Managing Legal, Ethical, and Social Responsibilities in Global Business

Compliance and Beyond: Managing Legal, Ethical, and Social Responsibilities in Global Business

Kurt GraverBusiness Development

According to a survey by the Institute of Business Ethics, 92% of the British public believes businesses are responsible for society beyond making profits [1]. Moreover, a study by the British Academy found that companies with strong environmental, social, and governance (ESG) practices tend to outperform their peers in terms of financial returns and resilience [2].

Managing these responsibilities in global markets presents unique challenges and opportunities for UK entrepreneurs. Different countries have varying legal frameworks, cultural norms, and stakeholder expectations that companies must navigate. At the same time, demonstrating a genuine commitment to ethical and sustainable business practices can help companies build trust, attract talent, and gain a competitive edge in the global marketplace.

This blog post explores the key aspects of managing global business’s legal, ethical, and social responsibilities, providing UK entrepreneurs with a comprehensive guide to compliance and beyond. From understanding international legal frameworks to embedding ethical decision-making and stakeholder engagement, we will cover the essential strategies and best practices for building a responsible and successful global presence.


The first step in managing global business legal responsibilities is understanding the various international legal frameworks that govern cross-border transactions and operations. These frameworks include:

International Trade Law


International trade law regulates the flow of goods, services, and investments across borders. The World Trade Organization (WTO) is the primary international body that sets the rules for global trade, with 164 member countries, including the UK [3]. The WTO’s agreements cover tariffs, subsidies, intellectual property rights, and dispute settlement.

UK entrepreneurs expanding globally must ensure compliance with WTO rules and any bilateral or multilateral trade agreements that the UK has with other countries. For example, the UK-EU Trade and Cooperation Agreement (TCA), which was signed on January 1, 2021, sets out the new trading relationship between the UK and the EU after Brexit [4].

International Investment Law


International investment law governs foreign investors’ and host countries’ rights and obligations. Bilateral Investment Treaties (BITs) and multilateral agreements like the Energy Charter Treaty provide legal protections for foreign investors against expropriation, discrimination, and unfair treatment by host governments [5].

UK companies investing in foreign markets should be aware of the investment treaties in place and the legal remedies available in case of disputes. They should also conduct thorough due diligence on the political, economic, and legal risks of investing in each country.

International Human Rights Law


International human rights law sets out the basic rights and freedoms all individuals are entitled to, regardless of nationality or location. The United Nations Guiding Principles on Business and Human Rights (UNGPs) provide a global framework for businesses to respect and protect human rights in their operations and supply chains [6].

UK companies operating in global markets are responsible for ensuring that their activities do not infringe on the human rights of workers, communities, and consumers. This includes conducting human rights impact assessments, implementing due diligence processes, and providing remedies for any negative impacts.

International Environmental Law


International environmental law aims to protect the planet’s natural resources and ecosystems from transboundary harm. The Paris Agreement on climate change, the Convention on Biological Diversity, and the Basel Convention on Hazardous Waste are key international treaties that set out obligations for countries and businesses to mitigate environmental damage [7].

UK companies with global operations must comply with these international environmental standards and any national or local regulations in their countries. They should also adopt sustainable practices and technologies to minimise their environmental footprint and contribute to the global fight against climate change.

Embedding Ethical Decision-Making


Beyond legal compliance, managing ethical responsibilities in global business requires embedding ethical decision-making into the organisation’s core. This means going beyond a checklist approach to ethics and fostering a culture of integrity, transparency, and accountability at all company levels.

According to a survey by the Institute of Business Ethics, 86% of British employees say that honesty is an organisation’s most important ethical value [8]. However, putting this value into practice can be challenging in the face of competing pressures and cultural differences in global markets.

To embed ethical decision-making, UK companies expanding globally should:

Develop a Global Code of Ethics


A global code of ethics sets out the company’s values, principles, and standards of behaviour that all employees, regardless of their location or position, are expected to uphold. The code should be developed through a participatory process involving input from employees, stakeholders, and ethics experts. It should be regularly reviewed and updated to reflect evolving global norms and challenges.

Provide Ethics Training and Support


Embedding ethical decision-making requires ongoing training and support for employees to help them navigate ethical dilemmas and make sound judgments. Companies should provide regular ethics training programs tailored to each market’s cultural, legal, and operational contexts. They should also establish ethics hotlines, helpdesks, or ombudspersons that employees can turn to for guidance and support.

