Business Ethics and Sustainability

Roman Meinhold

• Verlag: Routledge
• Jahr: 2021
• ISBN:
  9781000465730
• Auflage: 1
• Thema: Business
• Thema: Business Ethics

This book equips readers with the knowledge, insights and key capabilities to understand and practice business activities from ethical and sustainable vantage points.

In our interconnected global business environment, the impacts of business activities are under increased ethical scrutiny from a wide range of stakeholders. Written from an international perspective, this book introduces the theory and practice of ethical and sustainable business, focusing in particular on eco-environmental sustainability, intergenerational responsibilities, current disruptive technologies, and intercultural values of the business community and consumers. Written by an expert author who also brings to the fore non-Western concepts and themes, this book:

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• features positive case studies, as well as transferrable and applicable key insights from such cases;

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• highlights the importance of taking cultural differences into account;

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• takes a transdisciplinary approach which considers findings from research fields including conceptual and empirical business ethics, behavioral economics, ecological economics, environmental ethics, and the philosophy of culture;

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• weaves in pedagogical features throughout, including up-to-date case studies, study questions, thought experiments, links to popular movies, and key takeaways.

Written in an accessible and student-friendly manner, this book will be of great interest to students of business ethics, environmental ethics, applied ethics, and sustainable development, as well as business practitioners striving toward ethical, sustainable, and responsible business practice.

1 Business and ethics Contradiction and success story

DOI: 10.4324/9781003127659-1

Abstract

This chapter addresses the concept of the “unavoidability” of ethics in business. Almost any decision-making process involves ethical implications. Ignoring ethical concerns can lead to business consequences that can have a long-lasting negative effect. Decision-makers in organizations must understand basic theories of normative ethics and set up standards that will be carried throughout the organization. Business ethics has now been embedded in management through frameworks such as TSI (Total Societal Impact), illustrating the relationship between being ethically responsible and economically successful. Ethics can be systemically implemented through widespread awareness, reasoning, evaluating, and action. Ethics is not an exact science, like mathematics, chemistry, or physics, however, ethics cannot be evaluated void of a multidimensional understanding of value. Businesses must not only focus on increasing economic value, but need to be aware of other forms of value that are contributing positively to well-being, society, and nature. This chapter includes case studies, e.g. on Freitag and Total Societal Impact.

Chapter keywords

1. Business ethics
2. The unavoidability of ethics
3. Total Societal Impact (TSI)
4. B corporations
5. Values
6. Normative vs descriptive

Study objectives

After studying this chapter readers will be able to understand and explain the relevance of ethical issues in business contexts.

Case studies

• 1.1 Freitag
• 1.2 Boston Consulting Group: Total Societal Impact
• 1.3 Unethical businesses will go bankrupt

Films

1. The Big Short

Chapter 1 introduces the topics of business and ethics and clarifies why business and ethics have been viewed as contradictory concepts, but from today’s consumers’ and inventors’ perspectives are rather seen as necessary and often as an essential fusion. This chapter explains why it is meaningful to study business ethics and why it is impossible to avoid ethical decision-making. It very briefly covers etymological and genealogical aspects of business ethics and a few preliminary ethical concepts such as descriptive vs normative, the concept of values, and business ethics as a highly complex decision-making process that demands managers combine ethical, economic, and legal requirements. Case studies illustrate the concepts dealt with. The cases cover predictions, such as that of the former Governor of the Bank of England, who suggested that unethical businesses, especially those with negative environmental impacts, are very likely to fail in the future. Environmentally responsible and sustainable businesses like the Swiss upcycling company Freitag successfully expand globally while the Boston Consulting Group provides empirical evidence suggesting that ethically responsible businesses in general usually have a brighter and more successful future than ethically unsustainable companies (BCG, 2019).

Not too many decades ago a course like “Business Ethics” did not exist at universities. The mainstream understanding at that time was that business and ethics are a contradiction in terms. It forms a useless combination of contradicting words – an oxymoron, a mission impossible. If anything, ethics is a purely private matter and has nothing to do with organizations and businesses. It used to be a common (mis)understanding that business is only concerned with maximizing profits, while ethics is only about helping others in a purely philanthropic sense.

Meanwhile, the mainstream understanding of business ethics has changed. Nowadays business ethics, or ethical business, is seen as an almost indispensable marketing tool that increases sales. All major companies, especially larger corporations, have one or more Corporate Social Responsibility (CSR) campaigns, which, from some critical perspectives, are seen as whitewashing or greenwashing campaigns. Whitewashing or greenwashing are actions by companies that are, or appear to be, ethical or environmentally friendly, but in fact rather try to cover up some unethical actions or an environmental problem or even a disaster caused by the company. However, one should be careful not to rashly dismiss the socio-ethical commitment of companies as greenwashing and propaganda, especially since the internet and social media make it easier for critical consumers to expose greenwashing attempts by companies.

