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Ethics audits unnecessary in the west

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by Peter Kenter last update:Apr 25, 2006

Ethics auditing is a growing trend in Canada’s construction industry.
Ethics audits unnecessary in the west

“... if someone is acting improperly or treating someone unfairly, news gets out about it pretty fast.”

— Phil Hochstein


Ethics auditing is a growing trend in Canada’s construction industry.

Ethics auditing is the process of investigating a potential business partner, supplier or client, before engaging in a business relationship.

But while Vancouver construction is booming, a leading industry figure feels there’s no need for a formal process to keep local companies on the straight and narrow.

“Ethics in the construction industry are no better or worse than in any other industry in British Columbia. The values of any company are built on its owner,” said Phil Hochstein, president of the Independent Contractors and Businesses Association.

But while construction hires many people, it’s still a small “community” that makes it easier to enforce proper business practices, Hochstein said.

“With owners, contractors and subtrades, if someone is acting improperly or treating someone unfairly, news gets out about it pretty fast. The market corrects for misbehaviour,” Hochstein said.

And the current boom has only accelerated the process. If an employee is being treated badly by a sub-trade, he or she has many other choices of employer, which also limits an abusers actions, Hochstein said.

The Journal of Commerce contacted the Alberta Construction Association and Merit Contractors Association, but representatives said ethical auditing is not presently an issue in the Alberta construction industry.

But for companies concerned about ethics in the industry, there are options.

Many of the standards that might indicate a construction company behaves ethically are part of the public record — compliance with environmental regulations, for example.

Ethics scanning goes deeper than that, providing a snapshot of a company according to common criteria and helping to settle any specific ethical concerns a potential business partner might have.

A client who advocates a ban on the use of nuclear power, for example, might want to avoid the potential embarrassment of hiring a construction company working on a contract to build a nuclear reactor.

“We’re seeing more and more businesses in the energy, natural resources and construction sectors who want to know more about who they’re in business with,” says David Nitkin, president and founder of Ethicscan Canada, the country’s oldest ethical audit firm based in Toronto.

”The construction sector had many problems a generation ago when it was seen as a male-dominated industry and a ghetto for some ethnic groups. But each generation brings with it a new set of problems. People today might be concerned with worker training, whistleblower protection and employment equity.”

Ethics can offers clients a general corporate overview of potential partners, or the company will investigate corporate ethics using a tailored list of more than 200 potential variables.

“Some partners will be concerned about whether a potential partner has a unionized work force, while another will be interested in knowing whether the employees are happy,” Nitkin said. “Others will be more interested in certain environmental policies.”

Although Nitkin won’t reveal the identities of clients who choose to remain anonymous, he said that certain government ministries, Health and Welfare Canada for example, routinely perform ethics audits with potential suppliers.

“Canada has also hosted certain international events where we have been asked by the government department responsible to look at profiles of contractors and construction companies who were providing goods or services for the event,” he noted.

What happens when a company is audited?

“The companies are advised that they’re being scanned, although the identity of the client may be kept confidential,” Nitkin explained.

The audited company also takes part in the process. Management answers some questions directly, while employees may be quizzed separately. The company being scanned gets a copy of the ethics report and an opportunity to review the material or comment on it.

Avoiding answers or refusing information leaves researchers to assume the worst.

“You presume the company may not have anything constructive or positive to say about itself,” Nitkin said. “That’s not necessarily the case, but the question of why the subject is not making this information available comes to the front lobe of the brain.”

Refusing an ethics audit likely means that the company that ordered the audit will decline to work with that supplier, Nitkin said.

last update:Apr 25, 2006

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