Business Ethics and

Social Responsibility
(Q4)

Amihan Xenia Salem Ruizo-Tombocon

 Table of Contents

Module 4: Business Ethics: In Depth

Introduction 48
Learning Outcomes 48
Lesson 1. Ethics in Business 49
Lesson 2. The Businessman’s Myths about Business Ethics 50
Lesson 3. Effects of Doing Business Ethically 52
Lesson 4. Ethical Leadership and Its Components 55
Assessment Tasks 59
Summary 60
References 60

Module 5: Business Ethical Dilemmas, and Law in Business

Introduction 61
Learning Outcomes 61
Lesson 1: Ethical Dilemmas in Business and Corporate World 62
Lesson 2. Ethical Decision-making 70
Lesson 3. Ethics vs. Law 76
Assessment Tasks 78
Summary 79
References 79

Module 6: Ethics and Social Responsibility

Introduction 80
Learning Outcomes 80
Lesson 1. Models of Social Responsibility 81
Lesson 2. Ethical Sourcing and Sustainability 84
Lesson 3. Business and Ecology 87
Assessment Tasks 91
Summary 92
References 92
 MODULE 4
BUSINESS ETHICS: IN DEPTH

Introduction

Ethics as a science does not only evaluate morality of our human conduct but
also provides us with a common understanding of the universal, objective and
irreversible moral principles that should govern our human behavior and moral
decisions. Therefore, business without ethics threatens the survival of human society
and in some cases, destroys the relationships of people. The study of business ethics
paves the way for our common understanding of the fundamental concepts of what is
right and wrong in our human conduct, and its implications to business as an important
human activity.

This module will help us examine the many myths about business ethics, as well
as have a better understanding of what it takes to be an ethical leader, and your
company can be ethical and still achieve business.

Learning Outcomes

At the end of this module, students should be able to:

1. generate ways to improve business practices; and
2. discuss the responsibilities and accountabilities of entrepreneurs to
employees, government, creditors, suppliers, consumers, general
public and other stakeholders.
Lesson 1. Ethics in Business

By definition, business ethics are the moral principles that act as guidelines for the way
a business conducts itself and its transactions. In many ways, the same guidelines that
individuals use to conduct themselves in an acceptable way – in personal and
professional settings – apply to businesses as well (Roa, 2011).

Acting ethically ultimately means determining what is “right” and what is “wrong.” Basic
standards exist around the world that dictate what is wrong or unethical in terms of
business practices (SERDEF, 2013).

SAMPLE CASE:
Mistreating employees has become a familiar scenario in small and big companies
who make employees work for long hours and underpay them. Similarly, many
employees face stressful conditions, mental and even sexual harassment.

In the wake of finding cheap labor, many companies in developed nations hire
sweatshops in third-world countries for bulk manufacturing. The conditions in
these workplaces are worse than one can even imagine. The tech giant Apple
has been using the services of Foxconn, Taiwanese manufacturing company that
has been manufacturing the coveted iPhone. As an example, Foxconn has been
accused of employing child slaves working in hazardous conditions for 10 hours a
day all through the week.

While some unethical business practices are obvious or true for companies around the
world, they do still occur. Determining what practices are ethical or not is more difficult
to determine if they exist in a grey area where the lines between ethical and unethical
can become blurred.

SAMPLE SCENARIO:
Let us assume Company A works with a contact at Company B, an individual
through which they negotiate all the prices for supplies they buy from Company
B. Company A naturally wants to get the best prices on the supplies. When the
individual from Company B comes to their home office to negotiate a new
contract, they put him up in a top-tier hotel, in the very best suite, and make
sure that all his wants and needs are met while he’s there.
In technical terms, the practice is not illegal. However, it might be considered a
grey area – close to, but not quite, bribery – because the individual is then likely
to be more inclined to give Company “A” a price break at the expense of getting
the best deal for his own company.

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Business ethics, therefore, are important for every company. They keep workers safe,
help trade and interactions between companies remain honest and fair, and generally
make for better goods and services. Distinguishing what a company will and won’t
stand for is not always the same for each organization, but knowing basic ethical
guidelines is a key component of company management (SERDEF, 2013).

Lesson 2. The Businessman’s Myths about Business

Ethics

There are surely many myths about business ethics, but these 4 in particular cause
trouble, and pose significant challenges for anyone trying to have a productive
discussion about right and wrong in the world of business (Macdonald, 2010).

MYTH #1: “Business ethics” is an oxymoron.

MYTH BUSTER: The idea that “business ethics” is somehow a contradiction in terms
is based on a serious misunderstanding of what ethics is and what the world of
commerce is like. Indeed, it’s much closer to the truth to say that the term “business
ethics” expresses a redundancy, since commerce is quite literally impossible
without ethics. Every single commercial transaction requires some level of trust,
and without a shared commitment to some level ethical behavior, you simply do not
get trust.

MYTH #2: Ethics is just a matter of opinion.

MYTH BUSTER: While ethics does of course have something to do with having an
opinion, it’s also about having opinions that you can defend to other people. While
there certainly are a few really tough moral questions about which we might agree
to disagree, we should also recognize that on many ethical issues there are better
and worse answers. Poor answers to ethical dilemmas are typically rooted in factual
mistakes and logical inconsistencies. We shouldn’t settle for those. We should talk
them through. Having an opinion doesn’t come to much if you can’t sell that opinion
to others.

MYTH #3: There’s no such thing as “business ethics,” because ethics should be the
same everywhere.
MYTH BUSTER: There are two main reasons why ethics, while essential to business,
isn’t just exactly the same in business as it is in other domains of life.

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 First, business poses special challenges. The enormous productive capacity of
corporations and other large organizations also brings the potential to do substantial
harm, both to the lives of stakeholders and to the natural environment. So, we face
questions in the world of business that we just don’t face in other parts of our lives.

Second, the special social role of business implies a tailor-made set of ethical
principles. One of the defining characteristics of business is that it is competitive:
companies are naturally driven to do better than others in their field. This kind of
behavior is socially beneficial — consumers benefit when companies compete
vigorously to produce a better product, at a better price, than the other guy.

In practice, we can really look at business ethics as having two importantly different
components. One component consists of the rules needed to civilize a tough,
competitive game. This part of business ethics essentially has to do with the norms-
and-principles that ought to govern business’ behavior with regard to outsiders. The
other component of business ethics is about the ethical rules that ought to be
embodied in relationships within the organization. Here, we do value cooperative
behavior; so managers work hard to shape corporate culture to enable employees
to trust each other and to work together toward shared goals. Business is morally
complex that way.

MYTH #4: Business ethics is just a matter of laws and regulation.

MYTH BUSTER: This is not just false, but dangerous. The tendency to confuse ethics
and law is tempting, especially in an age in which the business section of the
newspaper increasingly refers to “ethics laws” and “ethics regulations.” But we
shouldn’t be misled by that short-hand way of speaking. If you think about it for just
a minute or two, there are in fact lots of ways in which law and ethics come apart.
There are plenty of things that are legal but unethical; and there are also behaviors
that are illegal, but arguably ethically OK. The short explanation for the fact that law
& ethics don’t overlap perfectly is this: laws are made & enforced by government.
But governments can’t be everywhere, and if they could, we wouldn’t want them to
be!

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Lesson 3. Effects of Doing Business Ethically

 Here are just some of the many POSITIVE EFFECTS brought about by adopting
ethical business practices (SERDEF, 2013):

a. PROVIDE A COMPETITIVE ADVANTAGE IN TERMS OF CUSTOMERS

When a company behaves ethically, they can attract customers to their products
and services and sway them towards loyalty. This is indicated by a Unilever survey
which found a third of consumers (33 %) choose to buy from brands that are making
a positive social or environmental impact.

Such a mindset might be a fashion brand whose clothes are sourced, designed and
produced in ways that are kind to the environment and the workers. Or it could be
a print company whose materials are sourced sustainably, the laborers are paid an
appropriate living wage, and the printing processes do not damage the environment.

