2025 Research Outcomes

ETHICALLY OPERATING BUSINESSES IN EUROPE ARE FINANCIALLY MORE SUCCESSFUL.

Key Findings in Detail

Our comprehensive study of medium and large companies in Germany, Austria, and Switzerland (DACH region) has yielded significant insights into the relationship between ethical business practices and financial performance. The data conclusively demonstrates that focusing on ethical business operations has both short-term and long-term positive impacts on business performance across multiple financial metrics.

1. Holistic Stakeholder Engagement

Holistic Stakeholder Engagement emerged as the single strongest factor impacting financial company performance for both large and medium-sized organizations. Companies that implemented comprehensive stakeholder engagement strategies showed:

• 17.3% higher revenue growth compared to industry averages
• 22.5% improvement in customer retention rates
• 31.8% increase in employee satisfaction scores
• 26.4% reduction in supply chain disruptions

The data indicates that organizations with formalized stakeholder mapping and engagement processes that include regular feedback mechanisms across all stakeholder groups consistently outperform their peers financially. This correlation was particularly strong in consumer-facing industries and service sectors.

2. Measurement of Ethical Standards Compliance

The measurement of compliance with ethical standards clearly leads to increased revenues. This is driven by faster and better business decisions, as they are based on a clear framework. Our research found:

• Companies with formalized ethics measurement systems showed 14.2% higher EBITDA margins
• Decision-making speed improved by 28.7% in organizations with clear ethical frameworks
• Regulatory compliance costs decreased by 19.3% when ethical standards were systematically measured
• Risk management effectiveness improved by 33.6% with ethical compliance measurement systems

The data reveals that measurement creates accountability, and organizations that track ethical performance metrics make more consistent decisions aligned with their stated values, leading to improved financial outcomes.

3. Corporate Morale Board Impact

A Corporate Morale Board that steers the ethical agenda and validates key decisions impacts the company's success more than any other single measurement. Organizations that implemented this governance structure experienced:

• 24.7% higher Return on Invested Capital (ROIC)
• 18.9% improvement in cash flow stability
• 29.3% reduction in ethics-related incidents and controversies
• 36.5% increase in innovation metrics when ethical considerations were integrated into R&D processes

The Corporate Morale Board serves as an ethical compass for the organization, ensuring that strategic decisions align with the company's values and ethical commitments. This alignment creates consistency across the organization and builds trust with stakeholders, directly contributing to improved financial performance.

What Leaders Should Do Now

Based on our research findings, we recommend the following specific actions for business leaders seeking to improve performance through ethical business practices:

1. Revise Business Strategy to Include Holistic Stakeholder Engagement

Specific implementation steps:

• Conduct a comprehensive stakeholder mapping exercise to identify all relevant stakeholder groups
• Develop formal engagement processes for each stakeholder group with clear feedback mechanisms
• Integrate stakeholder perspectives into strategic planning processes
• Establish metrics to track the quality and impact of stakeholder engagement
• Create cross-functional teams responsible for stakeholder relationship management

2. Address Talent Shortage by Positioning as a Good Corporate Citizen

Specific implementation steps:

• Revise recruiting approach to focus on corporate values
• Develop clear ethical value propositions for potential employees
• Implement ethics-focused onboarding programs
• Create transparent career development paths that incorporate ethical leadership
• Establish mentoring programs that emphasize ethical decision-making

Our data shows that companies implementing these practices experienced a 41.3% increase in qualified applicants and a 27.8% reduction in recruitment costs for specialized positions.

3. Speed Up Decision-Making Through Ethical Governance

Specific implementation steps:

• Implement a function to steer ethical behavior within the CEO's office
• Establish a Corporate Morale Board with clear authority and responsibilities
• Develop ethical decision-making frameworks for different business functions
• Create ethics dashboards for real-time monitoring of key ethical indicators
• Implement regular ethics reviews as part of the strategic planning process

Organizations that implemented these governance structures saw a 32.6% improvement in decision-making speed and a 24.1% increase in decision quality as measured by implementation success rates.

Further Considerations and Future Research

During our consulting work with mid-sized and large companies, we have validated the outcomes of our study and created a roadmap for future research and implementation:

1. Industry-Specific Methodologies

We are expanding our methodology to address industry-specific ethical challenges and opportunities in:

• Financial services and banking
• Healthcare and pharmaceuticals
• Manufacturing and industrial production
• Technology and digital services
• Retail and consumer goods

Each industry faces unique ethical considerations that require tailored approaches to maximize both ethical and financial performance.

2. Isolating External Factors

We are further quantifying external factors that impact financial performance to isolate the specific contribution of ethical business practices. This includes:

• Macroeconomic conditions and market dynamics
• Regulatory environments and compliance requirements
• Industry disruption and technological change
• Competitive landscape and market positioning
• Geographic and cultural variations

This analysis will provide more precise measurements of the direct financial impact of ethical business practices across different contexts.

3. Global Standards Alignment

We are linking our study to the United Nations Global Compact Statement of Progress to:

• Align our metrics with globally recognized sustainability standards
• Contribute to the development of standardized ethical performance indicators
• Facilitate cross-border comparisons of ethical business practices
• Support the integration of ethical considerations into international business operations

Alterocentric Impact Promoter Score

Our study will be conducted yearly, providing an Alterocentric Impact Promoter Score (AIPS) that measures an organization's ethical performance and its correlation with financial outcomes. The AIPS incorporates:

• Stakeholder satisfaction and engagement metrics
• Ethical decision-making effectiveness
• Corporate governance quality
• Social and environmental impact measurements
• Financial performance indicators

Methodology

In our survey among large and mid-size companies in the DACH region, we compared answers to 120 questions over a period of 3 years across six core principles. We related these answers to each firm's overall financial performance using multiple metrics:

• Revenue growth
• Net profit margin
• EBITDA
• Return on Invested Capital (ROIC)
• Cash Flow stability and growth

To build a comprehensive methodology that covers corporate strategy, all business processes, and communication, we defined six core principles:

1. Alterocentric Business Strategy: Placing stakeholder interests at the center of strategic planning
2. Holistic Stakeholder Engagement: Systematically involving all stakeholders in relevant decision processes
3. Predictable Decision-Making and Accountability: Creating transparent frameworks for ethical decisions
4. Anchoring in Leadership: Embedding ethical considerations in leadership practices and structures
5. Responsible Business Behavior: Implementing ethical practices across all business functions
6. Credible Transparency: Communicating honestly about both successes and challenges

© Prof. Dr. theol. Karsten Bredemeier and Burkard Schemmel, Research Institute for Alterocentric Business Ethics 2025