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To put in simple words, ethics is the principle of moral values which helps you to take actions that are considered as the right thing to do. However, doing what is 'right' is not that straightforward. Since everyone has different backgrounds and cultures, we therefore possess different conceptions and perceptions. This causes complication in the process of understanding the meaning of ethics as each person's point of view on what is ethical varies significantly.
Ethics is not a set of rules that should be followed inevitably but is a guideline to lead you to behave with integrity. It includes values such as equity, responsibility, honesty, and fairness. The importance of ethics can be seen from the fact that many of what were considered as ethical behaviors in the past has developed into law today. For example, stealing is known as an unethical act and is against the law as it is an infringement of human rights and justice.
Ethics in our daily life and in business management practice is slightly different. The ethics which apply in the business world are not just simply a matter of the fact that lying and stealing is wrong. It helps the organizations to act responsibly to all their stakeholders, including the environment surrounding them. It contributes to the process of decision making, giving a sense of ethical reasoning to the managers and employees how they should act in a situation of dilemma. Being ethical in a business activity may not seem so relevant to the prosperity of the business in the short term however, it brings great long-run benefits to the organization in the end and this is the reason why successful businesses try to act ethically even when the process may turn out to be costly.
Ethics cannot be practiced when one seeks for his advantages only despite the fact that there are other problems that should be concerned as well. Today, different industries are facing various ethical pressures as many businesses only regard increasing profit as their priority interest hence, don't perform ethically as it will increase their cost. These problems should be overcome through the compromises and efforts of different stakeholders in the industries for the benefits of everyone.
2.1 Ethics in Business Management Practice
The most important part about ethics in business is that the activity of the business should comply with the law, meeting the standards while it also follows its own clear aims and objectives of the organization and satisfying generally everyone who is involved in the business at the same time. Businesses should always take consideration of the interests and demands of all their employees, customers, suppliers, environment, and the public as they are the mainstay and the reason of their existence. Different stakeholders often have different interests which collide. However, those conflicts must be solved by making concessions and finding a common interest for the benefit and success of the business. Moreover, there is always a possibility where the business itself and the environment and the society find it hard to find an agreement, which is sometimes hard to solve. Therefore, it is important to find a midpoint where it is fair to both sides. Then is it possible for businesses to behave fully ethical?
The emergence of business activities started within the society. Therefore, it can be said that in order for the business to develop, the environment including the society in which it operates must develop too. Corporate social responsibility (CSR) is defined as the accommodation of corporate behavior to society's values and expectations. Milton Friedman has argued that "There is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as itâ€¦engage in open and free competition without deception or fraud." The consumer awareness towards social responsibility is increasing. Accordingly, company's attitudes toward society influence the consumers' purchasing decisions. Corporate social responsibility will contribute in businesses to gain productivity, competitiveness and sustainability, distinguishing itself from other businesses that don't consider corporate social responsibility.
Public opinion towards environmental problems is also becoming continually favorable. The trend in 'well-being' caused more consumers to prefer organic food. The reason for this is based on both economic and health reasons. Consumers are now willing to buy more environmentally friendly goods. Those kinds of goods are now described as 'green', meaning that it is not harmful to the environment and is considered healthy. The reason why businesses should perform environmentally is because to make sustainable development possible. Sustainable development is described as 'meets the needs of the present without compromising the ability of future generations to meet their own needs.' This is important as it allows the nature to keep itself fresh and providing us resources that we need at the same time.
By being green, the business can benefit in many different ways. Businesses must follow the environmental legislation. Some of the main environmental problems are related to waste disposal, recycling, replanting, and the consumption of scarce resources. If a business produce, transport, dispose, treat waste, they are likely to be affected by waste regulation. Also, if a business use substances that harm the ozone, they are likely to be affected by legislations that control or ban the use of these substances, and if they produce, import or export packaging waste in the public, they are going to be affected by the Producer Responsibility Obligations (packaging waste) Regulations. They will gain so much more by taking their commitment. By doing the environmental practices, businesses will gain improved reputation not only from the community but also all their stakeholders. Businesses can also save money by reducing the amount of waste they dispose of and resources and energy they use.
