[Financial Times] An acid test for better conduct in business An ISO standard may make improved behaviour measurable, says Alison Maitland Published: August 12 2001 18:37GMT | Last Updated: August 12 2001 18:46GMT Unlike the Ten Commandments, there is little that is black and white about the many international agreements and principles drawn up in the past few years to promote ethical business conduct. They abound with statements about contributing to economic progress, respecting human rights, promoting sustainable development and adhering to international and local rules. Most of these are open to interpretation, reflecting the difficulty of defining and agreeing what constitutes ethical and unethical behaviour. Now a completely different approach, creating an International Standards Organisation standard for global business conduct, is being proposed by the US Ethics Officer Association, a non-profit organisation representing 400 mainly US-based multinationals. Its members include General Motors, Microsoft, Pfizer, Philip Morris and Royal Dutch/Shell. "An ISO standard is all about process, not aspirations or objectives," says Edward Petry, executive director of the EOA. "It provides specific guidance as to what any new management system must include and it hopes to achieve consistency, clarity and measurability of internal processes." Sergio Mazza, former president and chief executive of the American National Standards Institute (ANSI), says that the initiative is radical. "Good business practice will be built into the culture and management systems of the company in the same way as quality or good financial controls," he says. Modelled on the ISO 9000 standard for quality management and the ISO 14000 for environmental management, it would set out the internal structures, processes and resources that organisations need to ensure that they adhere to their stated principles. It would require them to draw up a policy for business conduct, implement it, assess how well it is working, make improvements and keep it under review. On August 27, Mr Petry and his team will put their case to the international committee of the ANSI. If approved, the proposal would go to the International Organisation of Standardisation in Geneva. Work on the standard would start once it had secured the support of national standards bodies in five countries. The initiative is being driven by EOA members that are under pressure from stakeholders and the financial community to provide assurance of their own ethical commitments and are concerned about the potential risk to their reputation from relations with joint venture partners and suppliers, says Mr Petry. An international standard may also help to fend off a series of requests to sign up to alternative codes and guidelines. Significantly, the EOA is proposing that companies should be able to declare that they comply with the standard without having to seek certification by an external body. "The standard we're proposing does not require third-party certification," he says. "We're hoping it will avoid some of the more costly regulations that might come - and some of the cost and burden of other standards being proposed. Many of our members feel they have years of experience in auditing and assessing their own programmes and they can do that much better than most of the third-party certifiers." Why should anybody take a company's word for it? "It comes down to who is making the declaration," says Mr Mazza. "If the company has a sterling reputation and says: 'We comply', its customers will accept it. If it's a little company out of Taiwan that you've never heard of and it self-declares [compliance], people will say: 'I don't know about that.'" Mr Petry accepts that a lack of mandatory certification will not satisfy some stakeholder groups, "the ones that are very suspicious of business". Some companies may opt for external accreditation to comply with customers' or regulatory requirements or to enhance their reputation. He says interested parties such as aid agencies will be able to take part in drawing up the standard. "It's not going to do away with the need for continued pressure and scrutiny from the NGO and stakeholder community but we think it will provide a useful tool to ensure that whatever progress is made is effective and measurable." Might this not be rather self-serving for the EOA's members? Large companies that already have codes of practice and the resources and systems to communicate and implement them should not find it unduly burdensome to comply with the proposed standard. Smaller companies with less clout may be put off by the time and effort involved and by the cost of third-party verification. How will it allay concerns about the power of multinationals and the negative effects of globalisation? John Drummond, managing director of Integrity Works, an ethical business consultancy in the UK, says the search for universally accepted principles of good business conduct must continue. But some companies are using the lack of consensus as an excuse for failing to take the issue seriously. "This [proposed standard] is saying: 'You don't have to wait. We can judge your processes against your own statement of values.' There's no ducking and diving if you come up short."
