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Alison Taylor
166 Plays2 years ago
The sustainability, business ethics, and organizational psychology expert puts into context this moment in the annals of the business-society compact, sheds light on disconnects between ESG and ethics, challenges the convention and convenience of "win-win", and champions the need, in leadership circles, for a new sobriety and restraint
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Transcript
Alison's Journey into Corporate Ethics
00:00:05
Speaker
Alison Taylor is an expert in ESG, business ethics, and organizational psychology. What began in fraud and corruption investigations in high-risk sectors and emerging markets led to a foothold in the sustainability space. At a time, Alison explains, when momentum was beginning to shift in a meaningful way to social impact as core strategic principle versus box-ticking reputational exercise or thinly failed marketing imperative.
00:00:27
Speaker
Today, as the private sector and its chieftains continue to adjust structurally and philosophically to a new paradigm, one that puts the screws to decades-old orthodoxy, the principal at Ethical Systems, clinical professor at NYU Stern, and advisor to a multitude of companies as a leading voice and critic in the field.
Demystifying Corporate Political Responsibility
00:00:42
Speaker
Her forthcoming book, A Collection of Essays for Harvard Business Review,
00:00:46
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moves to dissect and demystify the space topic by critical topic, stir debate, and help crystallize the 2020s as, quote, the decade of corporate political responsibility. Here, Allison puts into context this moment in the annals of the Business Society Compact, sheds light on disconnects between ESG and ethics, challenges the convenience of win-win, and underscores the need in leadership circles for new sobriety and restraint.
00:01:10
Speaker
Why don't we start with you and your story? Tell us a bit about yourself. Take us through your background. Tell us how you got to where you are and share any formative experiences.
Investigating Multinational Behavior
00:01:20
Speaker
Sure. So I suppose I was very, very obsessed with traveling and then politics and political science when I was young. So in my twenties, I did various sorts of consulting, political risk consulting and mainstream management consulting. And then I spent 12 years investigating fraud and corruption.
00:01:47
Speaker
First of all, in the Middle East and Africa, and then in the Americas. So that was from the early 2000s, and it was a time of enormous change. It was a time of working with very high-risk businesses, especially in oil and gas and mining, telecoals, banking, that kind of thing. So my original focus was really how multinationals behave in what we used to call high-risk emerging markets.
00:02:15
Speaker
And then in 2015, I moved into a sustainability role, so what is now usually called ESG, and I began to work for a well-known sustainability nonprofit called BSR. So a lot of my perspective on responsible business, a lot of my perspective on sustainability in ESG, is very heavily informed by the fact that before that, I spent 12 years working with people in risk, people in legal, people in compliance,
00:02:43
Speaker
One of the things that I find completely fascinating about this space is how much of a disconnect there is between issues like human rights and climate change and social impact and social responsibility, and then the more mainstream what we often call ethics and compliance.
00:03:02
Speaker
I think there are a lot of questions that we need to ask about why and how those functions tend to be treated
Ethics vs. ESG: The Disconnect
00:03:08
Speaker
separately. I think it's very, very informative. It tells us a lot about how companies think about these topics. And then I suppose the third leg of the stool is that I also have another graduate degree in organizational psychology. So a lot of the work I do in general thinks about questions of culture,
00:03:27
Speaker
behavioral science, group dynamics, leadership, incentives, and how human beings are tricky characters and we like to tell ourselves certain stories in order to make ourselves feel better. And I think that can be another very revealing source of understanding about where we are with all these topics and where we need to go.
00:03:49
Speaker
And with BSR in particular, I mean, that organization has been around since the eighties, if I'm not mistaken. And you're joining in 2015. It seems so relatively recent. As you say, there is this disconnect. What are the reasons for the pervasive and the persistent disconnect?
00:04:05
Speaker
Well, I mean, I think the way I would put it is that what we have historically named as being questions of business ethics are in general treated in practical terms as efforts to deflect either reputational or regulatory risk.
00:04:27
Speaker
Legal and compliance teams say if we can tell a good story about our processes and our policies and our training, then the regulators will leave us alone and we will have lower regulatory penalties. So what we're trying to do is protect the corporation as a black box from external scrutiny and therefore try to deflect and manage potential threats to value over ethics and regulatory issues.
00:04:56
Speaker
Of course, we'd like to think about sustainability as being a little deeper and more systemic, but unfortunately, I think a lot of the ways that ESG and sustainability topics are treated in practice is rather similar, but just with the effort directed rather at building public trust and building reputation.
00:05:17
Speaker
and maybe also deflecting scrutiny of what is going on internally. So I like this idea of sustainability. I don't like the idea, but I think it makes a lot of sense to see very often sustainability being treated as the paramilitary wing of the marketing department. So it aims to tell a certain story about a company's efforts and goals and programs that's very much about win-win. It's very much about
00:05:44
Speaker
creating brand value. It's very much about getting a higher ESG score from investors.
