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Thursday
Jun302016

The future of business ethics: Hyper-transparency and other global trends

In the future, compliance officers will need to anticipate and respond to a transformation in business ethics. Here are six trends to watch out for.

Hyper-transparency: By 2020, there will be 80 billion devices connected to the internet. As internet access has grown, the media industry has fragmented, public debate has become less top-down and more diffuse, and companies have had to accept that the ability to control reputation has been greatly reduced.

This new environment raises complex and morally fraught questions around privacy, surveillance, transparency, and freedom of expression. Companies in the future will behave as if everything they say and do may become public, but they will expect the same from employees. More broadly, the vast expansion of interconnectedness will transform how companies manage and engage with their external and internal stakeholders. This will require rethinking approaches to reputation, stakeholder engagement, and values.

Individual and Collective Empowerment: Headlines today focus on inequality, but there is another underlying story here: the growth of the middle class. By one estimate, the world’s middle class will increase from 1.8 billion in 2009 to 5 billion in 2030, a growth trajectory that is concentrated in the Global South. Improved living standards and education levels will create an unprecedented level of individual empowerment, along with new expectations from business and governments. Individual empowerment is bolstered by collective action.

Through social media, citizens in the most distant locations can bring local issues to the world and work with global partners to address grievances. As anti-corruption tools and "literacy" continue to spread among populations, companies should expect to come under greater scrutiny. Already, we see individual and collective empowerment leading to rising public anger about corruption in countries as varied as Brazil, India, China, Russia, Turkey, Malaysia, and Indonesia.

We can expect demands for the fulfillment of individual and societal human rights to continue. This will lead to more powerful advocacy for social, economic, and environmental justice, along with the creation of a more vibrant and extensive civil society. The role of the business sector will change as expectations around its responsibilities shift. Standard but outdated concepts that the purpose of corporations is to “drive shareholder value” may be replaced by broader concepts of stakeholder trust and "shared value."

Demographics and Automation: The world is getting older. Today, over 60 percent of the world’s population lives in countries in which the fertility rate is below the replacement rate. This aging has sweeping social and economic implications, including a decline in the number of workers available to business and an increase in local communities’ need for (and demand for) services associated with an older population. The overall decline in the workforce will be counterbalanced by the automation of jobs across all industries. Many jobs will be eliminated, and there is risk of widespread societal and political disruption in a number of areas.

It is likely that in an era of reduced employment opportunities -- and thus, reduced contributions by business to society through job creation -- the pressure for equitable sharing of value created by business will be intense. Companies will need to consider their role in creating and sustaining more inclusive economies.

Organizational Culture: A consensus has emerged as to what an effective anti-corruption compliance program looks like – its components and success factors. At the same time, it has become clear that compliance programs don’t exist in a vacuum, and that the effectiveness of any process is driven by the surrounding culture. The ethical challenges facing companies today go far beyond the traditional control remit of compliance teams. In the future, compliance and ethics functions will not just police the enforcement of existing rules, but will be empowered, independent, and ready to meet the most pressing challenges facing companies. Compliance officers will become agents of change, taking ownership of company values and culture.

Supply Chain Oversight: The current approach of self-regulation in supply chains is likely to become untenable in the face of increasing transparency and awareness. Governments may seek a greater role in the regulation of corporate supply chains and of the expectations placed on companies. The California Transparency in Supply Chains Act and the UK’s Modern Slavery Act represent early moves toward the same standard. Given the immense practical complexity that this presents for businesses, we might expect to see the emergence of an “adequate procedures” framework analogous to the emerging global consensus on anti-corruption compliance.

Toward Systems Thinking: Corruption has long been approached with the implicit attitude that it is a victimless crime. This is now changing fast, as it has become impossible to ignore the links between corruption, poverty, conflict, and human rights violations.

Compliance and ethics departments will need to incorporate into their strategies the connections among corruption, human rights violations, and the conflicts they drive. They must underline not just the legal ramifications of corruption but its larger impact. As more initiatives seek to bring together actors from different spheres, companies should expect to be drawn into participating in expansive anti-corruption networks.

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Alison Taylor is director of advisory services at BSR, a non-profit consultancy and company network focused on sustainability and CSR.

James Cohen as an expert on anti-corruption, international development, and security sector reform. He is based in Washington DC, and can be followed on Twitter at @JamesCohen82.

Reader Comments (1)

Great article. Excellent image capturing the true essence of our challenges.
June 30, 2016 | Unregistered CommenterTjones
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