ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

CHAPTER 1: BUSINESS ETHICS

BUSINESS ETHICS ~
- the study of how ethics and business are connected
- analysis of ethical decision-making in commerce, at 3 levels: idv; org and
political/economic systems
- Business ethics is both normative and descriptive
 Describe idv and corporate behavior
 Evaluate practices managers and corporation ought or ought not to engage in

❗ Ethics creates the foundation for CSR

CSR AND CORPORATE CITIZENSHIP

CSR (Corporate Social Responsibility)
- Often confused with business ethics and corporate responsibility
- Sometimes identified with philanthropy từ thiện
- ~ corporate and other business’s responsibilites to the communities in which they
operate
Corporate citizenship ~ similar concept outlining corporate relationships to their
communities and to the natural environment

CASE STUDY: Merck and River Blindness

A scientist at Merck, one of the leading pharmaceutical companies in the United
States, observed that Merck’s new drug for deworming animals from parasites might also be
able to attack river blindness, a disease thay strikes 40-100 million people in very remote
poverty-stricken places in the world.
River blindness is caused by worms transmitted to humans through fly bites. These
worms get under the skin, causing terrible itching. They multiply, and by the time the victim
is 40 years old, he/she is blind.
The cost of developing a drug for human consumption, even with the previous
development of de-worming animals, would cost between $10 and $100 million USD and
would take approximately 10 years to develop. The disease is virtually unknown in
industrialized countries and there is no paying customers for this drugs, neither individuals
nor the countries where this disease is prevalent. WHO has already invested hundreds of
millions of dollars in fly eradication, a failed project, and they are unwilling to invest anymore
in river blindness eradication.

❓ Should Merck invest in research to develop and test this drug

❓ Or should it use it research funds to help cure other diseases such as cancer or HIV,
for example, disease for which there are paying customers

❓ And/or should it give rights to develop the drug to a nonprofit or government research
firm

ETHICAL THEORIES AND THEIR CONTRIBUTIONS TO DECICION-MAKING

Ethiccal decision-making and moral judgement
5 ethical theries of moral reasoning

(1) “Do the right thing”/Universalism or Deontology

Challenges
- Priniciples such as “never tell a lie” sometimes need to be overridden (Should I tell the
truth to terrorists?)
- What if doing the right thing produces harms rather than the benefits?
(2) Cost/benefit analysis: Utilitarianism or Consequentialism

❗ Decision rule: Something is morally good to the extent that it produces a greater balance of
benefits over harms, satisfies the most interests, or minimizes harms for the largest number of
people involved
Weakness
- If we overestimate the pain (costs) and underestimate the benefits, then we will make
flawed decisions
- The majority is not always right; who protects the minority?
(3) Rights-based
 Check the UN Declaration of Human Rights
(4) Fairness and justice

💡 Justice as fairness
- Justice involves
 Treatig every person and every org as an equal
 Giving every person their “due”, that is owned, earned or deserved
 Fairness: maing judgements that are free from discrimination
- Distributive justice:
 Justice also involves distribution: how do we distribute opportunities, goods,
services, welfare, voting, jobs, offices, and awards fairly?
 Priniciples of Distributive Justice
o Equal opportunity
o Need: bringing the worst off up to a level with the rest
o Potentiality: “Most likely to succeed”
o Desert: To those who have earned or deserved (e.g: the best employee or
manager, the Olympic award in sports)
o Utility: Given to the person or organization who is best at producing
positive benefits (e.g: the most promising researcher)
o Egalitarian: Certain things should be distributed equally (voting, health
care access, and environmental protections)
o Lottery, luck or chance
o Libertarian principle: no form of distribution is fair to everyone; all should
be abandoned
(5) Character and virtue
- Viture ethics recognizes that we often act in line with out habits and characters
- Companies, too, usually operate from a dominant logic, an organizational mindset ~
“The way we do things” – the governs corporate decision-making and creates the
character and culture of the organization
- Faced with a difficult dilemma, we might ask what would a person of virtue do, what
would a company acting with integrity do
 CHAPTER 2: STAKEHOLDER THEORY

ETHICAL DECISION-MAKING (Merck’s case study)

