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Questions and Answers
What is the main purpose of business ethics?
Which of the following is considered unethical behaviour in business?
Which method can a business use to improve ethics in the workplace?
How can management model ethical behaviour in a business?
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What is one role of staff training in business ethics?
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What is a key responsibility of an environmentally conscious business regarding policy development?
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How should an environmentally conscious business respond to accidental environmental breaches?
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What is the primary goal of raising staff awareness regarding environmental issues?
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What does openness in environmentally conscious businesses entail?
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What is one way businesses demonstrate sensitivity towards environmental issues?
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How do environmentally conscious businesses approach sustainable development?
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What is a potential benefit of meeting social, ethical, and environmental responsibilities?
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What is one disadvantage of adopting environmentally responsible practices?
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Why is Patagonia noted for its environmental commitment?
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Which of the following reflects a positive outcome of ethical business behavior?
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What additional cost might a business incur when aiming for ethical product sourcing?
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Which of the following practices might damage a company's environmental reputation?
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What is a necessary component of an environmentally conscious business's strategy?
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What kind of environmental strategy is exemplified by Ikea's practices?
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What is the primary purpose of an ethical audit in a business?
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Which of the following best describes a Code of Ethics?
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What is a potential disadvantage of implementing a Code of Ethics?
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What role does training play in the implementation of a Code of Ethics?
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What are the benefits of having a Code of Ethics in a business?
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Which of these characteristics is NOT part of making a business environmentally conscious?
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How should a business reward ethical behavior according to best practices?
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What is one responsibility towards investors that a business should uphold?
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What challenge might arise from enforcing a Code of Ethics?
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What is a potential consequence of failing to follow the rules established by a Code of Ethics?
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Which of the following is an example of socially responsible behavior toward customers?
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Which stakeholder requires fair treatment and compliance with labor laws from the business?
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How can a business demonstrate its adherence to a Code of Ethics?
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What is an essential aspect of maintaining a Code of Ethics over time?
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Study Notes
Business Ethics
- A set of moral rules and standards that guide ethical behavior in business situations.
- These principles should guide how businesses make decisions, considering right and wrong, fairness, honesty, and respect, regardless of the impact on profits.
- It is based on a business's social, ethical, and environmental responsibility.
Unethical Behaviour
- Low wages.
- Poor quality goods.
- Sourcing raw materials from unethical suppliers, such as sweatshop factories.
- Unsatisfactory dividends to shareholders.
- Unsafe working conditions.
- Environmental damage.
- Employee discrimination.
Improving Business Ethics
- Encourage whistleblowing: Businesses can incentivize employees to report unethical behavior by offering protection and rewards.
- Code of ethics: A formal written statement outlining expected moral behavior for everyone involved in the business. It should cover interactions with colleagues, customers, and the community, promoting fairness, honesty, and respect.
- Model ethical behavior: Leaders should lead by example and reward ethical behavior by employees.
- Staff training: Provide staff with education on the company's code of ethics during onboarding and annual training to reinforce ethical principles.
- Discipline procedures: Develop clear procedures for staff and consequences for breaches of the code of ethics, such as fines, demotion, or dismissal.
- Ethical audits: Appoint an external auditor to evaluate the ethical behavior of different areas of the business.
- Reward ethical behavior: Encourage and reward ethical behavior through monetary and non-monetary rewards, such as bonuses or promotions.
Code of Ethics
- A formal written statement outlining expected moral behavior for everyone involved in the business.
- It includes expected behavior for employees interacting with colleagues, customers, and the community.
- It should encourage fairness, honesty, respect, and a knowledge of right and wrong behaviors.
Benefits of a Code of Ethics
- Decision making: A code of ethics provides a foundation for business decisions, helping to consider all stakeholders (employees, community, etc.) when making choices.
- High standards: Clearly defined expected behaviors allow management and staff to know what is expected of them, promoting appropriate behavior aligned with high standards.
- Corporate image: Promoting the code of ethics on the website and highlighting examples of ethical action creates positive public relations, attracting employees and customers, and boosting the company's reputation.
- Rules and procedures: A code of ethics defines expected behaviors and clarifies consequences for those who do not follow the rules, deterring breaches of the code.
- Encourages whistleblowing: A code of ethics can include information on how employees can report unethical behavior to management, encouraging and enabling them to report concerns.
Disadvantages of a Code of Ethics
- Culture clashes: Employees might perceive a new code as a box-ticking exercise if it is not backed by action, particularly if management is not leading by example, potentially causing employee resistance to the code.
