Don’t Be Evil

Forget fiscal deficits, it’s the ethical deficit that is causing heartburn worldwide. Where does India Inc stand on this burning issue ?

Priyanka Sangani

Till a few years ago, SAP Labs India had a system whereby employees were given awards for integrity, a practice it has now stopped. The thinking behind the decision was that integrity was a given, so there was no need for special recognition. It was expected from every employee and the same also applied to ethics. That’s not all. SAP Labs is now coming up with products that actually help clients measure and reduce their carbon footprint, in the belief that sustainability has a positive rub-off on ensuring that the company is indeed following ethical practices. “Transparency is a critical element of sustainability, and when you are required to be transparent, you automatically become more ethical. Besides, it is not just about doing good but also making business sense” says VR Ferose, managing director. Globally, SAP is among the few that publishes a dedicated sustainability report annually.

Ethics form the foundation of how companies function but people are realising that ethics alone aren’t good enough. The new buzz word is being a principled business, and that involves being ethical, along with a healthy dose of sustainability thrown in. Adi Godrej, chairman, Godrej Group says, “I am a firm believer that to be successful in the long run, all aspects of a business need to be looked at. These are ethical business practices, strategy, sustainability and consumer centricity. I know businesses that have survived over the short term not being ethical, but for long term success, all four are crucial.” This is a view echoed by Farhad Forbes, director, Forbes Marshall: “Ethics are something that are a part of your normal culture and way of working, not something you can switch on and off. It is a part of our philosophy. You may lose out a bit in the short term, but in the long term perspective, it is the right thing to do.”

Thanks to the financial and corporate governance scams that have dominated headlines over the last few years, companies have woken up to the fact that just having a code of business conducts and a set of values is simply not enough. A direct impact has been a sharp increase in the number of companies now creating Chief Ethics Officer positions, something that was somewhat of an oddity till a few years ago. The ethics officer has been around in the US since the early 90s, but that was more to take advantage of a regulatory loophole which would ensure preferential treatment for those charged with whitecollar crimes if the company had an ethics officer. To be sure, their role has since evolved after scandals like Enron and Arthur Anderson, but some scepticism remains. Anil Singhvi, chairman, Ican Investment Advisors rubbishes the idea. “It’s ridiculous to appoint a person to watch over the character of the employees. This is something that has to come from the actions and behaviour of the promoters and owners, and percolate down to the employees. Sadly, they often don’t set the right example today,” he says.

Dell, among the companies that have an ethics officer says the idea is to use the company’s purpose and values as decision filters to guide behaviour. Anju Shenoy, director-ethics and compliance, Dell India says, “We are committed to making ethics personal by ensuring each team member understands what is expected of them and providing them with the tools and resources to be successful.” And this seems to be the foremost reason why, even though ethics are an intrinsic part of a company’s culture, they need constant reinforcement. Krish Shanker, executive director — HR, Bharti Airtel says. “Values are important as they help guide employees in how to behave in different situations. If it is erratic, they won’t know how to act. Ethics help set a consistent sense of where the company is going.”

Sure enough, there is some sort of consensus on the fact that people do need to be reminded how to differentiate between right and wrong. “We are facing an ethics deficit and the role of ethics in the workplace has never been as relevant as it is right now.” says Dev Bajpai, executive director-legal and company secretary, Hindustan Unilever. The company has a strict code of business principles which shape how employees behave, both at work and outside. Incidentally, these principles apply to all stakeholders including suppliers and distributors and Bajpai says that there have been instances when relationships were severed as a result of a breach in the code. Given the tumultuous environment companies operate in, long term sustainability of the business is emerging as a top concern. As is the realisation that being a principled organisation is one way to counter it. “This is at the core of our belief — if we are not ethical, we cannot be sustainable. To survive, you need the trust of stakeholders and without ethics, that trust cannot be there,” says Rajeev Dubey, president (group HR & after market) & member, group executive board, Mahindra & Mahindra. The company has initiated Rise, a movement based on its core values, which over time will impact how it does business. Vice-Chairman and Managing Director Anand Mahindra says: “It’s about being the drivers of change in our communities. We strive to create and share economic value in a way that simultaneously creates value for society by addressing its needs and challenges. We have embarked on a journey to further connect our companies’ successes with social progress..” Dharmic Dilemma

There is also the realisation that being principled is not only about ticking the right boxes but can be a crucial part of business strategy. Resource efficiency is among the first things that come to mind when one talks about sustainability, which automatically translates into a healthier balance sheet. The other big positive is the intangible impact on the brand and reputation. “Principled companies stand to gain from a huge positive spin off on their reputation which strengthens their social licence to operate,” says PS Narayan, vice president and head- sustainability, Wipro. “When you talk about ethics, the underlying principle is that I will not do harm to others. When you talk about sustainability, it is an extension of the same principle to the larger interest of society. It’s about not doing wrong, even if you are not mandated by any kind of regulation.”

Earlier this month, Wipro and Tata Steel were ranked by the Ethisphere Institute as among the World’s Most Ethical companies. Now in its sixth year, the list features companies who rank consistently high on transparency, investment in innovation and sustainable business practices and corporate responsibility. For Wipro, this ranking adds to it’s already impressive dossier of being featured on the Dow Jones Sustainability Index and the Nasdaq Global Sustainable 100. “Ethics have always been an integral part of how the company does business, and this has always been reinforced in a formal and tacit manner,” says Narayan.

Sustainability too has gone beyond conserving resources to actually impacting business strategy. For instance, all buildings built by Godrej Properties are LEED certified. Two years ago, Mahindra & Mahindra acquired a controlling stake in electric car company Reva in keeping with its stated business principles on sustainability. Dubey says, “The challenge is take to a philosophy to the nuts and bolts of everyday behaviour. If you don’t, it remains lip-service.”

On the same note, Sudipta Das, Advisory partner & climate change & sustainability leader (India), Ernst & Young points out that ethical practice is an important requirement for sustainability. “Over the last few years, there has been a marked improvement in awareness, practice and communication of sustainability initiatives by Indian companies. Increasing cost of resources, regulatory requirements, market opportunities, peer and supply chain pressure coupled with increasing need for transparent stakeholder engagement and inclusive growth has resulted into higher enthusiasm and initiatives by companies to adopt the principles of ethical and sustainable business practices,” he says. There are growing instances of customers preferring to give their business to a more sustainable company, all other things being equal. And the customer is always right.

priyanka.sangani@timesgroup.com