Who will be the business ethics winners and losers at the London Olympics?

Corporate involvement in the Olympic Games continues to expand in size and significance. This year, the 2012 London Olympics will boast sponsorship on hundreds of millions of dollars in corporate sponsorship and tie-ins. But as the corporate money flooding into the Games increases, so too do the attendant ethical risks. For all the advantages of being associated with one of the world's greatest and most watched sporting events, it also puts you at the mercy of activists and other critics ready to use the Games' huge pulling power to target big brands. Adidas, BP, Dow Chemical, McDonald's and Rio Tinto are all currently in the firing line regarding their involvement in the London Games. So the big question for the companies is: come closing ceremony time, who are going to be seen as the ethics winners and who will be the ethics losers?

 Four years ago, the 2008 Beijing Olympics also brought to the fore some major ethical risks for the Games' sponsors, mainly because of the potential for being tarnished with the human rights and environmental pollution problems facing hosts China. This time around, it is less the hosts than the companies themselves, accused of anything from using their sponsorship to greenwash their more unsavory practices (BP, Dow), to corrupting the ideals of the Games (McDonald's), and exploiting sweatshop labor to produce official Games sportswear (adidas).

The most tangible of these criticisms regards the sweatshop allegations. Over the years, adidas has worked hard on its ethical supply chain practices, and was one of the forces behind the Sustainable Apparel Coalition initiative. But having already dropped off one list of the most ethical companies this year, the accusations of poor labor practice in the factories producing the official kit for the Great Britain Olympic team will no doubt strike a significant reputational blow to the company.

Let's be clear here. It's unlikely that adidas is actually an outlier amongst apparel companies. A decent investigation into pretty much any global brand's supply chain could probably surface some major failures to live up to their impressive sounding codes. Not because they don't want to meet their commitments, but because there are always going to be suppliers that cut corners given the low cost, high flexibility model of production foisted onto them by the big brands. Adidas becomes a useful target though because of it's high profile in the Olympics. That's the risk that comes with the territory these days. Nike got it right 4 years ago when they published their special report on their Chinese operations months before the Olympics took place thereby taking any sting out of any likely exposé.

As for the so-called green washers, they also shouldn't be too surprised about the controversy they have sparked. BP as an official "sustainability partner" for the Olympics? Wouldn't it make sense to get your sustainability reputation back before wrapping yourself in such a cloak? Maybe they think that at rock bottom the only way you can go is up. But public trust needs careful nurturing if you are going to restore it after a major catastrophe. Not symbolic gestures.

If anybody should know how hard it is to rebuild public trust, it's one of the other Olympics sponsors currently in at the losing end of the PR battle, Dow Chemical. The beef with Dow goes back to 1984, and to a company that they didn't even acquire until 2001, Union Carbide. That the compensation question for Union Carbide's role in the Bhopal tragedy should still be rumbling on is testament to the importance of dealing effectively with legacy ethics issues. Here we are nearly 30 years later with Dow's banner role in the Games being the subject of front page news in India, the UK and elsewhere.

There's already been a high profile resignation from the watchdog supposed to monitor the sustainability of the 2012 Games as a result of the company's sponsorship deal, whilst over in India, the Government itself has now launched a diplomatic offensive against the company after it failed to persuade the London Olympics Committee to drop the firm as a sponsor. There has even been talk of a national boycott of the Games by India, but this currently looks unlikely. 

Let's get this one clear too though. Dow is no evil corporate monster, and has been doing some fine work in the sustainability space. But it does have a legacy problem still to deal with. And until it reaches a more easy relationship with key opinion formers in India (which, frankly seems unlikely in the near future given all that has happened ..... and when the response of the CEO to the current troubles is that any opposition to their sponsorship is "beyond belief"), it should just steer clear of huge global events like the Olympics. Any PR firm worth it's salt should know that. The $10m sponsorship money could have been spent in much more effective ways. Why take the risk of stirring up old problems - and more than that, give them a global airing - when you don't need to? Hubris, insensitivity, poor research, or just bad PR? It would be interesting to find out.

The bottom line is that the Olympics offers great opportunities for corporations to connect with a global audience. But those opportunities do not come risk free. Companies need to have their reputations in their best possible condition before they take such a plunge. And they need to have the PR department, the CSR team, risk management, and the senior leadership working together from the get go to minimize any damage.  Just ask any Olympic athlete. Winning at the Games is all about preparation, dedication, commitment, and having the right team in place to get you there. Business should be no different.

Photo by the|G|™. Reproduced under Creative Commons Licence

I selected this post to be featured on Ethics Blogs. Please visit the site and vote for my blog!

Ethics and financial crisis

With stock markets plummeting, financial institutions going belly-up, and governments on both sides of the Atlantic stepping in to bail out failing companies, the prospects for investors, the financial community, and even tax payers do not look good. And with the likely knock on effects for employment in other sectors almost certain to result in job losses, the fall-out from the current market turmoil is going to be widely felt.

For us business ethics professors, however, the picture is somewhat mixed. On the one hand, issues of social responsibility tend to be higher on the agenda when times are good. On the other, when greed and corruption contribute to downturns (such as in the post Enron wake of the early 2000s), significantly more attention can shift to issues of integrity and governance in business. Its no coincidence that the 2000s have witnessed perhaps the most sustained growth yet in the corporate responsibility 'industry' and in courses, books, conferences, and workshops on the subject.

Today's financial crisis clearly has at least some of its roots in corporate iresponsibility around the subprime mortgage market in the US. If 'responsible lending' practices had been observed (or if tighter regulatory oversight had been imposed), we might not all be in this position right now. Certainly, the financial industries of other countries appeared to be more attuned to the problem than in the US, such as in the UK, where the British Banking Association has in place a code on responsible lending:

Responsible lending is providing credit, based on background checks and professional judgement, to people who can accommodate regular repayments without getting into financial difficulty.

But although the sub-prime problem was the rockfall that got the financial landslide going, there are a number of structural issues that also need to be considered. And here we need to perhaps look at deeper institutional issues rather than the ethics of individual people or companies. As with Enron, the fault lines for disaster run through the system of risk management, regulation, transparency, business interdependence, and reward systems, not simply rogue traders crossing the ethical boundaries.

There are ethical issues here too of course, but they are at a different level to the ones that most people think of when they think about corporate responsibility. Here, we are talking about the ethics embedded in business systems and institutions, and how ethics and the law intersect to ensure that markets work effectively, fairly, and ultimately securely. Sure, a lot of our current problems with the financial crisis can be put down to individual greed, mismanagement, and bad decisions, but ultimately it goes deeper than that. Whether this means that the current crisis will be a boon to business ethics however depends on how well us ethical experts manage to get to grips with these deeper level problems.

For further reading on this, check out our paper on challenges to the business ethics curriculum, published in an early version available free online and later in the Journal of Business Ethics.