Navigating ESG Commitments: Beyond Compliance to Ethics


Navigating ESG Commitments: Beyond Compliance to Ethics

ESG regulation, specifically the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Directive on Corporate Sustainability Due Diligence (CSDDD) will enhance transparency over companies’ sustainability performance. 

In heavily regulated sectors like healthcare, there is a longstanding tendency to focus on what ‘we can do’ according to regulation, rather than what ‘we should do’ to align with our purpose. This natural focal point for Ethics & Compliance (E&C) is compounded by legislation like CSRD, which directs attention towards compliance and away from the fundamental questions about the focus of ESG efforts, what matters most, and what impact the firm wants to have on the world. 

It’s essential not to overlook this key aspect of ESG: it’s not just about documenting our actions and impacts, but also about negotiating priorities and making trade-offs. This is the heart of ethical decision-making, which lies not in compliance, but in ethics. 

At Principia, we help leaders—often in regulated sectors—pursue a vision beyond regulation. We assist them in fostering a sustainable ethical culture that encourages decision-making and behaviors in line with the company’s purpose, values, and priorities. 

Guiding leaders through complex ethical dilemmas

As comprehensive ESG regulations emerge from the EU, E&C leaders must maintain their strategic focus on ethical decision-making and culture. Recent global events have shown that sudden, unforeseen circumstances can present complex ethical challenges that can’t be addressed simply by following existing regulations. Therefore, the ability to navigate complex ethical dilemmas has become a vital leadership skill, integral to the authenticity of a company’s ESG efforts. 

The Good, the Right and the Fitting

At Principia, our team of academics and consultants leverage the resources of ethics and moral philosophy to create practical decision-making tools and concepts that guide leaders confronted with complex grey-area decisions. For example, when working with executive leaders, we often use a framework known as ‘the Good, the Right, and the Fitting’. Drawn from the triad of moral philosophy, this framework prompts leaders to consider their obligations to follow directives (the ‘right’), their organization’s intended impact (the ‘good’), and the alignment with their values and purpose (the ‘fitting’). 

The concept of ‘the Good, the Right, and the Fitting’ provides a heuristic for leaders. It encourages them to not only focus on regulatory obligations but also to weigh the net benefits and costs of their decisions. More significantly, it prompts them to consider how well a decision aligns with their organization’s purpose. 

Harnessing the principles of moral philosophy and ethics in this intentional way brings valuable procedural legitimacy to decision-making processes, as well as reinforcing the authenticity of a brand’s ESG commitments by helping to identify what truly matters. 

Leveraging ethics to strengthen culture 

Ethical decision-making at the top of the organization is only one piece of the puzzle. E&C leaders must ensure that ethical behavior is the norm throughout the organization. Frontline workers, executives, and those in between should be counted on to consistently behave in ways that reflect and amplify the company’s ESG commitments and brand values. 

While the necessity for a persistent ethical culture is self-evident, its cultivation remains a challenge. Despite most organizations gathering culture and sentiment data, many leaders perceive culture as elusive and intangible and only a handful can leverage this data to predict and influence behavior. 

At Principia, we provide Ethics and Compliance (E&C) leaders with tools to understand and actively shape their organization’s culture. Our comprehensive Ethical Culture Assessment, proven effective in leading organizations, uses qualitative and quantitative methods to analyse the primary drivers of ethical conduct. Our analysis is underpinned by our proprietary Ethical Drivers Model (EDM), based on thirty years of academic research, helping leaders identify not only what is happening but why

Ethics and ESG regulation, thinking beyond compliance 

E&C leaders, especially in highly regulated industries like healthcare, need to look beyond just ESG regulations. The real measure of ESG commitments is not found just in rule compliance but in the ability to make ethical decisions in line with your company’s purpose and values. It’s about fostering an ethical culture that authentically upholds ESG commitments. At Principia, we offer strategic guidance to navigate this intricate landscape and assist in building organizations where ethical decision-making and culture align with compliance, resulting in a truly cohesive organization.

About the author

Sarah Eccleston is a Principal at Principia, responsible for client engagements.

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