[00:00:05] Speaker A: Hi, everyone. It's a banner day for ethics compliance and business integrity as ethisphere announces the 2025 World's Most Ethical Companies honorees. I'm your host, Bill Coffin, and welcome to a special live stream of the Ethic.
[00:00:27] Speaker B: Foreign.
[00:00:34] Speaker A: Announced the 136 companies that have earned the coveted designation of the World's Most ethical companies in 2025. This year's honorees span 19 countries and 44 industries. 2025 marks the 19th annual world's most Ethical Companies recognition. As in previous years, honorees have demonstrated a commitment to ethical business practices through robust programs that positively impact employees, communities and broader stakeholders, as well as contributing to sustainable long term business growth. Eleven companies on this year's list are being recognized for the first time. There are also six companies, Aflac, EchoLab, International Paper, Cal Corporation, Milliken & Co. And PepsiCo that have been recognized 19 times every year since the inception of the World's Most ethical companies in 2007.
And with us today to talk about this year's class of honorees, the five year ethics premium and more, is Ethisphere Chief Strategy Officer and Business Ethics Leadership Alliance Executive Chair, Erica Salmon Byrne. Erica, it is always a happy day to welcome you back onto the Ethicast, but especially today.
[00:01:42] Speaker B: Yeah, Bill, happy launch day. This is, this is one of the things that is the culmination of months and months and months and months of work here at Ethisphere. And so it is a, it is, it is an exciting day where we finally get to share this news with the world.
[00:01:57] Speaker A: Absolutely. And that brings me beautifully right into the very first question I have for you, which is this recognition program represents an enormous investment of time and energy both by World's Most Ethical Companies applicants and frankly by the Ethisphere review team that spends hundreds if not thousands of personnel hours evaluating each and every application. Now, I know that you're very close to every aspect of this process, but now that the big announcement day is here, what are some of your top takeaways from this year's honorees?
[00:02:25] Speaker B: Yeah, Bill, you know, it's interesting to think about how long we've been doing this process and how much the process has evolved over the course of the last 19 years. And the breadth of what we look at in the process is different.
The breadth of our expectations is bigger in terms of what we expect to see in an application. So for those out there who are listening into UNI now and are not as familiar with the categories that we review as part of this Process. I'll take just a quick second to level set. So there are five categories that we review as part of the world's most ethical companies process. We look at your ethics and compliance program, which of course is the seven hallmarks of a successful program. What we like to call your formal systems, right? How are you training, how are you communicating? What do your policies look like?
How are you monitoring the effectiveness of your program? How are you investigating allegations of improper behavior through things along those lines? So that's a big chunk of the process, but the rest of the process also is weighted. So 20% of your score goes to your culture. And here we're talking about three elements of your ethical culture that maybe are not necessarily what people would think we're talking about, we're asking how are you measuring it? Because if you don't know what's happening across your business, you can't address those issues. How are you building an action plan off of what you learn? Because if you don't get back to employees with tangible change, they're going to stop answering questions. And then that third piece is how are you responding back to employees to say thanks so much for your feedback. Here's who we heard from, right? 97% of you took the survey or whatever it is, and this is what we're going to do, right? This is what we're going to do. Because what we know from so much of the academic research into failures of all sizes is the informal systems, right? The culture that happens inside your organization that is going to overwhelm your formal systems in a nanosecond. If you're relying just on your formal systems to, you know, help employees make the right decisions on a day to day basis, you're missing the boat. So that's where the culture piece comes in. 5% of the process looks at your third party practices. How are you selecting your partners? How are you, how are you vetting your suppliers? How are you thinking about whether or not these are the right people for you to be doing business with? 20% of the score looks at your impacts, which is your material non financial risk factors, how are you thinking about the communities in which you operate? And then 20% of the score is your governance practices. So how are you talking to the board? How are you onboarding a new committee chair, things along those lines and really all of it is designed to get a sense of the way in which you as an organization are focused on the preservation of your social license to operate and bill, you and I have talked about this a lot the end of the day, corporations are legal fiction. In order for them to function, they need people, right? They need people to be out there in the world doing work on their behalf, buying their products, selling them things to go into their products, and then executing on what it is that the company has engaged in from a commercial transaction process to deliver something that people want to continue to engage with. And that's the case if you are selling food, that's the case. If you're making a movie, that's the case. You know, it doesn't matter what you're doing. That's the, the formula, right? And if we as businesses fail to preserve all of those pieces, then the businesses themselves are going to fail. And so, you know, we are. We've been doing this for 19 years, Bill. If that's not a long term perspective, what is? So, yeah, we are very invested here that this year in helping companies understand that a focus on business integrity is going to set the business up for financial success in the long term.