Whatever the industry, an ethical way of doing business can be that company’s
USP (unique selling proposition). This boosts a company’s reputation which in turn,
can boost sales. Customers feel better about parting with their money if they know
the goods will have been produced ethically and responsibly.

b. IMPROVE EMPLOYEE HAPPINESS

Employees will feel more comfortable working for a business that’s behaving
ethically than one that’s not. After all, they don’t want to be partially responsible for
any unethical consequences, such as contributing to the deforestation of an area or
poverty due to underpaying laborers.

This will boost productivity, as indicated by a 2015 survey of more than 2,000 Brits
which found that 36 percent of people would work harder if they knew their company
helped society.

Business ethics don’t just make current employees want to stay. It can also give
businesses a competitive edge with regards to employee recruitment, particularly
among the younger generation. The same survey found that 62 percent of people

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born between 1981 and 1996 (millennials) want to work for a company that makes
a positive impact.

c. ATTRACT MORE INVESTORS

If investors know that the company, they work with prioritizes having high morals
and will operate in an ethical way, they will be safe in the knowledge that their
money is being used in a responsible way. Plus, it means they can be comfortable
knowing they’re not indirectly contributing to unethical practices.

This is an advantage because investors will be more likely to continue funding the
company.

Strong business ethics are also an attractive quality, which means other investors
are more likely to be interested in investing their money into the company, keeping
its share price high and protecting it from takeover.

d. BETTER FOR SOCIETY

Business ethics are beneficial for the company by attracting customers, investors
and employees). But that’s not all. When a company cares about its behavior,
impact and environmental footprint, it’s also better for society overall.

For example, a print company might care about sourcing their materials sustainably
and producing their products in a way that’s environmentally friendly. Both of these
approaches help to benefit society in a number of ways:

The print company’s stock (such as paper, card etc.) will be sourced in a way that
doesn’t impact the environment. For every tree that’s cut down to make the stock,
another might be planted in its place.
The laborers who plant, maintain, chop and produce the stock will be paid a good
living wage and ensure their business doesn’t damage the local way of life.
When the printed products are being made, it’ll be in an environmentally friendly
way – such as using sustainable inks or energy saving printers.
Being kinder to the environment ultimately benefits society because it means
consumers can live in a world that’s at its best rather than at its worst or suffering.

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 It also means consumers can start to become more aware of business ethics and
choose companies who uphold strong morals to help ethical practices continue.
Which help to boost the benefits even more.

 Now, if there are advantages in practicing ethical business, of course there are also
some disadvantages. Here are just some DRAWBACKS brought about by adopting
ethical business practices:

a. REDUCE A COMPANY’S ABILITY TO MAXIMISE PROFIT.

For example, having factories in developing countries can reduce costs. This is
because companies can have practices in place, such as child labor and low wages,
which help to maximize profit. But although these practices are legal in those
countries, they’re also incredibly unethical and will obviously never be tolerated by
a company following ethical practices.

Improvements in working conditions, such as providing workers with living wage

and having proper health and safety standards in place, are ethical but raises the
amount it costs to run these factories. This, in turn, reduces profit which might not
be an issue for large companies who can afford to allocate costs. But it can be an
issue for small businesses, especially if they’re evolving.

b. TIME CONSUMING TO IMPLEMENT THE PRACTICES

Developing, implementing and maintaining business ethics can be time consuming,

particularly if a company is looking to become more ethical when they’ve previously
followed unethical practices. Ethical practices also need to be continuously updated
according to changes in laws and regulations, especially as a company grows.

Companies can streamline the process by hiring an ethics officer but this adds to
the costs needed for business ethics.

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However, despite the drawbacks, it’s important to consider the positives. Although a
company might have less freedom to maximize profit, acting responsibly benefits the
wider society. Ethical behavior also significantly boosts a company’s reputation, which
has a knock-on effect on attracting and retaining customers, sales, investors and
employees.

Ethical behavior can significantly benefit a company, namely by improving their

reputation which can help boost sales and profits. And although the development,
implementation and maintenance of ethical practices can limit a company’s freedom
to maximize profit. Luckily, there are many different ways to operate ethically so
companies can choose the ethical practices and approaches that best suit them.

Lesson 4. Ethical Leadership and Its Components

Ethical leadership is defined as “leadership demonstrating and promoting normatively

appropriate conduct through personal actions and interpersonal relations.” When you
boil it down, this really means that ethical leadership is defined as putting people into
management and leadership positions who will promote and be an example of
appropriate, ethical conduct in their actions and relationships in the workplace (Roa,
2011).

In the business world today, ethics are an increasingly important element and point of
discussion. So, leadership with ethics is very important to understand, to develop, and
to recognize in the business world. If you want to become a business leader, learning
about ethical leadership is crucial to help you get there. It's your responsibility to model
moral behavior in the workplace when you're in a position of power in an organization.
Integrity, moral behavior, and ethics are key to being a great leader (SERDEF, 2013).

ETHICAL LEADERSHIP, according to the book Windows to Entrepreneurship (2013),

basically is:

1. Putting forth what is right, BEFORE what is profitable.

2. Is the application of ethics to the organizational realm BY its leaders.
3. Leading to higher satisfaction, greater goal orientation and lower turnover.

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 4. Is transformational leader as it attempts to change his or her company's
corporate values to reflect a more humane standard of fairness and justice
IMPORTANCE OF ETHICAL LEADERSHIP

According to an online article of Western Governor’s University (2020), Leadership that

is ethical is important for a variety of reason for customers, employees, and the
company as a whole:

1. Leadership skills are crucial to help create a positive ethical culture in a

company.
2. Leaders can help investors feel that the organization is a good, trustworthy one.
3. Customers are more likely to feel loyal when they see leaders in place in an
organization.
4. Good press is likely to come when there are ethical leaders in an organization.
5. Partners and vendors will similarly feel they can trust and work well with an
organization when they see leadership that is ethical displayed.

6. In the short-term, ethical leaders can help boost employee morale and help
them feel excited about their management and their work. It can increase
positivity and collaboration in your organization and make everyone feel
happier to be at work.

7. In the long-term, ethical leadership can prevent company scandals, ethical

dilemmas, and ethical issues. It can also help organizations gain more
partnerships and customers, which can lead to more money at the end of the
day. Loyal employees are also a crucial element of long-term success for a
business.

TRAITS OF ETHICAL LEADERS

There isn’t just one correct way to lead ethically. However, there are some basic
elements that are fairly consistent among ethical leaders. Behaving in an ethical
manner takes consideration and thought. Developing these traits will help you start on
the journey to become an ethical leader (Western Governors University, 2020):

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 Leads by example. Ethical leaders should have the same expectations for
themselves as for those that work for them. Ethical leaders help their
employees with daily tasks, so they have an in-depth understanding of what
the other workers do and the challenges that can come with their work. These
leaders are then able to guide employees as they do their daily tasks. Ethical
leaders also show how to be ethical and moral in their own work, which is a
crucial example to other employees. When employees see that their leaders
are constantly making decisions with integrity and honesty in mind, they are
also willing to make those ethical considerations in their work.

 Willing to evolve. Good leaders need to be able to evolve and adapt to the
changes that are sure to come in the business world. As businesses expands,
get bought out, merge, and more, adaptability is key for success. Good
organizational leaders are willing to take the changes that are coming and meet
them head on. This helps encourage employees to be adaptable and evolve
with changes as well. Whatever comes for a business, leaders can help steer
the ship in a positive and ethical way.

 Respects everyone equally. Respect is a vital element of ethical responsibility.

Leaders that are ethical will respect everyone, from their superiors to their
employees, equally. Not showing respect to the people around you can quickly
create a negative or hostile work environment. It’s a sure way to lose trust and
create issues inside your organization. Not showing the same level of respect
can make people think they’re being treated unfairly, and can cause even more
problems in the workplace.

