Andrew Matthews, Associate, Advisory Services, BSR

I recently finished Fran Hawthorne’s new book, Ethical Chic, which investigates whether the innovative and leading companies we love do business ethically. Hawthorne studies prominent technology and consumer companies like Apple, Starbucks, and Trader Joe’s to answer the central question of whether these companies’ ethical appeal is founded in reality or simply a marketing ploy. Some rank higher than others based on a number of criteria including environmental impact, labor rights, and community development; however, Hawthorne emphasizes that each company has practices that call into question its ethical standing. I could not help but wonder whether any company is completely ethical. Can a company actually achieve the seemingly elusive ethical label?

Many companies assume that certain outcomes are required – such as reductions in energy consumed, resources used, or emissions produced – to raise their ethical standing in consumers’ and investors’ eyes. Through various public rankings, companies determine how comparatively good they are based on their peers’ outcomes. But outcomes-based approaches to evaluate ethical standing gloss over the method by which companies make decisions and achieve these outcomes. For example, if two different coffee companies work with their coffee bean suppliers to increase annual yield, provide education for farmers’ families, and reduce the amount of water needed during irrigation, yet one company has a structured, long-term plan in place for the initiatives and the other simply has a good-hearted CEO who is due to retire in a year, we would take that into consideration when determining which company is more ethical. Simply put, the process by which companies make sustainability improvements is just as important as the outcomes they produce.

Leading companies have sophisticated CSR governance structures, integrate sustainability concerns into the innovation and R&D process, and engage their supply chain through coordinated, long-term sustainability strategies. Establishing stakeholder trust and building an ethical image is primarily about how sustainability is integrated into core business functions and less about the immediate outcomes year-over-year. Hawthorne writes, “For a company to be truly ethical, CSR concerns should be built into the corporate culture.” With more rapid climate change impacts and constrained resources, increasing government demands for private sector responsibility, increasingly diversified supply chains, and stakeholder calls for greater transparency, companies must take the question seriously of whether they are ethical or not.

BSR will explore how companies can integrate sustainability into corporate governance, product and service design, and supply chains among other areas during the annual BSR Conference on October 23-26.