(Hannagan, p.517)
Fairness and honesty are at the heart of business ethics and can relate to the general values of decision makers. Companies are expected not only to obey the law, but also not to harm customers, employees, or competitors through deception, misrepresentation, coercion, or discrimination.
With respect to the environment, pollutants that arise from fossil burning consist of sulphur dioxide and nitrogen oxides, which migrate from power stations. Fossil fuels are the main sources of human generated green house gases. According to the U.K. department of environment by 2050, this will cause precipitation to rise by 8%, temperature will rise by 1.6º C, and extreme floods, which are only likely every 100 years, could happen every year.
In the light of the problems faced by companies as to finding a balance with its ethical and environmental policies, and thereafter maintaining and reform these policies, it is fair to say that companies have much to gain by making ethical decisions. These benefits may come in the form of an improved social image, pre-empting legislation, attracting a wider consumer market, future growth and satisfied investors/shareholders.
Financial Gain
Every ethical and environmental concern comes with a price. Having to pay for such things as consultancy fees, which involve devising new codes or purchasing of new equipment to cut down on pollution, may deter some businesses that consider low costs to be the key to high profits. However putting off these expenses could cost more in the long run, by having to deal with clean up operations, like for the aftermath of the Exxon Valdez oil spill, which cost almost $2 billion. Companies benefit more from implementing ethical dimensions at their own pace than being faced with the unexpected cost of the alternative.
Consumer Market
Other than financial gain, the consumer has come into focus in dealing with ethics and the environment. In today’s competitive environment consumer image is everything, with businesses being increasingly aware that a good image is a good asset. It is estimated that the average aggrieved customer will tell a total of ten (10) other people, a happy customer will tell only four (4) people. (Chryssides and Kaler 1998). However while ethical businesses encourage customers to “shop around” in order to find what they want to buy, other companies might mislead and lie to the customer in order to coerce them into buying a particular product, which a customer may not want or need. This coercion is called fraud and is illegal. Therefore in order to maintain a good image, a company must act in a socially responsible way, which would certainly make good business sense.
The U.K. Department of Trade and Industry in their statistics published in 2003 stated that 81% of consumers agree that when price and quality are equal they are more inclined to be associated with a good cause. The consumer of today is very much concerned with ethical issues such as animal rights and respect for the environment, such that companies are taking them seriously. This consideration of consumer views, is allowing the company who is concerned with ethics and the environment to maximise their customer base.
Commitment to ethical and environmental issues, usually guard against consumers who would want to take action, against companies considered to be uncaring. Boycotts are one common tool for organised consumer groups to use in pressuring companies to change their business practices. There are actions that also come in the form of demonstrations
Investors/Shareholders
While companies are being concerned with the consumer, particular attention is also being paid to the investor. Mainstream investment funds invest purely on a company’s financial performance, but investment based on green and ethical performance is just as concerned with financial performance as with the company’s social and environmental record. Ethical Financial Global and Ethical Investment Advice Planning, gives guidance to invest into companies whose products or services are long term benefit to the communities in which they operate. A positive criterion includes: -
- A good safety record
- Openness about activities
- Pollution control
- Energy conservation
- Equal opportunities policy
According to a recent E.I.R.I.S survey, 70% of pension scheme members want their pension contributions invested ethically so that by performing well on socially responsible issues; companies can attract new investors, while keeping their original shareholders.
Employees
There is increasing evidence that companies that are strong in their social responsibility assist on attracting and retaining the best people within a competitive job market. A study conducted by McKinsey, “The War for Talent, found that only 3% of companies believed that they had enough talent to reach their objectives. They all recognized the need to market themselves to potential employees.
There are concerns also for good employment practices, respect for employee diversity and safety and health in the workplace. Recently Boeing, dismissed, its chief financial officer, for unethical conduct in the hiring of a senior Pentagon official to run a $20bn (£11.8bn) refueling contract for the United States air force. The aerospace group admitted that he had violated company policy by communicating with the official about her future employment when she was still acting in her official government capacity on matters involving Boeing.
Legislation
To deal with ethical issues, some companies have taken a proactive approach to avoid the legality involved. This in the long run would avoid companies having to pay fines, recalls and litigation resulting in shady products or unfair sales practices. Companies that do not have policies in place to cover the legislation, spend time and money that they may not have budgeted for. The ethically advanced companies would therefore be in a stronger position within the market.
Recent legislation that came into effect includes the Human Rights Act 1998, the Public Interest Disclosure Act 1998 and the Local Government Act 2000.
(Mullins, p. 152)
Companies can improve their ethical and environmental position by implementing and encouraging certain behaviours within their organisation. For example they can implement a code of ethics which are formalised rules and standards that describe what a company expects of its employees.
The institute of management defines code of ethics as a set of moral principle or values used by organisations to steer the conduct of both the organisation it self and its employees, in all their business activities both internal and in relation to the outside world.
(Cole p.135)
Although there are critics who believe them to be a public relations exercises rather than genuine attempts to change behaviour, these code of ethics together with training programs, can help employees determine what conduct is acceptable.
Businesses can encourage employees to report illegal and unethical practices internally so they can take steps to remedy problems before they result in legal action or negative publicity which is usually termed whistle blowing, and occurs when an employee exposes an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies.
The incorporation of an ethical dimension into the decision making process would enhance the business in many ways. The company will find itself in a position to, market itself, and attract new ethical consumers, investors and staff. Pre-emption of new legislation may be possible, by voluntarily becoming more socially responsible. The social image of the company will benefit, meaning less threat of protest or bad publicity. These benefits may not at first appear to be good economics but in fact they do all contribute to the financial benefit of the company in some way. Increasing investors and consumers, maximises growth and income. Pre-empting legislation means being able to budget for expenditure.
Increasing the company profile through good ethics means marketing costs of recovering from bad publicity are avoided. As can be seen, although the face value of some benefits may not appear to be simply fiscal. Invariable they do all lead to a financial gain or a limitation of expense.
BIBLIOGRAPHY
Appleby, R.C. (1994), Modern Business Administration, London, FT Pitman
Chryssides, G.D., Kaler, J.H. (1998) An Introduction to Business Ethics, London, Thomson learning
Cole, G.A. (2000), Management Theory and Practice, London, Continuum
Drucker, P. (1999), Management Challenges for the 21st Century, New York, Harper Collins
Hannagan, T (2002), Management Concepts and Practices, Harlow, FT Prentice Hall
Handy, C.B. (1987), Understanding Organizations, London, Penguin
Jewel, B. (1997), An Integrated Approach To Business Studies, Harlow, Addison Wesley Longman Limited
Mullins, L.J. (2002), Management and Organisational Behaviour, Harlow, FT Prentice Hall