Integrate Ethics into Performance Management


Companies should integrate ethics into their performance management systems to reinforce the importance of ethical behaviour. This means including ethical criteria in employee evaluations, rewarding ethical conduct, and holding individuals accountable for unethical actions. Leaders should also model ethical behaviour and communicate its importance through words and deeds.

Foster Open Dialogue and Transparency


Creating a culture of ethics requires fostering open dialogue and transparency within the organisation. Companies should encourage employees to speak up about ethical concerns without fear of retaliation and provide channels for anonymous reporting of misconduct. Leaders should also be transparent about the company’s ethical challenges and efforts to address them internally and externally.

Engaging with Stakeholders


Managing social responsibilities in global business requires active engagement with various stakeholders, including employees, customers, suppliers, communities, governments, and civil society organisations. Stakeholder engagement helps companies understand the social and environmental impacts of their operations, identify opportunities for collaboration and value creation, and build trust and legitimacy in the eyes of society.

According to a study by the University of Cambridge Institute for Sustainability Leadership, companies that engage effectively with stakeholders tend to have better risk management, innovation, and financial performance [9]. However, stakeholder engagement in global markets can be complex and challenging due to differences in language, culture, power dynamics, and expectations.

To engage effectively with stakeholders in global markets, UK companies should:

Map and Prioritise Stakeholders


The first step in stakeholder engagement is to map out the various individuals, groups, and organisations affected by or interested in the company’s operations. This includes internal stakeholders (e.g., employees, shareholders) and external stakeholders (e.g., customers, communities, NGOs). Companies should then prioritise stakeholders based on their influence, legitimacy, and urgency and develop tailored engagement strategies for each group.

Conduct Stakeholder Dialogues


Stakeholder dialogues are structured, facilitated conversations that unite diverse stakeholders to exchange views, build understanding, and identify common ground. Companies should conduct regular stakeholder dialogues in each market to gather input on their social and environmental performance, explore new ideas and partnerships, and address any concerns or grievances. Dialogues should be inclusive, transparent, and action-oriented, with clear follow-up and accountability mechanisms.

Partner with Local Communities


Building strong partnerships with local communities is essential for companies operating in global markets. This includes investing in community development projects, supporting local suppliers and entrepreneurs, and involving communities in decision-making processes that affect their lives and livelihoods. Companies should also respect the rights and traditions of indigenous peoples and obtain their free, prior, and informed consent for any activities on their lands.

Collaborate with Industry and Civil Society


Managing social responsibilities in global business requires collaboration and collective action beyond individual companies. UK companies should actively participate in industry associations, multi-stakeholder initiatives, and public-private partnerships to address common challenges and promote sustainable development. For example, the United Nations Global Compact is the world’s largest corporate sustainability initiative, with over 12,000 signatories from 160 countries committed to aligning their strategies and operations with universal principles on human rights, labour, environment, and anti-corruption [10].

Measuring and Reporting on Performance


To demonstrate their commitment to legal, ethical, and social responsibilities, UK companies operating in global markets must measure and report on their performance transparently and accountable. This includes setting clear targets and key performance indicators (KPIs), collecting and analysing relevant data, and communicating progress to stakeholders through regular sustainability reports and other channels.

According to a survey by KPMG, 96% of the world’s 250 largest companies now report on their sustainability performance, up from 64% in 2005 [11]. However, the quality and comparability of sustainability reporting varies widely across companies and countries, making it difficult for stakeholders to assess and compare performance.

To improve the measurement and reporting of legal, ethical, and social performance in global business, UK companies should:

Align with Global Reporting Standards


Several global reporting standards and frameworks guide what and how to report on sustainability performance. The Global Reporting Initiative (GRI) Standards are the most widely used standards, which cover a range of economic, environmental, and social topics [12]. Other relevant standards include the Sustainability Accounting Standards Board (SASB) Standards, which focus on industry-specific sustainability issues that are financially material to investors [13], and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, which provide a framework for reporting on climate-related risks and opportunities [14].

UK companies should align their sustainability reporting with one or more global standards to ensure consistency, comparability, and credibility. They should also seek independent assurance of their sustainability reports to enhance their reliability and trustworthiness.

Engage Stakeholders in Reporting


Sustainability reporting should not be a one-way communication between companies and stakeholders but a dialogue and co-creation process. Companies should engage stakeholders in designing, content, and disseminating their sustainability reports to ensure they address the issues that matter most to them and provide relevant and understandable information. This can be done through stakeholder surveys, focus groups, online feedback platforms, and other participatory mechanisms.