 Communicates openly. Leaders who have ethics need to excel at

communication to make sure their organization is a place of trust and honesty.
Without communication, issues can go undetected for a long time. This can
create hostility and distrust in your organization. Leaders who have ethical
behavior focus on having good communication that is honest and open with
every single person in their organization.

 Manages stress effectively. Leaders and managers are faced with stressful
situations every day, both in their work life and their personal life. It’s not
acceptable to take out your personal or even your professional stress on your
workers. This is taking advantage of a power dynamic and can create anger,
frustration, or fear in your employees. Leaders who have ethics know how to

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 handle their stress in a productive and positive way. Regular outbursts aren’t
acceptable and will make your other workers feel stressed as well. Good
leaders who practice ethical behavior find ways to deal with their stress, and
encourage their employees to improve if needed, in positive, helpful ways.

 Mediates fairly. A moral leader is an expert in solving problems in a way that is

fair to everyone involved. They consider all the opinions and people involved
in order to be fair and impartial. Good organizational leaders are
compassionate and kind when helping solve problems and issues. They want
to make sure everyone can continue to work together well after the disputes
are resolved, and are focused on positive interactions moving forward.
Employees will trust leaders who practice ethics who they know will listen and
care about them.

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Assessment Tasks

ASSESSMENT TASK 1 (Performance Task)

Interview an employee of any company. Ask the employee if he is happy
or proud to belong to his company, and why. Probe into how the company
is treating him/her and his/her co-workers, as well as their customers.
Write a short summary of the interview.

Then, solely based on your interview, do you think the employer is

practicing ethical standards in his company? Why or why not?

ASSESSMENT TASK 2 (Written Works)

Imagine you are about to form a business, which values do you think will
your company uphold as priorities? Give at least 3 values, and briefly
explain why you chose each.

ASSESSMENT TASK 3 (Performance Task)

Google search and key in the words “unethical entrepreneurship”. Choose
3 cases. Then, add the word “Philippines” to your initial google search.
Choose 3 cases again.

Based on these cases you have read, analyze and give reasons as to why
unethical practices still exist, and why ethics is important for
entrepreneurship to prosper in this country?

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 Summary

 Capital and money in an enterprise may be depleted, but the character of the
entrepreneur outlasts those material resources.
 Ethics is something that is internally imposed by the character of the
entrepreneur, and that it is simply carried over from him to his employees.
 Without ethics, the entrepreneur will fall under the weight of corruption, or have
lack of character and conscience.

References

 Corporate Finance Institute. (2020). Business Ethics.

https://corporatefinanceinstitute.com/resources/knowledge/other/business-
ethics/
 Macdonald, C. (2010, December 6). Four Myths About Business Ethics. The
Business Ethics Blog. https://businessethicsblog.com/2010/12/06/four-myths-
about-business-ethics/
 Roa, F. C. (2011). Business Ethics and Social Responsibility (2nd ed.). Rex
Bookstore, Inc.
 Western Governors University. (2020, January 20). What is ethical leadership?
https://www.wgu.edu/blog/what-is-ethical-leadership2001.html
 Windows to Entrepreneurship: A Teaching Guide . (2013). Small Enterprise
Research and Development Foundation.

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 MODULE 5
BUSINESS ETHICAL DILEMMAS,
AND LAW VS. ETHICS

Introduction

Business is a productive human activity that brings beneficial contribution to both

the people and society. Business produces employment, fair deals, creativity,
advancement of technology, customer satisfaction, among others. Ironically, however,
business is also an activity that provides an opportunity for some corrupt people to
take advantage of others, just like the abuse of relationship between employers and
employees, and between buyers and sellers.

In real life, entrepreneurs encounter ethical problems all the time. This is why it is
good to discuss ethics early on in the budding entrepreneur’s life. Entrepreneurs are
faced with complex moral problems related to business fairness, costing and pricing
dilemmas, distribution choices, and even personal relationships. Although it is difficult
to give clear-cut and outright answers to these ethical questions, airing these dilemmas
would be a good first step to making you, students, aware of what you will encounter
in real life (SERDEF, 2013).

Learning Outcomes

At the end of this module, students should be able to:

1. discuss the responsibilities and accountabilities of entrepreneurs; and
2. formulate a morally defensible position on ethical issues in
entrepreneurship like basic fairness, personal and customer
relations, distribution dilemmas, fraud, unfair competition, etc.
Lesson 1. Ethical Dilemmas in Business and Corporate
World (Roa, 2011)

Enumerated below are some of the most common ethical dilemmas still happening in
the corporate/business settings (Roa, 2011):

 SEXUAL HARASSMENT
The Philippine Congress enacted into law Republic Act No. 7877 or the Anti-
Sexual Act of 1995 defines sexual harassment “any other person who, having
authority, influence, or moral ascendency over another in a work or training or
education environment demands, requests or otherwise requires any sexual
favor from the other, regardless of whether the demand, request or requirement
for submission is accepted by the object of said act.”

This occurs due to the power struggle between men and women as a response
to a real or imagined loss of power (when men do it to women), or as an
expression of retaliation or flexing of the new power (when women do it on
men).

Two types of sexual harassment:

a. The “Quid Pro Quo”, which literally means “this for that”. Requiring a
sexual favor in exchange for something beneficial (e.g. promotion, pay
raise, etc.). An example would be a manager telling his subordinate “go
to bed with me and you will get that promotion you want.”

b. Hostile Environment type, where abuses include verbal, physical, and

visual conducts that create an intimidating, offensive or hostile
environment in the workplace that interferes with work performance,
and may be based on race, religion, sex, age, etc. Some examples
would be unwanted touching, catcalls, sexual propositions, “green”
jokes, insults of a sexual nature, etc.

 THE PROBLEM OF JUST WAGE

Just wage, is defined as that remuneration which is enough to support the wage
earner in reasonable and frugal comfort (Roa, 2011).

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 Some issues in Just Wage:
a. The Minimum wage mandated by the government is not a guarantee of a
just and fair wage.
b. Organizations and businesses usually conclude that they are legally and
morally right when they fulfill their “mutual agreement” with the employees.
c. Geographic differences hinder the formulation of a perfectly common
definition of fair wage. Some communities have a higher cost of living than
others.
d. Companies have different interpretations of the justifiable pay for certain job
positions, skills and tasks. Thus the prevailing rate in industry alone could
not perfectly establish a just wage.
e. The Law of supply and demand on labor, e.g. the more the supply the less
the compensation being given ton workers.
f. Inflation rate also dictates the formulation of just wages as it affects the
prices of commodities.

 GIFT-GIVING
The act of extending goodwill to an individual in an effort to share something
with them, businesses usually engage in gift-giving for the following reasons:
a. To show appreciation for a favor received;
b. To advertise;
c. To effectively establish goodwill with business partners; and
d. To compete effectively against competitors.

The following are common forms of gift giving:

a. Samples
b. Raffles coupons/certificates
c. Rebates/cash refunds
d. Paddings
e. Prizes
f. Patronage awards
g. Tie-up promotions
h. Allowance
i. Free goods
j. Tips

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 Is it ethical or unethical?
Business gifts of clients and business associates can raise conflict-of-interest
problems, and knowing where to draw the line between what is right and wrong,
is not always easy. The clear point is that those who cross the line, intentionally
or not, end up in big trouble.

Factors determining the Morality of Gift-giving:

a. Vale of the Gift - is the gift of nominal value? Or is it substantial enough to
influence a business decision?
b. Purpose of the Gift – as long as the gift is not intended or received as a
bribe and remains nominal, there doesn’t appear to be any serious problem.
c. Circumstance under which the Gift was Given or Received – Whether the
gift was given during a special occasion. Was it given openly or secretly.
d. Position between or Relationship of the Giver and Receiver – could the
recipient’s opinion, influence or decision result in preferential treatment in
favor of the donor?
e. Acceptable Business Practice in the Industry – Could the act be considered
acceptable in the kind of business industry.
f. Company Policy – if the company forbids the practice of giving and
receiving gifts to/from its customers, vendors, suppliers, associates, or
corporate directors, then gift-giving would normally be wrong.
g. Laws and regulations – certain states or local government institutions may
impose laws prohibiting accepting gifts from firms they do business with.