Figure 1.1 Business as contradiction, marketing tool, business philosophy

Only for a few companies is ethics an integral part of their business philosophy or part of their business DNA. But the number of businesses that take CSR, ethics, and sustainability very seriously is growing, be it through external pressure or – what is (virtue) ethically more desirable – through their own ethical insight. Prominent examples are Patagonia, Brunello Cucinelli, Freitag, Ben & Jerry’s, Toms, Ecosia, and many other companies, some of which are listed as so-called “B corporations” (https://bcorporation.net/). B corporations are companies that take CSR and environmental responsibility seriously as part of their business identity. Many of these companies’ customers would stop purchasing products and services from these businesses if the company deviated from its ethical agenda, bearing in mind that these customers are willing to pay a higher price for a fairly or organically produced item. In such a situation many socially responsible investors would prefer more ethical and responsible brands and corporations.

Case study 1.1: Freitag

Research Freitag’s sustainable business.

1. Explain and discuss the entrepreneurial and sustainable dimensions of Freitag.
2. What is the difference between a Freitag bag and a mass-produced bag?
3. Can two customers have exactly the same bag? Explain.
4. What can we learn from Freitag’s entrepreneurial and sustainable approach?

1.1 The aim of this book: Why studying business ethics?

There is a German saying narrated from the perspective of a child addressing its parents. This saying communicates the child’s wish and reads: “when I am young you should give me roots, but when I get older you need to give me wings”. This metaphor means that when we are younger, or when we are inexperienced beginners, we do need solid foundations, but when we are more advanced, we need the skills to be independent and we must be in a position to make crucial decisions with far-reaching consequences by ourselves. We also should be able to “think out of the box” and be able to “expand our horizons” (Gadamer, 2013). Likewise, according to the subsidiary principle, we should be able to help ourselves. The approach of considering unconventional ideas is an essential trait of unorthodox or open-minded philosophers, innovative engineers, and successful start-ups entrepreneurs alike.

Those who are responsible for educating us are required to have the ability to provide us with the necessary critical thinking and sound decision-making tools. This idea of this dual skill set can be easily transferred into the educational context, because once we begin to learn something novel and unfamiliar, we need to have a solid foundation on which we can build on, like the roots of a tree which need to carry and support the stem, the branches and the canopy of the tree, even in hurricane season. But once we are advanced and we need to apply the skills independently in real-world scenarios, we need to be able to navigate quickly, swiftly, and professionally like a bird flies with the help of its wings. In this regard this book, and a business ethics course for which this book is written, like any other course, should be able to accomplish both, namely to supply the learner with solid foundations but also with the tools that enable the learner to navigate swiftly, professionally, and independently in the real world of business transactions, which confronts us with a wide variety of ethical requirements and problems.

This idea of combining solid foundations and specific expertise is also expressed in the image of the ideal of “T-shaped education”. The horizontal bar of the letter “T” represents the ability to collaborate across disciplines with experts in other areas and apply knowledge in areas of expertise other than one’s own field of knowledge. The vertical bar represents the depth of one’s expertise in a specialized field. Business ethics is situated at the junction between the horizontal and the vertical bars. We need to be aware of ethical issues in our field and beyond and tackle those ethical issues by synthesizing ethical theories with our expert knowledge.

From the Boston Consulting Group’s research on Total Societal Impact (see below) we can easily deduce that unethical business activities quite often lead to business failures (BCG, 2017). Affected stakeholders can impact positively or negatively in various ways on a business and its activity. How stakeholders will react to certain company practices in the end is contingent upon various factors. Therefore, it is crucial in business decisions to take the well-being, an important holistic value, of all stakeholders into account. But another reason for studying business ethics is that it contributes to one’s own personal intellectual, social, and psychological well-being due to fostering cross-disciplinary knowledge and peace of mind in decision-making processes. Business ethics should enable managers to make decisions that allow them to look in the mirror with a clear conscience.

Figure 1.2 T-shaped education and business ethics

1.2 Unavoidability of ethical decision-making

In business ethics, as elsewhere in ethics, especially in applied ethics, there exists a fact that can be called an “unavoidability of ethics” or, more precisely, an unavoidability of ethical decision-making. Even if we decided we wanted to ignore ethics, we still are making decisions that have ethical implications, for example by making choices of consumption, by purchasing particular food items or information and communication technology devices. Buying organic Fair Trade coffee is a more ethical choice than buying coffee that is contaminated with heavy metals, pesticides, and insecticides, having negative health impacts on fa...