[00:06:07] Speaker A: Indeed, indeed. Well, every year Ethisphere updates the ethics Quotient questionnaire that is at the heart of the world's most ethical company's application process. These revisions and new questions reflect the changing nature of the business integrity environment and more importantly, what constitutes best practices within it. Now, bearing in mind those EQ updates and bearing in mind which companies received recognition honors this year, what through lines do you see around where best in class ethics and compliance programs are investing their time, their energy and their resources?
[00:06:38] Speaker B: Yeah, you're right, Bill. And that is actually one of the places where the months and months of time come into play because the team here at Ethisphere, yes, we spend a lot of time reviewing applications, but we're actually starting next week to update the EQ again. So it is a continuous process of us saying, okay, what did we learn this year? What are companies up to? What are some of the changing practices? What do we need to keep on top of? So it is a year round, it truly is a year round process for the team here in every aspect of the application cycle. So the, some of the changes to the EQ this year reflected, you know, things that we have seen in the ecosystem over the course the last couple of years that we've been trying to get our arms around. And I'm going to hit on three.
One is mergers and acquisitions practices. So, you know, obviously the M and A market for a number of months now, or years now rather, you know, has been relatively quiet, but we are anticipating at some point in the Next couple of years that will change. And we really wanted to get at the question of, you know, how do you as a company know if you're buying a problem? You know, how do you as a company know if the acquisition target that you're chasing is going to be a good fit for you as a business? Or, you know, and slash or how quickly can you integrate them to figure out whether or not you do have an issue and can address it? So that was a big expansion in this year's ethics quotient. And for those of you out there listening in who are subscribers to our Sphere platform, we just switched the data year this morning. So you can go log in and look at those new M and A questions and those practices right now. Well, when you're done listening to Bill and I, finish listening to Bill and I, and then you can go and log in and check out the new data.
But, you know, the M and A questions are ones that I'm particularly excited about. We added questions about how you are preparing a new committee chair of your board. Board to be able to effectively oversee the area of the organization that that committee has responsibility for. You know, are you kind of just saying, hey, you've been a member of the board for a while, hop into audit and take over as audit committee chair, or are you really, you know, thinking strategically and carefully about how that person might be actually able to do that job? We added questions about how you are thinking about root cause taxonomy usage on your investigations practices. Are you learning lessons from the things that you are seeing in your organizations, the mistakes employees are making? Are you asking yourself, well, why did that happen and how do we keep it from happening again? Or are you simply saying, well, we fired that person, must have been a bad apple, moving on? Right. Because there's a tremendous amount of learning that you can do from the things that are coming up in your organization to make sure that people have the information they need to make the right decision. So we changed about 30% of the survey this year, Bill. This past year for the 2025 process, Bill. And so there were a lot of changes in there, but those are probably the three that I'm most excited to look to work with the data on.
[00:09:36] Speaker A: Yeah, it's interesting when you look at the changes in the eq, I've gotten a chance to take a look at them and it's, it's, it's just rife with intentionality. Like these are not, these are not trivial changes and they're not just simply just, you know, futzing for the sake of futzing with it. These are, these are substantial things that are meant to really kind of fine tune, you know, a questionnaire that gets at the heart of really, what does excellent look like? And, and how do we, how do we find a way to kind of capture that in a kind of, in a data based way? So it's really, it's kind of inspiring actually, seeing all the changes that go into it. And when you talk to the team that behind it, they put an awful lot of work into this. I mean, they're very proud of their work and rightly so, because this is not something that gets dashed off over the course of a weekend. This is a, an awful lot of work. And it kind of, it kind of goes unseen a little bit, um, unless you're actually undergoing the application process. But it's a lot of work. And I think it shows how seriously that the team takes this and how serious this is as an evolving standard. It's not. This is not a set and forget it kind of thing. So it's really cool to see.