 BRIBERY
Defined as the practice of giving remuneration for performance of an act that is
inconsistent with the work contract or nature of work one has been hired to
perform. A form of corruption and is generally immoral and illegal.

Examples of Bribery:
a. A motorist offers a certain amount of money to a traffic officer in order not
to be issued a ticket for a traffic violation
b. A construction company sharing percentage of its income to a government
employee in order to win a contract.
c. A drug smuggler bribing a judge in order to get lesser sentence.

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 Bribery is unethical because:
a. It is generally used as an instrument to gain personal or corporate
advantage.
b. It corrupts the concept of justice and equality.
c. It produces cynicism and general distrust of the institutions.
d. It destroys people’s trust in the integrity of professional services, of
government and the courts, of law enforcement, religion and anything it
touches.
e. It treats people as commodities whose honor can be bought or sold, and
degrades the respect we owe to fellow human beings.

 THE MORALITY OF ADVERTISING

Kotler defined advertising as “any paid form of non-personal presentation and
promotion of ideas, goods, or services by an identified sponsor.” This plays a
significant role in marketing goods and services. Without it, the consumers
would not be aware of the presence of diverse products and services available
in the market.

Some issues on Advertising:

a. Deceptive Advertising – those which either make a false statement
(therefore, lie) or which represent the product without making any
statement. Deception can occur not only in statements but also in pictures,
or certain combinations which can deceived the eye and mind.

b. Ambiguity – when ads are ambiguous, they are considered deceptive. Use
of weasel words avoids a direct statement. It prevents accusations that
advertisers are acting immorally. Commonly used weasel words are “help”
(e.g. helps prevent; helps fight; helps you feel; etc.). Other commonly used
weasel words are “like”, “up to”, “as much as”, etc.
Although trhese ads are open to various interpretations, advertisers still
have an obligation to provide viewers with clear and factual information,
and avoid misleading consumers.
c. Exaggeration – consumers might also be misled through exaggeration. This
occurs when advertisements tend to make false claims unsupported by
valid evidences. E.g. a pain reliever claiming that it provides “extra pain
relief” or “50% more effective than other brands” contradicts the evidence

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 that all analgesics are effective to the same degree. Much of these
exaggerations are used by manufacturers of vitamins, food supplements
and other drugs. Exaggeration also go hand in hand with concealed
information, deliberately suppressing unflattering information about their
product.

d. Psychological appeal – a visual or aural influence on the subconscious

mind, influencing consumers by implying that doing what is suggested will
satisfy a subconscious desire. Some psychological appeals used to
motivate people to buy are power, prestige, masculinity, femininity, self-
esteem, etc.

e. Ads directed to Children – As children do not regard reason, they have been
considered in advertising as the purest of consumers. They tend to interpret
ads literally. So, advertisers aim for children to pester their parents to buy
things for them.

 THE PROBLEM OF FAIR-PRICING

Price is defined as a measure of value in exchange (as nothing really has a
price until it is offered in an exchange. It may be expressed in monetary terms
(a sale) and non-monetary terms (a barter).

Here are some ethical issues in Fair Price:

a. The true cost of the product is concealed – companies do not show real
cost of the product under clout of confidentiality.
b. Suggested Retail Price - makes price determination subject to doubt and
suspicion as it can be open to a lot of interpretations.
c. Promotional Pricing – on sale items manipulate consumers into thinking that
they are buying a cheaper product (e.g., Odd Price Policy: 99.99 instead of
P100.00)
d. Follow the Leader Pricing – purposely makes the buyers believe that what
is being sold is same as well-known brands due to its almost similar pricing.
It gives the impression that products that ae priced high are of good quality,
when in fact, it could sold for a lot less.

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 e. Price Gouging – takes advantage of an economic situation, for example,
pricing canned goods higher than usual during typhoons and other
calamities, or pricing pork meat really high because of the high cases of
swine fever.
f. Price Fixing – uses the power of the retailer among the producers in order
to control product price.

 ISSUES INVOLVING TRADE SECRETS

Trade secrets are what we call any confidential business information. These
are things that you want to protect from your competitors (imagine Jollibee’s
recipe for their gravy, or McDo’s concoction for their Sundae, or Coca-Cola’s
formula). These are information that has an independent economic value
mainly because of the cost it had to take to develop the right
recipe/strategy/formula/information. Usually, these are also the information that
makes your product unique, or makes it stand-out.

Imagine how much it would cost your company, if a top employee learned every
major area of the business, then decides to leave you, and puts up his own
business which directly competes with yours? He can definitely pose a serious
threat on your business.

These issues are often not addressed until an employee or competitor obtains
and uses against a company, its valuable information, thereby stealing their
sales, customers, technology, etc.

 PRODUCT MISREPRESENTATION
Misrepresentation happens when there is transformation of information to
misinformation. These can be done intentionally or unintentionally.

Issues involving misrepresentation include:

a. Deceptive Packaging – creating an impression/illusion that the consumer is
getting more by using bigger packaging (imagine shampoo bottles that’s
half-filled, or junk food packaging that’s mostly air).
b. Adulteration – adding something to the product to increase its bulk or
volume, or substituting it with an inferior product (think honey that’s mostly
sugar syrup instead of real honey).

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 c. Misbranding/Mislabeling – act of copying a leading brand’s product and
packaging design to hopefully trick people that it is the same with the
leading brand (think Ma Ling’s packaging almost being copied by
Purefood’s Luncheon meat; or Black Rice claiming to be organic, when it is
clearly not certified as such).
d. Short Weighing – imagine tampered weighing scales in wet markets by
offsetting the calibration of the dials, or weighing food with the packaging
(as it adds weight too).
e. Shortchanging – notice when you buy something from the grocery, and your
change is supposed to be P20.50, but they claim to run out of change, so
you end up getting just P20.00? Or when you see prices using the odd-
price policy, like 48.99 or 99.99? what happens to the 0.01 centavo then?
Those are ways of shortchanging a customer.
f. Short measuring – usually observed on products involving length or volume,
such as textile markets and electrical shops. Meter/yard stick used is
sometimes shorter than actual, resulting to increased profit.
g. Short numbering – when seller gives quantity by piece less than what was
paid for, or when product being sold are pre-packaged wherein it would
make counting difficult.

 UNFAIR COMPETITION
They say, competition is good because it can motivate firms to produce better
products or offer better services. Without it, firms will relax and quality will
suffer.

There are 3 different Kinds of Competition:

a. Monopoly – there is only one provider for a particular product/service,
therefore it lacks competition and viable substitutes, and therefore has
power to dictate the price (imagine Meralco in NCR, for their electrical
supply)
b. Oligopoly – there are a few sellers for a product or service. Here, members
of the oligopoly do not compete, but instead turn into friendly competitors
resulting to profitable prices (think gas stations, or telecommunication
companies).
c. Perfect Competition – situation where there is no firm or consumer that is
large enough to be able to dictate prices. Here, prices are usually dictated

68
 by the law of supply and demand (think of Milk Tea shops here in Santa
Cruz).

Unfair competition consists of:

a. Deceptive Trade Practices such as misrepresentation or false advertising.
b. Business Interference preventing competitor from continuing its business
process or business contract
c. Anti-Competitive Market Practices such as selling items below coast in
order to kill competition.
d. Defamation of a Competitor or badmouthing a competitor to a customer.
e. Caveat Emptor or withholding information from the buyer.
f. Violation of Intellectual Property Rights such as copyright marks, patents,
trademarks and service marks (think Big Mak vs. McDonald’s Big Mac)

 TAX EVASION AND TAX AVOIDANCE

Tax Evasion is an “intentional negligence” of the obligation to pay taxes. IN the
ethical sense, the three elements of tax evasion are:
a. The intention to cheat.
b. Knowledge that tax evasion is wrong.
c. By fraudulent means.

