Ethics is the depth dimension that can often go unnoticed and unmanaged by management. In the “low trust” that we are now living in, attention to business ethics must ascend the corporate agenda and become an integral part of the new regime of accountabilities.
The raft of new rules and guidance on corporate governance is not enough unless it is ingrained into an organisation. It is the living culture of an organisation that determines action and must be carefully nurtured by management so that employees know the right thing to do – business and ethics are indeed compatible forces, according to KPMG Director, Attracta Lagan.
Ms Lagan, who is speaking today at the APPEA (Australian Petroleum Production and Exploration Association Limited) conference in Melbourne, emphasised the need for all employees to learn how to become involved with their organisations’ internal vision, to learn the organisations’ culture from inside out so they are better equipped to know what to do at a point of crisis.
“There have been plenty of good examples of what happens when a company is not managing their internal ethical culture and how the social context of an organisation can bring it to its knees,” she said.
“These business collapses suggested that there was a lag between the values being espoused by business leaders and the resources allocated to ensuring the ethical imperative is embedded in day-to-day decision-making. Many businesses have recognised the need to move on, but it is important to take an holistic approach and not pay lip service.”
“It has been the executives and their boards within the oil and gas industries that have been the first to recognise this relationship between interdependence of business ethics and organisational performance,” affirmed Ms Lagan.
“It is these industries which have now moved into stage two phase of sustainability development where they are focussing their efforts on embedding the ethical perspective into their day-to-day performance management systems,” she added.
This is certainly the case according to a recent KPMG Global Survey on Business Reporting, the oil and gas sector ranks fifth out of 16 in terms of the number of companies producing wider corporate accountability reports.
Ms Lagan observed the benefits of these ethical business practices and the framework within which the oil and gas industry need to perform to ensure the reputation of the industry as a whole.
“It is crucial that business leaders pay particular attention to the importance of business ethics in safeguarding corporate reputations as this is the new source of competitive advantage for the future,” she advised.
“The experiences of global organisations such as BP, Shell, Rio Tinto and BHP Billiton have demonstrated how protecting corporate reputations means moving beyond the legal requirements and be seen to respond to societal expectations of socially acceptable business standards.”
Ms Lagan continued, “as the inherent nature of the oil and gas industry puts it on the defensive with social and environmental protection lobbies globally, the industry can be seen to be leading and shaping developments in the ethical business debate.”
“Just as human character does, an organisation’s ethical culture plays a vital role in determining its effectiveness and therefore securing its sustainability.”
“Ethical leadership means assisting employees hone the skills necessary to balance these, often competing, stakeholder tensions – success now depends on managing organisational cultures.”
New business ethics tools such as KPMG’s Integrity Thermometer, advocated by KPMG’s Ethics Services, assists management in determining and understanding how their people experience the organisation’s current systems and communications focusing on the truly critical ethical attitudes and behaviours.
“If business ethics are not being promoted in the workplace then business leaders are putting their enterprises at risk, as current research indicates that it is the workplace context that is the major determinant of the ethical behaviour that is adopted by employees,” Ms Lagan confirmed.
“Investing time in nurturing a culture to support core values is primarily a matter of aligning management processes to enhance total business value creation – corporate culture drives profits,” Ms Lagan concluded.
