Raising the ethical bar in businesses

India’s private sector today bears a new look than some decades ago. It has access to world-class technology, workforce and global investors. However, when it comes to ethics and integrity, only a handful of Indian companies have met global benchmarks. It is time Indian industry came together and did something about raising the integrity standards in its business transactions.

To get a sense of the magnitude of corruption in business-to-business transactions, all one needs to do is talk to some small and mid-sized businesses and entrepreneurs. Most of them have accepted it as part of doing business. Some call it facilitation and liasioning, some even call it marketing and relationship management.

Common areas where businesses face issues are in supplying products and services to Indian companies and collecting their dues. Becoming a distributor or dealer of established brands is also a challenging area. Another interesting observation is that there exists a significant disconnect between the boardroom and the operational levels of a company with respect to ethics and integrity. The board or leaders of a company in many cases are not even aware of some of the ethical challenges they have within their corporation.

However, addressing the problem of business-to-business corruption is also something that is relatively easier than addressing business-to-government and citizen-to-government corruption. With some innovation and leadership commitment, companies can enable themselves to implement integrity values and controls. To further this, India needs to establish an independent business integrity centre of excellence. The vision will be to improve the integrity of business-to-business transactions, making them corruption free. To start with, the centre could be supported through a subscription-based model by firms who believe in ethics and transparency.

The objective of the centre will be to develop business-to-business integrity standards that are easy to understand and implement. These standards can be developed by working with leading Indian and global bodies and must be practical so that they can be implemented in the current operating environment. The centre will assist companies in implementing these standards and audit them on a periodic basis. Companies and businesses that are compliant with the standards will be given a certification called the integrity logo. Once compliant, a member company could publish this integrity logo on all its tenders, requests for proposals and any other company documents used to transact business.

The compliance to integrity standards over time will serve as a competitive differentiator for companies. It will differentiate the good from the average. In the long run, companies who comply with integrity standards will probably enjoy higher valuations, be able to raise funds faster and attract better talent. Once the integrity logo becomes the norm, one could even look at tie-ups with the market regulator as a requirement for all listed companies.

Before businesses point fingers at the government on corruption, they need to demonstrate that business-to-business transactions are clean and we have an operating model that works. Business-to-business integrity standards can help in setting common protocols across industries, defining what’s right and distinguishing the businesses that operate with values. Also, an initiative like this by Indian firms will send a clear message to the government and foreign investors that India is committed to make it easier to do business in the country.

Sachin Taparia is chairman and managing director, New Venture in Social Transformation and member of advisory board, TVS and Sons.