(1) Facts and assumptions
(2) Culture and context
(3) Issues and challenges
- Develop the drug
 Expensive
 Might not work
 Might harm those who agree to a trial
- Not develop the drug
 Bad publicity
 Low morale of researchers at Merck
 Missed opportunities
- Give rights to develop the drug to another org
 Lose patent on deworming drug – a very profitable product
(4) Power dynamics
(5) Stakeholders: Who has an interest? Who affects and is affected by this decision?
What are their motivations? How much power does each hold?
Orgs and idvs who affect or are affected by the decision
- Merck: executives; shareholders; employees n’ researchers
- Patients who use Merck drugs
- Physicians and clinics who prescribe Merck drugs
- Suppliers
- Communities where Merck operates and sells drugs
- 30-100 million ppl with river blindness
- Ppl with other diseases
- Countries most affected by river blindness
(6) Alternatives
- Should Merck invest its research time and money into developing and testing drug for
river blindness? (Intuitively the “right thing to do”)
- OR should Merck use the same funds for research of another equally needed drug for
paying customers? (A cost/benefit alternative that will help ill people as well)
- And/or should Merck encourage another non-profit or government research firm to
develop this drug (An approach that increase the integrity of Merck)
(7) Impact of alternatives on each stakeholder
- Shareholders: Benefit from developing a profitable drug
- Researchers: Low morale if drug is not developed
- People with river blindness: Negative impact if drug is not developed
(8) What values are at stake: Applying ethical theories to the alternatives
- Intuitively it would appear that developing this drug to help 30 to 100 million people
is “the right thing to do”
- From a cost/benefit perspective, using the same funds to develop another the drug
could be equally effective and profitable
- Issues of testing challenge the development of this drug
- Issue of negative publicity if Merck does not develop this drug
- What about the morale of Merck’s researchers?
- What kind of precedent does each alternative set for the drug industry?
- What would a “virtous company” do?
(9) Action: Now what?
- Merck decides to give away the drug, called Mectizan
- BUT: how do you get this drug to the most remote parts of the world where river
blindness is prevalent? There are few roads, no trains, no post offices, and problem
with drugs on the black market
- Merck creates an international committee, including the World Health Organization,
through which to distribute the drug, village by village, person by person
- Vagelos, now CEO, pledges ”to give away Mectizan forever”
(10) Monitor outcomes
MANAGERIAL MODEL
Hierarchical view

 puts shareholders’ interests over and above the interests of customers, suppliers,
employees, and others, as if these interests must conflict with each other. It
understands a business as an essentially hierarchical organization fastened together
with authority to act in the shareholders’ interests
Challenge: tend to focus internally to the firm, and are insufficiently aware of nor attentive
to the interests of other stakeholder groups that might have an impact on the organization
Inward focus
Stakeholder focus

Stakeholders ~ those idv, org and nations that affect or are affected by the company and its
decision
- Basic stakeholders include:
 shareholders or owners
 customer or clients
 employees
 managers and executives
 suppliers
 communities where a company operates or that are affected by business decisions
❗ The environment or ecosystem is also considered a stakeholder

Standard stakeholder map

💡 Stakeholder analysis of CASE STUDY: Bayer crop science and the issue of child labor

(1) Facts and assumptions: Obtain all unbiased facts

- Bayer has purchased Crop Science
- Bayer needs cotton needs for its chemical industry
- The Indian farms that supply the cotton seeds have traditionally used child labor
(2) Culture and context
Culture of India:
- child labor occurs throughout India
- This is an ancient tradition partley driven by families in poverty and partley driven by
custom
(3) Issues and challenges: How should Bayer deal with child labor?
- Can they condone it as part of the “Indian culture?”
- What about the morale of Bayer’s employees? The challenges of negative publicity?
- Or should Bayer sell Crop Science
 They do buy cotton seeds from other venders who probaly buy from farmers using
child labor?
(4) Power dynamics: Bayer is a very large multi-billion global company thay has
operated in India for almost a century. Should thay exercise their considerable
financial resources to attack child labor in India? Will they then be seen as neo-
colonialists?
(5) Stakeholders
- Shareholders
- Customers
- Employees
- Executives
- Indian farmers
- Bayer crop science
(6) Alternatives
- Sell Crop Science
- Make a deal with farmers not to hire children
- What kind of deal?
- Would paying premiums for good seeds be viable?
- How can Bayer Crop Science respect the growers, avoid child labor, and not appear to
be neo-colonialists
(7) Impact of alternatives on each stakeholder
- Selling Crop Science does not address the child labor problem
- Selling does affect Bayer’s bottom line
- Cotton seeds are important to Bayer’s customers. Price, too, is important
- Indian children are also stakeholders. Do they have rights to education?
(8) What values are at stake
(9) Action: Now what?
 CHAPTER 3: THE ISSUES OF RELATIVISM

