Ethics and Social Responsibility

01/04/2020 0 By indiafreenotes

International Business Ethics

International business ethics emerged quite late globally compared to the business ethics that came up in 1970’s. It was only in late 1990’s that the international business ethics came to the fore especially so after the economic developments that occurred on a global scale.

In 1990’s many businesses from the developing countries expanded their operations and became multinational. The transactions between businesses and the governments increased as a result, which gave rise to many practical issues. Culture and its relativity was one factor more prominent than the others. Other ethical issues in the context of international business are generally dealt with the laws of the land; although all of them fall within the ambit of international business ethics.

Globalization diminished the barriers between countries on the globe and also called for universalization of values for trade to occur smoothly. Universal values were perceived to control the behaviour in the commercial space. This lead to ethical issues in the international business perspective, those that were unknown till date.

Other theoretical issues arise from the diversity of business ethical traditions in various countries across the globe. In addition, comparisons made on the basis of corruption rankings of a certain state or on the basis of gross domestic product of a certain economy also lead to ethical issues in the international arena.

Since religion brings in a wholly different perspective to the way we look upon things; the comparison of ethical traditions from the perspective of the latter also gives birth to ethical problems. For example, trade in Christian dominated countries is different from the trade in Islamic countries. Again depending upon how strong or profound the impact of the religion is, business practices are influenced proportionally.

In the international business arena, ethical problems also arise out mere international business transactions. Fair trade movement, transfer pricing, bioprospecting and biopiracy are examples of transactions that fall within the ambit of international business ethics. Similarly issues like child labor and cultural imperialism are controversial enough to call upon the attention of international business ethics.

Yet another arena for strong requirement of ethics would be when multinationals bargain to take advantage of international differences; For example when rich nations outsource their services to poor and developing nations at cheaper cost. Western nations were up till recently outsourcing many of services to third world nations where they could hire manpower for the cheapest prices. This led to a severe competition between developing nations with each one offering cheaper labour than the other.

Dumping is yet another way by which large companies are trying to kill the domestic players. Foreign players often sell goods and services at a cheaper price making it hard for the small players to survive the competition. Consumer durables and FMCG are biggest examples of such practices. The bigger threat here is the resulting monopoly which places the customer in a losing position. The international trade commission began for its search of its anti dumping laws from the year 2009.

All these are ways in which business at the international level can lead to ethical dilemmas. In absence of international business ethics it may become almost impossible to regulate business and create winning situations for people in the market place.

Ethical issues in Business

Business ethics is both part of the prescriptive (normative) ethics establishing standards of conduct, recommending certain behaviours, as well as descriptive ethics, describing the moral attitudes and behaviours of entrepreneurs. In principle, the practical goal of business ethics is to solve ethics problems in business.

Ethical factor in area of business communication

  • Proper marketing techniques, telling truth about products and services,
  • Informing customers, employees and partners about company’s mission statement and goals,
  • Respecting religious and social values of employees, customers and partners,
  • Negligence in informing shareholders about company’s situation, managerial ethics
  • Insider trading, hiding information about mergers, acquisitions, investments, etc.

Ethical factors concerning production processes

  • Eliminating unsafe working conditions,
  • Avoiding processes and technologies that jeopardize the safety of the employees and public,
  • Producing product safe for customers,
  • Waste product utilization and recycling,
  • Profiting from products bad for health (drugs, cigarettes, alcohol) and people (gambling),

Social Responsibility

Social responsibility is a form of management that considers ethical issues in all aspects of the business. Strategic decisions of a company have both social and economic consequences. Social responsibility of a company is a main element of the strategy formulation process. There is a misconception that corporate social responsibility is less relevant to small businesses; however, there is growing recognition of the importance of social responsibility for smaller firms.

Integrating social responsibility in strategic management requires sound knowledge of the types of social responsibilities a company deals with. Economic responsibilities are the most basic type of social responsibilities. The company is expected to provide goods to the society at reasonable prices, create jobs and pay due taxes.

Legal responsibilities reflect the obligation to comply with the laws that regulate business activities; ethical responsibilities mirror the company’s notion of the right business behavior. Some actions might not be illegal but can be unethical. Making and selling cigarettes is a case in point.

Finally, discretionary responsibilities are those that are voluntarily adopted by the business. For example, companies that adopt the good citizenship approach, actively support charities, public service advertising campaigns and other public interest issues

Corporate social responsibility is self-regulation by a company with the objective of embracing responsibility for the company’s actions and creating a positive impact through its activities on its customers, employees, communities and the environment. A company may build into its mission, strategy and everyday operations elements that serve to promote specific goals, for example, using recycled paper or organic hand soap in the offices to help save the environment.

Benefits for the Company

Although direct effects haven’t been proved and much criticism has risen around CSR, companies identify some obvious benefits. Implementing the values and goals of CSR improve the judgment and reputation of the business among customers. In a strong, competitive market it also makes the business stand out from its rivals. CSR may also prompt current and potential employees to commit themselves to the company and promote its values in their private lives.

Good Example

The Body Shop is the most cited example of establishing CSR early in an exceptional way. The natural-cosmetics company promotes social and environmental issues. It implemented a shared campaign with Greenpeace to save the whales; a campaign against overly skinny models to avoid perpetuating bulimia and anorexia; and an initiative called Community Fair Trade to help people sell their products in developing countries. It also regularly sponsors local charity and community events.

Cautionary Example

H&M, the clothing store implemented the CSR strategy of producing clothing items from organic cotton. The organic-clothing line gave consumers a positive image towards H&M for years. But this image was easily destroyed when three different reports in one year accused the company of using genetically modified cotton from India in its products. Today, H&M’s new line represents only low prices but not organic clothing.