Recently, I ran into an old family friend – a lawyer who works at a large Canadian company like the one where I worked in the corporate ethics office for 11 years.
He asked me what I am up to professionally these days. I told him that I’m speaking and teaching – mostly to professionals, including CPAs. “Ethics?” He asked. “Sort of,” I answered. “Interesting,” he said, picking up on my uncertainty. “It seems to me in some ways that ‘ethics’ as a topic has fallen out of fashion.”
He went on to describe how when he first started law, anti-corruption was all people cared about. Then – for a brief moment – ethics overall was cool. Shortly after, CSR (corporate social responsibility) had its moment in the sun.
We then talked about how things have really shifted now, to a focus on ESG (environmental, social, governance), and we began a conversation about polarization. About ESG and anti-ESG. And how challenging the whole topic is to navigate. The conversation – especially his comment about ethics being out of fashion – stuck with me. Perhaps that’s because both ethics and fashion have been a considerable part of my career.
After leaving the corporate ethics office, I went on to found an ESG-centric fashion marketing firm, called The Garment, the mission of which was to change the face of fashion by connecting women and responsible brands.
The business model was simple – we searched the globe to find responsibly-made garments (which were vetted according to a strong ESG standard) and connected them to our 35K Instagram followers. The business was strong, and in our first corporate year, we generated over $1M in responsible garment sales.
My time as the CEO of that organization was exciting. It was also hard. As anyone leading in this ESG era knows, it’s difficult to satisfy all stakeholders. Inclusive sizing, diversity and representation, material sustainability, supply chain transparency, animal rights…all of these were things we struggled to satisfy, while also wanting to be strong from a financial perspective.
The challenges I experienced during that time led me to believe that we are indeed in a new era of ethics and ESG – one in which the “old” way of managing business ethics, corporate reputation, whistleblowing, and ESG is insufficient.
While the prevalent “everybody wins” attitude towards ESG-related efforts – such as sustainability, diversity, inclusiveness, and social responsibility – is appealing, it has failed to equip employees and leaders with the skills to navigate the very real tension that can arise between different stakeholder expectations in business.
This, coupled with increasing expectations of leaders to provide moral leadership and “take a stand” on social and environmental topics, and a significant rise in (often public, social media-fueled) stakeholder activism has resulted in a new and very risky business environment.
The new era of (business) ethics is polarized and learning the skills to navigate this new environment is critical. There is a way forward that includes greater financial success and business integrity as it relates to ESG. But it might not include what you think.
The new way, what I refer to as ESG 3.0, involves the following, with ethics playing a central role:
- An understanding of business polarization – and the role viewpoint diversity plays in effectively engaging stakeholders and having healthy conversations about ESG.
- An understanding of behavioural ethics – why people make the ethical and unethical decisions that they do. Appreciating this can decrease risk associated with unethical behaviour, including (often inadvertent) diversity-washing and greenwashing.
- An openness to the idea that in order to move beyond the ESG/anti-ESG rhetoric and other polarizing deadlocks, we need better skills to engage in hard conversations. This involves using “but/and” thinking – that is, analyzing perspectives from both sides to help resolve ESG paradoxes and conflicting ideas.
This new way of thinking starts with a detachment from the opinions on ESG we hold most dear and a commitment to approaching people who hold different opinions from us with a spirit of fierce curiosity.
So, is ethics out of fashion? Maybe. But/and, understanding the way it relates to ESG is critical to surviving this new era, so in my view, CPAs and all those in business are wise to pay attention.
Along with her session at PD Nexus: Business and Leadership Insights, you can hear from Morgan at Becoming an Ethical Leader (July 21, Vancouver) and Shades of Grey: Ethics in the Workplace (July 21, Vancouver).
Morgan Hamel is the President of MH Partners Inc., a boutique consulting firm adept at helping leaders and their organizations navigate a new era of stakeholder activism. With experience in corporate ethics, academia (Master’s Degree in Applied Ethics from Utrecht University in the Netherlands) and ethical entrepreneurship, Morgan offers clients a business-focused, ethics-rooted perspective on reputation management that doesn’t exist elsewhere.