RELATIVISM ~ a perspective that there not exst universal truths or moral values but instead
they vary from culture to culture, or situation to situation
 No right or wrong answers, or behaviors
Descriptive Relativism
~ an observation about the existence of diverse moral beliefs and practices
~ diffenrent customs and moral standards in different cultures
~ cultural relativism
 Right and wrong are determined by social standards
Normative Relativism
~ subjectivity and relativity of moral judgments ~ no universal standards for morality
~ moral relativism
 No one can judge what’s right or wrong in other ppl, group or culture
Additional form of relativism
Naïve Relativism or Egoism
- Every idv makes moral jugdement
- Only that person can decide what right or right for themselves (who are we to judge
others)
- Moral judgement ~ personal opinion

💡 Problems

- What one think is right today maybe different from one’s belief tomorrow
- How to jugde between these beliefs?
- Morality has to do with interactions in a community or communities
- One’s moral judgements are learned from and affect others

💡 Moral judgements

~ social and interdependent

 One depends on others to verify or questions their judgements and decisions
 A pure egonist can’t make moral judgements
Role Relativism
 - Is my morality determined by my particular role? (E.g ethical behavior of doctor,
politician, businessman)

💡 Problems

- Role conflicts
- Must I always follow the dictates of my role?
- I’m not merely my roles. I can make judgement abt my role assignments

❗ “I’m just following orders” = excuses

Social Group Relativism

Social group ~ orgs governed by customs and norms
 As managers, do we have obligaitons always to follows these customs
 “just bcoz everyne does it, is it right?”

💡 “Accepted practices” (common practices in a community or org) > < “acceptable” – the
right thing to do
 To escape social group relativism, one has to appeal to more general norms or
standards than merely org practice

❓ How to make moral judgement

 Are all accepted practices also acceptable

 Are cultural differene irresolvable
 Can there be no cross-cultural agreement
 Are there no universal values
 Are there any abs values that shouldn’t be ignored or disobeyed
Moral absolutism
~ there are some actions that are universally right/wrong, whatever the context
~ universalism

UN GLOBAL COMPACT: A VOLUNTARY CODE

- Support & protect human rights
- Don’t be complicit in human rights abuses
- Uphold freedom of association and collective bargaining
- Eliminate forced and compulsory labor
- Eliminate child labor
- Eliminate discrimination in employment
 - Precautionary approach to the environment
- Promte environment responsibility & technologies
- Work against corruption in all forms
Micro contracts – Macro contracts/Hypernorms
- Micro contract:
 Contextual
 Social group contract
 Culturally relative
 Can change
- Macro contract:
 General principles across nations, communities…
 Hypernorms without which commerce couldnot operate

💡 Moral free space ~ norms within communities

- Gift-giving customs
- Professional standards (healthcare, journalism…)
- Religious morals
- Local customs
 These shouldn’t conflict with hypernorms

💡 UN Principles propose voluntary global “CSR to respect human rights”

- Moral minimums: NO lie, cheat, steal, kill, torture, slavery, child labor
- Positive obligations: BE fair, trustworthy, respect freedom, equality, environment,
property rights, NO bribery

CASE STUDY: What Price Safety?

 CHAPTER 4: WHY DO GOOD PEOPLE AND GOOD ORG DO BAD
THINGS?

