Ethics - 5

Class COR3302

Type Seminar

Reviewed

Status Not started

Status Done

Lecture 5: Corporations and Sustainability

Corporate Social Responsibility
what a business should or ought to do for the sake of society, even if it is
economically costly for the business
it believes in the concept of responsibility as accountability -

attributing liability for some event/action, for which a business can be held
liable

concerned with society’s interest that should restrict a business’s behavior

Case Study: What is a corporations’ responsibility to

society
1. Should a company pursue profit at all cost

A company’s primary motive is profit making

I personally believe that it should not pursue profit at all costs

all costs imply potentially engaging in illegal behavior like child labor

2. Does it have responsibility to society

I think it does have a responsibility to not damage the environment

or human life

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 A company earns its revenues from society, hence should help take
care of it

If it does cause damage I think they should make relevant

disclosures so that the customers know what they are getting into

However, I don’t believe that they should freely give out their
products, then the business would not survive

3. Cost/benefits to a company in pursuing CSR

Initial costs to implement/change manufacturing to prevent the

release of chemicals

If they agree to be sustainable but do not act ethically will have a

really bad social image in minds of consumers

Benefits: good PR, tax deductions, positive image in minds of

consumers, customer/employer loyalty

4. Cost/benefits to other stakeholders

Customers/Employees will have better working conditions and more

safe/healthy products

Government will have a lesser worry about natural resource decline

5. Is there any other party who should bear this responsibility

In the electricity example, I believe the government holds some

responsibility

electricity is a basic need for most people. hence I believe it

should be provided by the government to the public at
subsidized prices(for those who cannot afford)

A company has 3 levels of responsibilities

Duty not to cause harm

strongest sense of responsibility to not harm

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 business can be sued for causing harm(which can be avoided both
legally and ethically)

Responsibility to prevent harm

Businesses can prevent harms they did not cause, possibly at the
cost of profit

a higher sense of responsibility

Responsibility to do good

businesses should give back to society

most noble sense of responsibility

but is it something a business ought to do?(responsibilities vs

duties/obligation)

Four models of CSR

Economic model

Business’ sole duty is to fulfil the economic functions they were

designed to serve(make profit). Profits are an indication that a business

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 is efficiently and successfully producing the goods and services that
society demands, thus meeting society’s expectations
A business has no social responsibilities beyond the legal and
economic ends it was created for

Milton Friedman’s example-

he believes that a company should not do csr, because it is a manager
using the shareholder’s money. he believes that charity should be done
using an individual’s money. perhaps like a shareholder donating to
charity using his dividends

Philanthropic model
Businesses are free to contribute to social causes, it should be
encouraged to contribute to social causes but it has no ethical
obligations to do so.
sometimes the philanthropic model overlaps with the economic model (
donations = more PR, tax deductions, etc.)

Social Web model

Businesses exist in a web of social relationships. They must conform to

normal ethical duties and obligations. Here, creating wealth and profit
do not trump economic responsibility.

As businesses affect a wide variety of people, imposing costs or

benefits onto them, thus we need to balance the ethical interests of all
stakeholders (stakeholder theory)

but it is often impossible to satisfy the needs of all stakeholders, thus

we need to consider the stakeholders interests in the issue, as well as
their power/impact on decision-making in deciding who’s interests to
meet.

(high interest + high impact ⇒ must urgently resolve issue)

Integrative model

Believes that social goals and profit/economic goals are equally

important and believes in the integration of social and economic goals.

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 This is especially in social entrepreneurship and sustainability, where
we see that there isn’t really a tension between profit and social goals

“I can do profit by doing good”

Enlightened Self Interest

CSR can benefit society and at the same time ensure it a place in society
(by enhancing its reputation among stakeholders). but if it does not take
action, proportionate to the words it has promised, it runs risk of becoming
pure “social marketing” or creating a perception-reality gap, both of which
can greatly negatively impact a company’s reputation.

Case study: The case against corporate social

responsibility
1. Can companies be expected to voluntarily assume this responsibility

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 cannot expect them to voluntarily do good as they have no primary
incentive other than profits

but many companies are now engaging in CSR, so companies who

do not engage in it could be seen as falling behind and not reaping
the improved publicity/other benefits from CSR

maybe possible through ethical leadership or shareholder pressure

to be “green”

2. Are there ways we can try to ‘force’ or ‘encourage’ companies to do

more CSR

government can provide tax reductions for good CSR practices

customers can boycott unethical or unsustainable products

investors/shareholders could appoint a CEO who cares about

sustainability/hire sustainability manager

educating customers about the importance of sustainability to

change their practices, change in customer demand will change
company’s supply

governments can apply excessive tax on unsustainable events like

carbon emissions
Environmental Sustainability
Both present and future generations depend on the environment to survive.
Natural resources are inter-related, thus environmental issues can have global
effects and can be long-lasting

Case study: who is responsible for environmental harm?

