Business impact of values – A subject for boardroom review

“What are values? Values are those things that really matter to each of us and the ideas and beliefs we hold as special. Caring for others, for example, is a value; so is the freedom to express our opinions. Most of us learned our values – or morals, if you prefer – at home, at church or synagogue, at school. But, where are our children learning their values? Maybe from parents, teachers and religious leaders, but society has changed.

Too often young people today are most influenced by what they see and hear on television or on the street. The Scout Oath and Law express a well-defined code of ethical and moral conduct. If you think about it, you’ll see that these abstract ideas – trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent – can become very concrete goals for young people”.1

Sri Lankans are today exposed to an external environment that places emphasis on resolving conflict by violence. The media communications focus on “bad news,” violence, and antisocial activities. Leadership examples oppose accepted societal norms. Even religious leaders place less emphasis on the importance of values. No longer are Spiritual Leaders, Mahatma Gandhi, Martin Luther King and Nelson Mandela emulated as societal role models.

“Since all value is only value when it is perceived as such, it must seem unnecessary to write about ‘perceived value’. Is there any other type of value? Obviously a value is not a value unless it is perceived to be one. No matter how real a value may be, it has no value at all until the value is perceived. The whole purpose of salesmanship is to help people perceive values that are ‘real’. Of course, the same skill can equally be applied to getting people to perceive values that are not real. As one person’s assessment of real value may be very different from another person’s, it becomes very difficult to draw a line between effective sales talk and conning people.”2

Where do directors learn “values” and “perceived value” and their impact on business? In the business schools, from professional associations, chambers, published codes of conduct and ethics, board room, or whilst making business decisions!

Wherever and from whom the learning comes does not matter – so long as they learn the art of making ethical decisions and understand the business impact of their actions and inaction. They must recognise the critical importance of creating tangible mechanisms aligned to preserve the core and stimulate progress.3

Social premium

The Body Shop, once considered the top case study of an ethical company, meeting best practices of adding community value (‘social premium’ embedded as a part of its product cost), using only natural products, no animal testing experiments, and strictly adhering to international standards, was brought down to the ground following a due challenge of its trading principles and core values. This destroyed its perceived values and business value significantly whist at the same time destroying the personal image of its much respected creator, Anita Roddick.4

Societal values and perceived values are subject to change, either by evolution of time, education, awareness expansion, by subtle or direct actions, communications of players in society and by the media. However this phenomenon of change appears to be little recognised by business in Sri Lanka. The examples from Body Shop, Nike and many others taught in business schools are unfortunately not enforced through values checklists adopted by CEOs and top management.

Fair trade and green labels

Fair trade and green labelled products have taken Western markets by storm in recent years, based on certified products that help alleviating global poverty and promoting sustainability. Fair trade certified sales globally in 2007 amounted to $ 3.6 billion.5

The European Union has granted special duty concessions to countries that support human rights and good governance practices. In the context of consumer preferences so created and associated perceived premium value of products, many businesses have made significant investments. They have linked their distribution strategies and marketing communications to capture business value from the emerging market trends.

In the UK and also in some European markets, businesses planned strategic marketing initiatives linked to these trends. In these markets consumer “values” were sharpened by CSR led marketing communications. These businesses are currently experiencing marketing challenges led by the changing “values” of consumers. Consumers perceived positive value in purchasing imported perishable goods like fruits, vegetables and flowers of African origin, believing they were in effect:

nSupporting poverty eradication in Africa

nContributing a social premium (the word developed by the creator of Body Shop) transfer to African women and men and supporting their livelihood development

nSupporting fair trading

nSupporting “green label” environmentally superior products

The very same consumers are now critically questioning the validity of the embedded perceived social consciousness based value, taking account of:

nThe air miles these goods travel and the consequential pollution in burning jet fuel

nThe product pricing linked social premium vs. the actual real value transferred and embedded in the poor communities

nThe discrimination of the farming communities in their own countries

Several supermarket chains have as a result withdrawn many of these “green label products”. Some supermarkets have stopped positive promotional support for these products.

Changing values of consumers

The changing values of consumers have led to declining sales and a corresponding shift to locally produced alternatives. The increase in prices of imported fresh products flown in at fuel surcharge embedded air freight costs, have led to bigger market share losses.

A significant group of activists now canvass for the imposition of a steep surcharge on air freight and air travel. Another group of retailers and consumers appear to favour and advocate a new value premium transfer in buying locally from local farmers. They now believe that globalisation and CSR led marketing initiatives of the past discriminated local farmers and locally produced products.

Growing international concern over the speed and scale of climate change has thrown the concept of “food miles” in the spotlight. An article titled Miles Better – How ‘fair miles’ stack up in the sustainable supermarket6 argues many issues, with the key messages being;

nAir freighting flowers and vegetables from developing countries, especially those in Africa, has drawn fire on environmental grounds and highlighted the issue of fairness in “food miles” debate

nWithout the right analysis, there is a risk that environmental and food miles arguments will work against development goals such as ‘trade not aid’

nInformed debate in the UK on food miles vs. fair miles is now allowing supermarkets to move away from token gestures towards a balanced response

In the midst of this controversy it is not surprising that agriculture trade rules focused talks have turned out to be the most controversial and without an effective conclusion.7 The developing nations cannot look to these global developments, regional alliances nor trade and aid related handouts to be a substitute for competition based on quality, value for money, productivity and excellence in supply chain and logistics support.

Businesses must adopt strategies which continuously sharpen competitive advantages and seek productivity gains from effective and optimised resource management, quality that delight customers creating a feeling of ‘wow’8, accompanied by excellence in delivery logistics and supply chain management. This is the way forward for business and national economic value enhancement.

