Professor Daniel Malan, Trinity Business School, draws on his research in over 24 leading companies to propose a blueprint for ethics and integrity to become strategic, holistic and effective tools in corporate governance.
ES & ‘the Forgotten G’: Making Integrity Strategic in Governance by Tom Gamble and Daniel Malan. Related research: The Rise and Role of the Chief Integrity Officer: Leadership imperatives in an ESG-driven world, World Economic Forum White Paper 2022.
The environmental, social and governance dimensions to business have come to the forefront in recent years – so much so that the acronym ESG has become household with hardly a strategic correspondence going by without mention of it. But for Daniel Malan, Assistant Professor in Business Ethics at Trinity Business School, it is almost a case of ‘ES + the forgotten G’, governance having been relegated to third and often overlooked place as Environment and Social steal the limelight and garner greater attention and support.
For Malan, this over-focus on ES within corporations may be detrimental to a firm’s performance and impact. While putting more emphasis on integrity in the governance dimension to business may not only help deal with the complexities firms face, but also be a powerful source for strategic advantage.
Integrity on the rise
Prof. Malan has researched the issue of governance, ethics and compliance as part of his academic role at Trinity and also as part of his work as a member of the World Economic Forum’s Global Future Council on Transparency and Anti-Corruption. In collaboration with co-authors Alison Taylor, Anna Tunkel and Birgit Kurtz this research culminated in an article that was published by MIT Sloan Management Review .
Their findings point towards ethics and integrity gaining ground in companies, perhaps the clearest evidence being the recent emergence of the role of Chief Integrity Officer in leading firms. Often, the incumbent sits on the corporate C-suite and has a degree of independence and autonomy. But according to Malan, more is needed to fully make integrity and ethics an inherent part of corporate culture, behaviours, and importantly – a driver of strategy.
Meanwhile, ethical business continues to make its way in corporate circles, with the big names – Pepsi-Co, Vestas, Novartis and Unilever among them – leading the way. Giving it strategic importance makes it easier, internally, for managers and execs to identify instances of potential breach of ethics as well as avoiding hypocrisy. A decision, for example, to make an exception and offer a corporate gift very much above the norm to a ‘good and longstanding friend’ of the company could turn out to be an ethics & compliance nightmare when it comes to employees’ future belief in the function’s legitimacy and efficacy.
Malan’s research has also revealed an external impact when putting ethics under a strategic light. Investors, for example – increasingly willing to place their money in businesses with solid reputations and beneficial impact for the wider good – are demanding that companies straighten out their commitments to sustainability, as well as rules on lobbying and political spending.
Sometimes, blending integrity into strategic initiatives has both internal and external benefits. Reviewing sales and marketing strategy – especially regarding operations and supply chains in emerging markets where the temptation is higher to cut costs to the detriment of employee working conditions and wellbeing, or taking advantage of loose bribery and corruption legislation – can provide aligned ethical business practices internally, while strengthening external reputation and value for potential investors.
All in all, the research among leaders in over 24 large companies and institutions highlights three ways forward for ethics and integrity to gain momentum and weight: Make it aligned with strategy, make it holistic by breaking down silos and impacting every department in the organisation, and, finally, engage employees on ethics and integrity issues and initiatives.
Integrity must flow
To open up integrity to an organisation, silos must be broken down. One initial way of achieving this is a change in the Ethics & Compliance role. From being a ‘niche’ department that others respect, tolerate – or even fear – integrity must flow through several dimensions and impact the operations and decisions of the entire organisation. At Novartis, a pharma and healthcare company, for example, the role has expanded to become Chief Ethics, Risk and Compliance Officer thereby incorporating a key dimension – risk reduction – that cuts across all of the company’s operations.
Another trend is that of broadening the collaboration between business, compliance, legal and CSR/sustainability departments within a company. This ensures coverage of matters ranging from CO2 emissions, safety, impact on stakeholders, legislation and human rights by an underlying thread that is integrity. Failure to tackle silos leads, at best, to dealing with individual issues and problems and, at worst, to increased risk of missteps and ethical lapses.