Integrate Sustainability into Financial Reporting


Sustainability reporting should not be a standalone exercise but an integral part of a company’s overall financial and strategic reporting. This means integrating sustainability information into annual reports, investor presentations, and other financial communications and explaining how sustainability performance affects the company’s business model, risk profile, and prospects. The International Integrated Reporting Council (IIRC) provides a framework for integrated reporting that connects sustainability and financial information [15].

Use Technology and Innovation


Technology and innovation can help companies improve their sustainability measurement and reporting efficiency, accuracy, and impact. For example, blockchain technology can enable secure and transparent tracking of supply chain data. At the same time, artificial intelligence and machine learning can help analyse large volumes of sustainability data and identify patterns and insights. Companies should explore and adopt new technologies and innovations that can help them better measure, manage, and communicate their legal, ethical, and social performance in global markets.

Conclusion


Managing legal, ethical, and social responsibilities in global business is a complex and ongoing challenge for UK entrepreneurs. It requires navigating a web of international laws and norms, embedding ethical decision-making into the organisation’s core, engaging with diverse stakeholders, and transparently and accountablely measuring and reporting performance.

However, it is also an opportunity for UK companies to build trust, legitimacy, and competitive advantage in the global marketplace. By demonstrating a genuine commitment to responsible and sustainable business practices, companies can attract and retain top talent, enhance their brand reputation, and create shared value for their stakeholders.

The COVID-19 pandemic has further underscored the importance of legal, ethical, and social responsibilities in global business. Companies that have responded to the crisis with empathy, agility, and purpose have survived and thrived, while those that have ignored their responsibilities have faced backlash and scrutiny from stakeholders.

As the world recovers from the pandemic and faces new challenges such as climate change, inequality, and digital transformation, UK entrepreneurs have a unique opportunity to lead responsible and sustainable global businesses. By embracing compliance and beyond, they can succeed financially and contribute to a more just, inclusive, and resilient world.

References

  1. Institute of Business Ethics. (2019). Attitudes of the British Public to Business Ethics 2019. https://www.ibe.org.uk/resource/attitudes-of-the-british-public-to-business-ethics-2019.html
  2. British Academy. (2019). Principles for Purposeful Business. https://www.thebritishacademy.ac.uk/publications/future-of-the-corporation-principles-for-purposeful-business/
  3. World Trade Organization. (2021). What is the WTO? https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
  4. UK Government. (2021). UK-EU Trade and Cooperation Agreement. https://www.gov.uk/government/publications/uk-eu-trade-and-cooperation-agreement-ts-no82021
  5. United Nations Conference on Trade and Development. (2021). International Investment Agreements Navigator. https://investmentpolicy.unctad.org/international-investment-agreements
  6. United Nations. (2011). Guiding Principles on Business and Human Rights. https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf
  7. United Nations Environment Programme. (2021). Environmental Law. https://www.unep.org/explore-topics/environmental-rights-and-governance/what-we-do/promoting-environmental-rule-law-0
  8. Institute of Business Ethics. (2021). Ethics at Work: 2021 Survey of Employees – United Kingdom. https://www.ibe.org.uk/resource/ethics-at-work-2021-survey-of-employees-united-kingdom.html
  9. University of Cambridge Institute for Sustainability Leadership. (2019). Linking Planetary Boundaries to Business: Part of Kering’s series on Planetary Boundaries for Business. https://www.cisl.cam.ac.uk/resources/linking-planetary-boundaries-to-business
  10. United Nations Global Compact. (2021). Our Participants. https://www.unglobalcompact.org/what-is-gc/participants
  11. KPMG. (2020). The KPMG Survey of Sustainability Reporting 2020. https://home.kpmg/xx/en/home/insights/2020/11/the-time-has-come-survey-of-sustainability-reporting.html
  12. Global Reporting Initiative. (2021). GRI Standards. https://www.globalreporting.org/standards/
  13. Sustainability Accounting Standards Board. (2021). SASB Standards. https://www.sasb.org/standards/
  14. Task Force on Climate-related Financial Disclosures. (2021). TCFD Recommendations. https://www.fsb-tcfd.org/recommendations/
  15. International Integrated Reporting Council. (2021). International Framework. https://integratedreporting.org/resource/international-ir-framework/

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