[00:10:32] Speaker B: Well, and I mean, look, Bill, like, you know, I like to futs as much as the next person, but no, we are definitely not, we are definitely not futzing with the. Futzing with the questions. And for those of you out here, you know, listening to Bill and I that are curious about that piece, we actually make an annotated version of the ethics quotient available every year. So if you want to see the changes we made, whether we added a question, we changed the wording of a question, we added an answer option that didn't exist previously, that is all there. And you are not only welcome, but encouraged to take a look because the team is very proud. It's a team effort. A lot of work goes into it. It is, you know, that we have multiple drafters. We spend many, many hours, you know, pouring over questions we get from applicants who say, I'm sorry, I don't know what you mean by fill in the blank. Right. We take that seriously. We try to address it. Questions that we get from people saying, you know, anytime we offer the other option and people can write things in, we pour over, you know, what people have written to see if there's something we should update in the answer choices. So if you haven't engaged with the annotated version, I definitely encourage you to check it out.
[00:11:39] Speaker A: Most definitely. Now, my next question for you is about the ethics premium. Yeah, this is like my favorite part of this whole thing. Ethisphere's five year ethics premium for 2025 is 7.8%. Now this represents the margin by which publicly traded companies recognized in this year's worlds was ethical companies outperformed a comparable index of global companies over a five year period from January 2020 to January 2025. 7.8% is a pretty respectable number, especially given wider signs of economic headwinds and uncertainty. What is the ethics premium trying to teach us about the long term value creation of business integrity and how does it reflect the data driven side of ethics and compliance?
[00:12:22] Speaker B: Yeah, so, Bill, we started calculating the ethics premium about halfway through the tenure of the world's most ethical companies. And we did it because we were hearing from a lot of organizations in, you know, and you guys can think, you know, cast your mind back. This is kind of, you know, recession time, 0809 10. Right. You know, lots of economic turmoil. And we were hearing from a lot of companies or people inside of companies whose leadership teams were saying something to them along the lines of, yeah, yeah, yeah, that stuff is nice, but right now we're trying to like save the business. Yeah, yeah, yeah, that stuff is fine, but right now we're trying to grow the business. You know, that this, this idea that somehow we have to choose between doing the right thing, making the right choice, you know, empowering our employees with autonomy and good decision making and making money, that somehow there was some sort of inherent tension between those two things that made that, that made for a zero sum or a binary choice. And we had a very strong suspicion that that perspective was fundamentally flawed. And one of the ways that we went at that question of, you know, whether that perspective was fundamentally flawed was to start to calculate, okay, you know, this is a publicly available piece of information that we can get our hands on. These are publicly traded companies. We can take them, we can put them in a basket, we can weight each one of them. So no company on the list is worth more than 8% of the index. We can weight each one of them. We can look back over a five year period. Right? So we are not saying that being on the list is the thing that caused the outperformance because we do this calculation in the quiet period between when we tell companies that they're on the list and the launch day. Right. You know, in, in, in March. So we look back five years, right. We look back during the quiet period and we calculate how this particular bucket or basket of organizations is performing compared to a comparable index. And by comparable. Well, and I should, when I say we, the company that does the calculations for us because we are many things, but we are not an index company.
[00:14:33] Speaker A: Sure.
[00:14:34] Speaker B: And so we have a partner that we work with on this and they calculate for us the performance of the publicly traded companies on the list compared to a comparable index. And by comparable, we look for same industry mix, same country mix, you know, things along those lines. And every single year, Bill, that we've done this calculation, there has been an outperformance. The first year we did it was 4%. We thought we were on to something. Right. We've had double digit outperformance. We've had outperformance as high as 25% one year. But there's always been a statistically significant percentage of outperformance. And what it tells me is that, that, that suspicion that, that niggling thought that we had in the 2000s, that you don't have to choose. We were right. Yeah, we were right. You don't have to choose now, do you have to choose? Maybe in the very short term, I don't know. We don't have the data on that. Right. But we are talking about long term investment. We're talking about five year outperformance. We're talking about a sustainable business, by which we mean you are going to be here in 10 years. Right. You are running your business in such a way that your, your activities are sustainable, as in they will last. And that is, to me, that's what the ethics premium teaches us.