Some examples:
1. Omitting to report one’s corporate income
2. Intentional understatement of income
3. Improper overstatement of deductions
4. Claiming false personal exemptions
5. Misdeclaration or under-declaration of the estate tax return

Tax Avoidance is when taxpayers exploit legally permissible alternative

methods of assessing taxable property or income in order to avoid or reduce
tax liability, and is not punishable by law. Like Tax evasion, tax avoidance is a
deliberate escape from taxation but accomplished through legal procedures
which may be contrary to what the sponsors of the law initially intended.

Payment of Just Tax is considered an obligation in conscience and violation of

this duty is regarded as an offense against justice.

69
Lesson 2. Ethical Decision-making

THE FIVE APPROACHES TO ETHICAL DECISION-MAKING (Markkula Center for

Applied Ethics, 2014)

1. The UTILITARIAN APPROACH

Stripped down to its essentials, utilitarianism is a moral principle that holds that
the morally right course of action in any situation is the one that produces the
greatest balance of benefits over harms for everyone affected. So long as a
course of action produces maximum benefits for everyone, utilitarianism does
not care whether the benefits are produced by lies, manipulation, or coercion.

Many of us use this type of moral reasoning frequently in our daily decisions.
When asked to explain why we feel we have a moral duty to perform some
action, we often point to the good that will come from the action or the harm it
will prevent. Business analysts, legislators, and scientists weigh daily the
resulting benefits and harms of policies when deciding, for example, whether
to invest resources in a certain public project, whether to approve a new drug,
or whether to ban a certain pesticide. (Velasquez, Andre, Shanks and Meyer,
2014).

In an era today that some have characterized as "the age of self-interest,"

utilitarianism is a powerful reminder that morality calls us to look beyond the
self to the good of all.

CRITIQUES:

the greatest difficulty with utilitarianism is that it fails to take into account
considerations of justice. We can imagine instances where a certain course of
action would produce great benefits for society, but they would be clearly
unjust.

2. The RIGHTS APPROACH

Many moral controversies today are couched in the language of rights. Indeed,
we seem to have witnessed an explosion of appeals to rights—gay rights,
prisoners' rights, animal rights, smokers' rights, fetal rights, and employee
rights.

70
What is a right? A right is a justified claim on others. For example, if I have a
right to freedom, then I have a justified claim to be left alone by others. Turned
around, I can say that others have a duty or responsibility to leave me alone. If
I have a right to an education, then I have a justified claim to be provided with
an education by society (Velasquez, Andre, Shanks and Meyer, 2014).

The "justification" of a claim is dependent on some standards, acknowledged

and accepted not just by the claimant, but also by society in general.

Moral rights are justified by moral standards that most people acknowledge,
but which are not necessarily codified in law; these standards have also,
however, been interpreted differently by different people.

CRITIQUES:

Whenever we are confronted with a moral dilemma, we need to consider

whether the action would respect the basic rights of each of the individuals
involved. How would the action affect the basic well-being of those individuals?
How would the action affect the negative or positive freedom of those
individuals? Would it involve manipulation or deception—either of which would
undermine the right to truth that is a crucial personal right? Actions are wrong
to the extent that they violate the rights of individuals (Velasquez, Andre,
Shanks and Meyer, 2014).

Sometimes the rights of individuals will come into conflict and one has to decide
which right has priority. We may all agree, for example, that everyone has a
right to freedom of association as well as a right not to be discriminated against.
But suppose a private club has a policy that excludes women from joining. How
do we balance the right to freedom of association—which would permit the club
to decide for itself whom to admit—against the right not to be discriminated
against—which requires equal treatment of women? In cases such as this, we
need to examine the freedoms or interests at stake and decide which of the two
is the more crucial for securing human dignity. For example, is free association
or equality more essential to maintaining our dignity as persons?

71
 But rights should not be the sole consideration in ethical decision-making. In
some instances, the social costs or the injustice that would result from
respecting a right are too great, and accordingly, that right may need to be
limited. And, while morality does call on us to respect the uniqueness, dignity,
and autonomy of each individual, it also invites us to recognize our
relatedness—that sense of community, shared values, and the common good
which lends itself to an ethics of care, compassion, and concern for others
(Velasquez, Andre, Shanks and Meyer, 2014).

3. The FAIRNESS APPROACH

Justice means giving each person what he or she deserves or, in more
traditional terms, giving each person his or her due. Justice and fairness are
closely related terms that are often today used interchangeably. There have,
however, also been more distinct understandings of the two terms. While
justice usually has been used with reference to a standard of rightness, fairness
often has been used with regard to an ability to judge without reference to one's
feelings or interests; fairness has also been used to refer to the ability to make
judgments that are not overly general but that are concrete and specific to a
particular case. In any case, a notion of being treated as one deserves is crucial
to both justice and fairness (Velasquez, Andre, Shanks and Meyer, 2014).

When people differ over what they believe should be given, or when decisions
have to be made about how benefits and burdens should be distributed among
a group of people, questions of justice or fairness inevitably arise. In fact, most
ethicists today hold the view that there would be no point of talking about justice
or fairness if it were not for the conflicts of interest that are created when goods
and services are scarce and people differ over who should get what. When
such conflicts arise in our society, we need principles of justice that we can all
accept as reasonable and fair standards for determining what people deserve.

Justice, then, is a central part of ethics and should be given due consideration
in our moral lives. In evaluating any moral decision, we must ask whether our
actions treat all persons equally. If not, we must determine whether the
difference in treatment is justified: are the criteria we are using relevant to the

72
 situation at hand? But justice is not the only principle to consider in making
ethical decisions. Sometimes principles of justice may need to be overridden in
favor of other kinds of moral claims such as rights or society's welfare.
Nevertheless, justice is an expression of our mutual recognition of each other's
basic dignity, and an acknowledgement that if we are to live together in an
interdependent community, we must treat each other as equals (Velasquez,
Andre, Shanks and Meyer, 2014).

4. The COMMON GOOD APPROACH

A, Newsweek columnist Robert J. Samuelson once wrote: "We face a choice
between a society where people accept modest sacrifices for a common good,
or a more contentious society where groups selfishly protect their own
benefits."

Appeals to the common good have also surfaced in discussions of business'

social responsibilities, discussions of environmental pollution, discussions of
our lack of investment in education, and discussions of the problems of crime
and poverty. Everywhere, it seems, social commentators are claiming that our
most fundamental social problems grow out of a widespread pursuit of
individual interests (Velasquez, Andre, Shanks and Meyer, 2014).

The common good, then, consists primarily of having the social systems,
institutions, and environments on which we all depend work in a manner that
benefits all people.

The common good is a good to which all members of society have access,
and from whose enjoyment no one can be easily excluded. All persons, for
example, enjoy the benefits of clean air or an unpolluted environment, or any
of our society's other common goods. In fact, something counts as a common
good only to the extent that it is a good to which all have access.

73
 CRITIQUES:

Different people have different ideas about what is worthwhile or what

constitutes "the good life for human beings". Given these differences, some
people urge, it will be impossible for us to agree on what particular kind of social
systems, institutions, and environments we will all pitch in to support.

The benefits that a common good provides are, as we noted, available to

everyone, including those who choose not to do their part to maintain the
common good. Individuals can become "free riders" by taking the benefits the
common good provides while refusing to do their part to support the common
good. (Velasquez, Andre, Shanks and Meyer, 2014).

Another problem encountered by attempts to promote the common good is that

of individualism. There is also the unequal sharing of burdens wherein forcing
particular groups or individuals to carry such unequal burdens "for the sake of
the common good", is, at least arguably, unjust. Moreover, the prospect of
having to carry such heavy and unequal burdens leads such groups and
individuals to resist any attempts to secure common goods.

