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To address complex ethical challenges, companies must focus on breaking down silos and strategic alignment around governance and risk.
Daniel Malan, Alison Taylor, Anna Tunkel, and Birgit Kurtz
Reading time: 8 minutes
Governance – the “G” of ESG – is overshadowed by its peers, environment and sustainability discussions, although it is a source of strategic advantage. Although many companies see investing in management as just a way to get out of trouble, proper corporate governance can – and should – improve the company’s performance.
To turn this ideal into reality, more and more companies are moving towards a holistic approach to ethical and responsible business. This involves balancing and coordinating between critical fiduciary functions, reducing box-ticking and thinking holistically about ethical behaviour, risk management and value creation. With the leaders of more than two dozen large companies and multilateral institutions on the various steps they take to invest in business investment in a strategic response to both risks and opportunities.
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This research is supported by our ongoing work on integrity and compliance with the World Economic Forum’s Global Futures Transparency and Anti-Corruption Council and several Business 20 (B20) task forces and multidisciplinary best practices. We found that independent and autonomous leadership plays an important role in the process, reflecting the role of the chief integrity officer as a transformational leader. But our research shows that simply being appointed to a C-level role is not enough. To address today’s complex ethical challenges, companies must break down internal silos to create strategic alignment and collaboration and build a culture of trust. In this article, we examine how leading companies demonstrate this holistic approach.
A more systematic approach to sustainability
In our interviews with executives, a common theme is that leading companies are taking a more strategic approach to ethical business, which makes it easier to identify blind spots and avoid hypocrisy. For example, there are increasing demands from institutional investors to align sustainability commitments and political spending. And zero-tolerance anti-corruption programs can’t be effective if they don’t address the design of incentives, especially sales and growth targets.
Some organizations choose to appoint a leader in the C-suite, such as a chief integrity officer, who oversees a wide range of functions beyond compliance.
References
1. The term “corporate governance” is often defined as “the system by which companies are managed and controlled.” See, for example, A. Cadbury, “Report of the Committee on the Financial Aspects of Corporate Governance” (London: Gee, 1992).
2. “The Rise and Role of the Chief Integrity Officer: The Importance of Leadership in an ESG-Driven World,” White Paper, World Economic Forum, Geneva, December 2021.
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