Principles of Responsible Business Report

The Sustainable Development Goal 16 (SDG 16) is part of the United Nations' 2030 Agenda for Sustainable Development. SDG16 promotes and fosters peaceful and inclusive societies for sustainable development, providing access to justice for all, and building effective, accountable, and inclusive institutions at all levels (Mukombwe, du Toit & Hendriks, 2024). It promotes peaceful and inclusive societies by reducing violence, promoting the rule of law, and ensuring equal access to justice for all. SDG16 involves facilitating access to justice through equal access to legal services, including through legal aid programs, and promoting the rule of law at the national and international levels (Gupta & Vegelin, 2016). Successful implementation of SDG 16 will ensure that people throughout the world feel safe and are free from all forms of violence, regardless of their ethnicity, sexual orientation, or faith (Mukombwe, du Toit & Hendriks, 2024). Meeting such goals (of justice for all) requires collective responsibility from state agencies, non-state entities, and even individuals.

This report explores the role played by PwC in the tax leak scandal in relation to SDG16’s objective of building effective, accountable, and inclusive institutions at all levels. The report seeks to identify operational factors potentially capable of challenging and derailing the global path to just and inclusive institutions. The utilitarianism approach to ethics was applied to determine the expected impact of PwC’s response to the scandal.

Addressing the ‘Big Question’ Through SDG16

The question that needs to be addressed is “how should businesses operate responsibly in the provision of services in the financial industry?” Addressing this question based on the objectives of SDG16 will inform how the financial industry and society at large should operate responsibly. Effective application of SDG 16 in fostering responsible provision of financial services would result in a financial industry and society that supports and respects the government’s effort to advance justice, peace, and proper functioning of inclusive, effective, and accountable institutions (Pedersen, 2018).

Adoption of SDG 16 recommendations for responsible business will create peaceful environments, which in turn support the financial industry and society to thrive (Pedersen, 2018). Financial service providers would be ‘immune’ to potential legal costs and reputational risks. Such responsible businesses will influence other stakeholders, including governance systems, to promote inclusive, corruption-free, and peaceful societies. The financial service providers will be under a moral obligation to provide equitable financial services without discrimination. The society, especially the private sector, will build trust with the financial institutions, hence increasing partnership in business activities. Businesses in the financial industry will be in a better position to partner with civil societies and the government in strengthening the rule of law and eliminating corruption (Pedersen, 2018). Note that financial service providers can take part in preventing money transactions linked to corruption.

Key Changes at PwC

PwC responded promptly to accusations of facilitating tax leaks. The company undertook many structural and operational changes, including the sacking of the employees involved in the scandal, as well as giving room to private investigators.

Reporting and Sacking All Staff Involved in Tax Scandal

To protect its organization’s reputation, PwC stated that the scandal was an individual action to create the impression that such violations do not reflect the overall organization’s values (Belot, 2023). This was followed by the naming and sacking of all employees alleged to lead the scandal. It handed over the names of staff members implicated in the tax leak scandal, including the staff members who allegedly participated in disclosing confidential information concerning changes to multinational tax avoidance (Chenoweth & Tadros, 2023). It was responding to stakeholders requesting the company to declare its stand concerning confidentiality breaches. After conducting internal investigations, the acting chief executive announced that PwC Australia had terminated the employment of eight partners. The former CEO was among the individuals sacked. Some of the top officials stepped down after admitting that they occasionally received emails containing sensitive information about the government’s tax plans. The company admitted that an internal investigation led to the identification of instances of “misuse of confidential information” (Belot, 2023)

After sacking eight partners, a later investigation revealed that the majority of the employees, in addition to the eight officials, were involved, and PwC sacked another 329 employees (Belot, 2023). Kevin Burrowes, the PwC Australia CEO, stated that dismissing all the staff members involved was a complex and challenging task, but an important one because the business ought to realign with its new business strategy. The total headcount reduction was about 5% of the workforce. “Accountability is critical to improving our culture, and based on our investigation to date, it is clear that the conduct of a number of partners fell short of what was expected of them,” said the acting CEO, Kristin Stubbins (Belot, 2023). This statement shows that firing the perpetrators was a matter of showing accountability. Kristin added that while the company cannot change its past, the management ought to control company actions today and in the future. Therefore, the CEO stated that the new management would continue to take all appropriate actions intended to improve the standard and culture of the firm. The action of discontinuing its partnership with employees involved in malpractices was critical to restoring its reputation (Chenoweth & Tadros, 2023).

Business Reinvention Strategy

PwC seeks to meet the rising expectations of transparency and stakeholder engagement. The new PwC Australia management team, in the aftermath of the tax leak, came up with a new strategy intended to achieve many important goals, including fixing the company's reputation, shifting the public's attention from the scandal, and preventing the recurrence of similar scandals in the future (Chenoweth & Tadros, 2023). It is a three-year strategy seeking to position the firm as the best choice in the market for businesses experiencing unprecedented social, environmental, and technological change. The company plans to intensify investment in its core capabilities, including taxation, auditing, and risk analysis. The strategy seeks to safeguard businesses from disruptors such as changing social expectations, skills shortage, and economic uncertainty by capitalising on artificial intelligence (AI) and other relevant technologies. The management believes reinvention of the service delivery is the best approach for the PwC to pivot away from the tax leak scandal and demonstrate commitment to change (Belot, 2023).

The strategy will help PwC’s clients to build trust and deliver sustained outcomes. It will accelerate the deployment of emerging technologies in supporting audit equity. The strategy constitutes a multidisciplinary model that brings together diverse and passionate communities to assist organizations in building trust (Belot, 2023). It will address the rising expectations of transparency and stakeholder engagement. The business announced its plans to expand specialist capabilities in data privacy, AI, and cybersecurity (Chenoweth & Tadros, 2023).

