Two major disruptions to businesses have come from technology (e.g. the Internet) and from business models (SaaS, Freemium etc.) and these have been felt all the way from the board room to the high street.
But now I believe there is evidence that the next disruption to hit the board room will be driven by ethics. The behaviour and culture of banks and other businesses that caused or contributed to the global recession have rocked the confidence not just of governments, but consumers to the core.
This has been coming for some time and perhaps even one of the milestones of unethical business practices can be traced to the introduction of Corporate Social Responsibility (CSR). The very invention of this term is in itself recognition that businesses have fallen below the standards expected within society.
However, many businesses still promote CSR as a marketing tool rather than as a core principle. Marketing should be an outward expression of the inward mission and value the company stands for, but the reality is that with too many organisations there is no such connection. Just like companies that promote innovation whilst delivering legacy products, they will be disrupted when real innovation – and in this case ethics – is embodied rather than simply promoted.
Whilst some would argue the root cause of poor business practice is the single minded pursuit of profit over-riding ethical behaviour, I believe it is the lack of integration of business and society that has enabled this distorted and deviant behaviour to thrive. Again, as with CSR, the introduction of stakeholders as a concept was recognition that a business should not solely consider the wishes of the shareholders, but also consider other stakeholders the organisation serves (e.g. customers, employees etc).
But isn’t the question “who are my stakeholders?” just rephrasing a 2,000 year old question “who is my neighbour?”. And don’t we already know the answer?
Stakeholders are not just shareholders, employees and customers, but also suppliers and still the list goes further. The government not only profits – in terms of tax – from business, but also defines the laws in which it operates. Indeed, every tax payer or recipient of benefits has a stake in – and benefits from – successful and ethically run businesses. That’s about everyone.
This has become all too evident with the recent banking crisis. Millions of people who weren’t customers, shareholders or employees of these banks are now paying higher tax and receiving reduced benefits because of the unethical behaviour of these banks.
It is this painful lesson; that everyone is a stakeholder, that both community and businesses are learning.
The ethical disruption of banking practices is already starting to happen and I suspect that retail will become the next beneficiary of this disruption particularly with the recent discovery of unethical practices in the supply chain (horse-meat being passed off as beef).
So we don’t need complicated statements around Corporate Social Responsibility, nor do we need stakeholder management. Business just needs to answer one simple question…
Who is my neighbour?