Discuss the issue Ethical Business and how it relates to Corporate Social Responsibility (CSR). With reference to sources, provide examples of companies or organisations which demonstrate ethical behaviour and evaluate their motivation. The ideas of Business Ethics and Corporate Social Responsibility are oftentimes discussed in a similar manner even though they both have distinctly different definitions. As the name suggests, the term ethical business or business ethics is associated with a mixture of both ‘ethics’ and ‘business’.
According to Oxford English Dictionary (2010) a business is the buying and selling of products or services with an aim of profit making. Ethics, on the other hand is more complex in that it involves human judgment, between what is right and wrong, in regards to activities and their consequences towards the society (Velasquez, et al. , 2010). Chryssides and Kaler (1993) have drawn attention to the fact that in the same way that political ethics is related to honouring the right and wrong in governmental
concerns, or medical ethics being identified with the morality in medical practice, business ethics can simply be defined as the issue of morality within the business industry whereby “morality is taken to mean moral judgments, standards and rules of conduct” (Ferrell and Fraedrich, 1997, p. 5). Therefore, ethical business can now be defined as the ethics or principles that act as one’s behavioral rules and regulations when dealing in the world of business (Ferrell, et al.
, 2010). On the other hand, reference to The World Business Council for Sustainable Development explains CSR by putting across that a business has responsibilities and obligations that go beyond the workplace (WBCSD, 2001). This essentially signifies the voluntary duty that organisations participate in to fulfill the demands of a broader range of stakeholders (Jamali and Mirshak, 2006).
Based on the definitions stated above, it would seem that CSR and business ethics share similar theories, considering the fact that both of their notions go further than profit-based decisions and into values along with concerns for the society as a whole (Mullerat, 2010). Having said that, it is certainly interesting to see that most people are inclined to link CSR with the positive operations of a firm yet when a business engages in a non-moral act, they set the stunt side by side with business ethics or rather, the lack of (Crane and Matten, 2010).
The question of how business ethics relates to CSR can now be evaluated more closely. Some examples of issues in ethical business as well as CSR include harming the environment and sweatshop labour on top of fraud, health and safety and campaigning (IBE/Ipsos MORI 2009, cited in Irwin, 2010). This essay will comprehensively explore the motivations of firms that have demonstrated brilliant presentations of business ethics, such as Microsoft Inc. as well as examining the motives behind their ethical decisions.
Additionally, it will also look at other corporations that have been linked with having high regards to ethics in business yet have been accused in making poor business choices in the recent years, for instance H&M’s disposal of unsold clothing items in New York in 2010 (Daily Mail Reporter, 2010). Until recent years, Hennes&Mauritz, more commonly known as H&M has been highly admired for launching the use of organic cotton into the high street clothing (Vijayaraghavan, 2010).
Green Retail Decisions (2011) reports that it even succeeded in surpassing their organic cotton goal usage in 2010 by tripling their original aim, manufacturing 15,000 tonnes of organic cotton. Furthermore, the company was also proud in producing high street attires out of 16,000 tonnes of fabric that have been recycled (Green Retail Decisions, 2011). Be that as it may, when the firm threw away unsold clothes outside of one of its retail outlets, many were not only left appalled but also questioning their business ethics (Daily Mail Reporter, 2010).
In the same year, H&M were involved in two more shocking headlines in the news, one of which includes the contamination of the organic cotton textile with GM, and the other being a suspicion of unsustainably made clothes (Vijayaraghavan, 2010). As previously stated, H&M is widely respected for working with organic materials on their products. However, when genetically modified cotton was found in random product test conducted in a research lab, they were left with nothing to be applauded for.
Hence, it is clear that this particular case study provides contradicting information on H&M’s aims and motivations towards ethical decision-makings within their business. Even though they have been acceptable in their business ethics, for many of their stakeholders, the four issues specified above may heavily indicate otherwise. Another good example of a company with a similar situation is Coca Cola alongside its recent endeavours with ethical crises. Ferrel et al.
