23. Ethical, Social AND Environmental Responsibility
Learning Outcomes from this chapter
On completion, you should be able to:
- Define ‘business ethics’
- Outline how a business can improve its business ethics
- Explain what a code of ethics is and the benefits and challenges to a business of introducing one
- Discuss the social responsibilities that a business has to its stakeholders
- Identify important environmental issues in business
- Analyse the impact of environmental issues on a business
- Describe the characteristics of an environmentally conscious business
- Outline how a business can become more environmentally conscious
- Analyse the impact of being ethically, socially and environmentally responsible on the revenues and costs of a business
Business Ethics
These are a set of moral rules and standards that provide guidelines for right and truthful behaviour in business situations when a business is engaging with its various stakeholders
How a business can improve its business ethics
| Reward whistleblowing | Encourage staff to report unethical behaviour they see in the workplace |
| Establish a code of ethics | Create a formal written statement outlining the expected moral behaviours within the business |
| Offer ethics training | Provide induction/regular training on ethics, and how to improve them |
| Discipline poor behaviour | Fine, demote or dismiss staff for breaches of the company’s code of ethics |
| Carry out an ethical audit | Appoint an external company to identify areas for improvement and issue a report with recommendations |
| Highlight role models | Reward good behaviour |
Benefits and challenges of introducing a code of ethics
Benefits
- Involves staff in decision-making
- Sets high standards for staff to follow
- Improves reputation and brand image
- Creates clear rules and procedures
- Encourages whistleblowing
Challenges
- Difficult to change culture
- Needs to remain up to date
- Difficult to enforce
- Training costs (time and money)
Corporate Social Responsibility (CSR)
It is duty of a business to treat everyone they come into contact with honestly and fairly, making a positive contribution to the environment they operate in
CSR of a company to its stakeholders
| Investors | Honest and transparent reporting of the company’s financial position; pay out reasonable dividends based on profits |
| Employees | Pay a fair wage; provide proper working conditions and hours |
| Customers | Be honest in advertising and when informing the consumer about ingredients, processes and sustainability of materials; ensure customers are not misled or hurt in any way |
| Suppliers | Follow a fair tendering process; pay promptly; avoid taking on too much credit |
| Government | Pay tax owed to Revenue in full and on time; obey the law |
Characteristics of an environmentally conscious business
| Seek advice | Consult with stakeholders, look for help/information from the EPA |
| Be Honest | Report all accidents/breaches and take responsibility for them |
| Provide training | Make staff aware of environmental responsibilities; provide resources |
| Minimise waste | 4 Rs (reduce, reuse, recycle and recover); no illegal dumping of waste |
| Be open to change | Update and improve processes, packaging, recycling |
| Renewable energy | Use solar or wind energy instead of non-renewable fossil fuels (e.g. gas or oil) |
| Sustainable development | Change products/processes to avoid overusing non-renewables |
| Cleaner processes | Remove excess packaging and waste; use durable inputs to prolong life |
| Code of ethics | Create a formal written statement that sets out the expected modes of behaviour in relation to the environment and local community |
| Reduce pollution | Reduce emissions; prevent accidental releases of gases; aim for pollution prevention, rather than pollution control |
| Greener products | Invest in research to develop new products that are less harmful for the environment |
How meeting social, ethical and environmental responsibilities affects a business
Impact on business costs:
- Higher wages
- Higher manufacturing costs
- Higher installation costs for new resources (e.g. solar panels)
- Lower costs from fewer fines
- Lower long-term energy costs from renewable sources
Impact on business revenue:
- Increased Sales
- New market segments