Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Compliance and risk

As the compliance profession continues to mature, a cross-functional, integrated approach emerges as the most productive and effective operating model.  Compliance officers must continually seek to present themselves as partners to and promoters of the work of other functions – including legal, HR, sustainability, communications, and many more.  Compliance programs should strive to be powerful sparring partners and sources of important subject matter expertise that are willing to work together to give the business the most value for its controls framework.  The alternative – being seen as potential hindrances to progress or wallflowers that prefer to come only when they are called – must be avoided at all costs.

One of the most important partners for compliance in this capacity is the risk function.  It’s extremely important to have a healthy cooperation across the functional line between risk and compliance and to establish a respectful and enthusiastic system of knowledge sharing and collaboration, both internally as well as in facing the business.

Below are some important considerations for compliance programs to incorporate in aligning with risk.


Starbucks and CSR

Starbucks is one of the best-known companies and brands in the world. The success of Starbucks in the global market is not just, or even mainly, about the popularity of the coffees, teas, and snacks it serves to guests. Customers want to know where companies like Starbucks stand on social and political issues too. They’re eager to engage with the business values and cultural strategy of the company, in order to distinguish the choice for Starbucks over any of its many other competitors they could patronize for a drink or a pastry instead.

Corporate social responsibility (CSR) is a prominent strategic consideration for many companies. Authentic and convincing expression of CSR values can gain the attention and appreciation of consumers, competitors, and stakeholders. For a broad overview on the importance of inspiring this engagement for organizations seeking to use their interest in activism or social justice issues, check out this post on CSR tips for compliance programs.


Compliance as both function and discipline

Compliance makes concrete and professionalizes the rules, regulations, and questions of ethics and integrity that are everywhere in life. It can be very absolute, used in creating a framework to ensure adherence to external legal and supervisory requirements as well as internal policies and procedures, to form a rules-based approach to risk management. It can also be more esoteric, probing the challenge between general norms and existing controls, and what may be morally acceptable or within individual expectations.

Considering the distinction between the function of compliance and the discipline of compliance is helpful to develop a more mature understanding of its applications in both modes. Compliance as a function creates frameworks, translates regulations and directives into internal policies and procedures, identifies program priorities, and plans management strategies. Compliance as a discipline takes all of these efforts to ensure awareness of, and steps to comply with, all relevant laws and regulations, and applies them directly to the business in order to target this work toward facilitating ethical decision-making, encouraging integrity, and positively impacting business strategy.

The function of compliance describes the general task of keeping up to date on rules and regulations and designing governance, risk, and compliance (GRC) management strategies and structures to present to senior management, executive boards, and outside stakeholders such as regulators and other supervisory bodies. This includes regulatory compliance, which ensures that organizations are abiding by both industry regulations and government legislation. This also includes designing governance and control structures intended to encourage employee and organizational integrity and create disincentives against and penalties for misconduct.

The discipline of compliance, on the other hand, describes the dynamic and business-linked support activities that the compliance professional undertakes within the broader context of the organization. Disciplinary compliance takes the above-described principles and frameworks and applies them in the business arena. This is where the rubber meets the road between the compliance officer and the business line he or she serves. In this setting, compliance is a relationship-based activity of providing advices, cooperating and aligning with other stakeholders and functional partners, suggesting defense strategies in light of real-time business risks and strategies, and maintaining an on-going bird’s eye view of the business landscape which can only be achieved by pro-active, personal engagement.

Building upon the above definitions and borrowing from the philosophy of ethics, the comparison could be made between the compliance function and normative ethics on one hand, and the compliance discipline and applied ethics on the other hand.

The compliance function links to normative ethics, in which moral behavior is compared to the norms of the social context in which the actions are taken, because of the emphasis in both on external or supervisory expectations and standards. Normative ethics is quite useful in identifying and categorizing compliance risks and suggesting possible mitigations and strategies for the ones that cannot be eliminated or are deemed acceptable to some extent. Within the function of compliance, the question of what individuals should or should not do, is answered by relevant laws, regulations, principles, rules, standards and codes of conduct, and other guidelines applicable to these individuals and the organizations in which they work.

