Practicing ethical governance to support UN’s sustainable devlopment goals

Ethical governance has become one of the most prominent issues in the business world and has gained tremendous importance in the recent past (Biswas, 2015). Ethical governance is a framework in which organizations ensure that their policies and actions adhere to ethical principles (Naha & Hassan, 2018 ). Business leaders use this framework as a tool to determine the maturity of their organization’s governance, particularly in the areas of ethical leadership, ethical decision-making, ethical foundation, and organizational culture (Wessels & Wilkinson, 2016).

Significance of ethical governance in businesses

Ethical governance in business requires establishing a governance framework with the implementation of moral principles into the decision-making of an organization (Pahuja, 2019). Responsibility, transparency, fairness and accountability are the foundational principles of ethical governance that build trust and credibility among all organisational stakeholders. Stakeholders need to realize the virtues of governance to become responsible and understand the core values and principles of ethical business practice (Biswas, 2015).

Responsible leadership is essential for establishing an ethical culture and values within an organization, which in turn guides the organization’s policies, strategies, and decision-making processes (Wessels & Wilkinson, 2016). Promoting fair, honest and ethical behaviour within the firm to handle actual or apparent conflicts of interest in personal and professional relationships promotes good corporate culture. Fairness is a key aspect of ethical governance, as it ensures that rules, processes, and decisions are applied impartially and without bias. Fairness is important in ethical governance because it helps to build trust and confidence in the organization, promotes accountability, and ensures that the interests of all stakeholders are fairly represented (S & Mohapatra, 2012).

Transparency plays a key role in resolving work conflicts, with about 50% of these conflicts arising from ethical issues (Firstday, 2019). Transparency ensures that rules, processes, and decisions are applied openly and in a way that can be scrutinized by stakeholders. Transparency in business involves sharing clear information with all stakeholders, which not only builds trust but also fosters an ethical business environment, making it easier to resolve conflicts rooted in ethical concerns (Hosseini et al., 2018).

Accountability is a key aspect of ethical governance, as it ensures that individuals and organizations are held responsible for their actions and decisions (S & Mohapatra, 2012). Accountability enhances the performance of an organization and helps promote ethical leadership and governance (Sreeramana Aithal, 2021; Kassem A. Ghanem & P. Castelli, 2019). It is also an important part of modern business environments as it helps in building collaboration and ensuring responsibility in an organization (Femmy Effendy et al., 2022). Accountability is linked with both ethical decision-making and leadership roles which emphasize the importance of integrity in the practices of an organization (Kassem A. Ghanem & P. Castelli, 2019). A legal framework plays a crucial role in ensuring accountability and ethical governance. S and Mohapatra (2012) also suggest that a strong regulatory system helps to implement good ethical practices at firms.

Aligning ethical governance with the UN’s sustainable development goal

Sustainable Development Goal (SDG) 12 focuses on consumption and production. The main focus of this goal is to reduce the use of resources and encourage the general public to use renewable and sustainable resources and practices (Gabriel & Luque, 2019). One of the aspects of the goal is to ensure that economic growth is not at the cost of the degrading environment and depletion of natural resources.

Ethical governance involves making transparent, fair, and morally sound decisions, thus it aligns with the principles of SDG 12 by promoting sustainable practices in production and consumption. Additionally, transparency and accountability, the core aspects of ethical governance, ensure that companies and governments are held responsible for their environmental impacts and promote a culture of sustainability (Ramzy et al., 2019).

The alignment of corporate governance with the Sustainable Development Goals (SDG) is crucial for their effective implementation. Leadership plays a vital role in this process, as they have the power to provide the most robust accountability structure for the SDG process (Tam, 2022).

The United Nations highlighted transparency as an important quality of corporate governance (Ortega-Rodriguez et al., 2020). They emphasized the importance of transparency in building trust and cooperation among all stakeholders (Rweyendela, 2021). According to the UN, SDG advances long-term international goals. Building a just and sustainable society is seen to need ethical governance and openness (Custodio & Martins, 2023).

