Clarios is one of the world’s leading providers of energy storage, manufacturing about one in every three car batteries on the road. It is also less than four years old, having recently separated from Johnson Controls. So how did it earn its first-ever World’s Most Ethical Companies honor? In this conversation with Deborah Spanic, VP, Chief Ethics and Compliance Officer, we learnt that it’s all about trust, local control, and an unwavering conviction to live by integrity.
Congratulations on being named a 2023 World’s Most Ethical Companies honoree! Why did you decide to apply this year, what your application process was like, and what did you learn about your own program as you completed your application?
We always have valued the benchmarking that the World’s Most Ethical Companies process provides. To me, that’s one of the greatest benefits we get from it. A lot of the work that goes into submitting for World’s Most Ethical Companies allows us to understand what we need to improve and where ethics and compliance is evolving more broadly, because the application process itself evolves. Every year, there are always new areas of focus that are good indicators of what we need to pay attention to.
Ours is a cross-functional team. We rely heavily on our ESG team for the sustainability portion. HR, Finance, and Procurement all contribute to getting our documentation ready and getting our application filed. When the application asks certain questions that I don’t have answers for, I track down who in our organization would know. And I learn all kinds of really great things about our organization that way. So applying has been a very beneficial process for us.
Clarios separated from Johnson Controls a little over three years ago. There has been a lot of work to get our programs up and running, and a lot of things have evolved. Forcing ourselves to step back and take stock of what we’re doing, and also seeing where we might have gaps, is extremely valuable, particularly when you are experiencing relatively rapid growth and change.
What are some of the most important things that your program has achieved in the last year or so? And how have they positioned you to achieve your strategic goals for the next year or so?
We were finally able to wrap up our three-year implementation plan. As a brand-new company, getting our program in place has been our primary focus for the last three years. Now that we have wrapped up the implementation of our program, I feel like we can ask ourselves, where we can work on fine tuning? Where can we work on addressing gaps? And where do we have areas for improvement?
We are in a continual improvement mindset. We are always looking for opportunities to better operationalize our program, and to better embed our program within the business to streamline processes. We’re going through a lot of that now, and that’s really our focus for the next three-year cycle.
How would you characterize the support that your ethics and compliance program receives from the very top of your organization?
Integrity is in our DNA. We just launched our new set of values, and the first value is principled, and its principled for a reason. In fact, when employees were surveyed to establish these new values, we ran focus groups at all levels of the organization. We asked employees, what are the words they would use to describe Clarios? And variations on the words ethical, integrity, and principled were by far the most common answer people gave. And that is because our leadership, from the very top all the way down to every manager on the line, believes that it is important for our company to believe in that value and to live that value.
So, I’m extremely lucky. We have a very engaged and very supportive leadership team when it comes to our program. I know many of my colleagues in the ethics and compliance space have to push the rock uphill a little bit in terms of getting leadership support and getting ownership of the business. I don’t have that issue with our program at all.
You’ve mentioned that “integrity is in your DNA.” How does your ethics and compliance program align with Clarios’s business objectives and further empower it to achieve those objectives?
It’s critical. Everyone in the ethics and compliance field has seen time and time again that there are no shortcuts to integrity. And we’ve also seen that by focusing on building our ethical culture, we’ve actually improved our business results. There is no doubt in my mind or in the mind of our leadership team that our approach to ethics and integrity is a competitive advantage. We do regular surveys of our customers, and the number one reason why our customers, year over year over year, say they want to do business with us is because of our reputation and our commitment to sustainability. This is an absolutely critical part of what we do.
I even have a concrete example. Shortly after we separated from Johnson Controls, we had a number of helpline issues come in from one of our regions. That spawned something like twelve to fifteen investigations that took us about a year to address at the business level. They ended up letting go of a fairly high number of individuals in leadership roles in that region and embarked on a cultural turnaround. They had a poor culture with a lot of fear of speaking up, and a lot of fear of retaliation. But the leadership team there focused on building an ethical culture, and three years later, they are seeing dramatic performance improvements that they directly attribute to that change. Our Compliance Director who did the investigations three years ago returned there last summer, and the one thing he told me was the atmosphere was 180 degrees different from what it had been before.
When you talk to our head of the region, he says he sees the difference when he walks the plant floor. Employees will come up to him and talk to him. They feel open, they can be comfortable, they recognize him, they will talk to him, they will raise issues. That has made a significant difference in their day-to-day results. They are performing tremendously, and they attribute that to improving their culture.
What’s something special about your program that people outside of Clarios are not likely to know about?
It’s that the ownership of ethics and compliance runs through every corner of our business. We have a very lean, full time dedicated compliance team, but we are supported by a very broad, regional, and functional part time network of compliance leaders in our organization.
A lot of companies call them compliance ambassadors or compliance champions or compliance liaisons. I would say our folks go way beyond that role.
We have employees throughout the company who volunteer part of their time, in addition to their day job, to take a leadership role for compliance in their region. This is viewed as a high profile, in-demand, and valued role. It’s one that will typically be reserved for individuals that the business views as high-potential employees who they want to further develop as leaders, and who can truly own and drive compliance in their region.
This requires me and my team to relinquish some measure of control. The way we approach it is, we provide them with oversight, guidance, and governance. But they’re allowed to make the program their own. And they do! They are incredibly engaged and incredibly creative. Our European compliance team that decided to do a compliance day in their region, so they planned it, implemented it, and did it completely on their own. I found out about it after they were almost done with the planning. They made a mascot (the “Co-Bee”), they did videos… all kinds of great stuff. It was amazing. The way took it and they owned it shows how our business truly incorporates ethics and compliance into what they do. They view it as critical to their business and own it in their region. To me, that’s foundational to our success, and it’s really the engine that powers our program. I am so inspired by their creativity, their engagement, and their commitment to the program.