The compliance discipline, in the meantime, can be connected neatly to applied ethics, which centers on the use of ethical theory in order to analyze and address actual moral issues that arise in work and life. Dilemma analysis and discussion, and compliance awareness dialogs, all borrow from the didactic constructs of applied ethics.   Building upon the structures and foundations that come from the compliance function and from the philosophy of normative ethics, the compliance discipline and applied ethics both are used to take these frameworks from strict requirements to living, practical considerations within the robust culture of compliance at the organization.

For more posts on types of compliance and ethics, check out some of these: Guiding principles for a compliance advisory practiceCompliance 101: A quick guide; The five branches of ethics as applied to compliance principles; How to make voluntary engagement with compliance values meaningful.  Posts each Monday, which are categorized in “Best Practices,” often address this sort of topic from both academic and practical perspectives.


Starbucks and cultural respect in design as business strategy

Starbucks is one of the most recognizable global retail brands today. Its branding is universally known, with its ubiquitous green and white mermaid logo reliably present worldwide and its slate of coffee and tea products also dependably the same. While many consumers may find consistent branding and the resulting quality standards to be expected along with it comforting, one of the undeniable criticisms of globalization has been that localization – native customs and characteristics that often have deep historic and cultural significance – can end up subverted in favor of international sameness.

Indeed, companies such as Starbucks have struggled in some markets to import their menus and store designs to communities which may be resistant to connecting with what can be seen as a generic, foreign experience. Apart from just lacking appeal or seeming strange, sometimes these companies can offend local norms or fail to fit into the communities which they wish to court for business. While sometimes novelty of a brand can create allure or even cult status for the company’s products with curious consumers, more often, Imposing a company and its products on a community in a non-assimilative way does not likely make for a successful competitive strategy.

Starbucks has faced its challenges importing its distinctive coffee shop brand and products to new communities over the years. Even within the United States, local coffee houses with loyal customer bases have put up resistance to a major corporate brand setting up shop in communities such as Venice Beach, California which have preferred small, local businesses to fit with an indie, alternative vibe. Outside of the United States, the powerful social value of “coffee culture,” representing a social and community activity rather than just a caffeine and snack break, has sometimes not jived well with perceptions of the Starbucks brand. Criticisms of the products themselves come from people who have high expectations for bespoke coffee that they don’t feel Starbucks satisfies or, on the other end, a standard idea that coffee is quick, cheap, and on-the-go only, in light of which Starbucks seems expensive and inconvenient.

One striking way that Starbucks can address these objections is to seek to fit within and contribute to the community authentically and meaningfully. In Kyoto, Japan, the Starbucks Coffee Kyoto Ninenzaka Yasaka Tea Parlor is an amazing example of how a company can demonstrate respect towards a community and its traditions in the design of its public spaces. This Starbucks is located in a traditional wooden house, with subdued colors and branding on its exterior, which fits aesthetically and culturally in the historic neighborhood where it is located. On the inside, the authenticity of the retail experience to its cultural environment continues, with tatami (straw) matting on the floors and traditional Japanese garden in the back courtyard by the coffee bar. Rather than appearing in contrast to the other businesses in its area, this Starbucks blends powerfully into its distinctive surroundings. Starbucks does not seem here like it is trying to impose its brand or style, but rather to show respect for the traditions of the very historic Gion district of Kyoto.

Joining the community in which the store is located, rather than setting itself apart from it, is a powerful expression of social responsibility and engagement for a brand to make as it seeks to attract and appeal to customers. Matching with the experience and aesthetic of such a distinctive area as Gion, which was originally developed as a district in the Middle Ages and is one of the most well-known geisha districts in Japan with the Yakasha Shrine at its center, is a challenging but inspiring business strategy. This values-based approach to growth and design leads to sustainable expansion and competition for a brand such as Starbucks, which can benefit tremendously from positioning itself as sensitive and loyal to local communities and their characters.

For more on this interesting Starbucks outlet as well as Starbucks locations in other countries that aim to honor their communities with their design aesthetic, check out this CNN feature article.