What you'll learn on this podcast episode
The interdependence of our global business environment and the reach of regulators’ actions has contributed to generally accepted principles for E&C program design, implementation, and impact. This episode of the Principled Podcast dives into the business ethics practices in the Nordic region. Listen in as host Emily Miner explores key findings from the 2023 Nordic Ethics & Compliance Survey—and what they mean for E&C leaders in and outside the region—with Niina Ratsula, the co-founder of the Nordic Business Ethics Initiative.
Download the 2023 Nordic Ethics & Compliance Survey.
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Guest: Niina Ratsula
Niina Ratsula is a passionate advocate of responsible business and ethically sustainable working life. She has supported numerous global and local organizations with governance and compliance-related matters as a leader and through her own company.
Niina has received several acknowledgements for her work as a keynote speaker and business ethics influencer. She is also an author of several business ethics and governance related books (e.g. Tuloksellinen Compliance-ohjelma). The key conclusion of her PhD was that organizational culture plays a crucial role in the effectiveness of compliance programs. Niina believes that we should have more uncomfortable conversations at work to ensure that ethics and compliance becomes embedded in everyday work.
.Host: Emily Miner
Emily Miner is a vice president in LRN’s Ethics & Compliance Advisory practice. She counsels executive leadership teams on how to actively shape and manage their ethical culture through deep quantitative and qualitative understanding and engagement. A skilled facilitator, Emily emphasizes co-creative, bottom-up, and data-driven approaches to foster ethical behavior and inform program strategy. Emily has led engagements with organizations in the healthcare, technology, manufacturing, energy, professional services, and education industries. Emily co-leads LRN’s ongoing flagship research on E&C program effectiveness and is a thought leader in the areas of organizational culture, leadership, and E&C program impact.
Prior to joining LRN, Emily applied her behavioral science expertise in the environmental sustainability sector, working with non-profits and several New England municipalities; facilitated earth science research in academia; and contributed to drafting and advancing international climate policy goals. Emily has a Master of Public Administration in Environmental Science and Policy from Columbia University and graduated summa cum laude from the University of Florida with a degree in Anthropology.
Principled Podcast transcription
Intro: Welcome to the Principled Podcast brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business and compliance, transformative stories of leadership and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change makers.
Emily Miner: Ethics and compliance practices are now well-established around the world. The interdependence of our global business environment and the reach of regulators' actions, often extending beyond national borders, has contributed to generally accepted principles for program design, implementation and impact. Today, we're going to be diving into the business ethics practices in the Nordic region.
Hi, and welcome to another episode of LRN's Principled podcast. I'm your host, Emily Miner, Vice President of Advisory Services at LRN. I'm joined today by Niina Ratsula, the co-founder of the Nordic Business Ethics Initiative. We'll be talking about key findings from the 2023 Nordic Ethics and Compliance Survey and what they mean for ENC leaders in, outside the Nordic region. Niina is a real expert in this space, having spent the last five years as a full-time entrepreneur working with dozens of Nordic and global companies to build cultures of integrity. She also has over a decade of experience in global roles related to ethics and compliance, internal controls and audit. Niina, thanks for coming on the Principled podcast.
Niina Ratsula: Thank you for having me.
Emily Miner: So Niina, for listeners who aren't familiar, can you tell us a little bit about what the Nordic Ethics Business Initiative is, does, and a little bit about your history?
Niina Ratsula: The Nordic Business Ethics Initiative, it was founded in 2019 by myself and my dear friend, Anna Romberg. We both used to work in-house roles in multinationals working with ethics and compliance programs. And at the same time we became entrepreneurs and jumped out of the in-house roles. And we felt that really in the Nordics we don't have enough data and we don't have enough places where people could go into and share with their colleagues and interact and network within the ethics and compliance network. So we decided that we're going to establish one. That's basically how we started.
And over these five years or so that we have been up and running, we've basically had the mission to inspire and support both individuals and organizations with insights related to business ethics. And how we do this is through various events. So we organize a lot of different types of both online and in-house events. We do a lot of different collaborations and then we have our publications. And so we have done over the past five years, every year we have published a new survey that somehow is related to other ethics and compliance programs in the Nordics or then on a more general level on the business ethics in the Nordics. And I believe that these publications and surveys have been really valuable to our members. So basically, people working within ethics and compliance in Nordics, but also in other parts of the world.