[00:15:52] Speaker A: I'm such a big fan of the ethics premium and the graphic. I like to show that whenever I can because it's such an incontrovertible proof point and I really enjoy it. Erica, have to say, as a colleague, I'm just going to give you an advanced cringe alert. Okay. There is a non zero chance I will show up to GES this year wearing an ethics Premium T shirt that I've crafted myself. Okay. It's, it's. I just believe in it. I think it's really, really important. So just, just be be forewarned when you see me show up in Atlanta wearing it. That's the reason why.
[00:16:17] Speaker B: Okay. All right. Well, Bill, Bill, I will forgive you for showing up in Atlanta wearing an ethics premium T shirt if you bring me one.
[00:16:24] Speaker A: That. That's a deal. That's a deal. So my next question though is the elephant in the room this year is the turbulence that we are seeing in government offices across the country and in shareholder meetings that constitute kind of this broad pushback against ESG dei and frankly, even against ethics itself. And yet we see through the ethics premium that strong ethics truly is good business. At a time when there seem to be people intent on ignoring that fundamental and provable truth, what does the world's most ethical companies recognition tell a business world and an ethics community that is looking for direction and certainty?
[00:16:59] Speaker B: Yeah. Yeah. You know, Bill, you and I have talked about this off camera a number of times. You know, my, my dad's mom, my nana used to say to people she didn't like, may you live in interesting times. That was one of her favorite, very polite ways of cursing people. And I kind of feel like, you know, she doesn't like any of us right about now.
Because whatever your, you know, kind of, whatever your perspective is on what's happening in the world, you can certainly define it as interesting. And the fact of the matter is, is, you know, businesses of all shapes and sizes, what they want to be able to do is plan right. They want to be able to know, here's how we can forecast three years out. They want to be able to identify opportunities for mergers and acquisitions that they know are, you know, are capable of growing the business. They want to be able to report on their activities, you know, in a way that is going to clearly communicate in a, in an oversaturated information age what it is they're doing and how they're going to succeed. And there's no certainty in anything right now. And so to me, what the ethics premium tells us, what the world's most ethical companies list tells us, is that companies who are going to batten down the hatches, navigate based on their values and their purpose, are going to be the ones that can ride this out and are going to show up on the other side with their reputations, their brand and their employee base intact.
Because even in the back and forth on things like esg, which, you know, look, the, the challenge with any of these big acronym terms is there's so many things in them that they can be all things to all people and therefore nothing to anyone.
You know, you know, the, in the, in the heyday of, of, of the ESG conversations, the five major organizations that had matrices had all of the different things in ESG in different buckets. So, you know, if you followed one, one framework, you had labor rights in one bucket, and if you followed a different framework, you had labor rights in a different bucket. And so the, the, the, the froth of that allowed spurious attacks on the fundamental facts that in a world where between 85 and 90% of the average Company's value is tied up in intangible assets.
You have to care about your material non financial risk factors. You have to. As an investor, I want you to care about your material non financial risk factors. If you are a manufacturing company and one of your material non financial risk factors is whether or not your factory is going to run out of water, I as a shareholder want you to care about that. Now if you're a consulting firm, do I care if you care about water? No. Care about the things that matter to you. Right? And that's the reason why I'm, I'm, I've, I've been talking so much, Bill, over the course of the last 18 months about tying it to purpose, right? Tying it to value, tying it to the deal that you as an organization have with your stakeholders. Who are your stakeholders? Can you name them? Right? Can you say, these are the people that matter to me as a business and these are the things that matter to them. And so I'm going to keep a very close eye on the things that matter to the people who matter to me as a business so that I can continue to succeed as a business.
