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Ethical Analysis Of Investment Into The Alcohol Industry Commerce Essay

2663 words (11 pages) Essay in Commerce

5/12/16 Commerce Reference this

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Virginia Tech invests in multiple initiatives each year, being ethical in doing so is a job of its own. Analyzing all aspects of the investment and how it will impact financially, socially, environmentally, and ethically are extremely pertinent.

Virginia Tech receives donations of every size, daily. Virginia Tech’s total endowment value as of September 30, 2012 was $610,035,977.00, most options are limitless for Tech. The mission of the Virginia Tech foundation ultimately states that the foundation takes the funding and manages the assets to help supplement funds. The foundation also offers funding for standing initiatives as well as new initiatives ‘requested by the university.’ They state that this is all while being a “corporate citizen,” so for interests that not only affect the university (Virginia Tech Foundation, 2011).

Virginia Tech seeing themselves as a ‘corporate citizen,’ is an important note to stop on. Being ethically and socially responsible for all their actions, Virginia Tech must determine how each investment will affect their reputation and profits. These two characteristics, being ethical and socially responsible can affect Virginia Tech for years to come with potential students and the impact they have on the environment.

Researching the current investments Virginia Tech conducts as well as the potential for Virginia Tech to invest in the alcohol industry themselves has brought up many ethical issues and pressures.

Virginia Tech’s current policies on alcohol stands, that students and guests over the age of 21 may possess alcohol on campus and within their dorms. Students under the age caught with possession of alcohol are subject to a Conduct Review and “strikes” against their record. If further action is needed a formal charge from the Virginia Tech police can be issued.

Virginia Tech does although permit “ABC Approved” parking lots for the Virginia Tech Football games, which are monitored by Virginia Tech and Town of Blacksburg Police. Here, many students and guests can be ticketed for breaching the ‘open container’ or ‘public intoxication’ laws. Investment in the Alcohol Industry could cause most students and guests to consider a double standard between them and Virginia Tech.

Ethical standards and social responsibility must work together in the decision factor.

Ethical Issues

Due to the nature of the alcohol industry there are several ethical issues involving both the products and the marketing practices implemented by companies within the industry. Two main ethical issues concern marketing to those who are underage and health related issues.

Many argue that marketing practices of alcohol companies target those who are underage and encourage them to participate in illegally consuming alcohol. Others argue that even if marketing efforts aren’t directly targeting those who are underage they are still exposed to alcohol related advertisements which could influence to them to consume alcohol while underage. It has been reported that 45% of commercials teens see are somehow related to alcohol, which is a tremendous amount of exposure to products which they are not yet allowed to consume. One last argument for this issue is that there is no way to differentiate marketing efforts attempting to target those who are 21-30 from also appealing to those who are under 21. There are many similarities of what appeals to those who are any of these ages.

Many liquor companies have developed brightly colored labels, creative names, and a vast number of flavors; all argued to appeal to a younger crowd. In many forms of advertising drinking alcohol is made to look fun, exciting, and creates an atmosphere that viewers wouldn’t want to be left out of. Many advertisements create a sense of unity and fitting in and that participating in drinking alcohol can accomplish that.

Many companies attempt to counteract these claims by adhering to marketing regulations and running responsible drinking campaigns that advocate sensible drinking for recreational purposes only. These campaigns aim to help prevent alcoholism, drunk driving, and underage consumption. Marketing efforts implemented by companies within the alcohol industry are heavily regulated; at least 70% of the target audience must be over the legal drinking, the ad cannot be designed to appeal to those who are underage, and no part of the advertising can encourage irresponsible drinking.

The second ethical issue surrounding the alcohol industry concerns with public health. Alcohol provides no health related benefit but can instead harm the body and empower people to harm others. Not everyone is capable of self-control and consuming alcohol in moderation. In the United States there are approximately 17.6 million adults who live with alcoholism, which not only affects them, but their families and anyone close to them as well.

Consuming enough alcohol can cause judgment to be impaired and might cause a person to make a decision that they would not regularly make. Decisions can include, but are certainly not limited to, drunk driving. Three out of ten people will be involved in an alcohol related car crash at some point in their lives. Also, in 2009 a person died every 48 minutes due to an alcohol impaired driver. Many ask the question if the number of fatalities is really worth the ability to consume alcohol, at any age.

