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Why is Corporate Accountability Important?

By Darren Finkelstein
By Darren Finkelstein

The Accountability Guy®

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Corporate accountability refers to the functioning of an organisation in non-financial areas, like sustainability, social responsibility, and corporate governance. This type of accountability covers various aspects, including adherence to legal requirements, ethical behaviour, and consideration of the needs and interests of stakeholders. 

In today’s time when a company’s decision impacts its bottom line as well as the lives of employees, communities, and the environment, it’s essential to understand the importance of accountability and practise it. 

That said, stakeholders are not the only people for whom an organisation should be accountable, they should also be accountable for the employees and each member of the community. So, this guide will shed light on the importance of corporate accountability for any organisation.

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Table of Contents

Promotes Ethical Business Practices

With corporate accountability, businesses and corporations hold themselves back when it comes to engaging in unethical practices. It signifies that a company should be held responsible for the impact of its actions on employees, communities, and the environment. 

This aspect holds equal importance for investors and shareholders, as accountability compels them to choose investment opportunities based on ethical principles. All in all, a strong culture of accountability promotes responsible decision-making for both investors and businesses alike.

Adheres to Legal Requirements

While corporate accountability ensures the rights of stakeholders and community members, it also ensures companies adhere to all the regulations, including environmental laws, labour standards, financial reporting, etc. Compliance with all these regulations is not a necessity, it is an obligation that places a company in a better position while protecting them from fines, sanctions, and legal disputes. 

Adhering to sustainable practices means a negligible environmental footprint, hence reduced waste, less pollution, and inconsiderable climate changes. At the same time, when a company adheres to labour standards, it ensures a safe working environment for labourers and opportunities for development.

Trust Building

According to a survey by Deloitte, 81% of respondents indicated that trust directly affects their business relationships, while 79% linked it to employee engagement, and 76% to customer loyalty. And this trust among stakeholders can be built with corporate accountability

Because with accountability, you take ownership of your actions, decisions, and their outcomes. It strengthens trust, particularly when they fail to perform something.

Long-Term Business Success

With corporate accountability, companies can build trust and maintain transparency in their dealings. These two are the most important things for sustained growth of any business. And the best part? When companies are transparent about their operations, they tend to attract and retain investors who value ethical business practices. 

Moreover, accountability directly impacts a company’s reputation. Since it is a positive behaviour, it attracts customers, and investors, which is essential for the long-term success of any business.

Social Responsibility

While ethical business practices are one implication of corporate accountability, social responsibility is another. A study by Nielsen found that 66% of global consumers are willing to pay more for products from companies that promote positive social impact.

For businesses, sustainability is more than just a matter of social responsibility. It is a smart business move, as they can easily build a loyal and wide customer base in very little time. At the same time, they can reduce costs on production and enhance their reputation, which could help them in long-term business growth.

Importance of Corporate Accountability: A Tabular View

Benefits 

Description

Promotes Ethical Business Practices

Prevents unethical practices and ensures ethical investment choices.

Adheres to Legal Requirements

Ensures stakeholders, labors, and community members’ rights, thus adhering to legal compliance.

Trust Building

Builds trust and maintains transparency, which is important for employee engagement, and customer loyalty. 

Long-Term Business Success

Attracts investors and customers, leading to long-term business growth.

Social Responsibility

Fosters social responsibility that leads to a loyal customer base.

Conclusion

Corporate accountability is a fundamental aspect of the business world that is practised to ensure businesses act responsibly and are held responsible for all their rights and wrongs. They should be held accountable for the impacts of their activities on the wider society it functions in.

Not only that, but the culture of accountability puts your business on the path toward success with better trust-building and transparency. If you aim the same for your business, what could be better than mentorship from a person who has coached so many high-achieving individuals? 

If you need assistance you can take a look at my accountability coaching packages or book a 15-minute Accountability Power-Play Session.