CSR Study Sheet PDF

CSR STUDY SHEET W1 - Stakeholders PepsiCo: Performance with a Purpose Combines business success with societal impact. Focus areas: ○ Environmental sustainability (resource management, emissions reduction). ○ Social responsibi...

CSR STUDY SHEET W1 - Stakeholders PepsiCo: Performance with a Purpose Combines business success with societal impact. Focus areas: ○ Environmental sustainability (resource management, emissions reduction). ○ Social responsibility (community programs, workforce diversity). ○ Governance (ethical practices, transparency). Why Companies Have Social Responsibilities Business Reasons: ○ Attract/retain customers and employees. ○ Anticipate and shape regulations. ○ Long-term financial benefits. Moral Reasons: ○ Address social problems caused by corporations. ○ Responsible use of corporate power. ○ Impact on stakeholders and society. Criticism: Focus should be on profit-making for shareholders. Social issues should be addressed by governments, not corporations. Triple Bottom Line (John Elkington) Framework for CSR impact measurement: 1. Profit: Economic growth, cost savings, development. 2. People: Stakeholders—employees, customers, communities. 3. Planet: Environmental accountability—resource use, waste management. Carroll's CSR Pyramid 1. Economic Responsibilities: Profit generation (foundation). 2. Legal Responsibilities: Compliance with laws. 3. Ethical Responsibilities: Beyond legal requirements, societal expectations. 4. Philanthropic Responsibilities: Voluntary contributions to societal well-being. Spheres of Influence of a Company 1. Community Responsibility: ○ Engagement with local communities. ○ Example: Partnerships with NGOs. 2. Workplace Responsibility: ○ Working conditions, employee well-being. ○ Example: Work-life balance programs. 3. Marketplace Responsibility: ○ Supply chain ethics, consumer impacts. ○ Example: Ethical sourcing policies. 4. Environmental Responsibility: ○ Direct and indirect environmental impacts. ○ Example: Carbon footprint reduction. 5. Economic Responsibility: ○ Obligations to shareholders, employees, and local economies.  Traditional vs. Contemporary CSR Traditional CSR: Risk-focused, reactive. No clear link to value creation. CSR as an "add-on" to business activities. Contemporary CSR: Reward-focused, proactive. Integrated with business value creation. CSR as "built-in," aligned with corporate strategy. Example: Performance with a purpose. Ethics vs. the Law Ethics: Morality-based decisions about right and wrong. ○ Goes beyond legal compliance. ○ Examples: Avoiding tax loopholes, ensuring fair wages. Law: Minimum legal standards enforced by regulations. ○ May not cover all ethical concerns (e.g., environmental harm within legal limits). Key Insight: Ethical behavior often exceeds legal requirements to address societal expectations. Session 2: Stakeholder Theory and Stakeholder Engagement Stakeholder Theories of the Firm 1. Traditional View: ○ Focus on shareholders as primary stakeholders. ○ Managers prioritize shareholder profits (Friedman’s approach). 2. Stakeholder Theory (Edward Freeman): ○ Firms impact and are impacted by multiple stakeholders beyond shareholders. ○ Stakeholders include employees, consumers, suppliers, communities, and the environment. ○ Businesses have responsibilities to all stakeholders to ensure long-term success and accountability. 3. Network Perspective: ○ Stakeholders are interconnected in complex networks. ○ Businesses must address intersecting interests and dependencies. Analysing Stakeholder Relationships Stakeholder Salience Prioritize stakeholders based on: ○ Power: Ability to influence outcomes. ○ Legitimacy: Validity of their claims. ○ Urgency: How immediate their demands are. Stakeholder Analysis: ○ Identify: Map out all stakeholders (primary and secondary). ○ Prioritize: Assess salience based on power, legitimacy, and urgency. ○ Engage: Develop strategies to address and balance stakeholder needs.  Milton Friedman’s Critique of CSR Core Argument: 1. The sole responsibility of businesses is to maximize profits for shareholders within the bounds of the law. 2. Managers act as agents for shareholders and must prioritize their interests. 3. Social issues are the responsibility of governments, not corporations. Rebuttal to Friedman: 1. CSR aligns with shareholder interests when it enhances long-term profitability. 2. CSR addresses externalities (social and environmental harm) that markets fail to regulate. 3. CSR increases transparency and accountability, benefiting stakeholders and society. 4. Businesses often operate in areas where governments are unable or unwilling to address societal needs (e.g., regulatory gaps). Edward Freeman’s Stakeholder Approach Emphasizes ethical and strategic importance of considering all stakeholder interests. Businesses should create value for stakeholders to achieve long-term success. Stakeholders’ “social license to operate” ensures trust and legitimacy in the marketplace. Corporate Citizenship and Accountability Corporate Citizenship: Concept addressing the social role of corporations. Perspectives on Corporate Citizenship: ○ Limited: Philanthropy—sharing wealth as a good corporate neighbor. ○ Equivalent: CSR—fulfilling broader societal duties as part of responsible business. ○ Extended: Political CSR—acknowledging the political role corporations play, such