In short, integrity and ethics must be holistic in that they become an integral, inherent part of the firm’s operations and strategy, with no part of the whole able to function without an ethical culture underpinning its subsequent actions and behaviours. Unilever, for example, has set up a global business integrity team to manage all aspects of its internal conduct and external actions. And to ensure that decisions and their resulting impact remain ethical and desirable, the team also includes a gamut of stakeholders – other businesses, government, NGOs and civil society – in its actions and problem-solving initiatives.
Getting people involved
Challenging as it may be, it is essential to onboard all employees – from senior management to front-line – for business integrity to become a core competency and culture in an organisation. Learning from the pioneers is useful.
Novartis, for example, developed its code of ethics via an inclusive, co-creation initiative including input from thousands of its employees. Setting up a team of behavioral scientists, the company also launched an ethical culture survey among its 108,000 employees, and HR now features ethical dilemmas as part of the recruitment process.
The research also brought to light the Canadian engineering and construction company SNC-Lavalin which has implemented an ecosystem of 150 integrity ambassadors whose job is to increase awareness, offer help and guidance, and promote integrity throughout the company. Training workshops have given way to discussions involving employees, creating an open space where they can raise questions on issues – including ethical challenges – they face on a daily basis rather than uniquely on compliance.
Prof. Malan notes that many of the interviewees in his research put an emphasis on building an ethical culture within their organisations. This makes sense. For culture – the under-the-waterline segment of Edward T. Hall’s classic iceberg model – along with values, ultimately drive behaviours.
How to move from overlooked and tolerated to focused, holistic and useful
Although creating the post of Chief Integrity officer is a first step, this alone will not guarantee a culture of integrity within the organisation. Drawing on the results of the research in over 24 leading companies, Prof. Malan offers a set of recommendations to make ethics and integrity an inherent part of both the firm and employee:
- The first is to endorse integrity as strategic, with an effort to ensure alignment and coordination with the company’s business strategy. This increases the effectiveness of integrity tools such as decision-aids, codes of ethics, or internal Q&A forums. Integrity would also gain much in legitimacy if it is reflected in corporate reporting and roles, with back up coming in the guise of task forces to address ESG issues.
- As mentioned previously, Malan’s research points to an important factor being the breaking down of silos and cascading integrity throughout the various levels and departments in the organisation. A further way of trickling integrity throughout the matrix would be for compliance teams to work closer with their colleagues in sustainability/CSR and, as such, obtain an understanding of how the company’s stakeholders view its performance on social and environmental issues.
- Culture: being strategic and holistic, integrity can play a dynamic part in shaping behaviours and reducing risk.
- Autonomy and independence are important dimensions if the Chief Integrity Officer is to operate effectively, as well as having a voice in decision-making at board level.
- The Ethics/Integrity team multiply its chances of impact and success if it is composed of members drawn from a diverse set of cultures, skills and professional backgrounds. Skillsets should include data analysis, policy, stakeholder engagement and behavioural science.
Able to work on a wide range of ethical issues – from political spending and lobbying, to human rights, controversial social issues and ensuring the company walks the line of its values and ethical culture – the Chief Integrity Officer and team can prove of invaluable assistance to CEOs and organisations overwhelmed by both the complexities and demands of an increasingly fast-paced environment. Making integrity strategic would also help make corporations remember, not forget, the ‘overlooked G’ in ESG.
1] Malan, D., Taylor, A., Tunkel, A. and Kurtz, B. (2022). “Why Business Integrity Can Be a Strategic Response to Ethical Challenges. MIT Sloan Management Review. Available at https://sloanreview.mit.edu/article/why-business-integrity-can-be-a-strategic-response-to-ethical-challenges/
- Link up with Prof. Daniel Malan on LinkedIn
- View Daniel’s academic profile and publications at Trinity
- Read a related article: Why business leaders need a moral compass
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