The closure of BluSmart, brought renewed attention to the role of business ethics in sustaining corporate governance. While early reports celebrated its climate-friendly model and tech-driven approach, deeper issues rooted in ethical misconduct and governance failures ultimately led to the company’s collapse. This case is not just about mismanagement. It serves as a stark reminder that governance is not a “financial only-affair”; it is an ethical function at its core.
BluSmart’s failure can be viewed through the lens of what Boatright (2009) describes as the “ethical infrastructure” of an organization. It basically comprises formal systems like codes of conduct, as well as informal norms that shape behaviour. From initial indicators, it appears BluSmart lacked the internal checks necessary to prevent misuse of funds and protect whistleblowers. When governance is reduced to compliance and boardroom formality, without anchoring decisions in ethical deliberation, lapses become systemic rather than exceptional.
This happened due to the absence of ethical oversight at the leadership level. Treviño and Nelson (2021) point out that ethical leadership is not just about avoiding wrongdoing, but about cultivating a culture where transparency, fairness, and accountability are upheld daily. In BluSmart’s case, had the leadership actively embedded ethical principles into their decision-making processes, the trajectory might have been different. Instead, reports of employee dissatisfaction and opaque accounting practices reflected a governance structure devoid of ethical rigor.
Governance is often narrowly interpreted as financial control and regulatory compliance. But true governance as aligned with the G20/OECD’s Principles of Corporate Governance (2023)—involves stakeholder inclusivity, ethical clarity, and accountability at all levels. BluSmart’s downfall illustrates what happens when environmental responsibility is showcased to investors while internal systems betray basic ethical principles. This disconnect erodes trust within the organization, and across its stakeholder network.
Ethics in governance is not a “soft” issue. Research shows that organizations with strong ethical cultures are more resilient and perform better in the long term (Kaptein, 2015). These cultures help detect and respond to risks early, enabling businesses to withstand challenges. A preventive mechanism like an ethics and compliance committee, regular third-party audits, or anonymous grievance redress systems could have helped BluSmart identify and correct course before matters escalated. This is supported by empirical studies which reveal that early ethical auditing prevents larger scandals (Schwartz, 2013).
This case also underlines how ethics must be embedded in corporate governance training. Boards often include professionals with financial and legal expertise, but lack representation from ethics or civil society backgrounds. Including ethical experts or independent watchdogs on boards offer a wider lens of analysis. As seen in the case of the Tata Group post the 2016 crisis, the creation of a group governance council with independent voices brought greater ethical scrutiny and balance (Khanna, Palepu & Sinha, 2018).
The question then arises: how could BluSmart have prevented its downfall? First, the company needed a functioning ethical code tied to actionable policies, not just a poster on the wall. Second, governance processes should have included routine ethical risk assessments. Third, whistleblower protection must go beyond legal formality. It must be a culture. Finally, investors and CSR-minded stakeholders must demand more than green pledges. They should ask how a company treats its people, handles dissent, and ensures honest reporting.
The case reminds me that ethical failure is often the invisible prelude to visible collapse. The lesson for businesses is clear: ethical governance is not an optional value-add, it is a structural necessity. A company’s ability to navigate complexity, maintain legitimacy, and build long-term value depends not only on its financial health but also on how ethically sound its foundations are.
Today, ESG reporting is becoming mainstream. It is tempting for companies to chase optics rather than substance. But as this case shows, no amount of green branding or tech innovation can substitute for an ethically grounded governance model. For students of business ethics and practitioners alike, the BluSmart case should become a case study on what happens when ethical vigilance is treated as secondary to business strategy.
The writer holds a PGDM from XISS and a PhD in Business Ethics & Strategic CSR from Santiniketan. He is an IICA Certified ESG Practitioner. Currently he works for HPPI in New Delhi; Views are personal