Regardless of the many critiques, appeals to the common good ought not to be
dismissed. For they urge us to reflect on broad questions concerning the kind
of society we want to become and how we are to achieve that society. They
also challenge us to view ourselves as members of the same community and,
while respecting and valuing the freedom of individuals to pursue their own
goals, to recognize and further those goals we share in common.

5. The VIRTUE APPROACH

Virtues" are attitudes, dispositions, or character traits that enable us to be and
to act in ways that develop this potential. They enable us to pursue the ideals
we have adopted. Honesty, courage, compassion, generosity, fidelity, integrity,
fairness, self-control, and prudence are all examples of virtues (Velasquez,
Andre, Shanks and Meyer, 2014).

74
How does a person develop virtues? Virtues are developed through learning
and through practice. As the ancient philosopher Aristotle suggested, a person
can improve his or her character by practicing self-discipline, while a good
character can be corrupted by repeated self-indulgence. Just as the ability to
run a marathon develops through much training and practice, so too does our
capacity to be fair, to be courageous, or to be compassionate.

Virtues are habits. That is, once they are acquired, they become characteristic
of a person. For example, a person who has developed the virtue of generosity
is often referred to as a generous person because he or she tends to be
generous in all circumstances. Moreover, a person who has developed virtues
will be naturally disposed to act in ways that are consistent with moral
principles. The virtuous person is the ethical person.

At the heart of the virtue approach to ethics is the idea of "community". A

person's character traits are not developed in isolation, but within and by the
communities to which he or she belongs, including family, church, school, and
other private and public associations. As people grow and mature, their
personalities are deeply affected by the values that their communities prize, by
the personality traits that their communities encourage, and by the role models
that their communities put forth for imitation through traditional stories, fiction,
movies, television, and so on. The virtue approach urges us to pay attention to
the contours of our communities and the habits of character they encourage
and instill (Velasquez, Andre, Shanks and Meyer, 2014).

The moral life, then, is not simply a matter of following moral rules and of
learning to apply them to specific situations. The moral life is also a matter of
trying to determine the kind of people we should be and of attending to the
development of character within our communities and ourselves.

75
Lesson 3. Ethics vs. Law

Many times, the term law is juxtaposed with the term ethics, but there is actually a
huge difference, as ethics are the principles that guide a person or society, created to
decide what is good or bad, right or wrong, in a given situation. It regulates a person’s
behavior or conduct and helps an individual in living a good life, by applying the moral
rules and guidelines (Roa, 2011).

For a layman, these two terms are same, but the fact is that there is a difference
between law and ethics (as seen in the table below).

Law and ethics are different in a manner that what a person must do and what a person
should do. The former is universally accepted while the latter is ideal human conduct,
agreed upon by most of the people. Although, both the law and ethics are made in
alignment so that they do not contradict each other. Both go side by side, as they
provide how to act in a particular manner, as Law is also made with ethics as one of
its guiding principles (SERDEF, 2013).

76
Table 5.1 A Comparison Chart between Law and Ethics
Basis for Comparison LAW
Meaning?  refers to a
systematic body of
rules that governs
the whole society and
the actions of its
individual members.
What is it?  Set of rules and
regulations
 Lawful vs. Unlawful
Governed by?  Government
Expression?  Expressed and
published in writing.
Violations?  Violation of law is not
permissible which may
result in punishment
like imprisonment or
fine or both.
Objective?  Law is created with
an intent to maintain
social order and peace
in the society and
provide protection to
all the citizens.
Binding?  Law has a legal
binding.
Source: https://www.lawyersnjurists.com/article/law-versus-ethics/
ETHICS
 is a branch of moral
philosophy that
guides people about
the basic human
conduct.
 Set of guidelines
 What is RIGHT and
WRONG
 Individual, Legal and
Professional norms
 They are abstract.
 There is no
punishment for
violation of ethics.
 Ethics are made to
help people to decide
what is right or
wrong and how to act.
 Ethics do not have a
binding nature.
77
Assessment Tasks

Case study 1: Supposing you are a business professional, and Linda, a

former client, has steered half dozen prospective clients your way this year,
and several of them have become valued clients of your firm.

Would it be an appropriate gesture to thank her if you invite her and her
husband out for a dinner? Why or Why not? Defend your answer.

Case Study 2: An employee transfers from one business firm to another

competitor business firm. The employee resigned from Company A to
transfer to Company B in order to seek “greener pastures”. Now, let us
assume that this employee is formerly part of the “think tank” of Company A.
This employee acquired considerable technical skills and information from
the previous job.

If this particular employee ends up getting hired, would there be anything

unethical if he uses skills acquired with Company A, for Company B? Why
or why not? Explain your answer briefly.

Case Study 3: ABS-CBN claims that they have been an unfortunate victim
of grave abuse of authority and politicking after their franchise renewal was
denied, and was ordered to close down. Was the action taken by the
government indeed unethical, or were there legal basis for it?

Explain briefly your stand on this matter.

78
 Summary

 There are many approaches one can use in order to come up with an ethical
decision, from something that’s a bit individualistic, to something that is more
communal and benefits more.
 Ethics are a set of moral values an individual establishes for one's self and your
own personal behavior. Laws are structured rules utilized to govern all of
society.

References

 Corporate Finance Institute. (2020). Business Ethics.https://corporate

financeinstitute.com/resources/knowledge/other/business-ethics/
 Macdonald, C. (2010, December 6). Four Myths About Business Ethics. The
Business Ethics Blog. https://businessethicsblog.com/2010/12/06/four-myths-
about-business-ethics/
 Roa, F. C. (2011). Business Ethics and Social Responsibility (2nd ed.). Rex
Bookstore, Inc.
 Velasquez, M., Andre, C., Shanks SJ, T., and Meyer, M. (2014, Aug 8). Rights.
Markkula Center for Applied Ethics. https://www.scu.edu/ethics/ethics-
resources/ethical-decision-making/rights/
 Velasquez, M., Andre, C., Shanks SJ, T., and Meyer, M. (2014, Aug 8). Justice
and Fairness. Markkula Center for Applied Ethics.https://www.scu.
edu/ethics/ethics-resources/ethical-decision-making/justice-and-fairness/
 Velasquez, M., Andre, C., Shanks SJ, T., and Meyer, M. (2014, Aug 8). The
Common Good. Markkula Center for Applied Ethics.https://www.scu.edu/
 ethics/ethics-resources/ethical-decision-making/the-common-good/
 Velasquez, M., Andre, C., Shanks SJ, T., and Meyer, M. (2014, Aug 8). Ethics
and Virtue. Markkula Center for Applied Ethics.
 Western Governors University. (2020, January 20). What is ethical leadership?
https://www.wgu.edu/blog/what-is-ethical-leadership2001.html

79
 MODULE 6
ETHICS AND SOCIAL RESPONSIBILITY

Introduction

The business community is confronted with a great deal of challenges and opportunities.
Being part of the social order and as social expects, businesses are prodded, asked or
encouraged to improve their business practices in ways that respect ethical values, people,
communities and the environment. In response to these challenges, businesses recognize that,
aside from making profit, they are morally obliged to become more innovative, competitive,
productive and responsible members of the society. It is morally obligatory, even if not legally
required for the businesses to protect and uphold the interests of their stakeholders and meet
the tests of good corporate citizenship.

Learning Outcomes

At the end of this module, students should be able to:

1. describe the different models and frameworks of social responsibility;
2. formulate a framework of social responsibility that reflects the
practice of sound business;
3. explain the importance of establishing and sustaining business
enterprises as a source of job opportunities and financial freedom; and
4. prepare and implement a proposed personal action plan to assist an
existing small business enterprise to practice ethics and social
responsibility in their business operation.
Lesson 1. The Three Basic Models of (Corporate) Social
Responsibility

 CARROLL’S PYRAMID OF CSR

Carroll’s four-part definition of CSR was originally stated as follows: “Corporate
social responsibility encompasses the economic, legal, ethical, and discretionary
(philanthropic) expectations that society has of organizations at a given point in
time” (Carroll, 2016).

