The Business Opportunity of Ethical Behavior

Today in San Francisco there is a meeting of business leaders to discuss corporate social responsibility. It is part of the U.N. Global Compact, the largest volunteer initiative to promote ten universal principles relating to human rights, labor standards, environment, and anti-corruption. Part of that discussion will address the recently published McKinsey survey of business executives on business and society. A copy of the report is here (free registration may be required).

The McKinsey survey question that particularly grabbed my attention related to shareholder value. Here was the question: “Which three issues are likely to have the most impact on shareholder value for companies in your industry over the next 5 years? For each those three issues selected, what mix of risks and opportunities does each issue pose to shareholder value.” The three subjects that were viewed as posing the greatest opportunities for shareholder value were more ethically produced products, healthier and safer products, and human rights standards. When asked whether these issues will pose greater opportunity, equal mix between reward and risk, or greater risks the response was:

By contrast, issues such as the environment, privacy and data security, and opposition to foreign investment and freer trade will pose far greater risks than rewards. The response for these issues was:

There is an untold story behind these results: corporate executives strongly believe that providing products and services that are healthy, safe, ethically produced and consistent with human rights standards is a growth industry. Such business practices are likely to increase shareholder value in the coming years. Consequently, one would expect that corporations will increasingly move in this direction.