrying a cellphone. Their demographic even takes this one step further—a good lesson for the rest of us—and goes out of their way to frequent and support companies whose operations practice what they ethically preach. This is far removed from boycotts based on Apartheid in the ’90s or consumer boycotts in the ’00s, and is actually far closer to brand management and the lifetime value of a customer.

Even when making a good faith effort to make ethical decisions across global boundaries, though, leaders must be sensitive to potential conflicts between borders. Business practices are a function of the environment in which they’re practiced and are heavily influenced by national and, at times, local culture. This may put even the best thought-out worldwide social responsibility plans at loggerheads with their domestic goals, through no malicious intent.

For example, a multinational company doing business in a developing economy might consider contributing school uniforms to children in its local community as a means of engaging in helpful “charitable work.” This is a no-brainer, right? Not necessarily. The company was totally surprised when it received massive backlash because its donations upset the small tailors and street sellers in the area who suddenly had no income. Additionally, because the uniforms were not following dress code specs, the children were prevented from starting school on time. “Good” work takes cultural collaboration and often is more complicated than it appears at first glance.

It’s also an unwritten rule in some countries that beyond gifts, courtesies will be offered to members of your contact’s extended family, whether through college application letters, job hiring recommendations or otherwise. Failure to play along, even if patently outside of the bounds of your business dealings, or for people whom you’ve never met, might suddenly sour an otherwise solid relationship.

On the other hand, success stories abound.  When a U.S.-based, international nonprofit received positive visibility because of its contributions to a small, struggling school, based on a deep understanding of that institution’s needs, in-kind donations exponentially increased stateside. There are countless stories of U.S. executives donating time in their respective professions during periods of crisis or natural disasters, rather than just sending unneeded supplies. This type of thoughtful contribution offers not only significant visibility to the needs of survivors and people in poverty, but also paves the way for appropriate future resource allocation.

Here are some specific ways that using ethics in a strategic manner in the global sphere can serve as a strategic advantage:

  • Companywide operational review: Companies that view their engagement with stakeholders as a strategic element of their mission are more likely to ensure that their total operations are ethically fair and balanced. As part of a review of all stakeholder relationships and processes that involve them, it’s a good excuse to put everything on the table, even processes that haven’t been changed (or challenged) in years. After completing such a review, one of my Asian consulting clients unexpectedly reduced their overall COGS by 2 percent, by improving antiquated systems.
  • Unique PR opportunities: Effective implementation of a global ethics strategy will provide a unique opportunity to highlight different portions of your company, which normally wouldn’t receive traditional PR. A nonprofit organization I volunteer for found out they could increase employee participation in their retirement plan by translating basic materials into Haitian Creole. Had they not completed a social responsibility audit, they wouldn’t have discovered how many members felt frustrated trying to decode routine company literature using their Pidgin English.
  • Connection with customers: More so than any time in recent business history, customers long to have a personal relationship with their vendors. For example, I take great pride that I’ve been a cardholder with the same credit card for more than 25 years. In the past few months, this company has begun rewarding my loyalty by offering me promotions based on my specific charging history and even reached out with a personal phone call. Similar connections are possible through associated social strategy programs, because they provide an opportunity to connect with customers beyond the traditional service or product being sold. And, exactly like the credit card vendor did for me, it provides another reason customers will want to be loyal.

Don’t simplify ethics to an arm’s length audit of how much you’re in compliance with the U.S. Foreign Corrupt Practices Act, or chastising employees for accepting a golf invitation overseas. Ethical conduct is only one part of a much broader social responsibility approach and when done right, one that will positively contribute toward employee morale, a strong esprit de corps with customers and a higher EPS over time.

Greg Stoller is a Senior Lecturer, and is actively involved in building entrepreneurship, experiential learning and international business programs at Boston University’s Questrom School of Business.