(2011), in their book write that the company has been facing various allegations regarding their ethical misdemeanours since the 1990s, some of which include racial prejudice, pollution and consumption of natural resources. The claim against one of the world’s most acknowledged beverage companies, Coca Cola, otherwise known as Coke, for the practice of racial discrimination within their working environment was taken to court in April 1999 (Winter, 2000).
In his article, Winter (2000) reports that Coke practiced a method of pay scale that is based upon a hierarchy whereby employees of African American background were situated at the bottom, earning $26,000 on average less than white workers in a year. Although the company denied all charges at the time, the public was clearly upset, resulting in a decline of their shares at the end of the 90’s (Fairfield, 2007). As a consequence of this, Coca
Cola lost one of their main investors and biggest shareholder of 17 years, Warren Buffet in 2006 (Teather, 2006). Having their reputation jeopardised, Coca Cola announced the establishment of a new department to their company, the diversity group (The New York Times, 1999). Since the formation of this group, Coca Cola has been voted 46th on the DiversityInc’s top 50 list of businesses with the best practices along with coming 6th in The DiversityInc Top 10 Companies for Blacks and Latinos (DiversityInc, 2012).
In addition to this, Black Enterprise magazine has also awarded the organisation with numerous awards honouring their commitment to establish a working environment that is accepting of different cultures along with featuring the company in the Black Enterprise magazine’s yearly 40 Best Companies for Diversity list (Staff, 2012). DiversityInc (2012) also reports that Coca Cola donates forty percent of their humanitarian effort to culturally diverse non-profit organisations, such as their recent contribution to the Martin Luther King, Jr.
National Memorial Project Foundation. With that in mind, their ethics in business can be considered as acceptable to the public eye and it is almost unthinkable to think that they were accused of race-related discrimination just over a decade ago. The cases of H&M and Coca Cola are referred to in this essay to express the similarity in their questionable motives. H&M’s claim of being environmentally conscious with their utilisation of organic cotton within their business proves irrelevant after being caught with immoral acts that were stated earlier.
The genuineness of their principles in business ethics is flawed by this flagrant contradiction since one would argue that if their sense of responsibility for the environment were great, they would not be accountable for such unethical activities. On the other hand, Coca Cola only responded to possessing ethics in their business environment after being sued and attracting negative media attention, not including the obvious decline in their sales even though they still remained as the world’s leading carbonated cola in 2006 (Fairfield, 2007).
Thus, similarly the sincerity behind Coca Cola’s motive to develop a diversity group and their emphasis in cultural acceptance is also suspicious because these were only developed and implemented after the public uproar. Although it may be surprising, Microsoft Inc. can also be compared to Coca Cola and H&M to an extent in terms of the motivations behind their CSR works as well as business ethics practices. The co-founder and chairman of Microsoft Inc. , Bill Gates is widely known and celebrated for his great donations to the public.
In 2011, Microsoft Inc. won the award for being ‘Most Ethical, beating Google and Facebook after making donations of millions of dollars to non profit organisations and charities, establishing plans of actions for economic development as well as heightening their means of central reporting procedures (Smith, 2011). Having said all this, it is shocking to note that only just 15 years ago, a board experts at a panel in a well-known seminar held in California could not answer and decide whether Microsoft Inc. were an ethical corporation. (Spinello, 2003).
Spinello (2003) continues to write that not only were the panel of experts unsure of the answer, the audience, who were consisted of scholarly representatives did not know how to respond either. This is because Microsoft Inc. has been involved in an antitrust inspection worldwide and some Americans have referred to this event as the “antitrust trial of the century” (Mota, 2005). The antitrust laws, otherwise known as competition laws were introduced by the American government to protect customers from being exploited by companies who practice unfair competition in the market (Investopedia, 2011).
