Lesson 8: Business Ethics, Social Responsibility, and Environmental Sustainability

Introduction: Good Ethics is Good Business

The institute of Business ethics (iBe) recently did a study titled “Does Business ethics pay?” and
concluded that companies displaying a “clear commitment to ethical conduct” consistently outperform
companies that do not display ethical conduct. Philippa Foster Black of the IBE stated, “not only is ethical
behavior in business life the right thing to do in principle, it pays off in financial returns.” Alan Simpson
remarked, “if you have integrity, nothing else matters. if you don’t have integrity, nothing else matters.”
good ethics is good business. Bad ethics can derail even the best strategic plans. this chapter provides an
overview of the importance of business ethics in strategic management.

Does it Pay to be Ethical?

A rising tide of consciousness about the importance of business ethics is sweeping the United States and
the rest of the world. Strategists such as CEOs and business owners are the individuals primarily
responsible for ensuring that high ethical principles are espoused and practiced in an organization. all
strategy formulation, implementation, and evaluation decisions have ethical ramifications.

High-performing companies generally exhibit high business ethics. Investor’s Business Daily reported
that character-driven leaders deliver five times greater profitability results and 26 percent higher
workforce engagement than self-focused leaders. Being unethical can be expensive. For example, Cisco
Systems in 2015 sued arista networks for copying verbatim sections of its user manuals. in addition to
plagiarism, literally hundreds of business actions are unethical, including:

1. Misleading advertising or labeling

2. causing environmental harm
3. poor product or service safety
4. padding expense accounts
5. insider trading
6. Dumping banned or flawed products in foreign markets
7. not providing equal opportunities for women and minorities
8. overpricing
9. Sexual harassment
10. Using company funds or resources for personal gain
Ethics and Morality

Ethics examines the rational justification for our moral judgments; it studies what is morally right or
wrong, just or unjust. In a broader sense, ethics reflects on human beings and their interaction with nature
and with other humans, on freedom, on responsibility and on justice.

Therefore: What is morality? The simplest answer is that morality is the human attempt to define what is
right and wrong about our actions and thoughts, and what is good and bad about our being who we are.

Establishing a Culture of Ethics

a key ingredient for establishing an ethics culture is to develop a clear code of business ethics. Consider
this; internet fraud, hacking into company computers, spreading viruses, and identity theft are other
unethical activities that plague every sector of online commerce today.

Merely having a code of ethics, however, is not sufficient to ensure ethical business behavior. a code of
ethics can be viewed as a public relations gimmick, a set of platitudes, or window dressing. to ensure that
the code is read, understood, believed, and remembered, periodic ethics workshops are needed to sensitize
people to workplace circumstances in which ethics issues may arise. if employees see examples of
punishment for violating the code as well as rewards for upholding the code, this reinforces the
importance of a firm’s code of ethics.

Whistle-Blowing, Bribery, Workplace Romance

Whistle-Blowing
Whistle-blowing refers to employees reporting any unethical violations they discover or see in the firm.
Employees are encouraged to remain vigilant for any organizations wrong doing and be able to course
through proper channels if there are real ethical concerns observed in organizations. Organizations are
also encouraged to support employees coming forward to report factual wrong doing or unethical
behavior observed within the organization.

Ethics training programs should include messages from the ceo or owner of the business, emphasizing
ethical business practices, the development and discussion of codes of ethics, and procedures for
discussing and reporting unethical behavior. Firms can align ethical and strategic decision making by
incorporating ethical considerations into strategic planning, by integrating ethical decision making into
the performance appraisal process, by encouraging whistle-blowing, and by monitoring departmental and
corporate performance regarding ethical issues.

Gift Giving and Bribery

Gift Giving is an act of extending goodwill to an individual in an effort to share something with them.

Businesses usually engage in gift- giving in the following reasons:

 To show appreciation for a favor received

 To effectively establish goodwill with business partners
 To advertise
 To compete effectively against competitors.

Factors in determining the morality of Gift Giving

  Value of the Gift
 Purpose of the Gift
 Circumstance under Which the Gift Was Given
 Position between Relationship of the Giver and Receiver
 Acceptable Business Practice in the Industry
 Company Policy
 Laws and Regulations

Bribery

Bribery is defined as practice of giving remuneration for performance of an act that is inconsistent with
the work contract of the nature of the work one has been hired to perform. It is intended to induce people
inside the business or other organization to make decisions that would be justifiable according to normal
business or other criteria

Bribery is unethical because of the following reasons:

 It is generally used as an instrument to gain personal and corporate advantage.
 It corrupts the concept of justice and equality
 It destroys people’s trust in the integrity of professionals’ services, of governments and the
courts, of law enforcement, religion and anything it touches.
 It treats people as commodities whose honor can be bought and sold. It thus tends to degrade the
respect we owe to other human beings.

Workplace Romance
 Defined as a relationship between two people who are employed by the same organization.
 Characterized by mutual attraction between the parties and a desire for a personal , romantic
relationship.
 Is very likely to happen as long as men and women work together

Advantages of Workplace Romance

 These benefits include friendship, mutual support to each other at work and other personal
experiences.
 Romance becomes the reason to keep their jobs.
 Motivating for the people involved. Boosts workplace energy.
 Positive attitude releases creativity, teamwork and productivity.
Disadvantages of Workplace Romance
 Complications of relationship to work performance.
 Career may be at risk (some view WPR as unethical)
 Distracting for the team (specially when people involved are within the same team)
 Prone to conflicts