An important element to take into consideration is that ethical issues regarding the alcohol industry can and will vary from country to country depending upon how alcohol consumption is viewed. For example, there is quite a difference in opinion and normality between drinking behavior in Ireland versus the attitude of drinking in the United States. Certain events in particular countries are not allowed to have alcohol companies be sponsors, and even in some countries all forms of advertising are banned.

Pressures Facing the Alcohol Industry

When it comes to the alcohol industry there are many barriers and pressures that limit the industry’s success. The majority of problems come from activist organizations that negatively portray alcohol and bring to light the harmful effects alcohol can cause. There are organizations such as the Robert Wood Johnson Foundation, that “attempt to stigmatize alcohol, de-legitimize drinking, marginalize drinkers, and create a de facto quasi-prohibition of the legal product.”(Hanson). This organization has dedicated itself to limiting the alcohol industry in America. “The Robert Wood Johnson Foundation spent over a quarter of a billion dollars ($265,000,000.00) in just four years alone further developing and funding a nation-wide network of anti-alcohol organizations, centers, activist leaders, and opinion writers to promote its long-term goal” (Hanson). Although the Robert Wood Foundation may not be well know by the public, “nearly every study disparaging adult beverages in the mass media, every legislative push to limit alcohol marketing or increase taxes, and every supposedly ‘grassroots’ anti-alcohol organization” is funded by the Robert Wood Johnson Foundation” (RWJF). One of the well-known organizations supported by the Robert Wood Johnson Foundation is the Mothers Against Drunk Driving (MADD). Mothers Against Drunk Driving points out the most severe effect that is related to alcohol, death. “Founded by a mother whose daughter was killed by a drunk driver, Mothers Against Drunk Driving is the nation’s largest nonprofit organization that works towards stopping alcohol related harms” (MADD). Through testimonies and videos Mothers Against Drunk Driving attempts to educate teens about the dangers of driving under the influence as well as underage drinking. MADD publicly exposes the alcohol industry in a way that persuades individuals to think negatively about it. This creates a pressure on the alcohol industry, as they must fight to direct the public’s eye away from the negativity and more towards the positive and profitable side of the industry.

Although the pressures facing the alcohol industry seem severe, we believe the profitability and shareholder value will not be affected. The alcohol industry is a vital element in the American economy and no matter how negatively activist organizations portray it, the alcohol industry will remain profitable. Pressures from these organizations may slow the alcohol industry slightly, but with the superior influence alcohol has on the American people the alcohol industry will always persevere.

Corporate Social Responsibility

To address the pressures that are facing the alcohol industry, companies have come up with several initiatives to promote responsible drinking, address sustainability issues, and other charitable programs important to each specific company.

The International Center for Alcohol Policies, ICAP, is an organization that promotes understanding of responsible drinking and helps reduce the abusive behaviors associated to drinking. Their policy approach is based on drinking patterns, targeted interventions, and partnerships. The organization provides the current alcohol policies countries, worldwide. ICAP has partnered up with thirteen companies and other organizations working towards the same cause.

Bacardi, a sponsor of ICAP, is also a founding member of The Century Council which promotes responsible drinking, fighting against college binge drinking, and drinking and driving. They also have an campaign called “Champions Drink Responsibly” which educates drinkers on the importance of taking your time while drinking, staying in control of the amount of drinks you consume, planning your night out, and making sure you have a ride home or back to a safe place at the end of the night and also throughout the night. Bacardi uses a professional athlete as the face of the campaign. During 2011, Bacardi measured a 4 percent reduction in total water usage, a 7 percent reduction in greenhouse gas emissions, over 37 million people engaged with their “Champions Drink Responsibly” campaign, and having 3,750 employees from numerous countries participate in 128 various activities.

Smirnoff briefly describes their corporate social responsibility on their website. Their campaign, “Drink Responsibly” focuses on three main objectives, effects of alcohol, tips for drinking responsibly, and tips on how to get home safely and the importance in doing so. It was disappointing to see their lack of interest in taking on more responsibility to give back to the community and world around us. There is definitely much room for improvement to make the company more well-rounded.

