Chapter 21 - Business Ethics and Social Responsibility

Ethics is about moral rules. Listening to ones conscience and distinguishing between right and wrong. Ethical business decisions should involve choosing a course of action which is legal, decent and honest. eg. a business choosing not to sell a tasty, legal but unhealthy food product. Sustainable Development - industrial growth/advancement must not undermine natural resources of planet. Code of Ethics - guidelines to assist decision making, ensure moral viewpoint is considered Environmental Impact Assessment - requirement for new industrial proposals. Detailed examination of impact on environment. Environmental Protection Agency - state body responsible for monitoring pollution, issuing waste licences etc. Can prosecute firms who pollute excessively. Whistle Blower - employee who makes public info relating to unethical/irresponsible activities carried out by employer.

Reasons for Unethical Decision Making

1) 2) 3) 4) 5) Greed - wealth and power Profit - maximising profits Fear - employees driven to act unethically Lack of Regulation - inadequate/poorly enforced legislation Lack of Leadership - bad examples set my senior management

Unethical Business Practices

1) 2) 3) 4) 5) Bribery/Corruption - win contracts/influences decision making Child labour - cheap labour - maximise profits Product testing Pollution/Illegal Dumping Overcharging - exploiting venerable customers (e.g. prescription drugs)

Social / Ethical Responsibilities

1) 2) 3) 4) 5) 6) Employees - safe and secure employment, fair wages, legislation Customers - good quality products/service, goods are safe, fair price Investors - fair return on investment, transparent and honest Suppliers - pay on time, honour all contracts Government - pay taxes, obey legislation Local community - consult and inform on relevant issues, avoid pollution

Characteristics of Environmentally Responsible Firms

1) Conduct Environmental Audits - detailed independent studies of the impact of business operations on environment. Recommendations to minimise impact. Examines current and proposed activities. e.g. Ikea (insists suppliers comply with local laws, follow proper health and safety and environmental procedures and do not employ child labour) 2) Minimise Pollution 3) Recycling - BMW cars 4) Green Culture - corporate ethos which promotes environmental responsibility 5) Raw materials - renewable/sustainable sources

Costs to Business
1) 2) 3) 4) Paying fair wages and conditions Providing customers with honest inform without exaggeration may reduce sales Sourcing environmentally friendly materials Safe disposal of waste

Benefits to Business
1) 2) 3) 4) Proper waste management and recycling - saves money in LT - less wastage of materials Avoid being fined - green taxes. Socially responsible firms - reputation and customer loyalty (e.g. Body Shop - marketing tool) Easier to recruit and motivate staff (e.g. Richard Reed - Innocent)

Encouraging ethical behaviour

1) 2) 3) 4) 5) Establishing code of ethics Encouraging whistle blowing Modelling ethical behaviour - senior staff Staff training - code of ethics presented to staff at induction Discipline procedures/rewards - fines/demotion/dismissal or bonuses/promotion