as protecting rights and influencing global governance. Corporate Accountability: ○ Definition: The responsibility of corporations to be answerable for their actions. ○ Key Elements: Transparency: Clear communication about policies, impacts, and decisions. Responsibility: Ensuring actions align with ethical and societal standards. ○ Challenges: Complex supply chains. Balancing global and local stakeholder demands. Key Takeaways Stakeholder Theory broadens the view of corporate responsibility to include all impacted groups. Critiques of CSR (e.g., Friedman) highlight tensions between profit-making and social responsibilities but are increasingly countered by evidence of CSR’s benefits. Corporate accountability and citizenship address governance gaps, especially where governments fall short, reinforcing businesses’ roles in addressing global challenges.  Week 3 - Normative Ethical theories Ethical Absolutism Ethical Relativism There are universally applicable moral principles. Morality is context dependent and subjective. This Right and wrong are objective – are not context means that there can be many ‘rights’, it depends on dependent. They are rational. traditions, convictions and practices of those making the decisions. Western Modernist theories DEONTOLOGY (aka. Principle based theories) CONSEQUENTIALISM (Teleology) Focuses on motivation and principles behind actions Focuses on outcomes (consequence) rather than rather than their outcome. It is duty and rule based their motivation. If the outcome is desirable, then the ethics. action that leads to this outcome is right. Ethics of duty Ethical egoism Ethics of rights and justice Utilitarianism Consequentialist theories: Focuses on outcomes (consequence) rather than their motivation. If the outcome is desirable, then the action that leads to this outcome is right. Ethical Egoism: Utilitarianism: An action is morally right if decision-makers The Greatest Happiness Principle: An action is pursue their own short-term desires or morally right if it results in the greatest good/utility for long-term interests. the greatest number of people. Focus on self-promotion and Consequentialism: Morality is judged by the maximizing personal or business outcomes of an action. interests. Hedonism: Pleasure is good, pain is bad; No moral obligation to others, but morality is based on maximizing net happiness. actions should not harm others. Maximalism: Focus on overall net benefit, Donating to charity aligns with egoism even if not everyone gains equally. if it benefits the individual or company Universalism: Considers the consequences (e.g., improving reputation). for all individuals impacted. Criticism: Subjective definitions of happiness, equal treatment of all stakeholders, difficulty measuring impacts, and neglect of individual rights in favor of collective welfare.  Non-Consequential (Deontology) theories: Focuses on motivation and principles behind actions rather than their outcome. It is duty and rule based ethics. Ethics of duty (Kantian Ethics) Ethics of Rights & Justice Morality is based on unchanging obligations and established moral rules, which apply universally Morality is grounded in universal human rights, to all ethical problems. which are fundamental and must be respected in all circumstances. “Do the right thing, because it's the right thing to do.” Human Rights: Rights are basic, Inherent Dignity: Humans possess inalienable, unconditional, and without intrinsic value and deserve respect exceptions. Duty-Centered Morality: Actions are Reciprocal Duties: Rights come with guided by duty rather than outcomes or corresponding duties —e.g., my right to personal desires. property imposes your duty not to steal. Universal Principles: Rules of right and Foundational Thinkers: John Locke, Jean-Jacques wrong can be derived rationally and Rousseau, and John Rawls established these should be applied across situations. principles. Focus: Following universal moral laws to act Focus: Ensuring fairness, equality, and respect for ethically, emphasizing consistency and human individual rights in all ethical decisions. dignity. Kantian ethics is based on duties derived from the categorical imperative. The law that governs morality: The Categorical Imperative Core Idea: A universal moral law guiding ethical actions based on rational principles and respect for humanity. Key Maxims (Immanuel Kant): Maxim 1 - Consistency: Act only according to principles you would want universally applied. Consider the impact if everyone followed the same rule. Maxim 2 - Human Dignity: Treat all individuals as ends in themselves, never merely as means to an end, respecting their inherent humanity. Maxim 3 - Universality: Act in a way that your principles could be universally adopted without contradiction; consider whether your actions would be acceptable if publicly known. Focus: Ethical behavior requires rational consistency, respect for human worth, and universal applicability of moral principles.  