4.4.2 Ethics

• Business ethics


  The principles and norms that govern business behaviour
• Ethics of a business


  Determines how they operate and their decision making process
• Unethical actions


  Can damage the brand and result in a loss of profitability
• Unethical actions are usually pursued as they result in higher levels of profit for the business (or its owners)
• Customers around the world are putting more and more pressure on brands to behave ethically
• Ethical considerations businesses need to consider


  • Stakeholder conflicts
  • Pay & working conditions
  • Environmental considerations
  • Supply chain considerations
  • Marketing considerations
• Stakeholder


  An individual or group that has an interest or can be affected by a business
• Stakeholders


  • Have different levels of power
  • Have different priorities
• Stakeholder conflicts


  Inevitably creates the potential for conflict
• Management vs workers


  • Management may be more focussed on output or reducing costs, than on worker safety or creating a positive working environment.

  • Workers want to be safe and have a comfortable environment in which to work.
• Management vs owners


  The owners (shareholders) want management to maximise the business profits and, for example, be less interested in the mental well-being of the employees. The management work daily with the employees and will often sacrifice some profit in the interest of looking after their workers health and mental well-being.
• Company profits


  Requires more rapid usage of natural resources and generates more environmental damage
• Pay & working conditions


  MNCs often operate in countries which have different employment regulations and working conditions. MNCs need to decide if they will comply with the regulations of their base location or the country abroad. MNCs may demonstrate unethical behaviour by exploiting workers in LEDCs by paying them lower wages. MNCs argue that the wages they pay provide a decent standard of living within that country. Some MNCs also behave unethically by providing poor working conditions in order to cut costs.
• Environmental considerations


  Climate change and global warming have become a priority for governments across the world. Governments are encouraging businesses to improve the environmental impact of their business activity.
• Current environmental issues


  • Waste management
  • Emissions
• Waste management


  Many developed countries have regulations about how businesses should dispose of their waste. LEDCs usually have less regulation and enforcement on waste management. MNCs can also dispose of waste in LEDCs at a cheaper cost which allows them to maintain their high profits.
• Emissions


  Emissions are often released from factories or from the products made by MNCs. The emissions MNCs produce have a negative impact on local communities causing health issues such as asthma, cancer and skin irritations.
• Supply chain considerations


  Many MNCs have suppliers in different countries and increasingly they are held accountable for the working conditions of these suppliers. Many MNCs are now taking action to reduce unethical labour practices as part of their Corporate Social Responsibility (CSR).
• Issues with supply chain


  • Child labour
  • Exploitation of labour
• MNCs using child labour in their supply chain face backlash which can damage their brand and affect sales
• MNCs are under increasing pressure from governments, customers and institutions such as the International Labour Organisation to take action to ensure their product/services do not involve exploited labour
• Marketing considerations


  When developing their marketing strategy MNCs must consider the cultural and social differences in the countries in which they operate.
• Marketing considerations for MNCs


  • Misleading labelling
  • Inappropriate promotional activities
• Misleading labelling


  Labelling must comply with the regulation of the country. The information must be correct and not include any false information aimed at generating higher sales.