Corporate Speech Dynamics and Responsibility
00:05:50
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And it's not, despite all the language to the contrary, really about being transparent about how challenging all of this is.
00:05:58
Speaker
I think we're in this really interesting situation where regulator and reputational risks keep mounting and companies are more and more frantically trying to tell us a certain story about their efforts that isn't particularly convincing, that generates a sort of gotcha mindset among the general public. And in general, I feel very concerned that we're doing the same thing over and over again and expecting a different result. And we're not really being realistic.
00:06:25
Speaker
about the incentives and direction that we're giving to companies and then we're telling ourselves a certain story about how accountability and change will result that i think is only partially true of best.
00:06:38
Speaker
Well, in the last few years alone, we've had the BRT revised statement, the mainstreaming of ESG and sustainability as core strategic principles, the acceleration of frameworks and disclosures. And I'm just going through a list here that I have the debate around CEO activism, the blowback to so-called woke capitalism and the backtracking of corporate commitments, as we recently saw with BP and Bernard Looney.
00:07:01
Speaker
even more lately, the more measured tones and tax among both companies and CEOs when it comes to talking about citizenship and social imperative. And now that's to say anything whatsoever about the externalities that have reshaped the marketplace in the last couple of years. So by no means is this a full accounting of these signals, but it is quite an arc when you think about it. And in all, it does feel like we're at a bit of a tipping point with all these fits and starts and recalibrations merely part of the natural progression.
00:07:28
Speaker
Given everything that you've just said and the fact that you've been in the fight for a while, I am eager to get your perspective in the annals of Western capitalism and corporate citizenship. How do you characterize this particular moment? Well, I think we're in this really interesting kind of recalibration, right? So there's a lot of there's a lot of reasons to look at what happened between around 2014 and 2021 and see how transformative it was.
00:07:54
Speaker
Certainly, I would agree with you, we have vastly increased awareness of the negative externalities of business. I think the rise of social media and particularly strategic leaking has really transformed how companies should think about how they interact with their stakeholders. Then, of course, we've seen a vastly increased willingness, notably in the US,
00:08:16
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of CEOs and companies to move away from the consensus on, we need to be politically neutral, Republicans by sneakers too, as the famous Michael Jordan quote, to a much greater willingness to take public stands and speak up on contentious issues like immigration, gun control, abortion, climate change, and so on.
00:08:37
Speaker
So, you know, an example I'm very fond of giving is there were the first Black Lives Matter protests happened after the police killing in Ferguson, Missouri in 2014. At that time, multinational brands did not comment, did not say anything. This is too divisive and not something that they would get involved in. By 2021, we have multiple CEOs giving their opinion on the George Floyd murder verdict. So we've seen this real transformation of corporate speech.
00:09:05
Speaker
And I think that has obviously led to a lot of blowback from the GOP and a very interesting discussion now that we're having about ESG and stakeholder capitalism. I think it's also had the rather ironic consequence of, first of all, something that started off as very, very top-down CEO-led.
00:09:23
Speaker
seen as a new form of generating brand advantage, has become much more bottom-up and much more about employees seeking to hold their leaders to account and hold their employers to account in the public square. I think the other thing that's happened is that companies have realized it's getting harder to divorce speech from spending an action.
00:09:44
Speaker
We've seen this rising scrutiny and skepticism over all this business roundtable narrative about how all of this is a win-win and fantastic and fantastic for shareholder value and fantastic for everybody else. We're starting to look much more closely at which companies are, for example, saying they have a net zero commitment to fighting climate change. On the back end, the government relations team are aggressively undermining regulation on climate change.
00:10:11
Speaker
We're really laser focused on hypocrisy and laser focused on this mixed messaging. I think that's a really, really interesting moment, not least because a corporation in real life is not a human being that can be hypocritical. It is very, very easy as a company to end up looking hypocritical and bad faith simply because you're not thinking internally.
00:10:34
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about how to have a coherent approach to your values and social priorities so it's very easy to end up looking lacking in credibility hypocritical and bad faith just because you haven't aligned what your hr team your compliance team your sg team your government relations team.
00:10:51
Speaker
and your strategy team are doing. So I think we're still having a bit of an odd conversation. I think we're still not super clear on what we're really expecting businesses to do. I think we're not clear as a society on what it even means to be a good or bad business today. So I hope to have the conversation start to evolve. I still think some of our expectations and much of the discourse is a little simplistic.