It is now apt for CEOs to critically examine every process, procedure, human and other resource allocation in business and evaluate the net business value embedded in each of them. Business value enhancement must become the primary goal of business leaders and a treasured value in governance. All such initiatives must however remain within the framework of core values of the business, accepted business principles and also be consistent with societal values and norms.

Unless these values and principles are committed to and practiced by all stakeholders within a business, sustained business value enhancement is a pipedream. Managers of visionary companies must build first and foremost for the long term while simultaneously holding themselves to highly demanding short term standards.9

How many boardrooms in Sri Lanka have initiated studies to map the present and future carbon footprint of the firms? How many have initiated strategic action to manage the business risks associated with the future carbon footprint? If they have not done so already, they are risking future business value by ignoring a critical emerging perceived value of society likely to influence future consumer preferences and even attract the imposition of penal duties and taxes.

Apparel trade

In Sri Lanka the apparel trade has generated significant national economic value as well as business value. It has highlighted its compliance with good business practices, care for workers and branded its products as worker and environmentally friendly. In fact some of the larger production houses have made significant investments in eco-friendly production units to capture value from discerning consumers.

Despite there being no effective home-based competition in apparel industries in importing countries, will this trade too be negatively impacted by the air miles versus fair miles debate? Shouldn’t the apparel trade too concentrate on carbon footprints and take action to minimise controllable air freight? Will carbon footprint-led issues restrict the growth of ceramics, porcelain and even tea exports from Sri Lanka?

Perceived value of compliance

In the current external environment within a war justified economic and governance framework, business must have a clear commitment to values. The leadership in governance at the national level appears totally immune from fear and shame, two core societal values of Sri Lanka once embedded in society and honoured with commitment in history.

The key segments of society, including business, professionals and civil society, have unfortunately attuned their own values to accept the leadership values without question. This acceptance appears to be clearly driven by the perceived value of compliance. At the same time due to actions of leaders in governance, businesses and NGO’s have been infected by reward and terrorised by fear.

Toe the line blindly, never seek justification of economic and societal value of decisions and policy, nor seek validity in terms of societal norms of leadership action appears to be the guiding principle of business leaders. Business leaders do not wish to risk the wrath of leadership counter action.

Despite the negative and unacceptable values openly demonstrated by leaders, business persons freely network with them and their cronies seeking crumbs the favoured few receive. Business and civil society appears to endorse by silent acceptance corruption, now branded as “grease the wheel payments,” “donations” and “CSR payments” instead of “bribery”.

A blind eye is turned to waste and exploitation of national resources, nepotism and lack of meritocracy. Have business and civil society taken on the role of monkeys with their ears, eyes and mouth closed tight? They accept violence as a justifiable way in resolving conflict and do not stand up against the structure and practices that restrict human rights and prevents the effective discharge of good governance, justice, security and unbiased enforcement of laws and regulations.

What will happen to business, the nation and its people in the future if the present values and practices are embedded across society? How will this nation be viewed and ranked by the international community? What impact will these have on poverty, sustainable and equitable growth across regions, human development and environmental sustainability?

Public debate

Core values of civil society/ professionals/media and business should drive them to organise public debate on key policy issues and acceptability of actions of leaders in governance, judicial decisions (conducted in a manner that does not risk contempt of court action) and sustainable management of national resources, the economy and the environment.

There is a reluctance to debate publicly illegal actions of the authorities, controversial and misleading statements and policies with long term negative implications. Business and civil society are reluctant to examine the outcomes of the recent Supreme Court judgement (not a critique of the judgement) and review the issues arising from the judgement purely looking ahead in to the future (not backwards at what happened and correctness or otherwise of individual /collective action), seeking:

nLegal reforms essential as a consequence and lessons from the past

nSystemic changes in governance structures and systems for civil society advocacy

nSystemic changes in governance structures and systems of the private sector

nStandards expected from those in public life

Business and civil society must bear in mind that “in times of conflict truth is a casualty and results in the death of voice and listening”.10 The primary responsibility to raise the voice of the nation and its people, especially the voiceless, falls on media, business and civil society, especially in the context of a leadership that fails to listen to the civil society.

Unless business leaders sharpen their focus on ‘values,’ preserve ‘perceived values’ and grow ‘business value,’ the vision of driving ‘Sri Lanka Inc’ forward towards peace, stability, equitable growth and sustainability whilst placing the interests of Sri Lanka and its people first and the interests of the private sector second will not be a reality.

Within this endeavour, businesses must demonstrate publicly that they adhere to internationally-accepted business principles11 and hold those in governance of the nation accountable to accepted standards in public life12 (i.e. selflessness, integrity, objectivity, accountability, openness, honesty and leadership).

(The writer is a former Chairman of the Ceylon Chamber of Commerce.)



Footnotes:

1 American Boys Scouts Association

2 Perceived Value: When considering value, perception can be as important as reality by Edward de Bono

3 Chapter 4 –Built to Last James Collins and Jerry Porras

4 The Body Shop: The Ethics of the Diesel-Driven “Queen of Green” by Marty Venalainen

5 Wikipedia - Fair Trade

6 Ben Garside, James MacGregor and Bill Vorley of International Institute for Environment and Development published in May 2008- World Conservation

7 WTO Agriculture revised draft trade rules

8 www.customerdelight.com

9 Chapter 9 –Built to Last James Collins and Jerry Porras

10Professor E. Valentine Daniel, Department of Anthropology, University of Columbia, ICES Workshop August 2008

11 Transparency International Principles of Business Integrity

12 Nolan Committee recommendations on Standards for persons in Public Life