Following the completion of my second Contemporary Issues in Business Ethics Assessment, I felt I would take the opportunity to share a few thoughts on what I have learnt from the module. This piece shall pay particular focus on the place that business ethics has in society and whether ethical business activities are a critical element for consideration when looking to remain competitive in the modern business environment.
One of the most significant concepts to emerge within the school of business within the second half of the twentieth century is the body of work surrounding the implementation of socially responsible activities that include the fulfilment of the expectations placed on corporations by society at any given point in time (Crane and Matten, 2010:53).
The Shared Value Model of corporate social responsibility focuses upon corporations implementing a set of activities that creates increased “shared-value” for all stakeholder groups, rather than focusing upon corporate charitable hand-outs or philanthropic initiatives (Porter, 2011).
The Shared Value Model seeks to leverage the competencies of business to create wider societal good whilst simultaneously creating a competitor advantage (Porter and Kramer, 2006) and can be utilised as an example of good business sense being married with delivering societal good for stakeholder groups.
An example of the Shared Value Model in action comes from Cadbury, who began a 10-year £30million investment strategy into the Ghanaian cocoa industry in 2008, with the goal of boosting the sector’s productivity.
Through their Cadbury Cocoa Partnership scheme, the company has sort to boost the country’s crop yields from the estimated output of 40% of the country’s potential output levels (Crane and Matten, 2010:428).
The activities of Cadbury provides an excellent example of how shared value can be created, Cadbury will likely see the long-term benefits that are brought by a more reliable supply chain, whilst Ghanaian farmers will see a greater return from their labours.
Whilst CSR has been accepted by many across academia and industry, the esteemed economist Milton Friedman of course believed businesses to have a particularly limited responsibility to the delivery of societal good, arguing that the duty of a company within a free market economy is to maximise the profits that it return to its owners, so long as their activities remain within the rules of society.
This ‘shareholder view’ of corporate social responsibility determines that a business manager has no right in providing social donations at the expense of the shareholder (Velasquez, 2012:23-24). This opinion is considered to be at the extreme end of corporate social responsibility and business ethics and indicates that the position that business plays in society should be particularly limited.
One notable example of a corporation prioritising its own needs over those of society is the acquisition of the rights to the Aids drug Daraprim by Turing Pharmaceutical (BBC News, 2015). The barrier to entry for competitors resulting from Turing Pharmaceuticals being the sole possessor of the rights to the Daraprim drug has given the company scope to increase the price of the drug from $13.50 to $750, a 5000% rise, without the fear of a loss of market share.
Whilst any categorical imperative (Velasquez, 2012:99) would point to the fact that it would be impossible to universally implement a policy of extorting vulnerable clients in search of increased profitability, this situation highlight that the business case for ethical activity can be susceptible to the industry’s market forces (Porter, 2008).
The corporate social responsibility movement has got to have a bit more courage.
The high price of the commodity resulting from the lack of substitute products due to the monopoly held by Turing Pharmaceuticals (Moschandreas, 2000:76) has left those consumers dependent upon the drug vulnerable to the whims of the manufacturer.
Despite examples such as the one provided by Turing Pharmaceuticals, the convergence across many industries towards an interdependent societal-business relationship whereby the competitiveness of a business is determined by its ability to meet the expectations of the society it serves continues to develop.
One example that highlights the need for ethical business activities is the damage that the Volkswagen group sustained following the revelation that they had deliberately supplied misleading information to the consumer in order to generate revenue under false pretences.
This case study highlights that there is a substantial business case to be made for ethical business practices. Had Volkswagen upheld a high ethical standard then their shares would not have fallen 23%, wiping off approximately $17.6 billion of its value (Bloomberg, 2015), and they would not have faced legal action from over 35,000 motorists (Guardian, 2017).
Despite the growth of corporate social responsibility into a critical aspect of business strategy, Anita Roddick, one of the architects of the responsible business movement has criticised the direction it has taken since its inception.
Roddick has strongly criticised the greenwashing measures that have been utilised by organisational bodies that have hijacked the movement as a marketing tool and for boosting organisational profitability (globalissues.org, 2012).
Despite the issues that Roddick sees with the issues that have emerged with the responsible business movement, there are still reasons to show optimism for its future.
The trend towards environmentally friendly business activity, such as the industry revolution started by the hybrid Toyota Prius (Ianuzzi, 2012:6), is evidence that the trends in societal behaviour have a profound influence on industry and can be proof that the two are fundamentally intertwined.
Indeed, Roddick herself has built a business-franchise empire that has seen over 1,900 outlets in over fifty companies that was eventually sold to L’Oréal in a 2006 takeover valued at £652m (Keller, 2007:476-477).
Consumer desires for greener and more ethically sourced products and the subsequent need of business to serve these changing tastes in order to remain competitive has become an indisputable driver in the case for ethical business.
Ethical business activities is by no means a panacea for competitive advantage, but so long as this trend continues, the importance of the relationship between business and society will continue to manifest and the argument to be made that business ethics is an oxymoron will continue to be diminished.
BBC News, (2015). US pharmaceutical company defends 5,000% price increase. Available at: http://www.bbc.co.uk/news/world-us-canada-34320413 [Accessed 29/03/2017].
Bloomberg, (2015). Volkswagen Drops 23% After Admitting Diesel Emissions Cheat. Available at: https://www.bloomberg.com/news/articles/2015-09-21/volkswagen-drops-15-after-admitting-u-s-diesel-emissions-cheat [Accessed 29/03/2017].
Crane, A. & Matten, D. (2010), Business Ethics, Oxford University Press.
Global Issues, (2007). Video: Anita Roddick: Corporate Social Responsibility? Available at: http://www.globalissues.org/video/733/anita-roddick-corporate-social-responsibility [Accessed 29/03/2017].
Guardian, (2017). Thousands join UK legal case against VW over emissions scandal. Available at: https://www.theguardian.com/business/2017/mar/20/thousands-join-uk-legal-case-against-vw-over-emissions-scandal?CMP=Share_iOSApp_Other [Accessed 29/03/2017].
Ianuzzi, A. (2012) Greener Products: The Making and Marketing of Sustainable Brands. Boca Raton, Florida: CRC Press.
Keller, K. (2007). Strategic Brand Management. Third Edition. Upper Saddle River, New Jersey: Pearson/Prentice Hall, pp.280-281.
Moschandreas, M. (2000). Business Economics. Second Edition. London: Business Press/Thomson Learning. p.76
Porter, M. (2008) The Five Competitive Forces That Shape Strategy. Harvard Business Review. (Online). Available at: https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy [Accessed 29/03/2017].
Porter, M. (2011). Creating Shared Value. [online] Harvard Business Review. Available at: https://hbr.org/2011/01/the-big-idea-creating-shared-value [Accessed 09/01/2017].
Porter, M. and Kramer, M. (2006). Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. [online] Harvard Business Review. Available at: https://hbr.org/2006/12/strategy-and-society-the-link-between-competitive-advantage-and-corporate-social-responsibility [Accessed 20/03/2017].
Velasquez, M.G. (7th Ed.), (2012), Business Ethics: Concepts and Cases, Prentice Hall.