Corporations are powerful actors in society. They have the opportunity to shape the world around them and to influence global agendas. They have a responsibility not just to shareholders, but also to their employees, customers and the general public. Employees are increasingly choosing employers based on social responsibilities, rather than short-term profits, pushing companies to put transparency and accountability at the forefront of their operating principles.
The duty to pursue profit as a CEO is a duty of temporal order, while the pursuit of long-term advantage involves preserving and enhancing the competitive advantage over time, protecting the reputation and lifespan of the enterprise, and considering not just interests of the shareholders, but those of key stakeholders.
Legal and societal pressures on businesses operating around the world are rapidly evolving. There is a call for efforts to better align the activities of corporations with society’s drive to build a more inclusive, equitable and sustainable economy. Increasing demand from institutional investors to put funds into sustainable businesses, combined with stakeholder expectations around corporate responsibility, are putting a greater pressure on companies to place environmental, social and governance (ESG) concerns at the centre of their business management. Many governments are struggling to address challenges in today’s globalized world, and citizens are increasingly looking to the larger multinational companies to make use of their untapped potential and resources to fill some of the gaps left by the public sector.
The implementation of the Sustainable Development Goals (SDGs) and Agenda 2030 will depend on positive contributions from the private sector, through responsible business conduct and responsible investments. For companies, a successful implementation of the SDGs will strengthen the enabling environment for doing business and contribute to building stronger markets around the world. Doing the right thing is about more than just complying with the law. However, legal obligations are increasingly requiring companies to act responsibly.
Standards, norms and legislation
A growing web of principles, standards and non-financial reporting guidelines – such as the OECD Guidelines for Multinational Enterprises, the OECD Anti-Bribery Convention, the UN Guiding Principles on Business and Human Rights, the French due diligence law and the UK Modern Slavery Act – set out norms of corporate responsibility. The United States’ Foreign Corrupt Practices Act (FCPA) has for the past two decades been a significant source of corporate and individual liability. The FCPA has created change in business conduct through establishing expectations of corporate due diligence processes and compliance programmes, in addition to imposing liability through enforcement actions. Developments in legislation addressing business and human rights will most likely lead to higher scrutiny of the broader compliance and risk-management strategy of companies.
Taking a holistic approach to implementing respect for human rights and addressing corruption together makes more sense in today’s business environment. Those who take on this more proactive approach will be well positioned to meet new and future regulatory requirements, even if it means going beyond the requirements of current legal frameworks. This might require enhanced collaboration and coordination between business units, in-house teams and functions, including corporate responsibility, procurement, business development and legal, in addition to senior leadership, but breaking down these silos will lead to more sustainable business practice in the long term.
