Beyond ESG: Five core principles for ethical business practices in a turbulent world

2 minute read

The quest for ethical business practices is fraught with confusion, leading many well-intentioned leaders astray. There's a pressing need for companies to re-evaluate their strategies and principles to build better businesses, says NYU professor and author Alison Taylor

Sian Harrington

A tree growing out of a globe with dark clouds around it

How can we build better business when there are so many confusing and contradictory expectations and demands? This question is one Alison Taylor, clinical professor at NYU Stern School of Business, seeks to answer in her book Higher Ground: How Business can do the Right Thing in a Turbulent World.

Drawing on insights from interviews with more than 200 executives, activists and academics, Taylor delves into the challenging balance businesses must strike between pursuing profit and adhering to ethical standards.

So many people, many with good intentions, appear to be lost, she says. We no longer even share a common language to discuss the challenges we face. The old approach of managing different functions – branding, culture, sustainability, risk and ethics – as separate entities just doesn’t work anymore. Companies lacking rigorous internal coordination wind up looking disjointed and hypocritical.

She calls on business to rethink the concept of corporate value, advocating for a shift from viewing businesses as isolated entities focused on protecting tangible assets to recognising the predominance of intangible value, such as customer data, brand value and intellectual property. This shift necessitates seeing corporations as part of a broader ecosystem, an approach that is more aligned with the realities of the modern business landscape.

Here are five core lessons for navigating the complex landscape of modern business ethics, distilled from Taylor’s book:

  1. Anchor business values in human impact: Businesses must prioritise human rights by assessing the rights relevant to their sector and location. This involves direct consultation with affected communities through interviews and focused group sessions. Prioritising actions based on impact rather than risk ensures that businesses address the most pressing human concerns, fostering a deeper connection and understanding with those they impact.
     
  2. Embrace corporate political responsibility with caution: Before attempting to influence the political sphere companies should focus on ensuring that their operations do no harm. This principle underscores the importance of introspection and responsibility in business practices, setting a foundation for ethical engagement in broader societal and political issues.
     
  3. Navigate transparency with strategic discretion: The push for constant communication and disclosure can trap businesses in a reactive state, undermining trust and effectiveness. Strategic discretion in transparency means sharing vital information while avoiding the pitfalls of overexposure. The narrative of "win-win" stories often entraps companies into treating ethical issues as PR problems rather than aligning their actions with their words. Instead maintain a balanced dialogue with stakeholders, ensuring that transparency serves to build trust rather than exacerbate challenges.
     
  4. Exercise judicious voice in social issues: Deciding when and how to speak up on social and political issues requires clear boundaries. Businesses should engage when their operations are directly involved or when they can make a substantive difference. This focused approach avoids diluting efforts on matters where the company's impact would be minimal, allowing for a more meaningful engagement where it counts.
     
  5. Set priorities with bold ambition and realistic constraints: Undertaking a materiality assessment to set environmental and social priorities is important. Identifying and ambitiously addressing a small number of existential issues can lead to significant impact. But while these maps aim to align business strategies with stakeholder views and relevance, they fall short in fostering meaningful, strategic discussions on addressing societal challenges, says Taylor. This lack of depth prevents businesses from realistically tackling the broad, intractable issues that they are increasingly expected to solve.

Central to Taylor's thesis is the call for grounding ethical business discussions in human rights frameworks, moving beyond outdated metrics and tools. We treat businesses as if they are singular, self-interested black boxes operating in a vacuum, she says. “We use outdated tropes and tools like ESG, sustainability and compliance when talking about ethical business,” she saysInstead it should be anchored in human rights frameworks. It's a high stakes debate about the role of business today.

Alison Taylor is a clinical professor at NYU Stern School of Business and the executive director at Ethical Systems, a research collaboration of prominent business school professors working on ethical culture. Her book, Higher Ground: How Business can do the Right Thing in a Turbulent World, is available now (Harvard Business Review Press)

Alison will be the guest speaker at The HR Leaders Club in June. We open our new cohort in March for practising HR directors. Please click here to find out more and register your interest.  

Published 28 February 2024
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