Choose your friends wisely

I’m increasingly feeling that 2012 will be seen as the year that the supply chain took new dominance in the world of corporate reputations. 

Back in the day, 'corporate social responsibility' was all about showing that your business could do the cuddly stuff – that you had a heart, that you supported good causes, that you cared. Things moved on in many different directions, with many forward-thinking companies realising that they had to show that the way in which they did business itself was good.

But these days that’s not enough. Our newspapers offer enough scandal triggered by businesses' supply chain partners to give a Halloween fright to any corporate responsibility manager. We’ve got news of further rioting at Foxconn’s factories, no doubt deepening the headache for Apple about knock-on effects on its reputation; we’ve got BP’s never-ending deep water horizon battle, with executives still insisting “it wasn’t our fault!”, pointing in the direction of Transocean and others; while Sainsbury’s has been put in the ‘hall of shame’ over its treatment of suppliers.

It’s not just supply chain slip-ups that are repositioning the debate about what influences the ethical reputation of our biggest brands. This week’s Ethical Performance reports several stories involving multinationals publicly supporting 'pro-social' legislation whilst associated trade groups lobby for its downfall behind the scenes. So it’s not just what you do, and it’s not just what your suppliers do or you do to them, it’s also what your partners and associates do that’s in the spotlight.

Of course, I’m not suggesting that damaging supply chain and partner scandals are new. Nike and Gap’s sweatshop scandals in the ‘90s are a case in point that big brands have long been subject to such scrutiny. But I do think we’re seeing a more systematic assessment of what’s going on behind the scenes of big corporates – driven partly by the work of NGOs such as War on Want, Greenpeace and Global Witness, partly by investigative journalists and curious academics, and partly by an increasingly active and by-no-means homogenous ‘consumer’, empowered by rich data and networks offered by the internet and social media.

Can banks learn something from cycling's Team Sky?

There were always suspicions about Lance Armstrong and his use of doping, but the recent release of the United States Anti-Doping Agency’s report on doping in the sport has been nothing short of ground breaking. The scale, complexity and endemic nature of doping in cycling is quite remarkable.

But what has surprised me most, following the release of the USADA's report, has been the silence of the cycling teams. Until today not one of the cycling teams (many of which must have known something about the doping that was going on in the profession, if not in their own team) had come out publicly to say what their role was in this shocking situation or what they will do differently to clean up the sport.

Today, finally, a team put its head above the parapet and made a statement about what it was going to do differently. Team Sky has committed to making all its riders and management declare that they have never doped.

"We will ask everyone to sign up to a written policy, confirming that they have no past or present involvement in doping," said Team Sky. "Should anyone choose not to sign up, they will have to leave the team."

Making a clear statement like this and wearing your values on your sleeve is something that takes courage. What Team Sky will do if it finds any doping within its own team will allow us to see how serious it is. However, it’s commitments like this, and hopefully the actions that support it, that will play a key role in cleaning up the sport.

Interestingly I feel there is something of an analogy to be drawn between cycling’s predicament and what we are seeing in the banking sector. Here we have a sector that for too long has been riddled with cheating and manipulation (just look at the recent scandals on PPI and Libor, or back to the sub-prime mortgages) very much like the world of cycling. But those teams (banks), much like most of the cycling teams, that have been implicit in the corruption have yet to stand up and say what they’re going to do differently.

Sure we have seen a few CEOs (not many) come out and say how sorry they are and how what has been perpetrated by the banking sector has been unacceptable. But what has actually changed. Most are waiting for regulation to force any changes. We have the Vickers Report that, according to the Conservatives, will be implemented in full. But today we read that Paul Volker (the former chief of the US Federal Reserve and architect of the Volcker rule on America's regulatory reforms of banks) believes Britain is running the risk of bankers chipping away at the recommended reforms until they are rendered useless. The banks and their lobbyists are determined to see no change.

This all means we have yet to see any of the big banks put its head above the parapet and make a genuine statement about what it stands for and what it will do differently as a result of all the recent scandals.

As with the cycling world, if banks really want to regain the trust of consumers they need to take leadership. They need to demonstrate how things have changed and how they are genuinely committed to doing things differently.

And there in lies an opportunity for differentiation in the banking sector.

We need to see a Team Sky in the banking world making a statement about how what has been going on is unacceptable. And then we need to see that team (bank) show what it is going to do differently. It may seem simplistic but could Team Sky have the seed of a first step that a bank (or the sector) could do – introduce a code or ethical standard (similar to the Hippocratic Oath signed by doctors) for all banking employees.

It’s not a new idea, but perhaps it’s one that can start to help rebuild trust in the banking sector.

The Rise and Rise of Ethical Banking

There is frequently lots of talk around consumers saying they want businesses to be more ethical but when it comes to the crunch, do little to act on it.

It was therefore interesting to see stats published last month showing that the Co-op Bank has witnessed a 97% increase in customers requesting to switch to their current accounts in 2012.  And the mutually owned Nationwide also reported a huge 85% increase in new account enquiries -  signalling a shift in previously inactive consumer behaviour.

Louis Brooke from the Move Your Money Campaign says “Since January we estimate that half a million people have switched their current accounts to ethical alternatives” marking what appears to be a consumer movement towards ethical banking.

Moving to ethical finance is one of the ways a consumer’s choice can have the biggest positive impact with finance being so closely tied to all other elements of the economy. The Independent columnist, Simon Birch, predicts that this current revolution could well prove to be a significant moment for the wider ethical consumer movement.

Perhaps this will be the first wave of consumers really putting their money where their mouth is.