Vicky Andrew FCA cites the five building blocks that are essential for developing an ethical culture in a small practice or business.

A defined statement of values and purpose

It could be argued that a small accountancy practice or small-to-micro business may struggle to define its values and purpose in a formal way. After all, the primary focus of its leader(s) will be to get out there and win as much business as possible.

“That’s right to an extent,” says Vicky Andrew FCA. Andrew is a Member of ICAEW’s Council, Chair of its Ethics Standards Committee, and an adviser who helps small and micro companies. “However, we’re finding that many stakeholders, whether customers, suppliers or investors, are beginning to ask small businesses about their values. So arriving at that definition and communicating it is now an important step for even the smallest entities.”

A clear code of conduct

Following on from that is the most crucial building block of them all: some form of written code that sets expectations for employees’ conduct, in line with those defined values.

“Practices and businesses will have different approaches here,” Andrew points out. “ICAEW practices will already be bound by our Code of Ethics, and you don’t have to reinvent that particular wheel – although some firms may wish to build on it to align their codes more closely with their stated values.”

Businesses, meanwhile, can take advantage of starting points provided by the Institute of Business Ethics (IBE). For example, its Business Ethics Framework has a checklist to help even very small companies cover all the essential areas. 

Founders may also wish to harness the Nolan Principles as a foundation for their code, or the voluntary Code of Conduct from the Institute of Directors (IoD).

Training

“Even when you’ve got your values statement and code in place, it doesn’t stop there,” Andrew notes. “There’s plenty of online ethics training out there to help small entities keep costs down. ICAEW has its own Ethics CPD – now with a Culture module, which I’ve tested out – as do IBE and a number of other, reputable CPD providers.”

Tone from the top

Once those building blocks are assembled, it is vital for leaders to ensure that employees adhere to them. Andrew highlights two sources of support available to founders of small practices and companies: continuous development, and networking with peers. 

As leaders of small entities tend to operate in business communities, they can have informal conversations with each other about ethical dilemmas they are facing in the workplace, and exchange ideas on how to resolve them.

“Part of the ICAEW Code contains notes on potential threats and relevant safeguards,” she says. “There are also case studies in our ethics training, which bring problems to life as stories that can open up thought and discussion by enabling people to picture themselves in certain scenarios.”

Consequences

Consequences for ethical transgressions should not necessarily be punitive or draconian, says Andrew. Instead, critical assessments can pave the way for training refreshers and further discussion.

She also highlights the importance of an effective ‘speak up’ process. The employee raising issues should be confident that they will not be punished for reporting suspected misconduct carried out by somebody else.

“The message to staff must be: don’t wait until you’re sure that something’s wrong,” she says. “Even if an internal investigation finds that there wasn’t anything to worry about, the main thing is that it was flagged and properly looked at.”

Refreshing the blocks

How often should small entities refresh their ethical codes and frameworks? Andrew notes that practices typically take their cues from ICAEW Code updates. Small businesses should review their Codes once a year to ensure they are fit for purpose. “If you’re signed up to the IBE or IoD, you should get emails whenever those bodies update their principles. That will help you think about any changes you may need to make. But an internal consultation should always be an integral part of any annual code review, as it will provide your employees with a sense of ownership. It will also open up discussions about any needs for further training.”

She says ICAEW is working on a “pithy” document for small entities about the minimum expectations for environmental, social and governance (ESG) policies. “For small practices and businesses, ESG approaches can be included in their written codes and/or values statements. Lots of small entities tend to say that they’ve enough on their plates already without ESG, and don’t know where to start. But we want to get across that by taking incremental steps, they can reach quite significant goals.”

How different is it to build an ethical culture in a larger organisation? As businesses grow, setting tone from the top immediately becomes more complex. “The organisation will be led by a board or practice leadership team, rather than a sole director or practitioner,” she says. “That means all members of the leadership team must be aligned on the organisation’s values, purpose and ethics. Plus, as larger corporates are split into different departments and even spread across different countries, managing the reporting lines is critical.”