00:11:18
Speaker
And I'm glad you brought up the notion of hypocrisy. That's a good segue into the next question. So World Cup in November turned up the volume on a number of umbrella themes, the convergence of geopolitics and corporate and brand strategy among them, and also cast a light on glaring discrepancies in the corporate responsibility proposition and something the FT's Janan Ganesh touched on in the column titled World Cup Qatar. Critics are unprepared for the rest of this century. One such discrepancy
00:11:44
Speaker
And our view is the opposition to progressive corporate taxation. And when we fast forward to Davos last month, where the issue is basically all but absent from the agenda, blotted out by allegedly by climate change. I know this is something that you focus on as well. So help us understand why taxation is such a hard nut to crack, because it seems like such a clear and obvious non-starter for so much of what we're talking about.
00:12:10
Speaker
How can a company like claim to ethical standards without squaring this fundamental piece of economic participation? I suspect we would agree on this. I don't think that they can. So whether it is progressive taxation or campaign finance and political spending regulation, or really doing something meaningful about anti-corruption and particularly the role of the international financial system and offshore financing,
00:12:35
Speaker
perpetuating many of these problems. I mean, this really takes us back to where I started by looking at this disconnect between ESG and sustainability and then ethics and compliance. What we have from both those departments is very aggressive efforts to distract us from these more fundamental ethical questions. So I think we need to ask, again, what function is all this rhetoric about ethical culture and ethics and compliance in ESG programs and win-win and net zero?
00:13:04
Speaker
To what extent is that companies responding to stakeholder pressures? And to what extent is it companies saying, look over here, whatever you do, don't look at what we're doing on tax and what our government relations team is doing. And so don't look at whether we're paying our workers a living wage. Don't look at whether we've got appropriate basic health and safety standards before we go out there crowing about all the wonderful things we're doing on ESG.
00:13:32
Speaker
These are good questions and I think we would all do well as a society to focus on these issues because I suspect, back to this kind of partisan conflict here, I suspect that most of us, whether Republican or Democrat, do not believe, as just happened at Amazon, the warehouse workers should be forced to work around a dead body all day. I don't believe
00:13:54
Speaker
There's been another recent story about Hertz being fined $168 million for having its customers arrested for falsely stealing cars. I don't think that's the partisan issue. It's sort of interesting, I think, that we have seen a very selective narrative about ESG that largely disregards the political context and doesn't really grapple with these fundamental questions.
00:14:18
Speaker
I'm fond of saying that the 2020s is going to be the decade of corporate political responsibility. I see a much more awareness of this in the classroom and I hope we're at the start of a more grown-up conversation about what this really looks like.
Integrity in Business Strategy
00:14:32
Speaker
Well, this brings us to an article you actually co-authored last year for MIT Sloan, where you make a case for integrity as an organizing principle, which I think is really powerful because it recenters the conversation. We get hung up on ESG and sustainability as the all-defining things, whereas they've actually catalyzed the reorientation of strategy and conduct around risk, impact, compliance, and accountability.
00:14:55
Speaker
What's more, integrity is not phony dogma like, say, purpose or trust and nor does it overreach, which winds up mudding waters, making easy targets for detractors and really undermining real progress. But at the same time, integrity is a bit less tangible and I can see how it would be dismissed as fluff. Could you elaborate on the idea of strategic integrity because it's so foundational? Could you put it in concrete terms?
00:15:20
Speaker
Sure. I tend to agree. I quite like the word integrity, but I believe it's the most popular commitment in corporate codes of conduct. No one really says, I'm against integrity. What I would say is, I think it's, again, extremely interesting and extremely revealing how keen everybody is in the sustainability world to say ESG has nothing to do with ethics.
00:15:45
Speaker
Sustainability has nothing to do with being a good business. This is all about opportunity and creating shareholder value. There are masses of credible commenters saying this. There was a woman, I believe, from a major investment firm said, people still inappropriately conflate sustainability and ethics. I find that so fascinating because it's sort of obsession with moving this conversation to a topic of material risk that is somehow
00:16:15
Speaker
perception-free, ethics-free, and just a kind of technical discipline, I think misunderstands the source of reputational risk, misunderstands the challenges presented to business about its role in society, and misunderstands that something becomes a reputational risk because we think that it is a business behaving in an ethically egregious way and having negative impacts on society.
00:16:40
Speaker
I can obviously completely understand why so many experts are so keen to say that sustainability and ESG have nothing to do with ethics, but unfortunately, I think it's a conceptual booby trap. So what I'm really recommending is that businesses take a more strategic approach to these questions that starts with, as I've already mentioned, this kind of coordination across the ethics function. So that would be human resources, sustainability,
00:17:07
Speaker
risk and compliance government relations in general that a company thinks in a holistic way about its values and about its commitments about its strategic priorities. That a company doesn't just kind of put in place a program of tackling stuff with a bunch of goals that gets a little bit clearer.
00:17:27
Speaker
What is a material risk? What is an innovation opportunity? What is an ethical guardrail? The companies start to think in a more strategic way about tackling corruption in markets, about what countries they shouldn't be operating in given their values and commitments.
