As the Prime Minister calls for UK companies to use ethical trading to create competitive advantage overseas, a report newly published by UK law firm DMH Stallard confirms that UK manufacturers are increasingly focused on operating ethically and transparently to be more competitive and as a means of winning business.
DMH Stallard's 'Ethics and Compliance' report based on in-depth interviews with senior executives from UK-based multi-nationals and SME manufacturers points to a future characterised by the rigorous application of boardroom governance, the signing of 'Honour Codes' by employees and an increasing focus on upholding corporate values and principles.
David Cameron in his speech today highlighted the apparent concerns about the Bribery Act but said, "now we've got it, let's make an advantage of it."
The Prime Minister continued, "Increasing the number of SMEs that sell overseas by 100,000 has the potential to add 30 billion to the UK economy."
David Seall, Strategic Adviser, Manufacturing at DMH Stallard and report co-author says, "As high profile companies count the cost of shabby governance - not just in reputational and brand damage but in stock market value and lost deals many people are asking 'where next for UK business?',"
"Our research shows that with the ever increasing public perception of corrupt and dishonest behaviour by leading organisations, manufacturers operating internationally fully appreciate that calamitous headlines mean that business standards for all companies have never been under such intense scrutinyand they are taking action accordingly. Increasingly they are viewing ethical trading as a key competitive advantage in overseas markets."
"However, while multinationals have the muscle to effect change, smaller companies are really struggling to grow beyond Europe and the US because they say they consistently bump up against corrupt behaviour."
The report lifts the lid into what's happening inside the boardrooms of UK manufacturers when it comes to trading by the rules in a challenging global marketplace.
There's a renewed sense that operating ethically and with transparency can offer a competitive advantage through clarity of values and the so-called 'triple bottom line effect' the impact of taking care of people, the environment and profitability
UK-based manufacturers now operate under the most rigorous ethical business code of any country in the world including the US and many have transformed policies and procedures root and branch, flowing down the requirements to their supply chains
Codes of conduct are embedded in organisations, with many staff being asked to sign an 'Honour Code' covering ethical behaviour, while being given access to 24/7 whistle blowing help lines
Smaller and medium-sized manufacturers say they need help from government and/or larger contractors to trade successfully beyond the EU and the US currently many are wary of exporting to some BRIC (Brazil, Russia, India, China) and CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa) countries because of what some describe as endemic bribery and corruption. This is proving to be a huge barrier for some SMEs and a real issue for UK export potential at a time of financial turmoil in the Eurozone (UK exports to BRIC nations represent just 5% of total exports; the UK's combined trade with India and China is still less than with Republic of Ireland)
'Off-set' the practice of placing sub-contract work overseas as part of a larger deal with a foreign country is still acknowledged to be a pre-requisite for winning business by many manufacturers
Says co-author Simon Bellm, Partner at DMH Stallard: "While some interviewees did express the opinion that the UK was trying to out-do the whole world in ethical trading for example by out-lawing practices still commonplace elsewhere, such as facilitation payments to public officials the vast majority preferred to do business in a way that matched their principles, notably in the way they delivered their contracts and the way they interact with local communities.
"As we looked at it more closely, it became increasingly clear that the issue is not just about organisations reacting to ever increasing media coverage of corrupt and dishonest behaviour it's about how companies define their business values, communicate them and uphold them. It's about how companies, particularly manufacturing and engineering businesses, meet the challenges of foreign trade."