Management: Some find the case for ethics hard to stack up

A growing number of British companies are paying closer attention to ethics - environmentalism, ethical sourcing, even ethical approaches to dealing with staff. Yet few managers are prepared to realise the ethical dream, Meg Carter says.

Last month saw two significant developments: publication of Christian Aid's report on ethics and supermarkets and the launch of a proposed global standard for ethical sourcing, called SA8000.

The question now is not should a business adopt ethical policies, but can it do it effectively, John Drummond of the consultancy Integrity Works believes. "There is a growing amount of activity in this area, some mix- directed, some ill-directed and some effective," he says. Before a company gets to the point of establishing ethical principles on, say, external sourcing, a number of key issues should be internally addressed.

"We already work with companies to evaluate their own ethical codes of practice and how these can be used to audit suppliers," says Jeff Homer, corporate director at the international certification agency SGS-ICS. Many, however, have had trouble writing a code that was auditable. "Often they are too general, do not include sufficient requirements and are too open to a broad range of interpretations."

Christian Aid's report highlights progress that is being made. The charity is campaigning to encourage supermarkets to adopt more ethical policies. Seven of the biggest have already done so; six are drawing up ethical codes of conduct for dealing with suppliers of products and materials around the world. Tesco has made most progress over the past 12 months, the report says. Safeway and Sainsbury shared second place.

"For the time being our focus is outwards - on how Sainsbury should be dealing with its suppliers," explains Petrina Fridd, Sainsbury's technical manager, who has been developing Sainsbury's ethical code in partnership with the Fair Trade Foundation. "We are now setting out principles we will work to in future to realise this goal. We will shortly be drawing up our own code of practice for our people's use."

Sainsbury has also been involved in the development of SA8000, an initiative by the Council on Economic Priorities Accreditation Agency. Along with Avon, Body Shop, Toys R Us and others, it has shaped a global standard intended to improve conditions for workers making goods for brand owners and retailers around the world. SA8000 is based on conventions of the International Labour Organisation, the Universal Declaration of Human Rights and the UN Convention on the Rights of the Child and has been designed for independent verification by an outside auditor, such as SGS-ICS, which has also been involved.

Homer hopes the global standard will help to iron out inconsistencies between different company initiatives. It offers an industry-wide standard approach and promises cost savings - two companies using the same supplier will no longer need to invest in two separate ethical audits, he explains. However, he has reservations about the ability of many managers to make such systems work.

"Internal management systems are required to implement ethical controls on suppliers," he points out. "There is still a significant need for further education. This whole process is about identifying where processes fail and improving those processes." Fridd agrees that putting ethical principles into practice will prove tricky. "Ethical auditing systems are very different from quality auditing systems," he says. "It takes time to establish these systems."

And so it should, Drummond believes. "Companies must address a number of key issues internally before declaring intent. There is the issue of why they are doing it - it should be more than a response to public pressure. It should be an approach that grows from within." And there is the issue of what "ethical" means. "Too often it is defined in terms of liberal Western values that may not be appropriate internationally. Putting lots of under-age workers out of a job doesn't necessarily help their families. They might end up doing something more reprehensible."

Such a considered approach is also advocated by John Elkington, chairman of the strategic consultants SustainAbility and author of Cannibals with Forks, an assessment of business ethics being published this month.

"Ethics" go far beyond sourcing, he believes. Aside from working conditions and labour management, there is the impact a business has on the environment - both natural, commercial and social, and there is the way it deals with staff. "It can even extend to whether your entire business strategy is based on sensible foundations," Elkington adds. "It can beg the question: is there really a need for you product."

Managers attempting to implement ethical policies face a number of challenges. One comes from the potentially conflicting demands from the world outside - for example, to protect the environment and the economic interests of the local community where a material is sourced. There is also the need to manage the communication of ethical policies to the consumer.

"You've got to communicate your principles to the customer to build trust," Elkington says. "A number of companies, however, are struggling to do so effectively. There is a danger in selling yourself as whiter than white and, of course, inflating expectations on which you cannot deliver."

Younger people, he says, are most receptive to ethical ideas. "Generation shift will be one of the most powerful drivers of future change." But for the time being, perhaps the greatest challenge is to identify future priorities and ensure younger members of an organisation have the opportunity to discuss them and be listened to by senior management.