Making Ethics pay back in difficult times

The other day I was watching a debate on US television on whether the investments by industry in controlling carbon emissions were worthwhile and the payback adequate. A similar question can be raised about Business Ethics. Putting an Ethical framework and culture in place costs a lot of money. BE practitioners have for long given broad-brush hypotheses on how ethics pays - like customer loyalty, ability to retain employees, etc. These generic benefits apply to businesses that are running well and financially in sound health. To test the hypothesis we need to put BE to the acid test. Which is - can a business that is in trouble benefit from Ethical behaviour? Let us look at a few real-life situations.
When a business is in a financial crunch the first set of stakeholders to get affected are its vendors. Supplier payments are delayed, initially by a few days and progressively by longer durations. Vendors get to hear a variety of excuses. Those who are large start to insist on cash before delivery. Uncertainty prevails and supplies get affected. We see a vicious spiral setting in, with business consequences. A Business Ethics-based approach would be different, and be based on a prudent level of transparency with the vendors. The Purchase team could explain to the vendors that the firm is going through a period of financial stringency, and re-negotiate payment terms. In some cases, prices may have to be increased to compensate for the additional financing costs. This approach would, apart from building enormous trust, help the vendors plan their internal finances and operations. For the firm, this would mean business continuity and improved support from its business partners to tide over a difficult period.
The next group of stakeholders who normally get affected by a downturn are the employees. The contemporary solution to this problem is that of the "pink slip". This ensures immediate cash savings, but just imagine the impact on the morale of the employees who the firm needs to stay back. They would feel miserable, and the sensible ones start looking out for alternate jobs. The firm invariably ends up losing the employees it actually needs, and the business gets hit further. What I am saying is not new, we see this happening time and again. The ethical response to this situation would be pro-active and positive. Let me quote a personal example. I had a consultant working on a long-term assignment with a client. The client cancelled the contract overnight for internal reasons. Suddenly, I had a consultant on my rolls with no work. I spoke to the young man and told him that in the absence of the contract I could not employ him productively. We decided mutually that I would employ him till he found a suitable job, and also support him in his job search. He got a good job within 3 months.
To talk of an extreme situation, let us look at a firm that is closing down parts of its business in the process of a restructuring. We read of massive lay-offs every day. In a situation like this, the HR department has a significant opportunity to demonstrate ethical leadership - by helping employees re-skill themselves to be employable outside, hiring counsellors to provide psychological support, using placement agencies to outplace employees discretely, and so on. I have seen all these options being used by responsible firms. The Supply Chain function also needs to demonstrate ethical vision in this situation - by being candid with business partners and giving them adequate advance information so that they can find alternate customers. Innovative ways to help them sustain their businesses need to be worked upon. The positive rub-off of these actions on the rest of the business, and its reputation, is significant. There is also significant financial feedback, as the business continues to have the whole-hearted support of its employees and business partners during the phase of closure. This means that financial losses are minimised and financial recoveries maximised.
Business Ethics always pays back. It needs innovative thinking, a large dose of transparency, and above all the belief that responsible behaviour is required towards people we separate from the business.