❓ Why good ppl engage in unethical acts

(1) Consensus/Peer pressure: we want to “fit in”

(2) The inside/outside struggle: we don’t want to be cast out for being different
(3) Self-serving bias: ppl tend to look for info that will confirm their pre-existing views
 con người chỉ nghe những thứ họ muốn nghe =)))
(4) Slippery slope: ppl or companies are willing to do unethical things bcoz they have
already done smaller, less extreme acts
(5) Sunk cost and Loss aversion: simply bcoz we’re reluctant to accept that our prior
choices/investments were wrong or wasted
(6) Additional reasons:
- Courage: sometimes it’s hard to do the right things
- Fear: I’ll lose my job
- Confusin & Error: sometimes we don’t have all the info we need, we make mistakes
- Selectivity: we may overlook the issue (not paying attention to it)
- Corporate culture: fixed habit that prevent changes
- “I’m justing following orders”
- “we have always done it this way” -> blamming for habits and org dominant logics

❓ Combating unethical behavior with moral courage

- Question authority
- Step out of your box
- Question corporate dominant logic
- Find colleagues who agree with u
- Challenge authority with good arguments
 Can we as managers or a company justify this action to oursleves?
 Will I as a manager or engineer be proud of this?
 Can we support this sort of behavior in all that we do?

 Does this fit with our mission and code of conduct

 Is this what we would expect from other companies?
 Can we make this public? Can we be transparent?
 Who is harmed and who benefits?
 What about the company’s brand image?
 Other stakeholders
 Does this behavior or action fit with local culture and/or laws?
 Is it consistent with international expectations or laws?
 What rights are at stake?
 Are any basic values being challenged? E.g. safety, environmental harms, respect
for all stakeholders?
 How does this reflect, in the long run, on ourselves as managers, as professionals
(e.g.. engineers), and on our company
 CHAPTER 5: SUSTAINABILITY AND CSR

17 GOALS OF SDGS
~ Sustainable Developemnt Goals
- Came into effect from 1/1/2016
- Ultimate objective is to gain sustanable development by 2030
- Backed up by a set of 169 detailed targets
- Negotiated and reviewed over 2 year period at UN
Distinction
- Universal
- Integration
- Transformation
(1) No poverty: End poverty in all its forms everywhere
(2) 0 hunger: End hunger, achieve food security and improved nutrition and promote
sustainable agriculture
(3) Good health and well-being: Ensure healthy lives and promote well-being for all at
all ages
(4) Quality education: Ensure inclusive and quality edu for all and promote lifelong
learning
(5) Gender equality: Achieve gender equality and empower women and girls
(6) Clean water and sanitation: Ensure access to water and sanitation for all
(7) Affordable and clean energy: Ensure access to affordable, reliable, sustainable and
modern energy for all
(8) Decent work and economic growth: Promote inclusive and sustainable economic
growth, employment and decent work for all
(9) Industry, innovation and infrastructure: Build resilient infrastructure, promote
sustainable industrialization and foster innovation
(10) Reduce inequality: within and among countries
(11) Sustainable cities and communities: Make cities inclusive, safe, resilient and
sustainable
(12) Responsible consumption and production: Ensure sustainable consumption and
production patterns
(13) Climate action: Take urgent action to combat climate chane and its impact
(14) Life below water: Conserve and sustainably use the oceans and marine resources
 (15) Life on land: Sustainably manage forests, combat desertification, halt and reverse
land degrafatoin, halt biodiversity loss
(16) Peace, justice, strong institutions: promote just, peaceful and inclusive society
(17) Partnerships for the goals: Revitalize the global partnership for sustainable
development

💡 Major concerns of the 21st century

- Peace
- Freedom
- Development
- Environment

💡 The Global Compact

- Anti corruption
- Human rights
- Labor standard
- environment
 CHAPTER 6: CONCERNS WITH BUSINESS IMPACTS

- industrialization
- neo-liberalism
- globalization

💡 Concerns towards Neo-liberalism

- inequality
- business responsibility
 CHAPTER 7: STRATEGIC RESPONSES TO SUSTAINABILITY

Mechanism business use when seeking to embed sustainability:

- Org ethics programs
- CSR
- Market-based environmentalism
ORGANIZATIONAL ETHICS PROGRAMS
~ tools, policies and procedures aim at controlling or guiding behavior of org members around
ethics matter
- Elements of ethics programs
 Written standards or code of conducts
 Ethics training
 Ethics advice
 Anon report system