00:17:44
Speaker
that companies get a little bit more thoughtful about what the second or the consequences might be of them taking positions on contentious issues. Might that increase the polarization and divisiveness that we have in the US? Might it be more ethical and more defensible if we rather try to support employees to use their political voice and engage with the democratic process?
00:18:07
Speaker
So I think, again, we need to have a little bit more of a grown up conversation. I think we need to look at the various narratives coming out of these different departments and from these different experts and look a little bit harder on what's not being said and why so many people seem so keen to distract us from these more fundamental questions. Well, and you are in constant dialogue with CEOs. So how does something like this land? How is it received?
00:18:34
Speaker
When I think if you're a CEO today, you tend to feel a little bit besieged. You tend to feel that you're getting all these mixed messages from your legal teams, your PR teams, your employees. You very often feel you have very little choice but to speak up on what your employees are passionate about. So I think it
00:18:52
Speaker
It feels a little bit like whack-a-mole, or it feels a little bit like there's a corporate affairs team putting your company through the equivalent of a full-body MRI and finding all these potential risks you might need to act on. What I would really recommend, and I think the mood I'm hearing out there, is something a little bit more restrained and something a little bit more thoughtful.
00:19:14
Speaker
So I think what companies are hopefully doing is getting a little bit more sober, a little bit more cautious on the problems that they're trying to solve, a little bit clearer on where they have direct leverage and where the wider environment needs to change, whether it's on climate change or systemic racism or something else.
00:19:33
Speaker
and maybe just be a little bit more sober, a little bit more factual on what they're claiming, on their goals, on their intentions, and then also maybe a little bit more thoughtful about the divisiveness going on in the US and what corporate voice can and can't do to tackle these issues.
00:19:50
Speaker
I hope we're in a phase of a little bit more reflection and a little bit more caution. And I hope we're at the beginning of, as I said, a slightly more realistic conversation about the problems business can and can't solve. There's a big narrative out there of
00:20:05
Speaker
Business needs to solve social challenges just because of its scale and reach. And I'm sorry to say, I think that's incoherent about the institutional role of business and on topics, whether a business can really represent the voice of its employees in the political domain, which it's not set up to do. And I think we get into very dangerous territory if we start to make those suggestions.
00:20:26
Speaker
The Times recently suggested that Harvard Business School is becoming a hotbed of anti-capitalist radicalism, which is something of an impressive feat for a private institution charging 80 grand a year in tuition. How
Ethical Concerns in Career Choices
00:20:37
Speaker
is the insurgency taking hold at NYU Stern?
00:20:39
Speaker
Yeah, I mean, I find what I hear in the classroom fascinating. You know, I teach business school students. They're practical. They're pragmatic. They owe you just a reference to have enormous amounts of student debt. So I find it completely fascinating to discuss with them. They're all incredibly smart and incredibly brilliant.
00:20:58
Speaker
how they think about these topics, the questions they ask, how they feel, how they feel it's going, what they're skeptical about, what they believe in and don't think needs questioning. I tend to run a group discussion with my MBA students that ends with the question of, would you work at Amazon? And I would say that this divides a Stern classroom 50-50 and generates an enormous amount of debate, with half the room saying this is still the most innovative, brilliant, best CV points I could ever get. I would jump at the chance to work there.
00:21:28
Speaker
and the other half of the students saying I don't think they have me and I think this is a ethically problematic company and it's just not where I want to spend my career so maybe that's where we are a sort of a fifty fifty split and very very different visions of what is important in a career these days and I think that's productive and I think it's fascinating.
00:21:48
Speaker
I do want to point out the fact that you have a book on the horizon. So you have a book coming out next year, Higher Ground, and it sounds like quite an opus. So if you could tell us a bit about it and where in your body of work it lives.
00:21:59
Speaker
Yeah, fantastic. It is going to be coming out January 2024, and I'll be sharing more about what's in it during the course of the year. It's really structured as a set of essays on key contentious topics, and it really tries to navigate and discuss this question of what it even means to be a good business in the 2020s. So I have chapters on stakeholder trust.
00:22:24
Speaker
setting ethical and social priorities, transparency, culture, leadership, speaking up, human rights, political risk, corruption, purpose. I have a lot of different discussions. The book is written so each chapter will work as a standalone as well as there being a narrative flow. And I'm hoping that what I have to say is contentious enough that it sparks a debate and sparks a better conversation.
00:22:51
Speaker
This is the first in a mini run of episodes tied to the Concordia America Summit, Miami, March 9th and 10th. Join us in person or virtually for the 2023 edition of this eclectic international gathering focused on intelligence, ideas, and collective solutions to pressing global matters. To find out more and register, visit www.concordia.net. Many thanks to this episode's guests, Alice and Taylor. Until next time, I'm Eben Howell for Studio Santiago and Kit Mags.
00:23:24
Speaker
you