课 20, 主题 2

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4-4-2-ethics

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An introduction to ethics

Business ethics refers to the principles and norms that govern business behaviour
The ethics of a business will determine how it operates and its decision-making process
Unethical actions can damage the brand and result in a loss of profitability
- Unethical actions are often pursued, as they result in higher levels of profit for the business (or its owners)
- Customers around the world are putting more and more pressure on brands to behave ethically
Businesses are being judged more on how they handle the following issues

Ethical considerations

Ethical considerations explained

Stakeholder conflicts

A stakeholder is an individual or group that has an interest in or can be affected by a business
Different stakeholders have different levels of power and different priorities, which inevitably creates the potential for conflict

Conflicts between stakeholders

Conflict	Explanation
Management vs workers	Management may be more focused on output or reducing costs than on worker safety or creating a positive working environment Workers want to be safe and have a comfortable environment in which to work
Management vs owners	The owners (shareholders) want management to maximise the business’s profits and, for example, be less interested in the mental wellbeing of the employees Management works daily with the employees and will often sacrifice some profit in the interest of looking after workers’ health and mental wellbeing
Company profits vs resource depletion	The owners (shareholders) aim to maximise output so as to generate increasing levels of profit Higher output requires more rapid usage of natural resources and generates more environmental damage

Pay and working conditions

Multinational corporations (MNCs) often operate in countries that have different employment regulations and working conditions
- MNCs need to decide if they will comply with the regulations of their base location or the other country
MNCs may demonstrate unethical behaviour by exploiting workers in LEDCs by paying them lower wages
- MNCs argue that the wages they pay provide a decent standard of living within that country
- In 2015, Apple came under scrutiny as its production facilities in China were found to pay workers approximately $1.85 an hour, nowhere near enough to cover workers’ living expenses
Some MNCs also behave unethically by providing poor working conditions in order to cut costs
- Factories and warehouses with poor working conditions are referred to as “sweatshops”
  - Nike was accused of using sweatshops in countries such as China and Vietnam, paying workers just 14 cents a day
Another issue with MNCs is child labour, where school-aged children are working extremely long hours
- Starbucks was found to have children under 13 working 40-hour weeks in Guatemala picking beans for as little as £5 a day

Environmental considerations

Climate change and global warming have become a priority for governments across the world
Governments are encouraging businesses to improve the environmental impact of their business activity

Current environmental issues

Issue	Explanation
Waste management	Many developed countries have regulations about how businesses should dispose of their waste LEDCs usually have less regulation and enforcement on waste management There is usually poor waste management infrastructure MNCs can also dispose of waste in LEDCs at a cheaper cost, which allows them to maintain their high profits Four major MNCs (Coca-Cola, Pepsi, Nestle and Unilever) dispose of half a million metric tonnes of plastic across six developing countries (Tearfund, 2020)
Emissions	Emissions are often released from factories or from products made by MNCs E.g. the Carbon Majors database report found that just 100 companies are responsible for 71% of the global emissions that cause global warming The emissions MNCs produce have a negative impact on local communities, causing health issues such as asthma, cancer and skin irritations

Issue

Explanation

Waste management

Many developed countries have regulations about how businesses should dispose of their waste
LEDCs usually have less regulation and enforcement on waste management
- There is usually poor waste management infrastructure
MNCs can also dispose of waste in LEDCs at a cheaper cost, which allows them to maintain their high profits
Four major MNCs (Coca-Cola, Pepsi, Nestle and Unilever) dispose of half a million metric tonnes of plastic across six developing countries (Tearfund, 2020)

Emissions

Emissions are often released from factories or from products made by MNCs
- E.g. the Carbon Majors database report found that just 100 companies are responsible for 71% of the global emissions that cause global warming
The emissions MNCs produce have a negative impact on local communities, causing health issues such as asthma, cancer and skin irritations

Supply chain considerations

The supply chain consists of all the suppliers involved in the manufacturing of a product/service
Many MNCs have suppliers in different countries, and increasingly, they are held accountable for the working conditions of these suppliers
Many MNCs are now taking action to reduce unethical labour practices as part of their corporate social responsibility (CSR) practices

Issues with child labour and exploitation of labour in the supply chain

Child labour

Exploitation of labour

Some MNCs have manufacturing facilities in countries where child labour is common
- Usually in areas where children are working to generate income for the family
MNCs using child labour in their supply chain face backlash, which can damage their brand and affect sales
- E.g. there were protests outside the Primark Oxford Street store after a documentary revealed that child labour was used in its factories in Bangladesh

Exploitation of labour can take the form of low wages and poor working conditions
- E.g. workers having to work long hours and with poor ventilation
MNCs are under increasing pressure from governments, customers and institutions, such as the International Labour Organisation, to take action to ensure that their products and services do not involve exploitative labour practices

Marketing considerations

When developing their marketing strategies, MNCs must consider the cultural and social differences in the countries in which they operate

Marketing considerations for MNCs

Misleading labelling	Inappropriate promotional activities
Labelling must comply with the regulations of the country The information must be correct and not include any false information aimed at generating higher sales Examples of misleading information include false information about a product’s: Size Content Features Functionality E.g. Volkswagen was found to falsely promote “clean diesel” vehicles and had to pay approximately $34bn in fines This severely damaged the brand	Promotional activities should not be offensive or illegal E.g. Nivea had to pull its “White is purity” campaign for its deodorant in the Middle East, as the public believed it was promoting white supremacy

Misleading labelling

Inappropriate promotional activities

Labelling must comply with the regulations of the country
- The information must be correct and not include any false information aimed at generating higher sales
Examples of misleading information include false information about a product’s:
- Size
- Content
- Features
- Functionality
E.g. Volkswagen was found to falsely promote “clean diesel” vehicles and had to pay approximately $34bn in fines
- This severely damaged the brand

Promotional activities should not be offensive or illegal
- E.g. Nivea had to pull its “White is purity” campaign for its deodorant in the Middle East, as the public believed it was promoting white supremacy

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