Emily Miner: Thanks, Niina. We talked at the outset about your entrepreneurial spirit, doing your own business consulting over the past five years, but I'm also seeing that come through in the founding story of the NBE. I think it's clear from reading the results of some of your research, including the research that we'll be talking about today, that the NBE is providing a much needed service in the region to promote dialogue around best practices and information sharing and adoption. So I'm excited to dig into the results of the report. So let's turn to that.
So this is your latest survey research, then it's a review of ethics and compliance practices in Nordic organizations. It's the second time NBE has conducted this research. You did it previously in 2021. What is your high level commentary on the state of ethics and compliance in the region?
Niina Ratsula: Well, overall, if we compare, for example, these two reports, and I think firstly I have to say that, even though the respondent numbers is not very high, so it's a little bit more than 120 respondents, but we have to remember that these are actually people working closely within the ethics and compliance programs. And we don't have that many companies in the Nordic. So it is actually quite a good number. So I think we can reasonably compare, also, the numbers between this year and then the first time we did the report.
And I guess overall, we could say that there is a lot of positives. So you can see that companies are putting more efforts in the compliance work, so the number of teams are increasing. And also you can see that, for example, there's more training, there is more whistleblowing reports. There are many indicators that we can see that it's evolving.
But maybe on an overall level, I could see that you can also see very clearly from these reports the fact that Nordic companies, they are actually very good in complying with the law. And I think this whistleblowing regulation that we have in EU is a great example of that. So this year, we got finally the national legislations for the whistleblower protection finally effective in the Nordic countries. And you can see that now 98% of the respondents had the whistleblowing channels in place because of having this legislation. But before that, it wasn't as common as, for example, in the US where you have had it quite some time longer.
So you can see this, that the Nordic companies, they do things that are required by the law. But you can also see then that the resources are very tight in the ethics and compliance work, meaning that they are not that much of capacity or budget to do all of these more voluntary initiatives, like really putting a huge effort in the communications and trainings and awareness programs, or spending a lot of money and time investments in really getting to know the company, doing really in-depth risk analysis and these kinds of things. And you can also hear this when you talk with the Nordic ethics and compliance programs. So they are very practice oriented and lot of times in most of their work is also very operational compliance related work.
Emily Miner: You had an interesting statistic in your report where you asked how much of the ENC team's time was dedicated to compliance as compared to ethics. So compliance being understanding and complying with the law, whereas ethics being related to integrity, responsible business practices, et cetera. And there was an x and a y axis and respondents could drag their position to where they were. And it did skew slightly more towards the compliance side of that spectrum.
But I felt that I could see some signs of change in the results as you compare them to 2021. Things like the program's impact on organizational culture, manager support, team size, as you mentioned. Those indicators were increasing. So perhaps this is an early preview of a broader shift as practices become more established in the region, whether that's in response to regulations like the EU whistleblower directive that you mentioned or just are changing business practices and expectations.
Niina Ratsula: That is definitely true, and I think that maybe I was a little bit pessimistic when saying that we are focusing on the very legal aspect, because also I do work a lot with the biggest companies in Finland who have operations on a global scale. And honestly I can say that they are putting a lot of efforts in all of this face-to-face interaction, having ethics and compliance visibility towards globally, really putting their efforts on in-depth risk analysis where they actually want to get to know their people and their risks and do a lot of this, a part that is doing more than just the kind of a legal compliance. So we have, I think at the moment also a huge variety between the companies and their maturity. So of course companies who have their ethics and compliance programs for 10 to 15 years, they have the capabilities of being there on that next level, comparing to the smaller organizations who are just getting the foundations there.
Emily Miner: The report highlighted six key insights, and one of those which represented a large area of opportunity is in the independence and autonomy of the ethics and compliance function. So only 23% of your respondents indicated that they had the ability to report independently to the board or a board committee. And that is, and you specified this in your question wording, without materials being first reviewed by the CEO and/or the general counsel.
So contrast this number to over 80% of ethics and compliance functions globally. And I'm basing that 80% number on some of LRN' own research. We conduct research every year into ethics and compliance program effectiveness, and this is a question that we've asked for a number of years now. And so looking from 23% to 83%, since regulatory expectations are pretty clear on this matter, what do you think accounts for this lag in adoption and how or do you see this shifting?
