When considering the use of business ethics in organisations big and small, which trade on a national and international basis; it is important to assess whether using business ethics is the way forward for organisations and businesses as a whole. This essay will assess this argument in a balanced fashion by looking at the advantages and disadvantages of business ethics whilst using real examples of companies that embrace these ethics with those who do not. This essay will conclude that business ethics is the way forward for businesses and that they should be practiced in day to day operations of organisations.
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What are Business Ethics?
To begin with, it is important to highlight what business ethics actually are and how organisations embrace these ethics. Business ethics has the accepted definition of “ rules, principles and standards for deciding what is morally right or wrong when doing business” (Cambridge University Press 2011). In short, business ethics are very similar to ethics practiced by society such as upholding moral values and practicing in the interest of others however, in regard to ethics associated with business it can include the likes of how international companies approach certain practices within Third World countries or how members of staff are treated internally within the company. Parboteeah and Cullen (2013) describe business ethics as principles and standards which help to guide a business. When it comes to evaluating how ethics are embraced in practice; understanding how organisations incorporate ethics in daily procedure is crucial when it comes to contrasting alongside those who do not implement business ethics as successfully.
How Ethics are Embraced in Practice
Organisations such as Ethisphere measure corporate ethical standards and award companies that are practicing more ethically worldwide to create global transparency to the companies moral and ethical methods as stated by Ethisphere (No date). Ethisphere is an organisation that wants to bring leading global companies to define but also promote best practices that works for ethics and compliance This organisation holds an honouree list every year to which companies expand their positive impact on global society and are then able to see increasingly better performance results.
An example of an organisation that has been previously seen to struggle with embracing ethical methods is Coca-Cola. In 2000 Coca-Cola commenced bottling operations in Kaladera in which the following year saw ground water levels falling. This meant great loss to the agricultural village due to farmers losing income as a result and locals walking further to get water to feed their families. In years to come Coca-Cola agreed to a voluntary assessment into the plant undertook by the University of Michigan. One recommendation made was to close this plant down and Coca-Cola initially ignored this (Khanka 2015). Since then in 2016, Coca-Cola made the decision to close the plant down. A similar issue has arisen in Tamil Nadu where over a million traders have made the decision to boycott fizzy drinks which does include the likes of Coca-Cola due to the exploitation of water sources. (Doshi 2017). Coca-Cola have also been seen to face ethical issues within Columbia in previous years. This is a primary example of how a large company has failed to embrace business ethics in their practices.
On the contrary, other organisations have embraced business ethics to their full potential and in contrast with the example of Coca- Cola are the likes of Starbucks. Starbucks in comparison to Coca-Cola embraces business ethics on a day to day basis with the previously mentioned Ethisphere naming Starbucks as one of the words most Ethical companies as written by Starbucks Newsroom (2018). The difference with Starbucks is they have embraced business ethics in large considering their social impact as well as their environmental stance. Starbucks rely heavily on sourcing coffee and they claim ‘99%’ of their coffee is ‘accredited by conservation international’ under their CAFE Practices programme (Starbucks, no date). Starbucks have made a big ordeal out of sourcing Fairtrade ingredients but have also tried to improve the living standards of those who are harvesting the coffee beans for the use in their coffee houses. The values of Starbucks are as follows: to creature a culture of warmth as well as belonging where everyone is welcomed, to act with courage by fighting the status quo and finding new ways to grow their company and each other, Starbucks also believe being present and connecting with transparency and dignity. Lastly Starbucks believe in delivering the very best in what they do and will be held accountable for any results achieved. Starbucks use the phrase ‘We are performance driven, through the lens of humanity.’ Starbucks (No date). This is merely an example of how two different businesses with great influential power that both practices internationally have embraced business ethics in a contrasting manner, as well as a real perspective of how large organisations don’t follow business ethics as closely as society expects them too.
To assess the examples regarding businesses embracing ethics in a modern-day society, it is important that there is a full understanding of how these ethics can affect different factors internally and externally within an organisation. This was touched upon earlier with the analysis of Coca-Cola and Starbucks but there are hundreds of other real-life examples that could have been used to portray this argument. However, with the companies that have been assed, it should allow for readers alike to make their own informed decisions on whether organisations should embrace ethics or disregard them completely. When it comes to the question of whether business ethics is actually the way forward for organisations. This essay needs to evaluate how business ethics can be beneficial to an organisation in terms of their brand image and social awareness but how business ethics can also be detrimental to a company’s practices in ways of profit reduction and social acceptance.
