Are companies building the wrong castle?
Business Ethics Debates | read time: 5 min
Published: 18 December 2025
GoodCorporation’s latest business ethics debate at the House of Lords explored whether companies have the right organisational structures to manage their ethics, compliance and sustainability (ECS) issues effectively. With participants from a wide range of industry sectors, the debate explored whether current corporate structures can lead to business functions operating in silos, creating barriers to the robust management of ECS risks and what might be needed to manage this more effectively.
Hosted by Baroness Kingsmill, one of the UK’s most experienced non-executive directors and a prominent voice on fintech, business regulation, sustainability and diversity, the debate was introduced by David Ward, Regulatory, Ethics & Compliance Director and Legal Operations Director at Tesco PLC.
Opening remarks
David Ward opened the discussion by reflecting on the evolution of the ethics and compliance function. Historically grounded in competition law, anti-bribery, privacy and sector-specific regulation, compliance was once a more self-contained role. Today, the role has expanded significantly and matured into a well-established discipline, supported by its own frameworks, tools and professional infrastructure.
In addition, the rapid expansion of sustainability and human rights obligations has fundamentally changed the compliance landscape. These issues now cut across multiple business functions including procurement, operations, HR, finance, risk, communications and the board itself, significantly broadening both the scope of risk and the range of stakeholders involved. What was once seen as a specialist or compliance-led agenda has become a whole-business concern.
However, as David highlighted, while this increase in scope has led to the emergence of many specialists in areas such as human rights, communications, the environment and risk management, there is a risk that unless well managed, this emerging multi-disciplinary environment can lead to conflict and confusion.
To start the debate, David posed the question: How can we construct ethics, sustainability and compliance controls that interconnect to create a coherent cross-function, multi-disciplinary system that will endure in the years ahead?
Against this backdrop, participants were invited to consider whether companies are building governance structures that genuinely work to promote ethical and sustainable behaviour. Discussion focused on whether these structures draw on the right expertise, enable coordination across functions, and embed ethics, compliance and sustainability into all aspects of company decision-making rather than treating them as an overlay or reporting exercise.
How are companies organising ethics, compliance and sustainability functions?
Participants described a wide variety of organisational models. Some operate with centralised sustainability or ethics teams, while others distribute responsibility across legal, compliance, procurement, HR and operational functions. There was consensus, however, that there is no single ‘right’ structure.
What matters far more is whether companies have in-depth and focused expertise where it is needed, clarity over who owns which risks and effective coordination across functions.
Many noted that sustainability and human rights responsibilities are often wedged into existing structures, creating silos and potential gaps. Environmental issues may sit in one part of the organisation, while social and human rights risks are fragmented elsewhere.
Despite these differences, there was alignment around one point: ethics, compliance and sustainability should not sit in isolation. Such a siloed approach could lead to risks being unidentified and unaddressed. Instead, companies need structures that ensure each function understands the sustainability issues and compliance requirements that relate to their area, but with overall responsibility and accountability clearly identified at the top of the organisation.
To manage this effectively it was argued that companies need clearly defined frameworks to help ensure that all risks are identified. Clear lines of communication and cross-functional dialogue are also needed, feeding into the senior leadership team who have overall control and accountability for the management of these ECS issues.
Governance, tone from the top and monitoring
Strong governance emerged as a central theme throughout the debate. It was widely agreed that boards need to set the right tone and ensure the effective management of all ECS topics across their organisations. This is essential, not just to support robust compliance, but to ensure the right allocation of resources to manage these issues properly.
Boards will need the right level of expertise across the business to address their organisation’s ethics and sustainability risks but will also need to establish clear cross-functional dialogue to manage this multi-disciplinary approach. They also play a critical role in resolving any tensions between competing objectives or functions and maintaining momentum during periods of economic or political pressure.
Formal governance mechanisms, including board committees, executive forums and cross-functional steering groups, were viewed as essential enablers. These structures help ensure that issues do not fall between the gaps and that assumptions are not made about who is responsible for what.
Ongoing monitoring was also emphasised as vital. Participants noted that without effective oversight, reporting lines and feedback loops, even well-designed frameworks can fail.
Culture, embedding and shared ownership
Beyond formal governance, participants stressed the importance of embedding ethics, compliance and sustainability into organisational culture. Some argued that initiatives are weak when they are perceived only as compliance-driven rather than value-led.
Several contributors noted that organisations are often good at explaining what is required, but less effective at explaining why. Embedding the ‘why’ ensures the issues are baked into the heart of the business, and become part of the strategy, decision-making and day-to-day operations, rather than treated as a separate agenda. Some organisations are doing this through internal champions across different functions, while others are focusing on clearer communication and stronger alignment with commercial objectives.
There was strong agreement that responsibility sits with the business as a whole, not just compliance or sustainability teams. Collaboration, coordination and mutual understanding across functions were seen as essential to achieving sustainable goals.
The commercial case and external pressures
Anchoring ECS to commercial outcomes was seen as increasingly important. For many businesses, client expectations are now a key driver, with organisations increasingly scrutinised for their management of these issues by customers and clients. Organisations that can demonstrate strong practices to support these sustainability issues are often better placed to win and retain work.
There was agreement that mixed messages from the investor community can make it harder for businesses to take a consistent approach. While many investors see the management of ethics and sustainability risks as a proxy for good governance, it was felt that most make their decisions based primarily on commerciality. Nonetheless, where companies are able to demonstrate that sustainability is well embedded and enhancing corporate value, they can benefit from access to a wider pool of investors and preferential rates.
Economic headwinds, complex supply chains and different regulatory regimes were acknowledged as significant challenges. Competing legislation can make it harder; governance structures that work well in Europe may not always support compliance with US laws, for example. That said, participants acknowledged that well-designed legislation can have a meaningful impact. The US Uyghur Forced Labour Prevention Act was cited as having significantly influenced the development of stronger human rights practices.
The expanding body of EU sustainability legislation is also pushing these issues higher up the corporate agenda. However, concerns were raised that an increasing emphasis on reporting, alongside the rapid growth of technology solutions to support compliance, could lead to organisations focusing on reporting and feeding the technology rather than addressing the underlying risks.
The GoodCorporation view
As our debate found, there is no single blueprint for managing ethics, compliance and sustainability effectively. What matters most is tailoring the ECS strategy to the needs of the business and their particular priorities.. A business with a highly complex supply chain spread across multiple jurisdictions will need a very different approach to one based in fewer locations operating in a low-risk sector.
Whatever the nature of the business, however, there will be a range of ECS risks that will need to be managed. The strong companies we work with understand this and set out to build systems that identify all the salient issues, develop frameworks for their effective management and establish clear lines of accountability.
This may not require an entirely new castle, but it does need one where there are bridges rather than barriers between different business functions. This approach strengthens corporate sustainability in its widest sense, enhancing resilience, growth and contributing to long-term value creation.
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