Cyprus Mail
Guest Columnist Opinion

Business ethics not just a virtue, but a necessity

By Kyriakos Parpounas

I have recently spoken about the difference between corporate philanthropy and corporate social responsibility (CSR). I specifically mentioned that all acts of corporate philanthropy are welcomed social activities, but they are certainly not core CSR actions. A concrete example of the difference between the two is the latest court case against executive members of the former Cyprus Popular Bank. Without disputing the presumption of innocence of these executives or their right to a fair trial, there is no doubt that certain bank executives and the overall organisation violated business ethics and the principles of responsible entrepreneurship in a number of cases. The case highlights the extended responsibilities of executives working in large organisations, or in socially important organisations such as banks.

I use the example of the Popular Bank because it was perhaps the pioneer of corporate philanthropy during its boom years. They offered contributions to various social groups, embraced and expanded the radio-marathon, the largest charity action in Cyprus, and made their name largely synonymous with organised charity.

I am sure if we went back to the bank’s communications at the time, we would find a series of reports showing these actions were in the framework of the bank’s CSR. This demonstrates that the bank’s executives had a completely wrong understanding of their obligations to the community. They considered these as an obligation to return something to society in the form of charity, but did not appreciate that their foremost obligation was to protect the community from poor and irresponsible business practices.

In recent years the CSR concept has been standardised by various organisations around the world. In 2004, after two years of discussions, the International Standards Organisation (ISO) published an international standard for CSR.

This lasted until November 2010, when the ISO 26000 Standard was issued. Called the “Guide on Social Responsibility” it has a substantial difference from previous standards issued by the ISO. The ISO 26000 is an advisory and not mandatory standard, providing a guiding framework rather than a certified management system. It attempts to clarify what constitutes CSR and how it can be integrated into everyday business practice. The stakeholders of an organisation should be defined by the relationship of CSR to sustainable development and is based on seven core principles.

These principles are: accountability, transparency, ethical behaviour, respect for stakeholder interests, respect for the rule of law, respect for international norms of behaviour and respect for human rights.

As part of defining the limits of its social responsibility, each undertaking is required to focus on the following key issues: organisational governance, human rights, labour practices, the environment, fair operating practices, consumer issues and community involvement and development.

It is clear that the standard is wide-ranging and touches in a coherent manner upon the need to respect both the financial results of firms, the interests of people (employees, partners, customers, consumers, local communities and society at large) and those of the planet (the environmental impact of the business, etc).

If businesses do not manage to incorporate the basic principles of CSR in their daily operation, we will continue to have examples similar to that of the former Popular Bank, where the showcase might be stunning, but the content is insufficient, socially analgesic and, depending on the extent of the social impact of a business failure, potentially dangerous.

The use of the guidance standard ISO 26000, as the basis for identifying the responsibilities of a business, but especially for the design of a coherent strategy to undertake such responsibilities, is a good starting point on the way to improve business ethics and develop more sustainable entrepreneurship.
Kyriakos Parpounas is director general of Green Dot (Cyprus) Public Co Ltd

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