The growing impact of ethics on business success

Shifting cultural norms push companies to prioritise values

The growing impact of ethics on business success

Reinsurance

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Businesses are grappling with the growing importance of ethics in shaping their reputation and success, as cultural shifts and societal expectations reshape the corporate landscape.

A new report by Gallagher Re found that ethical practices have become crucial in maintaining stakeholder trust, attracting talent, and meeting the rising demand for responsible business conduct.

Companies are now assessed not only on financial performance but also on environmental, social, and governance (ESG) metrics by investors, employees, and consumers.

Tom Tropp, global chief ethics officer at Gallagher, pointed out that businesses face growing pressure to publicly demonstrate their values and their impact on the world.

"If you ask a company whether it's ethical, the answer will likely be 'yes'. However, the next step should be to ask for a definition of what its ethics are,” Tropp said.

Navigating this complex environment requires more than legal compliance. Lisanne Sison, managing director of enterprise risk management at Gallagher, said that adhering to regulations alone is insufficient for managing an organisation's reputation or achieving its objectives.

"Doing business ethically means more than just focusing on profit. It's about ensuring that your work aligns with your values and regulatory requirements and that you can trust the organization to do the right thing, even in the absence of specific, documented guidance,” Sison said.

Sison said that building an ethical culture involves aligning corporate actions with core values and fostering trust in leadership. This alignment is particularly crucial in a world where public perception can significantly influence business outcomes.

The report highlights how ethical considerations are increasingly central to reputation management. Sison noted that companies must actively assess their "ethical footprint" to ensure their behaviour aligns with their stated principles and external perceptions. This alignment is particularly vital in the digital age. Businesses now operate under intense scrutiny, as the internet enables individuals to share information widely and quickly.

At the same time, Ray Iardella, vice president of investor relations at Gallagher, cautioned that businesses overly eager to present themselves as ethical or sustainable may risk credibility if their actions fail to align with these claims.

“Companies that are overly aggressive about trying to present themselves as super ethical or super focused on sustainability really aren't doing all the things that should be integral to their organizations” Iardella said.

“Observing leaders' behavior is crucial. If you see your boss handling an issue in a certain way, you might be inclined to follow the same path.”

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