It can be repeatedly seen that companies with high sustainability are more aware of stakeholder relationships, such as those made with employees, consumers and Non-governmental organisations in an environmental context whereas, low sustainability companies will follow the traditional approach in regard to the business model with profit maximisation as suggested by Jobber and Ellis-Chadwick (2016). When looking into suggestions as to why organisations shouldn’t embrace business ethics, it starts with profit being affected as a result of outsourcing certain products as mentioned previously with low sustainability companies. Fairtrade suppliers may prove to be much costlier when compared with a cheaper and less sustainable alternative. It is not only sourcing materials and ingredients that prove to suffer as a result but large companies too; noticeably in the clothing industry tend to use sweatshops in developing countries.
Companies such as H&M and Gap have been found to use these types of manufacturing methods in which workers are paid low rates to produce ‘quick turnarounds and low overheads’ (Hodal 2018). Now from a business entrepreneurial perspective, quick turnarounds and low overheads is often what most companies desire to have. This sends profit soaring as a result and this can arguably be a reason as to disregard business ethics to maximise business output. Another argument towards overlooking business ethics is that of the competitive nature within the business environment. Many companies focus on business ethics and talk with great enthusiasm in regard to ethical methods. However, in the analysis of Ruddell (2004) it is implied that business leaders disregard business ethics and live by the ‘Credo: business is business.’ Without this mentality the competitive market will take advantage of the ethical values being imposed.
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Comparing Arguments For and Against Business Ethics
So, it can be better for a business to disregard ethics as it can be more beneficial for the company in the competitive environment given that the market changes at a rapid rate on a daily basis with new companies entering all the time. Acting ethically can potentially hinder these proceedings and mean a company can lose certain elements for example, market share. Some believe that business should be kept separate from ethics and that ethical beliefs only hinder business. Laws such as The National Minimum Wage Act 1998 in the UK already ensures a set amount of income and other laws which already protect workers and consumers rights and so forth. The attitude can be that, why should business act more ethically when there is no legal obligation for them to do so? If an organisation is acting in compliance with the law and follows legislation then who is to say that they are not fulfilling their ethical obligation, despite following laws that are ethical in nature; it can be argued that by following the Governments laws is enough and in theory it is. There is no obligation for a business to practice ethically, only that of moral obligations. This is a prime example of why perhaps businesses should not follow business ethics when they are already adhering to ethically inspired laws.
However, despite the arguments against business ethics, there are often strong arguments towards why a business should embrace ethics within their operations. The argument begins with business ethics being a driver for an improved society. It has been argued that there have been times in history where employees have been discriminated against as well as exploited by businesses. Business ethics have led to equality and fairness in the working environment and as a direct result has helped produce certain laws being imposed; which has benefited society as a whole which Fernando (2016) illustrates. Business ethics are the main foundations for workers and consumers throughout their lives in respect to buying and selling. Following business ethics is quite plainly like being a good human being. It’s about protecting what matters and ensuring that any worked carried out falls within the guidelines set in place. An argument for business ethics being practiced is that, society is much more conscious about how businesses carry out operations. Stopping unnecessary plastic being used in packaging movement is a prime example of a time in which people have seen what is going on and is calling for a substantial change. Businesses have taken this on board and have acted appropriately.
The main focus is on millennials and their beliefs; ‘Millennials prefer to do business with corporations and brands with pro-social messages, sustainable manufacturing methods and ethical business standards.’ Forbes (2017). This is why businesses should focus on business ethics closely as the new generations are expecting more ethical processes as well as buying more ethically as a result. Society views are changing as a whole and what consumers expected 50 years ago is not what consumers seem to expect now. Crane and Matten (2015) highlight the importance of business ethics by stating businesses have to comply with these ethics due to greater pressure applied on them by stakeholders. If done effectively and there is a balance between the challenges and how to respond to them, increases the performance of their economic role in an effective manner. Imposing business ethics is not only benefiting those around but the business itself. It is making them practice to a better more sustainable standard, which is a great positive as the business can better themselves internally. Improving operations and excelling in particular areas are important to progress in today’s economy.