Utilitarianism-based Critical Analysis

The two response measures by PwC were intended to align the company with SDG 16. According to the utilitarianism concept of actions and expected consequences, such measures are likely to impact individuals, organizations and the larger society in various ways (PwC, n.d.). John Stuart Mill, the promulgator of the utilitarianism theory, stated that “… the ‘greatest happiness principle’ holds that actions are right in proportion as they tend to promote happiness; wrong as they tend to produce the reverse of happiness” (Mill, 2016). In line with this logic or reasoning approach, we need to determine the “utility value” of the PwC’s response measures on individuals, organizations and society.

Individuals

There are both costs and benefits, i.e., good and bad, for individuals associated with PwC either directly or indirectly (Mill, 2016). Many individuals lost jobs, but at the time, it will deter many individuals from engaging in activities that violate standards of ethical practice. The PwC response measures will help many individuals to prioritise moral principles over self-interest.

Organizations

The consequences of PwC's actions will benefit organizations more than they benefit individuals. The act of sacking and cutting ties with employees or partners who have been implicated in unethical and irresponsible practices can help organizations maintain trust and reputation. Companies rely on trust from customers, partners, and the public. If employees are involved in unethical or illegal behaviour, it can damage the company's reputation (Mill, 2016). Terminating those employees sends a clear message that the company does not tolerate such behaviour and is committed to upholding ethical standards.

Additionally, organizations previously accused of violating the standards of ethical and responsible business operations can restore confidence by firing implicated employees. It shows that the company is taking decisive action to address the situation and prevent similar incidents from occurring in the future. PwC actions can inform other organizations to cultivate social responsibility (Mill, 2016). Social responsibility is concerned with how business institutions should be structured and making decisions that impact many people rather than the individual decision maker.

Sacking of perpetrators creates an impression that an organization is committed to accountability and compliance. Companies have legal and ethical obligations to comply with laws and regulations. If employees violate these obligations, it can expose the company to legal risks and regulatory scrutiny. Terminating implicated employees demonstrates accountability and reinforces the company's commitment to compliance.

Firing non-compliant employees helps organizations to preserve culture and values. Many companies have values and a corporate culture that emphasize integrity, honesty, and ethical behaviour. Employees who violate these values can undermine the company's culture and erode employee morale. Removing those employees helps preserve the company's culture and sends a signal that unethical behaviour will not be tolerated.

Organizations can minimize risks of legal actions by not accommodating individuals who are likely to violate the law (Mill, 2016). Depending on the nature of the scandal, retaining implicated employees could expose the company to legal liabilities or regulatory sanctions. Terminating those employees may be necessary to mitigate these risks and demonstrate cooperation with authorities.

Nevertheless, PwC will incur some costs related to firing and recruiting a new workforce. There are some direct costs in the recruitment exercise itself, plus the cost of training the incoming workforce. Recruitment costs include expenses related to advertising job openings, hiring recruiters or agencies, conducting background checks, and attending job fairs or networking events. There are onboarding costs or expenses for onboarding new employees, including training materials, orientation sessions, and the time spent by managers and colleagues to help the new hires get up to speed. The company suffered from temporary productivity loss because there was a period of reduced productivity as new employees ramped up in their roles. This can include the time it takes for them to learn the job, adapt to the company culture, and become fully proficient.

Society

The changes implemented by PwC will strengthen the moral standards of society. The moral standards in society will provide basic guidelines for cooperative social existence. Generally, all benefits or costs for both individuals and organizations associated with decisions made by PwC in response to the tax leak scandal are also benefits or costs for society. If organizations benefit, society will also benefit from the smooth operations of that organization

Recommendations

Build Trust through Improved Transparency

Transparency in an organization fosters growth and nurtures trust among its members. PwC can foster transparency through open communication, informed decision-making, credibility, accountability, building relationships, and stakeholder engagement (Mill, 2016). Transparency signals that an organization has nothing to hide. When leaders share both successes and failures, it demonstrates honesty and integrity. This builds credibility with employees, customers, and stakeholders, as they see the organization as trustworthy and reliable (Cini, 2024). Transparent organizations encourage open dialogue. When leaders share information openly, it creates a culture where employees feel comfortable expressing their ideas, concerns, and feedback without fear of reprisal. This open communication builds trust as everyone feels heard and valued. Transparency holds individuals and the organization as a whole accountable for their actions. When processes, goals, and outcomes are transparent, it’s easier to identify areas for improvement and hold individuals responsible for their contributions.

Build a Culture of Responsibility

Building a moral culture in an organization involves fostering an environment where ethical principles and values guide decision-making and behaviour at all levels. A culture of moral behaviour and employees’ sense of obligation to do what is ethically acceptable even in the absence of supervision will achieve what organizational laws and professional code of conduct cannot achieve. Good organizational culture will improve individual character (for employees), establish moral rules that govern its conduct, foster fairness, emphasize good over bad, emphasize the obligation of ethical conduct, promote justice, and establish ethically acceptable organizational values. Requisites for ethical action include the awareness of an ethical problem, the ability to reason about the ethical challenge, and demonstrating persistence in implementing the ethical action even in the face of inevitable actions. PwC ought to integrate ethics into policies and procedures to ensure that ethical considerations are embedded into the organization's policies, procedures, and codes of conduct. This includes addressing issues such as conflicts of interest, diversity and inclusion, fairness, and respect for stakeholders (Cini, 2024).