[00:20:34] Speaker A: This.
[00:20:35] Speaker B: That's it. That's it. That's what we're doing, right? So to anybody out there listening to, to Bill and I right now, your purpose, your values, your mission, that is your North Star, right? That is the thing, you know, to, to completely screw up the, the, the, the Mariner metaphor, right? That is the thing that's gonna, that's gonna help you steer through the storm and, and come out on the other side with your reputation, your values and your people still on the boat.
[00:21:08] Speaker A: Well, Erica, this is such an exciting conversation and I look forward to launch day every single year. You know, if you, if you'll permit me a personal comment. I was a fan of at the sphere and of the world's most ethical companies recognition before I actually joined at the sphere. And as an outside observer it was always cool to see the list come out and then I take a look at the companies and these are often the companies that I was already writing about and I was covering. I was familiar with them and I'd look at them going, yeah, you know what? These companies all, they like these, all these all track. I'm not surprised to see these, these comes on the list. But then within, at the sphere I got to see what actually goes into the application process and the evaluation process and understand just the deep degree like this is really far more science than it is art.
And the quantification of it all is, the more you learn about it, the more excited you get about the process and the more excited you are about the companies that are on the list because it is so hard to earn this recognition. There is so much to do, so much work that has to be proven. This is so far from a whimsical, non intentional list. And so this is truly a collection of the best of the best of the best companies that have really worked hard to earn it. And it's especially impressive when you look at companies that have been on this list, you know, five times, 10 times, 15 times, the 19 times. It. The only thing harder than getting recognized is staying recognized. And it's just such a, it's so inspiring these companies every year. So I get very excited to see this and to talk about it. So that end. Thank you so much for coming on today and for spending some time with us to discuss the 2025 Worlds with ethical companies. This is a huge day for business integrity and more importantly for each of this year's 136 honorary companies. Thank you so much for joining us.
[00:22:47] Speaker B: Oh, bill, it is 100% my pleasure. As you know, you know, some of the why behind the world's most ethical companies process is something that, you know, that's a story I'm willing to tell over and over and over again, especially when I get a chance to talk about the financial proof points because I think it is incredibly tempting, particularly in the times we're living in right now, to look at all of this as a zero sum game. And that, that is, you know, a similar point of view was, was happening when we made the decision to start calculating the ethics premium.
And so, you know, a little bit of, of, you know, what is, what is old is new again, unfortunately in that front. But we're just reminding people over and over and over again to seal your tagline, Bill, look, strong ethics is good business. It just is. And you know, that is, that's, that's why we do this work. That's why we're so excited to recognize the world's most ethical companies every year. Because the companies on this year's list, they put a ton of work into applying, they put a ton of work into their programs, they put a ton of work into the work that they do every day to make sure that their people are out there making the right decisions on their behalf. And, and that is often unsung. Unsung work. Right? That is often unsung work. And so this is our chance to, to sing their praises for a little bit.
[00:24:05] Speaker A: Most definitely. Well, to everyone out there watching, thank you for joining us today. To learn more, please visit worldsmostethicalcompanies.com where you can find a full list of this year's honorees, the five Year Ethics Premium and more. Also, this recognition marks an enormous amount of work and dedication on the part of every single honorary company. Every honoree on our list deserves their recognition, so please join us in congratulating them as you see their posts on LinkedIn and elsewhere. We invite you to like, share and comment on a job very well done indeed. To learn more about how to advance business integrity and build an ethics and compliance program that will create sustainable success for your organization, please visit ethisphere.com There you will find a resource library with a host of free reports, videos and more. You'll also find our events calendar, links to our benchmarking platform, the Sphere, and links to our membership society, the Business Ethics Leadership Alliance. I'm Bill Coffin and this has been a special World's Most Ethical Companies live stream of the Ethicast. We hope you've enjoyed the show. For more episodes please visit us at the Ethisphere YouTube
[email protected] ethisphere as well as on Apple Podcasts and Spotify. Thank you so much for joining us and until next time. Zarika said, Remember, strong ethics is good business. Bye now.
