Business can only be sustainable in the long-term if it is built on good, ethical values
By 
Ethical business: An image of a John Lewis store in 1899 - the John Lewis Partnership was set up in the 1920s to dissolve opposition between owners and workers
By Nick Sturge
Many people think that principles hold a business back – that success is always built on sharp practice, that businessmen and women have to push moral boundaries to make money for themselves and their shareholders.
The Institute of Directors believes that is wrong. Think Innocent Drinks, Café Direct, Rowntree, Cadbury, John Lewis — all businesses which have become very successful having been built on overt “ethical” values.
Cadbury’s and Rowntree were founded by Quaker businessmen to achieve social as well as commercial aims. They weren’t limply philanthropic: they were hard-headed and very successful enterprises.
The John Lewis Partnership, Britain’s most famous employee-owned retailer, was set up in the 1920s to dissolve the opposition between owners and workers to create a non-adversarial business. The model has worked well, and made money, for 80 years.
On the flipside, several of our high street and investment banks were founded by Quakers in the 17th and 18th centuries with very strong values of simplicity, honesty, integrity and fairness with a purpose of providing social benefit.
You could argue that these businesses have lost sight of their core values – getting into irresponsible lending, currency speculation, complex derivatives and so on. Do they have a sustainable future?
This all sounds a bit too politically correct, doesn’t it?
But a large corporate with a significant presence in Bristol is under close scrutiny at the moment for alleged bribery. Whether it’s the law that’s been broken or “unethical” practices — it’s not good for business.
I don’t want to comment further on this specific case but I think it is worth looking at ethics in business and the ethical leadership.
A business with good direction, will have a vision, strategy and set of values that create a sustainable business which generates profit. If profit is your aim, of course. But for some organisations, social benefit is the goal — so let’s call it value.
An ethical business will take seriously, attributes such as integrity, honesty, responsibility, respect, trust, openness, fairness and transparency, and reflect those in its values (written or unwritten).
It’s not so much about specific issues but about practice. Can abattoirs be ethical businesses? A vegan would probably say no, but in the context of what is generally acceptable in the modern world, it could.
Short term value creation is often attractive, but directors have a responsibility in law to promote the success of the Company and pay due regard to the likely consequences of any decision in the long term.
That to me says “sustainable”. As a director, you must think about the long-term and in most organisations that has to involve giving consideration to the interests of your stakeholders.
And who are stakeholders? Not only shareholders and customers, but also suppliers, employees, neighbours, the environment and any other party that a business interacts with.
Ethics is about defining values that treat all your stakeholders with respect and understanding, being open and honest about your strategy and values, and then sticking to those.
These can all have a direct impact on creating value — treat your employees with distrust, and they’ll leave, costing you more in recruitment and reduced product quality.
Investing time in considering your carbon footprint can have a big impact on your bottom line — through reduced energy, fuel and travel costs. The average cost saving of companies that have implemented a carbon reduction strategy is 25% – and for those spending more than £500,000 a year on fuel, this will be law soon.
So where does the leadership bit come in?
It’s all very well setting a strategy according to a set of ethical values which reflect what’s special in your business, but if the people in your organisation do not know, understand, believe or can be bothered with your strategy and values — you’ve wasted your time.
So, and this is a key point of ethics, only set a strategy and values that you — as the leaders of your organisation — believe in and will champion.
Culture starts at the top — a strong positive culture is essential for consistent quality of your product or service and therefore for generating sustainable value in your business.
So, if the ethics of your business (as defined within your values) are important to your culture, then ethics are important to the survival of your company.
Most important of all, is that the directors believe in the values they have set and demonstrate them. Set the standard, set the right example, work to the values that you expect your employees to work to. Make sure all your policies and practices reflect your values. That will have the biggest effect on culture.
Nick Sturge is the Chairman of the Bristol branch of The Institute of Directors and Centre Director of SETsquared Business Acceleration at The University of Bristol
Fair point. Interesting to me to see the Chair of Bristol's IoD echoing, from a different starting-point, much of the thinking of the newer corporate social responsibility focuses in the city – Bristol's Hub at the top of Bush House, where many green businesses and organisations are based, and the new centres at Stokes Croft. And the Tobacco Factory.
It seems that Bristol is well-placed, as a medium-sized city, regional centre and base for media, creative and academic work, to co-operate across the boundaries that divide us and build up its own cross-city ethical basis for business. We have the traditions going back to the 18th century and before, of Christian values of justice and thrift.
There's the less ethical history of business in Bristol too, of course, around the old trade in human beings and other sharp shipping practices, which we all believe we've turned our backs on these days. So wouldn't it be good to hear from, say, Bristol's Merchant Venturers and Freemasons, that they squarely support the values Nick Sturges is espousing, and are open and honest, fair and ethical, while welcoming democratic scrutiny.
Nice piece. The business case for strong ethics is actually just an extension of "what goes around comes around". People do business with people they like and trust, and trust is earned by practising what you preach, and keeping your promises. I also think that small businesses are in a powerful position to lead by example.
Ethics isn't just about doing business with ethical companies and treating people right, it's also about paying people on time. Cashflow, especially now, can make or break a business. Large companies with "ethical policies" will completely forget that it's also about treating your suppliers fairly. Paying on time as much as you can shows respect. We do our damndest to do so as a small business, but would love to see others (those large clients with huge accounts departments) acknowledge that having an ethical payment policy is just as important as having a corporate social responsibility pot!!