MANAGING ENVIRONMENTAL

ETHICS

Program Magister Akuntansi

Fakultas Ekonomika dan Bisnis
Universitas Gadjah Mada

ETHICS RISK AND OPPORUNITY

MANAGEMENT
Risks of not meeting stakeholder
expectations leads to potential loss of
support for a corporations objectives
Exceeding expectations leads to an
opportunity to garner support through the
creation of a competitive advantage

Who are the Corporate Stakeholders

Shareholders
Employees
Activists

Goverments

Creditors

Customers
Corporation

Suppliers
Lenders

Others, including the Media, who can be affected

by or who can affect the achievement of the
corporations objectives

Approach to Risk Management

The

full ethics risk management

framework
The

tone at the top, codes of conduct, employee

awareness, pressures to meet unrealistic or
inappropriate goals, managements willingness to
override established controls, code adherence in
performance appraisals, monitoring of internal control
system effectiveness, whistle-blowing programs, and
remedial actions in response to code violations
Without those, corporations will continue to suffer
from risks and lose opportunities

Position of External Auditors

Some

executives presume external auditors

would bring any risks found to the attention
of management
Auditors review IC and business risks, but
those that resulted in material misstatement
New standard redirect auditors toward
greater fraud awareness, examination, and
reporting thereon

Ethics Risk and Opportunity

Identification and Gap Assessment
Phase I
Develop a projected, ranked
understanding of stakeholder
interests and expectations

Identify
Rank: urgency,
power, legitimacy

Confirmation

Dynamic Analysis

Ethics Risk and Opportunity

Identification and Gap Assessment
Phase II
Compare activities to
expectations to identify ethics
risks and opportunities
Reputation driver: trustworthiness,
credibility, reliability, responsibility
Hypernorm: honesty, fairness, compassion,
integrity, predictability, responsibility
Performance: inputs, outputs, quality, virtues

Ethics Risk and Opportunity

Identification and Gap Assessment
Phase III
Reports by
Stakeholder group
Product or service
Corporate objective
Hypernorm value
Reputation driver

Diagnostic Typology of Stakeholders

Stakeholders potential for threat
Stakeholders potential for cooperation

High
High

Low

Low

Type 4
Mixed Blessing

Type 1
Supportive

Strategy
Collaborate

Strategy
Involve

Type 3
Nonsupportive

Type 2
Marginal

Strategy
Defend

Strategy
Monitor

Workplace Ethics
Employee

rights?
Privacy and Dignity?
Fair Treatment
Healthy and Safe Work Environment
Ability to Exercise Ones Conscience
Trust and Its Importance

Johnson & Johnsons Credo

Johnson & Johnsons Credo (continued)

The New Ethical Environment in

Workplace

Common

Business
Ethical
Challenges

 On-the-Workplace

Ethical Dilemmas

Conflict

of Interestsituation in which a business

decision may be influenced for personal gain.

Honesty and

Integritytelling the truth and adhering

to deeply felt ethical principles in business decisions.

Loyalty versus

Truthbusinesspeople expect their

employees to be loyal and truthful. But ethical
conflicts may arise.

Whistleblowingemployees disclosure

to
government authorities or the media of illegal,
immoral, or unethical practices in the organization.

International Operations
Impact

on Local Economies and their

Cultures

Labor markets: wage rates, availability of

supply
Raw material and other input markets
Political and legal processes
Religious and social customs

International Operations
Conflicts

between Domestic and Foreign

Cultures

Approval of bribery
Use of child or slave labor
Unhealthy labor conditions
Treatment of women
Respect for environment
etc

Corporate Social Responsibly

Acting

responsibly to satisfy society

Social Responsibilitymanagements
acceptance of the obligation to consider profit,
consumer satisfaction, and societal well-being
of equal value in evaluating the firms
performance.
Social Auditsformal procedures that identify
and evaluate all company activities relate to
social issues such as conservation,
employment practices, environmental
protection, and philanthropy.

Responsibilities of Business

Social Responsibility...
an

organizations obligation to maximize

its positive impact on stakeholders and to
minimize its negative impact

includes

legal, ethical, economic, and

philanthropic (discretionary) dimensions

Responsibilities to the General Public

 Responsibilities

Public

to the General

Public

Health Issues
Protecting the Environment
Recyclingreprocessing

of used materials for

reuse.
Green marketingmarketing strategy that
promotes environmentally safe products and
production methods.

Guidelines for Environmental Claims in

Green Marketing

 Responsibilities
Developing
Corporate

to the General Public

the Quality of the Workforce

Philanthropyact of an
organization giving something back to the
communities in which it earns profits.

 Responsibilities

to Customers

Consumerismpublic

demand that a
business consider the wants and needs of its
customers in making decisions.

 Right

to Be Safe

Consumers

should feel assured that what they

purchase will not harm them in normal use
Product

Right

Liability

to Be Informed

Consumers

should have enough access to

education and product information to make
responsible buying decisions

Wacky Warning Labels

 The

Right to Choose

To select

which goods and services they want

and need to purchase

The

Right to Be Heard

Should

be able to express legitimate

complaints to appropriate parties

 Responsibilities
Workplace

to Employees

Safety.
Quality of Life Issues.
Ensuring Equal Opportunity in the Job.
Age Discrimination.
Sexual Harrassment and Sexism
inappropriate actions of a sexual nature in
the workplace.

 Responsibilities

to Investors and the

Financial Community
Fundamental

goal of any business is to make

a profit.
Investors and the financial community
demand that businesses behave ethically as
well as legally.

Crisis Management
Is

an event that brings, or has a potential

for bringing, an organization into disrepute
and imperils its future profitability, growth,
and possibly its very survival (Lerbinger)
how to minimize all harmful impacts
Ethical consideration is very important
Company should develop advance planning