We also found it important to touch on a couple beer companies, as well, when looking into whether Virginia Tech should invest in the industry because beer and liquor are the main drinking preferences for college-aged students. We took a look at MillerCoors, which is also a sponsor of ICAP, breaks their corporate responsibility into several areas. Their slogan, “Great Beer, Great Responsibility” shows their dedication and stand on their responsibility to various areas of public concern and not just responsible drinking. Most recently, MillerCoors came up with a competition amongst eligible colleges to win $10,000 grants by supporting responsible consumption efforts for legal-age students. This program is called Great Play Grant Program and the grants were issued for the first time in 2012 with a totle of $230,000 in grants. MillerCoors also addresses the issue of drinking and driving by providing free rides in certain cities on holidays, specifically, as well as sponsoring 1-800-TAXICAB service, which is a toll-free phone number that passengers can call and connect to taxicab companies in their local area.

MillerCoors also worked to install a new cooling system that saves 100 million gallons of water each year. They also reduced energy consumption in their major breweries by 4.3 percent for that last 4 years. Along with these two sustainability efforts, MillerCoors also worked with their supply chain to make sure they are working to find ways to decrease energy and water usage and grow to use sustainable practices throughout each step in the supply chain.

Anheuser Busch uses a similar slogan as MillerCoors, “Our World. Our Responsibility” They do not even address their product in this slogan, but instead focus the attention on their belief in being responsible for the world around us. 2012 marks the 30th year since their first responsible drinking campaign. They launched many initiatives since the first campaign to prevent drinking behaviors and most recently started a campaign, Nation of Responsible Drinkers, which asks adults nationwide to take the pledge which is promise to respect the legal drinking age, enjoy responsibly and know when to say when, be the designated driver or use one.

This is another company that knows their responsibility does not end with their responsible drinking efforts. They must also show the importance in other issues that this world is facing, such as environmental threats. Anheuser Busch has reduced water usage by 34 percent in the last three years. They have also gotten to the 99 percent marker of recycling the solid waste in their breweries. Both, Anheuser and Miller have reduced the materials in the packaging stages and coming up with ways to use renewable fuel in their factories.

Both brewing companies we took further look into, Anheuser Busch and Miller Coors, have also participated in many charity and philanthropic events. MillerCoors’ employees spent more than 53,000 hours during 2011 in local community fundraisers. MillerCoors specifically participates in Great Water Month which aims to improve the watersheds around the breweries. Anheuser Busch has a foundation that has contributed $490 million to organizations that support education, environment, economic development, and preparation of disasters and relief.

Social/Ethical Investment Policy Recommendations

When making investment decisions, Virginia Tech absolutely should take into account Corporate Social Responsibility and ethical issues pertaining to the alcohol industry and its particular firms.  Especially when we are talking about this amount of money, you must think about the responsibility and possible outcomes of our decisions.

In this case there are red flags surrounding the alcohol industry that must be studied.  By red flags we are talking about issues that could look bad for Virginia Tech.  For the alcohol industry in particular there are problem areas such as; misleading the public, along with the concerns for the health and safety of its users.  The way you understand and deal with these possible negative issues can have a major impact on your decisions and outcomes.

Although we know that maximizing shareholder value is important, when making decision with investments we take into account not only the financial payoff but also what we believe is ethically correct.  Virginia Tech needs to be very careful when dealing with situations that would lead to benefited financial return while sacrificing ethical reasoning.  Overall, we believe there is no room to take ethical risks for financial returns because the possible negative outcomes.  A major negative outcome we consider comes in the form of being negatively publicized.  Having this negative publicity could have an even greater impact than the possible increased profit.  Even legal industries, such as the alcohol industry, are very baiting because of the possible financial rewards.  These are areas/scenarios that Virginia Tech should steer away from.  We believe it simply sends a wrong and conflicting message to our community and to an institution that prides themselves on their high moral ground.  

After completing our research we do recommend that Virginia Tech NOT invest in the alcohol industry. Seeing much of this activity as inappropriate as an academic institution. A majority of the Virginia Tech student population is under the age of 21, making sponsorships and other endowments an inappropriate presentation of the Virginia Tech reputation and hypocrisy against the standing alcohol policies.

Investing in this industry could also create bad publicity with the potential to destroy the Virginia Tech reputation and standards. Also, many could see this as Virginia Tech supporting underage drinking on their campus. Overall this investment could destroy the brand Virginia Tech has been building for so long.

Financially, this investment would be profitable because the alcohol industry only seems to be growing, but ethically inappropriate to pursue. Many people see the alcohol industry as having impressive corporate social responsibility and not supporting underage drinking, while also leveraging the saying “drink responsibly” on every marketing campaign. So as an academic institution with a majority of the student population under the age of 21, Virginia Tech should NOT support it either.

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