1. Who bears responsibility for reducing greenhouse emission from the
production of aluminum?

companies and manufacturers should ensure that their production

facilities use processes and materials that limit emissions, and
ensure proper waste management processes

consumers have the responsibility to not purchase from these

companies, if consumers stop demanding the companies will stop

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 supplying

governments have the responsibility to implement regulations to

limit emissions

2. Who is in the best position to initiate change?

governments are in the best position where can initiate change by

introducing anti-emission laws or increasing/reducing tax based on
emission rates

The organization’s leadership can create a culture of sustainable

environment practices in the organization, and thus the entire
company can limit their emissions\

individuals can take initiative to recycle

scientists can develop less pollutive methods of production (a

school of thought believes that scientists can have the most impact)

from this we can see that everyone has a role to play in producing
emissions, and initiating change in reducing emissions. However, because
everyone has a role, it is easy to say that I as an individual am not
responsible, so we need to be careful and take accountability.
Approaches to Business Environmental Sustainability
The Market approach

environmental issues are economic problems that require economic

solutions

they will be sustainable to the extent that it matters to them

most efficient allocation of scarce resources

optimal level of pollution that would serve society

Challenges:

costs are borne by individuals outside the economic exchange

no market exists to value social goods like clean air etc.

individual vs group consequences - collection of individual

thinking might not benefit society

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 first-generation problem, where someone has to experience a
consequence before they can prevent it, they are sacrificed

The Regulatory approach

Tort Law:

places burden on the person harmed, and offers compensation

for the harm

Other standards:

gov.t sets up other standards to prevent the occurrence of harm,

rather than just compensating the harm

businesses can do whatever they want as long as they comply

to these laws

Challenges:

society can shape a business’ environmental responsibilities by

demanding environmentally friendly products and supporting
environmental legislations

but businesses can influence legislation through lobbying

against environmental laws(especially in the US), they can
influence customer views/choice through advertisements (etc.)

environmental issues can be international in nature, but there is

a limitation as regulation can only extend as far as the law
extends (geographic boundary)

The Sustainability approach

There are 3 pillars to sustainability

economic

environmental

ethical sustainability

triple bottom line

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 measures the full cost of doing business (but consider, is
everything measured in cash?)

Sustainability tools

Eco-efficiency

doing more with less

products which are more energy efficient

Biomimicry

mimicking the biological process, by making the business

responsible for the product from production, to sale, and
even its disposal

It integrates waste into the production cycle, thus closing the

loop

Service economies

switching to a service based economy, which produces

lesser waste than a production based economy

it retains ownership of the entire lifecycle of the product :

Production, maintenance, disposal

eg: changing from a company who makes and sells carpets,

to one that cleans/repairs/maintains carpets. This reduces
the need for additional purchases of carpets and can thus
consequently reduce production.

Greenwashing
When a company or organization spends more time and money claiming to
be “green” through advertising and marketing than actually implementing
business practices that minimize environmental impact

Case study: Cruise Ship

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 1. If laws are strict in one country, but less strict in another, how should
cruise operators choose? What are the costs and benefits

maybe it depends on the size of the country and how much

revenues/costs can be generated from it. perhaps this means
releasing wastes in the less strict country, which would also be legal
there(but ethical?)

but also depends on consumers, would they boycott you for

releasing wastes in the less strict country? in such a scenario, I
would choose the strict one

maybe follow some self-imposed standards to not pollute, even

when the laws allow

would the decision based on short term profitability affect the long
term business viability(eg: if i pollute a beach, eventually it will be
too polluted to use)

2. How should ports set pollution standards

follow international guidelines/agreements or policies of competitors

consider availability of technologies to control pollution

adopt “pay as you pollute” policy to help cleanup

3. What are the costs and benefits

externalities - the pollution would affect the quality of life of the

citizens there

short term, stricter laws will reduce profitability of the port, long
term it might be beneficial

We realize that we often fail to consider externalities or other long term

impacts of our decisions when thinking about the ethical impact of our
decisions

Sustainability

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 Sustainability in business usually means that they need to address the
effect a business has on both the environment, and on the society. Thus, to
be successful, a business needs to address environmental and societal
concerns.
Investors today also use environmental, social, and governance (ESG)
metrics to analyze an organization’s ethical impact and sustainability
practices.

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