Figure 6.1 Carroll’s Pyramid of CSR

Source: https://jcsr.springeropen.com/articles/10.1186/s40991-016-0004-6

Carroll (2016) said that while meeting these ethical responsibilities, important
expectations of business include they’re:

 Performing in a manner consistent with expectations of societal mores and

ethical norms
 Recognizing and respecting new or evolving ethical/moral norms adopted by
society
 Preventing ethical norms from being compromised in order to achieve business
goals
 Being good corporate citizens by doing what is expected morally or ethically

81
  Recognizing that business integrity and ethical behavior go beyond mere
compliance with laws and regulations

 THE INTERSECTING CIRCLES (IC) MODEL OF CSR

The intersecting circles (IC) model of CSR contrasts with the pyramid model in two
main aspects: (1) it recognizes the possibility of interrelationships among CSR
domains; and (2) rejects the hierarchical order of importance (Carroll, 2016).

Figure 6.2. The Intersecting Circles Model of CSR

Source: https://www.researchgate.net/figure/a-The-pyramid-model-b-the-
concentric-circle-model-c-the-intersecting-circles

As Schwartz and Carroll claim, the primary idea behind the IC model is that none of
the CSR domains is more important or significant relative to the others.

In particular, the economic responsibility is not necessarily the most fundamental.

According to Davis's Iron Law of Responsibility, it is true that corporations are
designed for business, but before anything else they are social creations whose
very existence depends on the willingness of society to endure and support them.
In this view, the social responsibilities of the firm are not necessarily less important
than its economic undertakings (Geva, 2008).

82
 THE CONCENTRIC-CIRCLE MODEL OF CSR

The concentric-circle (CC) model is similar to the pyramid in that it views the
economic role of business as its core social responsibility, and similar to the IC
model in that it emphasizes the interrelationships among the different corporate
social responsibilities (Geva, 2008).

But underlying these similarities are essential differences in the very definitions of
the corporate responsibilities. Thus, the pyramid defines the corporate economic
role in terms of narrow self‐interest (“be profitable”), whereas the CC model defines
this same role in terms of CSR, namely, enhancing the good of society (“be
constructively profitable”). In contrast to the pyramid, which scales down the
importance of the non-economic social responsibilities (i.e., legal, ethical and
philanthropic), and in contrast to the IC model which, along with interrelationships,
also allows for no relations among the different domains of responsibility, the CC
model outlines the non-economic social responsibilities as embracing and
permeating the core economic responsibilities (Carrol, 2016).

Figure 6.3 The Concentric-Circle (CC) Model

Source: https://www.pinterest.ph/pin/314900198943897930/

83
Lesson 2. Ethical Sourcing and Sustainability

Ethical/Sustainable sourcing is the process of ensuring the products

being sourced are obtained in a responsible and sustainable way, that the workers
involved in making them are safe and treated fairly and that environmental and social
impacts are taken into consideration during the sourcing process. Building supply
chains that exclude vendors engaged in unfair or illegal labor practices is a priority. It
is the integration of social, ethical and environmental performance factors into the
process of selecting suppliers (Ecovadis, n.d.).

This is needed as supply chains continue to expand globally into developing countries
seeking lower costs and greater production capacity, and they expose companies to
an even wider array of risks. These risks not only include risk of supply disruption, cost
volatility and compliance with local laws and regulations, but also in brand reputation:
Companies must meet the growing expectations of stakeholders (including customers,
shareholders, employees, NGOs, trade associations, labor unions, government
observers, etc.) to take responsibility for their supplier’s environmental, social and
ethical practices. Thus, companies increasingly making responsible sourcing an
integral part of their procurement and supply chain management processes to
understand and manage these risks in the supply chain (Ecovadis, n.d.).

Ecovadis (n.d.), in their website, also highlighted that the ultimate goal of
Ethical/Sustainable Sourcing is to build strong, long-term relationships with suppliers.
Improving performance in environmental, social and ethical issues is becoming a major
part of the overall process. Working toward this has become an extension of the
company’s commitment to corporate responsibility and as such becomes a part of the
overall business structure and model. Effective supply chain management can foster
and build competitive advantage for companies especially in sectors where production
is mainly outsourced such as food and clothing.

To maximize profit margins, companies have been outsourcing their manufacturing as

the cheapest way to source their goods (Roa, 2011). The focus on ethical sourcing is
a relatively new trend. However, in recent years, there have been some major success
stories of companies that have gone out of their way to make their sourcing and
manufacturing both ethical and responsible.

84
In an article by Bennet O’Brien (2018) he listed three companies that did not only
boosted the reputation of their brands, but also ensured that workers on their supply
chains were being treated well:

1. Patagonia is an American outdoor clothing company, that has used organically

grown cotton for all of its products since
switching from pesticide-heavy cotton crops in
1994. Patagonia altered its entire supply chain
to ensure environmentally friendly, safe
working conditions. Furthermore, Patagonia

(Patagonia logo sourced from provides excellent health insurance and gives

https://www.reddit.com/r/vectorart/co paid paternity and maternity leave for all of its

mments/c857yw/patagonia_logo/) workers. Patagonia has built a very strong
reputation for being ethical, environmentally
friendly, and using ethical sourcing. This positive reputation only strengthens its brand,
and gives conscientious customers more incentive to buy.

2. Starbucks is committed to 100% sustainably sourced coffee, and uses a system

called C.A.F.E. (Coffee and Farmer Equity
Practices) in order to optimize its sustainable
sourcing. There are four ideas at the heart of
Starbucks’ C.A.F.E. sourcing system: quality,
economic transparency, social responsibility,
and environmental leadership. Starbucks strives
(Starbucks Logo sourced from
to always buy coffee at fair prices and ensure
https://www.google.com/search?q=s
tarbucks+logo&tbm=isch&ved) each step of the coffee planting, harvesting,
processing and purchasing is always done
ethically. The coffee giant even uses third parties to verify that its sourcing is ethical.
The standards set by Starbucks are now recognized as the industry standard for ethical
sourcing. Starbucks works with over 170,000 farmers and generates billions of dollars
in revenue every single year. Its ability to remain both profitable and set the industry
standard for sustainability has been a shining example for North America’s coffee
industry.

85
3. H&M Clothing retailer is committed to supply chain transparency. They publish a list
of 98.5% of their suppliers’ names and
addresses on their website, and update it on a
quarterly basis. This ensures they can be held
publicly accountable for the conduct of their
(H&M logo sourced from suppliers, and that anyone can verify whether
https://www.google.com/search? their suppliers are living up to the standards set
q=h%26m+logo&sxsrf) by the company. In addition to sharing its supply
chain information, H&M also has a responsible
sourcing goal of using only 100% recycled or sustainably sourced materials by the year
2030. This makes H&M a trendsetter, and an ethical leader in clothing retail. The
fashion industry is viewed by many as problematic in terms of sustainable and ethical
sourcing. If a leading clothing retailer like H&M can demonstrate its dedication to
ethical practices and sustainability while maintaining profits, there is a potential to
change this reputation as other retailers follow this example.

HOW DOES ETHICAL SOURCING AND MANUFACTURING IMPROVE THE

WORLD AND THE BOTTOM LINE?

Despite the fact that not every company currently prioritizes ethical sourcing, and that
many of the products in developed markets are still tied to unethical business practices,
the long-term trend is turning toward sustainability. Social networking sites and the
internet are making the world much more connected. It’s easier than ever before for
ethics violations and bad business practices to be seen and reported on (SERDEF,
2013).

The opposite is also true, and socially conscious consumers can now easily use the
internet to find ethical brands. As customers increasingly use their purchasing power
to send the message that ethical sourcing and manufacturing is important to them,
more businesses will change their practices as they acknowledge it makes good
financial sense. This should see a rise in brands competing with each other to build
ethical reputations to entice new customers. As a result, ethical sourcing and
manufacturing practices will become much more commonplace around the world
(SERDEF, 2013).