Percentage of disciplinary actions relative to total employees as a metric of accountability

Disciplinary actions in business refer to the measure which is designed particularly to address the misconduct of employees and to ensure organizational rules (Okolie & Udom, 2019). These actions are used to correct undesirable behaviour and to build a positive overall performance of an organization (Keerthana, 2023). A higher percentage of disciplinary actions indicates that an organization is facing internal governance issues, such as non-compliance with ethical standards and policies, potentially impacting sustainable practices.

This serves as an internal metric to gauge how well an organization’s workforce adheres to ethical and sustainable standards. Furthermore, it can also signal to improve employee engagement, training, and ethical governance. Addressing these internal issues through proper and fair disciplinary action helps enforce compliance with ethical standards, supporting responsible production practices (Knight & Ukpera, 2020). Implementation of these actions also enhances the efficiency and productivity of a workplace. If these actions are fair and transparent, they will lead to a positive work environment and support the overall performance of an organization (Keerthana, 2023; Knight & Ukpere, 2020).

Average percentage of females on the Board and Key Management Personnel as a metric of diversity and leadership

It is related to the UN’s Sustainable Development Goals (SDG) through its connection to inclusive and ethical governance, diverse decision-making, and corporate sustainability practices. With enhanced business outcomes and increasing ethical practices, female representation is increasing in leadership positions. The presence of female directors on the board enhances the functionality of the board and innovation. It also ensures the overall performance of the board (Slomka-Golebiowska et al., 2022). Companies with a higher number of women on their boards experience improved financial performances and increased market values (Cassells & Duncan, 2020). Gender diversity not only leads to better financial results but also results in increased corporate governance and transparency (Nel et al., 2020).

Percentage of differently abled employees relative to total employees

It serves as a valuable metric to measure a company’s alignment with the Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth) and SDG 10 (Reduced Inequalities). By employing a significant percentage of differently abled individuals, companies demonstrate their commitment to fostering a diverse and inclusive workforce. Companies that prioritize hiring people with disabilities are actively working to reduce barriers to employment and promote social and economic inclusion, which aligns with SDG 10’s goal of reducing disparities based on disability. The incorporation of differently abled individuals for inclusivity is vital for organizations competing in a diverse and changing global landscape. Companies are addressing issues of diversity and inclusion, including the hiring of differently abled individuals and making workplaces more accessible.

Capex vs R&D Investment Ratio and CSR Expenditure Percentage as a metric of transparency

Capital expenditure (capex) is a financial metric investment in long-term assets, it impacts business performances and reporting. It influences different companies’ environmental, social and governance disclosure (ESG) (Ahmed Saber Moussa, 2023). It plays an important role in the growth of revenue and helps in expanding customer bases. It also helps in enhancing the profit of the organization. The R&D investment ratio refers to the measures of an organization’s investment in development and economic output. It is calculated by the percentage of contribution to the country’s GDP (Lee et al., 2019).

It is an important part of ethical governance as it shows the contribution of an organization to a country’s economic growth. Corporate Social Responsibility (CSR) refers to the spending of 2% of the average profit of an organization, as it is mandatory for Indian companies by the Company Act of 2013 (Verma et al., 2019). It is important as it has a positive impact on the performance of the company and ensures the cash flow from the company (Bhattacharya & Rahman, 2019). These metrics provide insight into a company’s strategic priorities. They show whether a company is focused on sustainable innovation and long-term impact or short-term growth.

Significance of ethical governance in the logistics sector of India

Ethical governance leads to economic growth and enhances responsibility. It helps to gain public interest and create a positive image in jobs or the market (K. Govindan et al., 2021). In a study, it was observed that global logistic firms between 2010 and 2015 had a notable shift towards transparent carbon disclosure both internally and externally (Herold, 2018). As India becomes more integrated into the global economy, adherence to international standards in sustainability, labour rights, and environmental practices becomes essential. The logistics sector of India contributes around 13% to India’s GDP (Deepak M. Salve & Dhiraj Raghunath Ovhal, 2020). The ethical behaviour of employees in the logistics sector plays a significant role in corporate governance (P. Karacsony, 2020). In India, logistics sectors face many challenges related to inadequate financial constraints, infrastructure and technology (R. Naik & S. Singh, 2022). By adopting ethical practices, logistics companies can better integrate into large-scale infrastructure projects and contribute to the creation of an efficient, transparent, and sustainable logistics ecosystem.

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