Gates is also the primary shareholder in America’s second biggest waste administration called the Republic Services (O’Hagan, 2013). In her article O’Hagan (2013) questions how the co-founder of the Bill and Melinda Gates Foundation can spread the word to publicise vaccinations for poliomyelitis, a disease that can cause a temporary or permanent paralysis while “Republic Services is locking out its workers as part of an industrial dispute”, a policy that may put a risk to the Americans’ sanitary.
There is no doubt that Microsoft Inc. ’s involvement in charity work over the years have been generous and can be regarded as a model example of a company who takes their corporate social responsibilities seriously. However, it is also evident that while their voluntary organisations are remarkable, their business practice leaves with less to be awed for. Hence, similar to the H&M case brought up previously, there is a contradiction between Microsoft’s work with charity and some of their immoral activities in the workplace.
It is also comparable to Coca Cola in that it only came to be involved in large ‘corporate citizenship’ after the aftermath from their antitrust cases (Smith, 2011). It is safe to say that most companies are fighting to prove their good works through all types of methods, charity works in the case of Microsoft Inc. as well as forming a new diversity department in the case of Coca Cola. With thousands of other corporations yearning to prove their sincerity in making ethical decisions and practicing moral behaviour in the workplace, it is becoming tougher to examine just how responsible and principled an organisation is (Kwan, 2012).
Kwan (2012) writes that this issue can be solved with the help of a B Corp certification. B Corp stands for Benefit Corporations, which is one of the latest kinds of corporate structure, acting as a third party classification to calculate the effects of an organisation to the environment (Fritz, 2013). Balch (2012) argues that the term benefit not only considers social and environmental aspects of a business but also its financial side as well, where he insists that 21st century capitalism would be a hybrid of generating social value together with maximising financial returns.
B Corps essentially “provides what is lacking elsewhere: proof” to support that the specific company is in actual fact practicing what is proclaimed by them, hence, useful for firms whose focus is to not only make profit but also putting social and environmental interest a primary concern while doing so (Rosenberg, 2011). Although certifying B Corps to sincere businesses with aims of increasing positive social and environmental impacts sound fair, smaller and newer companies may say otherwise (Akalp, 2011). In their academic journal, Helsey et al.
(2013) report that a company must be prepared to invest on their time and money to obtain the status. Depending on the area that they are operating in, the business must able to relate themselves with certain criteria listed, such as “providing low-income or undeserved individuals or communities with beneficial products or services” (Helsey et al, 2013). Fritz (2013) also confirms that a company must be assessed in accordance to the B Ratings System in which they must score at least 80 points out of 200 on top of consenting to changes in their legal articles of incorporation.
Furthermore, there is a fee involved, which varies depending on the revenue of the firm (Akalp, 2013). This implies that organisations with strong awareness and appreciation of responsibilities may choose not to be certified with B Corps and thus put across a sense of false portrayal to companies without the B Corp certificate (Akalp, 2013). Therefore, it can be argued that larger companies with a higher source of income can afford to pay more to be certified. In addition to this, there have also been criticisms on the marking boundaries of the certification process.
As stated earlier, companies need to score a point of 80 out of the maximum 200. Horatio (2012) disputes that this only indicates a 40% passing score for a company to be certified, which he claims as “not much of a standard” and “essentially worthless”. With that in mind, a case could be made that there is now a limitation to the authenticity of the certificate since large companies can afford to pay their way through the process and most probably pass the low 40% passing requirement.
The purpose of this essay has been to convey that most companies, regardless of their past, recent or current reputation are never completely ethical in their business activities and that in one way or another, they have been associated with its share of moral negligence. With the examples used in the essay, it is safe to say that most companies that operate in what is considered to be as ethical to the public are only doing so to receive public attractions, and consequently earn more profits and success to the company.
It is important to draw attention to the fact that there is a fundamental difference between what a company does and what their beliefs are. Just because a company is praised for their CSR related activities and was voted amongst the best of companies with high business ethics performance, this does not indicate that they are doing so for the sake of the planet or the people. If anything, this essay has been stating otherwise, demonstrating that most ethically responsible organisations are only involved in ethical activities to draw consumers in, thus, increase their profit.