What is the name of this particular role?
There are a variety of roles, but collectively we refer to them as the Regional Compliance team. There are Geographic Program Leaders, or GPLs, that are sort of the mini-compliance officer for the region. They head up the program in their region. And then in our five main risk areas that we focus on, we have regional leaders for each one of those. So every region has six individuals who have a direct role to play in ethics and compliance.
Then those five risk areas also have a global leader. The folks in the region meet regionally, but they also meet with their workstreams vertically with their colleagues in other regions of the world who are focused on the same area that they are. There’s a matrix of communication and regular engagement. It’s a great way for us not only to support compliance within those regions, but to also leverage the best practices and the creativity that that they demonstrate.
Remember that example of our team in Europe doing the Compliance Day? That was so well received and got such great feedback that it inspired other regions to do it. Latin America did it, Asia is doing it, and so is the U.S. They’ve all seen what Europe did, and they’re all putting their own spin on it. Latin America did it as a Compliance Week. EMEA did it in a single day. They developed it based on what works in their region, because every region is different.
You mentioned that these people are not paid for this particular kind of work, but they are often picked for it based their past performance as high value employees. Does the work they do for this factor into their annual review?
Not formally, but we encourage all of our regional team members to add that into their performance plans for every year, and they get evaluated on it. The interesting thing is our regional compliance program is not overly structured. It’s not like there’s a two-year term and then you have to rotate out. It’s a bit more organic than that. What we find is that people rotate out of those roles because they’re getting promoted. And that’s a great thing, because now we’re seeding those individuals in leadership roles who have a deeper understanding of ethics and compliance. The more of them who get out there, the deeper ethics and compliance gets into the modality and the culture of our organization on a very intrinsic level.
This has been so effective for us that now other functions within the organization are emulating it. ESG has emulated our structure. IT Security has emulated our structure. They want to do what ethics and compliance is doing, and they’re all building these networks of employees within the organization who are helping to support their particular function or area of focus.
Why is earning the World’s Most Ethical Companies distinction so important to Clarios?
Getting the World’s Most Ethical Companies recognition this year is a really important external recognition of what we already know about our company: that our values drive our results, and that principled is the first value we have. It goes through everything that we do. It’s a direct result of the commitment of all of our employees across the globe, and all of our leaders who support this by talking about it with their teams every quarter.
I highly recommend that companies go through the World’s Most Ethical Companies application process. Even if you don’t achieve the honor, going through that benchmarking and seeing where your program stacks up against those that are considered to be at the top of their game is a fantastic way to gauge the things that you need to focus on, or that you might want to consider for your program.
For us it has spurred really substantive discussions with leadership on areas that we could improve on, and that we could better align with best practices. So, it’s a very valuable process.
This is a comprehensive evaluation, it’s not just about the ethics and compliance program. Recognizing that and understanding that we need to engage with our other stakeholders in the business, early on in the process, has also been incredible valuable to us. And I would definitely recommend that anyone who’s applying does that, because it provides visibility into parts of the organization that we may not engage with regularly. When we connect with them, we get an understanding of what we’re doing more holistically than just within our own functional silos.
The other advice I would offer is to make sure to allow yourself enough time to ensure that you’re able to provide the most fulsome answers possible. When we first applied it was like a scramble, and in retrospect, we realized we could have done it a lot better. You learn as you go that there’s a cadence to this. Don’t wait till the last minute, because there’s all the documentation that is required. Make sure that you’re giving yourself enough time to provide the best answers that are most representative of what your company does, which may not be what you immediately think it is. That’s what I’ve learned.
I usually like to give us about two to two and a half months. As soon as the application window opens, I pull the team together and send the Ethics Quotient to everybody and give them a certain amount of time to get their sections done. That gives me maybe three weeks on the back end to pull everything together, review, make sure we’re not missing anything. It also gives me time to do some interviews with key folks like our Chief Sustainability Officer, or a VP of Communications, on some of the things that they’re doing in their respective spaces, and then pull together all of that documentation.
I will say, the process this year was significantly easier than it has been in previous years, with the documentation being in line with the questions. That was very valuable and made things a lot easier. We were done about a week early because of that.
Why are you personally excited that Clarios has earned the World’s Most Ethical Companies honor?
We’re only four years old. Getting that external recognition is incredibly validating, and it not only helps validate what we’ve been saying internally to leadership and our Board of Directors, but it also gets our employees excited about it. Even beyond the corporate headquarters. Folks in the regions, I had to tell them to embargo the news that we had gotten the honor because they were so excited to share it with their own leadership team and employees.
We’re not a company that you necessarily recognize by our brand because we’re under the hood of your car, and often times, our products are privately labeled, especially in the U.S. But our employees are really proud to work here, and I think this honor gives people a sense that Clarios really delivers on our values, and that we are really striving to be that kind of company for our employees, customers, and stakeholders, that we aspire to be.
I am so excited and proud of what our what our teams have accomplished. Now, we’ve got to make sure we get it every year from this point on. The bar is raised, so we have to make sure that we keep continuing to improve the program, and not take our foot off the gas.
ABOUT THE EXPERT
Deborah Spanic is the VP and Chief Ethics and Compliance Officer for Clarios, the world’s largest automotive battery manufacturer. She is an expert in compliance program development and management, ethical leadership, process excellence and innovation, and regulatory and legal compliance.