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Lesson 3. Business and Ecology

Businesses, no doubt, has contributed greatly to the destruction of the earth and the
environment. The creation of new products and services to satisfy the needs and wants
of the customers comes with a price to pay. It is our duty to ensure the survival of the
next generations of human beings. As although man is privileged to live in a decent
environment, so is he also the one responsible in tampering it (Roa, 2011).

Businesses, however, should get the bigger share of this responsibility for the following
reasons:
1. Businesses use natural resources in the production of goods or services; and
2. Businesses dispose waste to the environment.

THE DIMENSIONS OF THE ECOLOGICAL PROBLEM (Roa, 2011):

a. Population Explosion – this is a problem because earth, and its resources

are limited, and if human population on earth continues to grow, it will soon
come to a point where all resources are used up, resulting to famine,
poverty and more pollution.
b. Depletion of Natural Resources – The growth of this problem worldwide is
due to activities of businesses. And although we humans benefit from the
use of these resources, time will come where it will all be depleted and we
might experience technological regression.
c. Pollution of the Environment – the waste of our increased population and
from our modern industrial lives are destroying the quality of land, air and
water. Due to these, the earth is slowly becoming unsuitable for decent
human living.
d. Destruction of the Earth – losing forest lands for subdivisions, or use of
chemicals in agricultural practice, are just some of the many ways humans
are destroying the earth, that makes it no longer capable of supporting
cultivation, farming and gardening, as well as resulting to a decrease in
food supply.

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THE CERES PRINCIPLES (also known as the Valdez Principles)

The Valdez Principles, subsequently called the Ceres Principles, are a set of ten
guidelines designed to regulate and monitor the conduct of corporations in matters
relating to the environment. These transparency focused guidelines rely on public
audits and environmental impact reports. They were drawn up in 1989 after the Exxon
Valdez oil tanker disaster which ran aground and spilled more than 10 million gallons
of crude off the Alaskan coast (Matthews, 2015).

The CERES Pledge:

“By adopting these principles, we publicly affirm our belief that corporations and
their shareholders have a direct responsibility for the environment. We believe
that corporations must conduct their business as responsible stewards of the
environment and seek profits only in a manner that leaves the Earth healthy
and safe. We believe that corporations must not compromise the ability of
future generations to sustain their needs.

‘We recognize this to be a long-term commitment to update our practices

continually in light of advances in technology and new understandings in health
and environmental science. We intend to make consistent, measurable progress in
implementing these Principles and to apply them wherever we operate
throughout the world.”

The CERES Principles is a ten-point code of corporate environmental conduct to be

publicly endorsed by companies as an environmental mission statement or ethic.
Companies that endorse these Principles promise to go voluntarily beyond the
requirements of the law, and publicly assert their belief that corporations have a
responsibility for the environment. They require that investment decisions minimize risk
to the environment and promote sustainable use of natural resources. These are the
following (Matthews, 2015):

1. Protection of the biosphere

We will minimize and strive to eliminate the release of any pollutant that may cause
environmental damage to air, water, or earth or its inhabitants. We will safeguard
habitats in rivers, lakes, wetlands, coastal zones and oceans and will minimize
contributing to the greenhouse effect, depletion of the ozone layer, acid rain or smog.

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2. Sustainable use of natural resources
We will make sustainable use of renewable natural resources, such as water, soils and
forest. We will conserve non-renewable natural resources through efficient use and
careful planning. We will protect wildlife habitats, open spaces and wilderness, while
preserving biodiversity.

3. Reduction and disposal of waste

We will minimize the creation of waste, especially hazardous waste, and wherever
possible recycle materials. We will dispose of all wastes through safe and responsible
methods.

4. Wise use of energy

We will make every effort to use environmentally safe and sustainable energy sources
to meet our needs. We will invest in improved energy efficiency and conservation in
our operations. We will maximize the energy efficiency of products we produce and
sell.

5. Risk reduction
We will minimize the environmental health and safety risks to our employees and the
communities in which we operate by employing safe technologies and operating
procedures and by being constantly prepared for emergencies.

6. Marketing safe products and services

We will sell products or services that minimize adverse environmental impacts and that
are safe as consumers commonly use them. We will inform consumers of the
environmental impacts of our products or services.

7. Damage compensation
We will take responsibility for any harm we cause to the environment by making every
effort to fully restore the environment and to compensate those persons who are
adversely affected.

8. Disclosure
We will disclose to our employees and to the public incidents relating to our operations
that cause environmental harm or pose health or safety hazards. We will disclose
potential environmental, health or safety hazards posed by our operations, and we will

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not take any action against employees who report any conditions that create a danger
to the environment or pose health or safety hazards.

9. Environmental directors and managers

We will continue to improve management resources to implement the CERES
principles. This includes monitoring and reporting our implementation efforts, and
sustaining a process to ensure that the board of directors and chief executive officer
are kept informed of and are fully responsible for all environmental matters. We will
establish a committee of the board of directors with responsibility for environmental
affairs. At least one member of the board of directors will be a person qualified to
represent environmental interests to come before the company.

10. Assessment and audit

We will conduct and make public an annual self-evaluation of our progress in
implementing these principles and in complying with applicable laws and regulations
throughout our worldwide operations. We will work towards the timely creation of
independent environmental audit procedures which we will complete annually and
make available to the public.

Some of the prominent companies that have adopted the CERES principles include:

The Body Shop

Coca-Cola, Consolidated Edison
Dell
Dunkin Brands
eBay
Levi Strauss
McDonald’s
Nike
PepsiCo
PG&E
Time Warner

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 Assessment Tasks

ASSESSMENT TASK 1. (Performance Task)

Using one of the companies you googled in Module 4 for “unethical

entrepreneurship”, as well as all the theories, practices discussed in the
entire BESR module, come up with a proposed action plan for that
company in order for them to start practicing high ethical standards and
social responsibilities in their operations.

ASSESSMENT TASK 2. (Written Works)

As an ABM student, having learned about the many aspects of Business

Ethics and Social Responsibility, what to you was your biggest takeaway
in all of these? Explain briefly.

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 Summary

 There are indeed so many ways on how a business enterprise can include
ethical practices in their business operations, but that it will all depend on how
willing the entrepreneur is to implement such practices.
 Businesses owe it to the people and also to the environment, where they get
most of their resources, to do ethical practice as their businesses do rely
heavily on these two.
 Businesses that practice social responsibility still succeed because in the end,
when people see a business’ effort to reduce waste and be more mindful of the
people and the environment, these same people reward such business with
loyalty and following. It is like hitting two birds with only one stone.

References

 Bennet O’Brien (2018 Aug 02). 4 Companies Who Succeed by Focusing on

Ethical Sourcing and Manufacturing. Trade Ready. https://www.tradeready
.ca/2018/topics/supply-chainmanagement/4companies-succeed-focusing-
ethical-sourcing-manufacturing/
 Carroll, A.B. (2016). Carroll’s pyramid of CSR: taking another look. Int J
Corporate Soc Responsibility. https://doi.org/10.1186/s40991-016-0004-6
 Geva, A. (2008 March). Three Models of Corporate Social Responsibility:
Interrelationships between Theory, Research, and Practice. Wiley Online
Library.https://onlinelibrary.wiley.com/doi/full/10.1111/j.14678594.2008.00311
 Matthews, R. (2015 March 02). Valdez Principles (Ceres Principles) Ceres
Pledge. The Green Market Oracle. https://thegreenmarket
oracle.com/2015/03/02/valdez-principles-ceres-principles
 Roa, F. C. (2011). Business Ethics and Social Responsibility (2nd ed.). Rex
Bookstore, Inc.
 What is Sustainable Sourcing? (n.d) Ecovadis. https://ecovadis.
com/academy/sustainable-sourcing/
 Windows to Entrepreneurship: A Teaching Guide . (2013). Small Enterprise
Research and Development Foundation.

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