Disturbed Coworkers
• The biggest concern is the reaction of coworkers and if they will support the relationship or not
• Even if the relationship is discreet, coworkers will eventually find out what is happening- time is
the only question.
• They may have an idea that favoritism, unfair treatment, and bias may arise from the
relationship
Corporate Social Responsibility
CSR is described as “a belief that corporations have a social responsibility beyond pure profit.” In other
words, “Firms are social entities, and so they should play a role in the social issues of the day. They
should take seriously their ‘obligations to society’ and actively try to fulfill them. Corporations should
employ a decision-making process to achieve more than financial success on the assumption that CSR is
integral to an optimum long-term strategy.
Sustainability and Corporate Social Responsibility
In the 21st century, sustainability (the ability to maintain or support a process continuously over time.)
and corporate social responsibility (CSR) have become strategic imperatives for organizations as
fundamental market forces for financial viability and success, where consumers are important
stakeholders.
Businesses worldwide develop CSR initiatives to become better corporate citizens but also to
communicate their activity to both internal and external stakeholders, which may involve several groups.
Pillars of Corporate Social Responsibility
Known by different terms like “the 3 P’s of Corporate Social Responsibility” and “The Triple Bottom
Line (TBL)”, the three Pillars of are Profit, People and Planet. These 3 concepts are closely related to and
reflective of the mission of CSR and firm activities. These incorporate and assists businesses measure
accountability in their funding of and support for social, environmental (ecological), and financial
benefits to allow for a greater good. Many corporations have started to add three pillar metrics to their
business plans to evaluate their overall performance and reflect on how companies are contributing to
society.
Vision, Mission, Corporate Values and Corporate Social Responsibility
CSR initiatives by organizations are not simple dole outs given to less fortunate members of society. It is
a commitment by the organization to take responsibility for the society where they operate. To do so, the
Vision, Mission and Values of the organization need to be aligned with the organization’s CSR initiatives.
These initiatives need to be true to form reflections of how the organization sees itself in the future, how
they intend to do so, and the collective belief the organization embodies. As mentioned before, using
metrics to measure the performance and effectiveness of CSR initiatives helps align these initiatives to
organizations Vision, Mission, and Values.
Adoption of CSR Practices Locally and Internationally
A small sample of contemporary CSR initiatives make a difference. For example:
• The GE Foundation gave $88 million to community and educational programs in 2016.
• The 3MGives corporation funded $67 million in 2016 to focus on community and the environment,
along with educational initiatives boosting student interest in science and technology.
• Apple was named by the environmental organization Greenpeace as the “greenest tech company in the
world” for over three years because that firm’s packaging is manufactured with 99 percent recycled paper
products.
• Walt Disney Company’s social mission to strengthen communities’ states that “by providing hope,
happiness, and comfort to kids and families who need it most”. The Walt Disney Company donated more
than $400 million to nonprofit organizations in 2016.
• Alaska Milk Corporation (Alaskaunlaran Program) - aims to improve the lives of Filipino dairy
farmers by equipping them with knowledge and skills to refine and boost local milk yield and quality. its
social responsibility initiatives are a gateway and key drivers towards the nourishment of children,
development of micro, small and medium enterprises, women, local dairy farmers, and the protection of
the environment.
 San Miguel Foundation, Inc. - As a Corporate Social Responsibility arm of San Miguel
Corporation, the Foundation is tasked to implement various programs and projects aimed at
accomplishing the social and environmental goals of the Corporation. Among these are the following:
o promote Education to youth from low-income families through scholarship, literacy classes
and support programs like supplemental feeding, book donation;
o strengthen communities through capability building activities and basic social services;
o support local enterprises that bring livelihood opportunities to community groups,
dependents, retirees and other stakeholders;
o provide assistance to disaster-stricken communities through relief and rehabilitation programs
and
o protect, preserve and regenerate the environment. Geographical scope of programs:
Nationwide.
 Ligo Sardines Corporation - Ligo Sardines was one of the first companies to pledge their
advertising budget for the year in support of relief operations for those affected by the quarantine and
frontliners.
 Jollibee Foods Corporation - Based on JFC’s Annual sustainability report, the organization CSR
focuses on food, people and planet.
o Food – regular audit on food service cleanliness and condition audits, 100% audit on all
stores, commissary, and logistics.
o People – balance of gender in jobs and managerial roles, supplier partnership with local
farmers, continuous training of their employees, and assistance during the pandemic to both
frontliners and the community.
o Planet – Reduction on food loss and wastages, reduced consumption from grid, reduction in
water use ratio, reduction in energy use ratio.

Environmental Sustainability
The ecological challenge facing all organizations requires managers to formulate strategies that preserve
and conserve natural resources and control pollution. Special natural environment issues include ozone
depletion, global warming, depletion of rain forests, destruction of animal habitats, protecting endangered
species, developing biodegradable products and packages, waste management, clean air, clean water,
erosion, destruction of natural resources, and pollution control.

Firms increasingly are developing green product lines that are biodegradable or are made from recycled
products. green products sell well. Managing the health of the planet requires an understanding of how
international trade, competitiveness, and global resources are connected. Managing environmental affairs,
for example, can no longer be simply a technical function performed by specialists in a firm; more
emphasis must be placed on developing an environmental perspective among all employees and managers
of the firm.

Sustainability Reports
a sustainability report reveals how a firm’s operations impact the natural environment. this
document discloses to shareholders information about the firm’s labor practices, product sourcing, energy
efficiency, environmental impact, and business ethics practices. no business wants a reputation as being a
polluter. a bad sustainability record will hurt the firm in the market, jeopardize its standing in the
community, and invite scrutiny by regulators, investors, and environmentalists. governments increasingly
require businesses to behave responsibly
and require, for example, that businesses publicly report the pollutants and wastes their
facilities produce. it is simply good business for any business to provide a sustainability report
anually to the public.