Niina Ratsula: I'm really glad you brought this up because actually this is also a matter of how you ask the question. It's actually quite funny that two years ago when we did the survey, we've only had a question, do you have a regular independent access towards the board? And for that question, 81% said that yes, I do, that I do have the independent access. And this year we wanted to maybe question this a bit because we knew that there are many companies who actually have their CAO or general counsel review before going to the board. So we modified the question, and the result was very, very different now when comparing to the previous year.
So I think this is very good learning maybe for everyone in the Nordics who is also reading the report to really maybe question if they think that they have the very independent access to really maybe start defining it more detailed, that what do we actually mean with that independence? So is the material reviewed or not before going to the board? I
Emily Miner: I think that's such a great point and it brings to mind something that I heard. I went to a conference, the national conference put on by the Society for Corporate Compliance and Ethics, and we were talking about reporting to boards and what we report to boards. And the nature of the conversation was slightly different, but there was this dichotomy where everyone said, oh yeah, we do this. And then somebody in the audience sort of pressed on it and they got a little bit more specific and all of a sudden a lot of the hands went down.
So I think that that's such a good point that you make in terms of this reflexive nature of, oh yeah, I can report to the board, and assuming that as being independence or glossing over the word independence. But when you get really specific into the practices, you find out that perhaps it's not quite to the degree that maybe we initially thought. And that's an opportunity to sit back and reflect and say, okay, I thought that I did this, but now that I'm seeing it spelled out for me of what does that actually mean, maybe I don't and should I? And what could I do to get there? So I appreciate that you took the opportunity to drill down a little bit deeper this year, and I think that that change is so striking.
Niina Ratsula: I think so too. And thank you, [inaudible 00:12:18], who was actually the one who proposed that we make this change. So it was a very good change to the questions.
Emily Miner: So another key insight from your report that is really topical right now is around mechanisms to incentivize ethical conduct. 13% of your respondents say that ethics and compliance is reflected in their compensation or incentive schemes, even though regulators have recognized the importance of this aspect, most notably the Department of Justice, the US Department of Justice guidance from earlier this year. And I do think that on a regulatory scale, making the connection between ethical conduct and compensation and other forms of incentives, that is a fairly newer focus for regulators. So it would be interesting in two years time if you asked this question again to see how the results have changed. But this is also something that LRN has been tracking for four years now in the research that I mentioned. And even though we've changed the geographic distribution and weighting of our respondents, we've actually seen some pretty consistent results over those four years.
And we're seeing that around 50% of organizations globally are integrating ethics and compliance as meaningful components in their incentive and compensation programs. And perhaps here we're also getting into that dynamic of when you ask specific practices. So we ask specifically whether ethics and compliance is a factor in performance reviews, in promotion decisions, and in hiring for managerial executive or control functions. We also ask the same when it comes to bonus allocations, and we see slightly less adoption there, around 45%. But it's clearly an area of opportunity. It's something that regulators are focused on. I think we all, just as humans, understanding human behavior and psychology, can appreciate that what you get measured on is kind of a large driver of a behavior.
So I'm curious if you have any examples of what good looks like when it comes to this practice among NBE organizations or organizations with whom you work? Are there any organizations, and of course not necessarily mentioning any names, but that kind of do it well that you think could be upheld as an example for others in the regions? Or conversely what are the organizations that you're interacting with, what are they saying or struggling with when it comes to adopting this practice, and what would you recommend to them?
Niina Ratsula: This is I think, one of my favorite topics, and definitely this is a topic where the Nordic companies can learn from the other regions who obviously maybe are more mature in this one. I think it's very difficult to say even that what good looks like, because I think if we would have a very good best practices on how you actually put this topic into the incentives, we would all be doing that. But because it's not that clear, it's also a bit maybe confusing for the companies to actually define that. How do you actually put this there? Because of course everyone can say that, yeah, this is part of my decision when I make a promotion or performance review. But because the ethics part is so dependent on the capability of the person doing the performance review or the promotional decision, it's also very difficult to make it a kind of a black and white thing saying that either it is there or it isn't there.
And I know that some companies who say that they have this in their metrics, it might be that they have this rule that you have to do all of your compliance e-learnings to get your bonus. But I don't think that is the best practice because that is not really making any statement or evaluation on the fact whether the person has actually been following the ethics and compliance rules. So definitely this is a part where we can learn. And I think that right direction would be to really try to teach and engage the people who are making that compensation and incentive-related decisions to have the right tools to make the right kind of evaluations.