One of the main ethical issues in the business world is multinational companies' misuse of their power. Multinational companies often seek for opportunities and often go and operate in developing countries. However, there have been a lot of arguments about this. Multinational companies would bring the expert employees from their country and mostly hire low wage labors in order to reduce cost. It is also argued that they would come and extract the resources in the host country and gain the most out of it then leave the country afterwards, when they should actually try to be more helpful to the host country and help them to develop by such as reducing unemployment by providing jobs with appropriate wages. Nike has been sued in the past for using child labor in the process of making football. This have affected greatly on their public image and their brand. However, we cannot just judge them for being unethical because by using the child labor, the company can actually reduce their cost, which will satisfy their stakeholders as it will increase their profit. Customers will be satisfied with the products as well because the price might have decreased too due to the reduced cost. The only stakeholders who suffer from this case are the children labors. This is why it is very difficult to clearly state whether a business is acting ethically or not.
Another problem is providing consumers misinformation about certain products or services. Due to today's modern technology, consumers now have greater means to collect information about the market. However, many businesses still provide misinformation or false information that is lucrative to them in order to deceive the consumers so that they would purchase their products. This misinformation can harm the consumers, both physically and mentally, which then can affect the businesses negatively, which will definitely cause decrease in their profit as it will affect their reputation and at the same time, goes against the public law.
The emergence of black market is also a big issue that is concerned. Black market is a type of unofficial market that appears for example when the prices of inelastic goods rise or when the goods are banned. The black market gain profit by setting the price of the goods above the equilibrium price. These kinds of activities should be stopped as they are illegal, disrupting the balance of the economic order. The legal markets which sell those goods will be affected greatly as their profits will decrease.
There are different points of views on which how businesses can act ethically. In the consumers' perspective, businesses should guarantee the safety of the consumers by executing product testing before actually launching the products in the market so that the outcomes are fully known. Also, setting the right price level of the products, balancing its quality, providing after services, and investing the business's profit into research and development of their products so that the consumers will get improved products and services in the future is important. In the employees' perspective, treating the employees well with respect and providing them with an adequate payment is also an ethical behavior that should be performed as well. For the suppliers, it is important for the businesses to set the right price on their goods so that the suppliers will receive the right payment. And for the society, businesses can provide specific trainings to the public which the society needs, funding or sponsoring charities and non-profit organizations and also participating in, or hosting volunteer campaigns. Moreover, businesses should develop ethics awareness training programs to their employees and perhaps to the community as well so that everyone can get involved. Overall, it is essential for businesses to maintain good relationship with all their stakeholders, as they are part of their assets, affecting their business.
Tom Lloyd made the point that "The nice company will become more dominant not because it is more ethical, but because it is, in the long run, more profitable." Just like this, some of the advantages which can result from being ethical in business management practice are improved public image, relationships, reputation and increase in the range of customers which will lead the business to gain greater profit. This will accordingly allow the business to benefit from economies of scale, reducing their cost due to their increased market power, which will increase their profit even further. Moreover, the ambience of the workplace can improve and the business can prosper more rapidly through employee growth as the employee motivation will also increase due to having pride in their work for being ethical.
However, most of businesses' prior goal is to maximize their profit, so there will be cases where businesses might not be able to make concession with their stakeholders and the environment. How well the business response to their stakeholders in a way that satisfies everyone, while legally achieving their goal without harming the third parties shows whether the business is acting ethically or not. In my opinion, a business cannot be fully ethical as it is almost impossible to always satisfy every stakeholders involved in the business at a same level. Also, I believe that businesses will benefit in the long term if they perform ethically however, it doesn't mean that they must always sacrifice their priority interest, which is increasing their profit, just in order to satisfy all of their stakeholders. Being ethical involves being fair and equal however, if this is the case, then this wouldn't be fair for the business itself.
2.2 The UK Supermarket Industry
Supermarket is defined as 'a large store that sells a variety of food and household items to customers.' The fact that groups of retailers being able to purchase goods to sell in bulks has contributed to start this concept. In 1929, in Burnt Oak, North London, Tesco opened its first store. Since 19th century, Sainsbury had been selling dairy products however, from the 1920s it developed and started to sell other types of products as well. And in 1930, in Marble Arch, London, Marks and Spencer opened a flagship shop and after a year, they started to sell food products as well.
All the three brands mentioned above are included in the UK's largest supermarkets today. They all started as small shops in the beginning however, grew rapidly and spread diversely. They kept growing and sell more diverse range of products. There are significant numbers of different types of supermarkets however, only minorities of those companies are growing massively. Small stores have been continuously closing down at a fast rate over the past few decades, enabling the successful supermarkets to grow even more. These supermarkets have become so big that they now are capable of abusing their market power. This creates pressure to the farmers, other competitors, environment and the consumers.
