Ethics, Corporate Social

Responsibility, Sustainability
and Governance in
International Business

By
Arsalan Ahmed
 Ethical Behavior and its Importance

■ Ethical behavior is about doing the right things for the company,
the employees, the community, the government and the natural
environment
■ Ethics, Corporate social responsibility, sustainability and
corporate governance form the four key components of ethical
behavior
■ Integrated strategic approach towards these four components
provide the firm with competitive advantages
■ Why is it imperative for firms that conduct International
Business to behave ethically?
Organizing framework for Ethical
Behavior in International Business

Corporate
Social
Responsibility
Ethics Sustainability

Corporate
Governance
Nike striving towards sustainability
Coca Cola giving back to the society
 Causes of Unethical Behavior

■ A study in the Harvard Business Review found that bad/

unethical behavior results when:
i. Top Management sets goals and incentives aimed at promoting
good outcomes (profits) that instead encourage bad behaviors
ii. Employees overlook unethical behavior in others because of
peer pressure and self interest
iii. Managers tolerate lower ethical standards in value-chain
activities suppliers or third party
iv. Unethical practices are allowed to accumulate in the firm
slowly
v. Bad means are justified by good ends
 Ethical Standards and Dilemmas
Globally
■ Are ethical standards uniform around the world?
■ Ethical standards often vary by levels of economic development
■ Relativism and Normativism
■ Following are the examples to deny the ethical uniformity:
i. Counterfeits in China, illegal practice in most of the countries
ii. Accepting expensive gifts in Africa, inappropriate in some countries
iii. CEOs compensation in United States, unacceptable in other parts
of the world
iv. Ban on advertising directed at children in Finland and Sweden,
while well accepted practice elsewhere
 Ethical Connections
■ Imagine you are a manager and visit a factory an affiliate owns in
Manchester, only to discover the use of child labor in the plant. Upon
studying the problem, you learn that child labor is accepted in many
developing economies even though girls are vulnerable and may be
abused or exploited, and work prevents children from attending
school, which would improve their prospects for a better life. There
are more than 50 million children working in India alone. However,
you also learn that without their children's income, families often go
hungry. If the kids are dismissed from the plant, many will turn to
other income sources, including prostitution and street crime. The age
at which children are deemed adults varies worldwide, sometimes as
young as 15 years. What should you do? Do you make a fuss about the
immorality of child labor, or do you look the other way?
 Ethical Challenges in International
Business
1. Corruption
■ More than 30% MNEs agree that corruption is a major concern in
International Business costing around 5% of global GDP ($2.6 Trillion)
■ Increasing business cost by up to 10%
Corruption is encountered in following ways in International Business:
i. Bribery
ii. Embezzlement
iii. Fraud
iv. Extortion and Blackmail
v. Money laundering
Corruption Perception Index, 2018
2. Unethical Management Practices:
■ A corporate culture that advocates profit over sustainability and
human welfare can lead to employee abuse, harmful procedures
and other unsustainable practices
3. Harmful Global Sourcing:
■ Sourcing inputs from sweatshop factories in which employees are
children or employees work long hours for low wages often in harsh
conditions
■ The use of third party suppliers is challenging for firms that procures
inputs from multiple factories operating globally
4. Illicit Products and Marketing:
■ Flawed products of packaging can lead to disastrous outcome for
public health and safety or for natural environment
■ Marketers making false claims about the quality and effectiveness
of a product
5. Intellectual Property Infringement:
■ Intellectual property refers to ideas or works that individuals or
firms create and includes a variety of propriety assets including
inventions, artistic, musical and literary works
■ For protection against intellectual property infringement,
trademarks, copyrights and patents are as intellectual property
rights
■ Intellectual property infringement arises in the form of piracy and
counterfeiting
■ China is the largest source of counterfeit products with share of
around 64%
■ International trade in fake goods is now 3.3% of the world trade
 Corporate Social Responsibility

■ Corporate social responsibility refers to operating a business in a

manner that meets or exceeds the ethical, legal and commercial
expectations of stakeholders
■ Examples of Corporate Social Responsibility values include:
i. Avoiding human right abuses
ii. Eliminating child labor
iii. Avoiding workplace discrimination
iv. Protecting the natural environment
v. Undertaking philanthropic efforts
 Settings for
Corporate Social
Responsibility Workplace

Corporate
Community
Social Marketplace
Responsibilit
y

Environmen
t
Best CSR Initiatives
 Sustainability

■ Sustainability implies the development and execution of company

practices that avoid harming the ability of future generations to
meet their needs
■ The sustainable firm carries out value chain activities an ways that
protect and preserve economic, social and natural environments
■ Examples of sustainable practices include:
i. Beneficial agricultural practices
ii. Water conservation
iii. Reduced energy and fuel consumption
iv. Increased use of solar and wind energy
 The Role of Corporate Governance
■ Implementing ethical conduct, CSR and sustainability is challenging
for most firms especially those with extensive global operations
■ Leading companies implement corporate governance creating
code of ethics and code of conduct
■ Corporate governance that ensures ethical practices, CSR and
sustainability provides numerous benefits to the firm in following
ways:
i. Increased employee commitment
ii. Increased customer loyalty and sales
iii. Improved reputation and brand image
iv. Reduced likelihood of government intervention
v. Reduced business cost
vi. Improved financial performance