And in the Nordics, we're also living an interesting era because the ESG requirements have kind of been brought into the incentive programs during the past few years, and we can see that meeting the environmental sustainability goals is starting to be more and more normal for even the top level compensation and incentive programs. And that is kind of clear, and it's easy to measure. You have the environmental targets and then you either make it or not. But for ethics and compliance, setting the targets is more difficult than for the environmental part.
Emily Miner: You said this was one of your favorite topics. It's one of mine as well. It's something that I'm really fascinated by because I can see the potential scale of impact when you get it right, but I agree that it's really hard. I mean, even just saying that even if ethical conduct or values-based conduct is part of your performance evaluation, for example, what I've heard just in talking with other ethics and compliance leaders is there's also this perception that it's tablestakes. So you would never say that somebody isn't ethical or hasn't behaved ethically because then they shouldn't be in your organization. So everybody sort of gets five points, or whatever the top rating is, on that particular metric. And so is it then therefore a very meaningful aspect of your performance evaluation? No, it's not if everybody scores a five.
In talking with an organization that I've worked with in the past, one thing that they do that I do think has been successful for them, so I'll offer this as an example of practice, is in promotion decisions once you reach a certain level or are being promoted into a certain level, having collaboration between human resources and ethics and compliance as well as the business line or functional line, having all of those players have a seat at the table in evaluating the merits of that promotion decision and going through the person's records. Have there been any complaints filed against them in the past or that might suggest? And we could sort of say, well, that seems obvious, but in a lot of organizations, that type of cross-functional information sharing isn't happening.
And so by mandating that it happens, and this particular client of mine shared actually, a particular example of when that information sharing resulted in a decision to not promote somebody that was almost there in their promotion. It turns out that they had a whole slew of allegations against them for bullying and other types of inappropriate behavior. And it was this opportunity to really catch something that, had that information exchange not happened, that person would have been promoted. And the message that that sends to people in the organization or that part of the organization that that type of behavior is rewarded is really disastrous for organizational culture.
So that's one aspect. I think that maybe there's easier ways to think about how to incorporate it in promotion decisions than in general performance evaluations. And I'm sure there are other great practices. So maybe when we share this episode on LinkedIn and whatnot, we can start a dialogue among listeners that can offer up some of their examples of what good looks like.
Niina Ratsula: Thank you, Emily, for sharing that story. It's a great one.
Emily Miner: So perhaps my biggest takeaway from your research was the scale of opportunity for program maturation in Nordic organizations. You talked about this at the beginning. It seems as if organizations in your research have most of the basics down. So virtually all of the organizations surveyed have a formalized program. They conduct some kind of risk assessment that forms the basis of their activities. They have codes of conduct. They have anonymous whistleblower lines. They train their workforces. So these are of course, many of the basics, if you will, of having an ethics and compliance program. And so the opportunity then is to take it to the next level.
As I said, you've talked about this a little bit throughout our conversation. So there's only about a third, I think, measure the effectiveness of their program activities. Your research highlighted an opportunity to improve third party due diligence, which there's a lot of growing focus on that, huge opportunity to integrate ethics and compliance in compensation and incentive programs as we were just talking about. And perhaps there's also an opportunity in terms of taking these elements to the next level to really ensure that they're geared at inspiring and enabling ethical conduct.
So having a code, but how effective is the code in reaching people and is it actively being used as a source of reference and as a guide? For example, one way that we've seen codes being taken to the next level in our research and in our work with organizations is making them web-based and searchable, so they're easier for employees to access. So to meet these opportunities, I thought that there were some really, really positive indicators of increased investment in focus on appreciation for ethics and compliance in the Nordic organizations.
And I want to cite a few stats from your research, some of which we've already kind of touched on. But for example, the percentage of organizations with a dedicated ethics and compliance officer has increased. Team sizes have increased. Management teams are more supportive of ethics and compliance. And all of these are in comparison to your research two years ago. So that's a really encouraging sign that organizations will be better equipped to take advantage of the maturity opportunity. What do you predict the areas of focus are going to be in the next few years? You were talking about ESG, for example, so perhaps that's one of them. So what do you predict are going to be the areas of focus in the next few years, or what do you think they should be?