To conclude, to be an organisation that practices ethical business practices puts them at the forefront of a bettering society. As many arguments brought forward previously stated, business ethics is about morals and upholding social values. Working in the interest of the environment and employees increases moral and overall public image. Working unethically and against business ethics suggests there’s nothing more to the company other than profits to which millennials and younger consumers have been driving closer towards ethically produced products as displayed by Hancock (2017). People are wanting a more ethnically diverse business option; this is where business ethics can play a big role. Given the arguments stated throughout, it can be strongly suggested that business ethics is and will be the way forward for organisations as the arguments for greatly outweigh those against. Given the current transparency of businesses and how they operate, it’ll be more beneficial from an organisations point of view to follow business ethics in day to day running of the business.
- Cambridge University Press (2011) Cambridge Business English Dictionary. Available at: https://books.google.co.uk/books/about/Cambridge_Business_English_Dictionary.html?id=XnAEiEaSPikC&printsec=frontcover&source=kp_read_button&redir_esc=y#v=onepage&q&f=false (Accessed: 5 November 2018).
- Crane, A and Matten, D (2015) Business Ethics: Managing Corporate Citizenship and Sustainability in the age of globalization. Available at: https://books.google.co.uk/books?id=J8-SDAAAQBAJ&printsec=frontcover&dq=why+should+we+embrace+business+ethics&hl=en&sa=X&ved=0ahUKEwjmv4WM3L3eAhUlB8AKHWftD_IQ6AEIOzAD#v=onepage&q=why%20should%20we%20embrace%20business%20ethics&f=false (Accessed: 5 November 2018).
- Doshi, V. (2017) 'Indian traders boycott Coca-Cola for 'straining water resources' [online], The Guardian, 1 March, Available at: https://www.theguardian.com/world/2017/mar/01/indian-traders-boycott-coca-cola-for-straining-water-resources. (Accessed: 1 November 2018)
- Ethisphere (No Date) About Ethisphere - Ethisphere institute Available at: https://ethisphere.com/about/ (Accessed: 6 November 2018).
- Fernando, A.C. (2016) Business Ethics An Indian Perspective. Page 16. Available at: https://books.google.co.uk/books?id=Jzo8BAAAQBAJ&printsec=frontcover&dq=business+ethics&hl=en&sa=X&ved=0ahUKEwiUurDom7veAhXOTsAKHSSIBbIQ6AEIKDAA#v=onepage&q&f=true (Accessed: 4 November 2018).
- Hancock, A. (2017) 'Younger consumers drive shift to ethical products', Financial Times, 23 December.
- Hodal, K. (2018) 'Abuse is daily reality for. female garment workers for Gap and H&M, says report', The Guardian [Online], 5 June, Available at: https://www.theguardian.com/global-development/2018/jun/05/female-garment-workers-gap-hm-south-asia (Accessed 2 November 2018)
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- Landrum, S. (2017) 'Millennials Driving Brands to Practice Socially Responsibly marketing. Forbes, available at: https://www.forbes.com/sites/sarahlandrum/2017/03/17/millennials-driving-brands-to-practice-socially-responsible-marketing/#ca316454990b. Accessed: 5 November 2018.
- Parobeetah, K.P and Cullen, J.B. (2013) Business Ethics. Available at: https://books.google.co.uk/books?id=9nkgW2mjd0gC&printsec=frontcover&dq=what+is+business+ethics&hl=en&sa=X&ved=0ahUKEwiEu-295L_eAhXRa8AKHctQA0QQ6AEIXTAJ#v=onepage&q&f=false (Accessed: 6 November 2018)
- Ruddell, L. (2004) Business Ethics - Faith that works. Available at: https://books.google.co.uk/books?id=jU2VDr62rnUC&printsec=frontcover&dq=business+ethics&hl=en&sa=X&ved=0ahUKEwiUurDom7veAhXOTsAKHSSIBbIQ6AEIUzAI#v=onepage&q=business%20ethics&f=false (Accessed 3 November 2018)
- Starbucks (No date) Taking Responsibility. Available at: https://www.starbucks.co.uk/responsibility (Accessed: 2 November 2018).
- Starbucks (No Date) Mission Statement: Our Mission. Available at: https://www.starbucks.co.uk/about-us/company-information/mission-statement (Accessed: 6 November 2018).
- Starbucks Newsroom (2018) 'Starbucks named one of the world's most ethical companies.' Available at: https://news.starbucks.com/news/starbucks-worlds-most-ethical-companies-2018 (Accessed: 2 November 2018).
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