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Consistency and Integration Key to Ethics, CSR, and Strategy

Ethics and Corporate Social Responsibility seem, at first glance, to be two sides of the same coin. Both are voluntary constraints on behavior while in pursuit of profit. Ethics and compliance programs focus on keeping the behavior of individual employees within the law and creating an internal culture of compliance, whereas CSR is concerned with strategic and operational relationships with external stakeholders. The key tool of the Ethics department is the Code of Conduct and its related policies.

CSR is frequently distributed throughout organizations, with some responsibilities residing in Marketing, others in Operations, and others still as part of community relations. Rarely, if ever, are Ethics and CSR organizationally proximate. Furthermore, the principles articulated by the ethics department often remain for internal use only. These values often go missing when making decisions of significant strategic import.

Recent academic research suggests that the organizational and conceptual distance between ethics, CSR, and strategy weakens the efforts all three. If the Ethics department is seen as the home of “compliance cops” who are interested primarily in keeping the firm out of legal trouble, employees sense this and will be less likely to behave in ways that create an ethical culture. If CSR is perceived as a marketing gimmick without substantive changes in the way the company actually operates and reports the impacts of its operations, that will further weaken the company’s internal sense of itself as an ethical firm. “Greenwashing” ultimately backfires. And if strategic decisions, like the selections of markets, customers, and products, are divorced from the ethical values that the firm espouses in Ethics and CSR, that signals to both employees and external stakeholders that there is not a coherent, normative set of values for the entire company.

A section devoted to “guiding values” is common to Codes of Ethics, CSR reports, and strategic plans. To develop a company culture that is consistent and deeply embedded, the substance of these sections should be identical. A company’s guiding values should be explicitly stated and used in decision making at all levels of the company. An integrated system of values that ties together Ethics, CSR, and ultimately, all other disciplines within a company, will make it stronger, more competitive, and will reduce its risk profile.

James D. Meacham

James Meacham is Director of Consulting on SAI Global’s Advisory Services team and specializes in business ethics, cultural and behavioral influences on ethics risk and compliance, strategic corporate governance, and GRC technologies.

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