- Keeping up-to-date: A code of ethics needs to be updated regularly to stay relevant and include new behaviors that are considered unethical, such as employee interactions on social media or using company email addresses.
- Enforcement: Sanctioning employees, especially if it's a new process, can cause industrial unrest and create conflicts for management. Staff might feel that management is questioning their values by introducing a code and resist potential repercussions.
- Training: Staff need training on a new code, including during onboarding, and regular reminder training, which requires time and resources.
Corporate Social Responsibility (CSR)
- The duty of a business to treat everyone honestly and fairly, making a positive contribution to its operating environment.
- It involves the social responsibility a business has to its various stakeholders.
Stakeholder Responsibility Example
- Investors: Businesses should be honest and transparent when reporting their financial position to shareholders. They should provide reasonable dividends and avoid excessive bonuses for senior management. For example, Volkswagen's share price dropped 25% when they admitted to manipulating emissions data, leading to investors taking legal action.
Environmentally Conscious Business Characteristics (CHAOSS)
- Consultation: Seeking information and advice from relevant stakeholders before introducing new environmentally friendly policies or initiatives.
- Honesty: Being transparent and truthful about environmental impact and taking responsibility for actions that negatively impact the environment.
- Awareness: Promoting environmental issues among employees, customers, and the business community and investing resources in environmental initiatives.
- Openness: Willingness to adapt and change processes, including product design, manufacturing methods, and recycling practices, to minimize environmental impact.
- Sensitivity: Conducting environmental audits and assessments to evaluate the environmental impact of business operations and making necessary adjustments to minimize harm.
- Sustainable Development: Considering the needs of future generations when using natural resources and adopting environmentally friendly practices to minimize environmental impact.
Consultation
- Businesses should consult with employees, customers, suppliers, and government agencies on policy development.
- Consultation ensures the business receives updated information on environmental issues and gains valuable insights from different perspectives.
- Example: McKinsey & Co provides expert assessment and consultation services to businesses on environmental issues management.
Honesty
- Businesses should be transparent about their impact on the environment and take responsibility for any negative consequences.
- They should avoid covering up accidents or breaches of environmental laws and proactively address environmental concerns.
- Example: Starbucks addressed a social justice issue caused by a manager's insensitivity by closing thousands of stores, sacrificing substantial revenue, to train employees on unconscious bias.
Awareness
- Businesses should educate employees, customers, and the broader community about environmental issues and their responsibilities.
- They should encourage environmentally conscious behaviors and provide resources to support these actions.
- Example: Patagonia, a leading outdoor clothing brand, has prioritized environmentally conscious practices throughout its business by promoting sustainable materials and production and participating in environmental activism.
Openness
- Businesses should be open to adapting and changing their processes, such as product design, manufacturing methods, and recycling practices, to minimize environmental impact.
- They should strive to use durable and recyclable materials and prioritize waste reduction and recycling initiatives.
- Example: Ikea revamped its manufacturing processes to be completely powered by renewable energy in 2020.
Sensitivity
- Businesses should be sensitive to all environmental considerations in their decision-making processes.
- They should conduct environmental impact assessments to assess the potential effects of their operations and adjust their actions accordingly.
- Example: The construction of the M20 route in Ireland underwent several environmental impact assessments before construction began.
Sustainable Development
- Businesses should consider the needs of future generations when using natural resources and adopt environmentally friendly practices.
- They should prioritize the use of renewable energy sources, such as wind and solar power, and strive to improve energy efficiency.
- Example: SAP, a software company, has committed to achieving net-zero emissions across its value chain by 2030.
Benefits of Meeting Social, Ethical, and Environmental Responsibilities
- Cost reductions: Ethical behavior reduces potential fines for breaking environmental laws, reduces litigation risks from employee discrimination, and, in the long term, decreases energy consumption by using renewable resources.
- Corporate image: Environmentally friendly products and socially responsible actions create a positive public image, attract environmentally conscious customers, and foster brand loyalty.
- New markets: Ethical sourcing and environmentally friendly products appeal to specific consumer groups, potentially opening new markets and increasing sales.
- Employee morale: A positive and sensitive approach to environmental issues can boost employee morale and create a more fulfilling and engaging work environment.
Disadvantages of Meeting Social, Ethical, and Environmental Responsibilities
- Labor costs: Paying the living wage to employees increases labor costs.
- Production costs: Sourcing ethically produced raw materials can be more expensive.
- Capital expenditures: Investing in new environmentally friendly equipment can involve significant upfront costs.
- Waste disposal: Ensuring the safe disposal of dangerous or toxic materials can increase operational costs.
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