Types of ethics programs

- Value-based programs: define general org ethical values or aspirations and encourage
employees to identify with these
- Complianced-based programs: focus on detecting and punishing violations

CSR
~ A range of voluntary measures strategically undertaken by corporations, to reassure the
wider community that business can be trusted, to look after social and environmental interests
without further regulatory intervention
- Defensive CSR
 Defusing issues
 Deflecting unwanted attention
 Lobbying or public relations
- Offensive CSR
 Can do a lot more
 Expertise
 Resources
 Capabilities
 - Proactive CSR
 Pick the right issue
 Establish concrete goals and report progress
 Deploy company’s key assets
 Work in cross-sectoral partnerships

MARKET-BASED ENVIRONMENTALISM
~ market opportunities for business that embrace more environmentally sustainable green
practices
 CHAPTER 8: NEW AND SUSTAINABLE BUSINESS STRATEGIES

CROSS-SECTOR SUSTAINABILITY PARTNERSHIPS

SOCIALLY RESPONSIBLE INVESTING (SRI)

~ umbrella term given to a range of practices, when making investment decisions, combine:
sustainable + social, ethical goals + more conventional financial criteria
- Venture philanthropy
- Envionmental venture capital “clean tech”
- Micro finance/Micro credit
Criteria for exclusing business
- Labor rights violation
- Environemtal harm
- Operating in arenas of tobaco, alcohol, firearm, gambling, porno, nuclear energy,
fossil fuel
- Genetic engineering or animal testing
- Human rights abuses
Implications
- Confusing nature of investment funds
- Criteria for inclusion and exclusion
- Micro credit
SOCIAL ENTREPRENEUSHIP – CIRCULAR BUSINESS MODELS

Business roles in circular economy

(1) Narrowing loops
- Reduce the amount of materials needed per product/service
- Resource efficiency
(2) Slowing loops
- Life-long goods
- Product life extension
- Service loops
 Extend or intensify the use of products
(3) Closing loops: After many cycles of reuse we need to close the loop and recycle
- Reduce the amount of watse
- Save raw material costs
 What might be considered waste in one process can often be a resource for another

💡 Blue economy ~ sustainable use of ocean resources

❓ What makes a business circular

(1) Circular value creation: the business model should include one or more ways to
close/slow/narrow resource loop
- Recycle
- Repair
- Remanufacture
 - Reuse
- Optimize
- Increase efficiency
(2) Value prosposition enabling circularity
- Circular branding
- Premium branding
- Product-service offerings
- Cost reduction
- Cheaper offerings
- Asset sharing
- On-demand production
(3) Circular value network
- Value chain collaboration
- Value network collaboration
- Take back management
- Online platforms
- Localisation

❓ Implementinig a circular strategy requires

- Activities
- Resources
- Technologies
- Capabilities
- Partner networks
Circular business model innovation
E.g: Value prosposition
- Can be a life-long product with low maintenance and lifecycle cost
- Rela with customer segment can be designed to encourage return of a product after use
Example of circular business – IKEA
KEA is committed to becoming a circular business by 2030. These are the circular loops we
are working with:
Reuse
Once people acquire a product, the product enters the first circular loop of reuse. Reuse is
how we describe the customer use of the product and it includes all aspects of normal product
use and care, such as maintaining its condition and adapting them to the evolving needs of
life. This also includes passing on products and enabling secondhand markets.
Refurbishment
It’s the process by which used, damaged, or non-compliant products are restored to ‘like-new’
condition with limited improvements. This includes repairs and upgrades made by customers
or an after-market service in their home or another location. Through refurbishment, products
are evaluated, cleaned and/or repaired, upgraded, recertified, and eventually released back
into the market.
Remanufacturing
Remanufacturing of products is a process by which usable parts from dismantled products are
used to produce new products, increase resource recovery, and potentially lower the cost for
IKEA.
Recycling
Recycling is how products are transformed into new raw materials, which can then be used
within IKEA or external supply chains. This process is the last step for every product part.
The pre-requisite for a product part to reach this stage in its life cycle is that when relevant, all
possibilities to go through the reuse, refurbishment, or remanufacturing loops have been
considered.