Niina Ratsula: I think that a few years ago, no one was able to say that during the next few forthcoming years, the compliance teams would be dealing a lot more than they thought with the issues regarding the sanctions compliance. So I think this is definitely, as a Finn and as a Nordic representative, it's the kind of thing that I cannot believe [inaudible 00:23:06] that we have had this catastrophe with our neighbor Russia having the invasion in Ukraine. And that is very visible in the Nordics compliance work. I think probably that is also one of the reasons why there has been increased team sizes and increased attention in having the ethics and compliance in place because the issues whether to have even the business in the Russia has not been only a compliance issues and dealing with the sanctions, but it has been also ethical issues for the Finnish corporations especially. So I think that making predictions is always difficult because this was something that we maybe weren't seeing that clearly before.
And now maybe I think that during the past few years, as I said previously because of the challenge with the Russia and before that the challenge with Covid, so a lot of the efforts within the ethics and compliance personnel have been dedicated to just survive from the kind of a daily operational compliance related topics. And I hope that during the next few years, there will be more time to actually focus on more of this development side. So I would like to see that the future will be to put more focus on developing the compliance, pulling your compliance 1.0 to either compliance 2 or even compliance 3.0, a point where actually we have time to not only talk about the risks to the company and to have all these mandatory mechanisms in place, but also to put more focus on understanding the human risk kind of thinking, not only the risk to the corporation, but also the risk to the wider society transferring the speak-up culture into listening-up culture, and also putting more focus on the stakeholder engagement.
And I think this will be the future also because in the EU, we have a lot of this corporate sustainability related initiatives at the moment. And one of them is this due diligence related regulation that will actually mandate companies in the long run to actually implement the due diligence processes for their entire value chain. And this is now also when all of the things regarding human rights will become closer to the traditional compliance field. And at least when meeting with the ethics and compliance officers in the Nordics, many are at the moment thinking that how should we put the human rights part into the ethics and compliance program? And how do we do more collaboration within the functions that have been traditionally dealing with that social responsibility part? And I think this is a good initiative and a good way to also broaden our understanding that what do we actually even mean with the whole ethics and compliance program?
Emily Miner: That's so well said. I almost don't want to ask my last question because it feels like such a very insightful and also impassioned perspective on the current state of ethics and compliance in the region and the broader global context in which you sit geographically and also sort of what the next phase looks like. So I, almost as I said, don't want to ask my last question because I think that was so beautifully said. It seems hard to top it. But I will, in any event, because we do have a few more minutes.
And so, I guess, perhaps in light of what you were just sharing, this is a little sobering, this statistic from your research, which was the decrease in NPS, Net Promoter Scores, among ethics and compliance officers. So relative to 2021, the measure of satisfaction decreased by 10 points and the willingness to recommend decreased by 15 points. As the mandate of ethics and compliance grows in complexity, as expectations of stakeholders continue to shift, requirements of regulators continue to rise, this decrease in NPS scores is a worrying trend. And I wonder what your call to action is, perhaps not for ethics and compliance professionals, but the business leaders, those who lead the organizations that ethics and compliance officers are there to support and to propel and protect?
Niina Ratsula: I think it's a great question to end our conversation, and to be honest, I was also quite sad when I saw the results, but maybe I wasn't that surprised because of what I just said, that I think that on a personal level, being an ethics and compliance officer in Nordics during the past few years hasn't been easy. I think it has been for many personally very difficult and maybe burdensome. So I can imagine that many have been under a lot of stress.
And I guess also these are the situations where your value in the organization gets measured, and maybe some have been disappointed also for not being or having to be put into the position where you have to do a lot of work to prove to the company that the meaning of ethics and the need to make more of these ethical decisions. But I think that I would like to say that people who've been working in this field have gone through tough times, but the future will look bright. And I'm sure that when we do the survey in two years time, we will have back this positive trend for also promoting this job. And I'm sure that even though the scores went down, we all in our hearts know that we do very important job and we are needed in the organizations.
Emily Miner: Niina, thank you so much for joining and sharing your insights on the research and on ethics and compliance more broadly in the Nordics. I really encourage our listeners to get a copy of the report. We will put it in the episode notes. And Niina, I hope that you'll come back and speak with us again soon.
Niina Ratsula: Definitely. Thank you, Emily, for the discussion and for the invitation.
Emily Miner: My name is Emily Miner and I want to thank you all for tuning into the Principled podcast by LRN.
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