LexisNexis sat down with Emmanuel Lulin, Senior Vice-President and Chief Ethics Officer at L'Oreal, at the One Young World conference in Bogotá, Colombia this month. In a frank and wide-ranging interview, Mr Lulin told us that businesses must pursue ethical policies to succeed.
The One Young World conference brought together more than 1,300 young leaders from 193 countries to tackle major issues facing the world, including corruption. We met Mr Lulin and two colleagues from L'Oreal on the fourth floor of Bogotá's new Agora Convention Centre. From where we sat, we could see the high-rise buildings of downtown Bogotá and the city's Eastern Hills looming in the background. But there was no time to admire the view – Mr Lulin was laser focused on explaining why ethics are vital to the success of businesses.
Mr Lulin said a key reason for businesses to act ethically is that today's investors, shareholders and consumers not only expect strong ethical standards but require them. Another reason is that people are becoming increasingly aware of the importance of human rights. So companies should ensure their supply chains are free from human rights violations, and that their products are ethically sourced.
LN: What do you think of the ethical standards of companies today?
EL: "Companies are taking responsibility for the impact of their activities on society, and they agree that they have an ultimate duty of transparency with the world. The time where it was enough to respect the law to be on the safe side, or the safe harbour as lawyers like to say, is over forever."
LN: How far should companies take their compliance efforts? Is it enough to ensure they comply with the relevant national and international laws on financial crime?
EL: "For a long time, companies thought and they were advised to think that if you respect the law that it is enough, but nothing is more wrong. An ethics programme based only on compliance is a failure of the mind because you are just asking people to obey but not to understand. The underlying message is that you don't trust people, but when you trust people you ask them to adhere to same values as you.
"People will always try to go around the law - that is why I believe to have the right culture is so key. Things can be perfectly lawful and perfectly awful. As leaders, state your ethical values with transparency and above all walk the talk. If you do not walk the talk, you will be caught. Unethical leaders, unethical people, unethical organisations now disappear much faster."
LN: Why is simply complying with the law no longer enough?
EL: "The issue is that the speed of technical and scientific innovation is much faster than the speed of production of a legal framework and therefore there is a vacuum and this vacuum is filled in by our values. The law is not any more the sole framework for decision making - it is much too slow. It is better for companies to concentrate on the positive side of ethics than the negative side of law - it is much more positive to focus on a culture of integrity and loyalty than on conflict of interest. It is more positive and engaging to focus on diversity than on discrimination."
LN: How should companies judge the success of their compliance efforts?
EL: "There is a new currency coming and this is trust. If you want to measure the success of an organisation it is not enough anymore to look at the financial results, this is just plain wrong. There is a flaw in the current accounting system that does not take into account sufficiently the value of a culture of integrity and ethics of any given organisation. This culture of integrity is probably a much better indicator of the sustainability of an organisation than the anything else.
"If we were a newspaper, we would worry a lot about the trust of our readers, if we were a cosmetics company we worry a lot about the trust of our consumers and suppliers, of the market, and of our employees. It's a new paradigm, it's a new way of looking at things, and this new way is welcome."
LN: What about customers and investors? Are they just happy with a good product or a good return? Do they care about ethics?
EL: "Customers and investors are not just expecting but requiring ethics and transparency in companies, and that is good. You probably notice that, every year, corporations' annual reports are getting bigger. This is not because they are making bigger numbers, but because they need to explain with more transparency how they achieve their results."
LN: Are there any particular ethical issues companies should look out for in the coming years?
EL: "I think human rights is a main rising subject and will become a key focus for corporations and a subject larger and bigger than corruption. Corruption is a huge subject but human rights is really the rising subject and will most probably succeed corruption. Human rights will be the next instrument of change. The increasing focus on human rights forces organisations to have a wider view, a more integrated view, and to take into consideration to a larger extent the local situation wherever they operate."
LN: The theme of the One Young World is that young people have the power to tackle the biggest issues facing the world - such as corruption. Do you think the next generation of business leaders are more ethical than their predecessors?
EL: "I don't think it's that the new generation is more ethical than the previous one. But the level of consciousness is more frontal and the new generation speaks up more. Ten or fifteen years ago very few candidates at interviews would ask questions about the ethics, values and culture of organisations. Today it is common practice and we also discuss ethical issues with prospective candidates to make sure they have good fit with our values.
"Leaders of the future will be confronted with very difficult choices and when ethical issues arise, silence is not an option. Integrity, respect, courage, transparency are the new fashion. So the current development with the new generation, the fact that they have got very interested in the ethical aspect of business, is fantastic."