An example of abusing their power is to raise the prices of goods. However, what is being concerned the most is that the firms can actually set the prices too low instead. Dominant firms can use their economies of scale, the absolute cost advantage due to its success of the business, and undercut other competitors. This situation is good for the consumers however on the other hand, is harmful to the suppliers and the competitors as the suppliers will get paid lower and the competitors will have to lower their price further in order to compete with them. Therefore, the supermarket cannot be fully ethical in this case because they cannot satisfy all their stakeholders.
2.3 Main Ethical Issues facing the Supermarket Industry
One of the main ethical issues facing the supermarket industry is the use of false advertisement. It is an act of labeling misleading information in order to persuade customers to buy their product. Overall, it is an example of lying. This can bring significant effects as it can hurt the customers. Many businesses are trying to deceive their consumers in a way that's not illegal. However, whether it's legal or not, all the information about what the consumers are buying should be on the label as they have the right to know what they are actually buying. It is not fair for the consumers as false advertisement make consumers to believe that false statements and waste their incomes on purchasing certain goods that aren't necessary to them.
Another issue is over packaging. Packaging is essential in many products for sanitary and safety reasons however; the problem is that today, businesses use more than they actually need in order to promote their branding. Over packaging increase the amount of wastes in our society and it wastes resources and fuels used in the distribution process. This not only is damaging to the environment, but will also cause businesses to get affected by the Producer Responsibility Obligations (packaging waster) Regulations, increasing their cost. Moreover, over packaging is an issue also because it can be deceitful to the consumers. Over packaging can increase the overall weight of the product which the cost for the producers were small compared to what the consumers think what they are actually buying. Last year, the UK supermarket was ranked as the worst packaging impact and now the UK government has recently announced that all supermarket food labels must show their carbon footprint, country of origin and animal welfare standards. Now some of the biggest UK retailers such as Tesco and Sainsbury have agreed to reduce their carbon footprint on their grocery packaging through weight reduction, increase in recycling and recycled contents.
The use of false advertisement and over packaging both can be described as being dishonest, which is basically considered as an unethical act. If businesses are to success in the long run, they should be honest with themselves, setting an example so that the community, consumers, and all their stakeholders can trust them and follow them. Doing such unethical acts will be harmful to themselves as it will affect negatively in their branding and will cost them a lot to recover.
In order to prevent these acts, the government should constantly monitor the firms' practices and see whether they are being legal, complying with the legislation and standards. Government intervention should be increased for the benefits of the stakeholders in the supermarket and the community. This is important as the monopoly power of the dominant supermarkets can cause the firms to abuse their power and bring negative effects to the society. If situations get worse, the government then should ban the activities or modify the laws strictly. Participation and care from the consumers can be another solution. If consumers take part, the market will anticipate and become even more considerable in what they do to satisfy the consumers as they are their important assets. This can bring improvement in their business management, service and the quality of the products. Moreover, creating corporate social responsibility reports and environmental audit reports would be helpful for them to comply with the law and different legislations. It would especially help them to improve, and prevent making same mistakes next time.
Ethics is a principle of guide that helps us to behave in a moral way. Many businesses today choose to act unethically for their own good. However, the fact is that at the end it all comes back and affect negatively upon them. It is important for businesses to perform in a way that is both socially and environmentally friendly. Although ethics is not a requisite principle, businesses that operate ethically will benefit in many ways. Being ethical actually saves cost for businesses as it allows them to balance with the law and legislations. The most important part is that this will plant confidence to all their stakeholders, including the public. It will therefore improve their management skills, public image and reputation, relationships between stakeholders and with the community, which will result increase the success and promise of the businesses.
Added to this, there are different ethical issues concerned in different industries. In the supermarket industry, there is a big concern towards the monopoly power of dominant firms. Some of the main ethical issues here are price setting strategies, use of false advertisement, and over packaging. These activities are harmful to all supermarket stakeholders and should therefore be prevented. Some of the solutions include government intervention, constant participation and care from the consumers, and firms' use of corporate social responsibility (CSR) and environmental audit reports to inspect and keep records of their performance for the future. This will act as a precaution and will help them to try to act ethically as possible. However, businesses cannot be fully ethical because it is always almost impossible to fulfill all the demands and interests of the stakeholders at an equal level. Moreover, the core target of most of the businesses is to maximize their profit. Therefore, it is not legitimate for businesses to always sacrifice and compromise for the benefit of all their stakeholders, which most of the times affect their profit.