Social Contract Theory (Rousseau) A hypothetical agreement among individuals and society establishes fair relationships, rights, and responsibilities, ensuring justice and stability. Key Principles: Rousseau’s Perspective: People are inherently kind and peaceful, but social organization and democratic principles are necessary to address resource scarcity. Difference principle: If there are any economic differences in the social contract, the greatest benefit should be for the least advantaged Veil of Ignorance: Decisions about the social contract should be made without knowledge of one’s societal role, ensuring fairness and equality. (ex: you cut the cake I choose the slice) Focus: Businesses gain a license to operate by participating in society responsibly and upholding shared values of justice and equality. Application of Ethical Theories Prism Argument: Use multiple theories to analyze ethical dilemmas for a well-rounded approach. Toy Production Dilemma: ○ Ethical Egoism: Pursue the deal if it benefits the company’s self-interest. ○ Utilitarianism: Weigh the broader societal costs (e.g., child labor) vs. benefits (e.g., jobs, economic growth). ○ Kantian Ethics: Refuse the deal if it treats workers as means to an end. ○ Virtue Ethics: Evaluate whether actions reflect integrity and justice. ○ Social Contract: Assess whether the deal aligns with principles of fairness and societal obligations. Key Takeaways 1. Ethical dilemmas often involve clashing duties or values (e.g., profits vs. morals). 2. Ethical theories provide structured approaches to decision-making but have limitations. 3. Applying a combination of theories (prism approach) can yield balanced and thoughtful solutions.  Session 4 - Descriptive Ethics Descriptive vs Normative Ethical Theories Descriptive Theories: Explain how ethical decisions are made and what influences them; focus on "what is" rather than "what should be." Normative Theories: Focus on establishing principles for ethical decision-making; address "what ought to be done." Asch Conformity Study People conform to group opinions even when they know they are wrong. Reasons: Normative Influence: Conforming to avoid social punishment. Informational Influence: Conforming because they believe the group knows better. Milgram Experiment Purpose: Examined obedience to authority. 65% of participants administered maximum shocks under authority directives. Demonstrated the "Agentic State," where individuals transfer responsibility to authority figures. Application: Highlights risks of blind obedience in corporate settings. The autonomous state: people direct their own actions, and they take responsibility for the results of those actions The agentic state: people allow others to direct their actions and then pass off the responsibility for the consequences to the person giving the orders. In other words, they act as agents for another person’s will. Power Dynamics Authority: Employees often model behavior after leaders, sometimes leading to unethical acts. Groupthink: Decision-making suffers when groups prioritize harmony over critical evaluation. Prevention: Assign critical evaluators, invite external experts, promote open dialogue. Rest’s Four-Stage Model (1986): This model explains the process individuals go through when making ethical decisions: 1. Awareness: Recognizing that a situation involves a moral issue (e.g., harm or benefit to others). 2. Judgment: Evaluating the ethical implications of possible actions, often using moral reasoning (e.g., is it right or wrong?). 3. Intent: Establishing motivation to take a moral course of action, despite potential pressures or risks. 4. Behavior: Acting on the ethical decision made in the earlier stages. Factors Influencing Ethical Decision-Making: Individual Factors: Personal characteristics that influence moral decision-making: Personal values: Stable beliefs about what is desirable or important. Integrity: Adherence to moral principles. Cognitive Moral Development: An individual’s capacity for moral reasoning. Situational Factors: Environmental influences that affect ethical behavior: Organizational culture: Shared norms and values within a workplace. Rewards and punishments: Incentives or consequences tied to decisions. Moral intensity: How significant and urgent the ethical issue feels. Authority: Influence of superiors or leaders.  Kohlberg Theory Moral Development (Kohlberg’s Stages) Kohlberg’s theory explains how people develop their ability to reason morally through three levels: 1. Pre-Conventional Level: Focus: Basic morality based on avoiding punishment and pursuing self-interest. Typical Stage: Common in children or individuals with self-centered reasoning. 2. Conventional Level: Focus: Conformity to societal norms, rules, and expectations to maintain relationships or societal order. Typical Stage: Most teenagers and adults operate at this level. 3. Post-Conventional Level: Focus: Autonomous reasoning based on universal ethical principles, such as justice and human rights. Typical Stage: Rare and seen in individuals with advanced moral reasoning. Whistleblowing Definition: Disclosing unethical or illegal practices to parties that can effect change. Challenges: Risks to personal safety, reputation, and career progression. Examples: Edward Snowden, Frances Haugen.  Session 5 - Shareholders Shareholders as Stakeholders Shareholders are key stakeholders with rights (e.g., to vote, sell stock, and receive information) and managers owe duties to act in the company’s best interest. Ethical Dilemmas: Conflicts between shareholder profits and long-term corporate sustainability. Globalization’s impact on shareholder relations. Corporate Governance Definition: System by which companies are directed and controlled (Cadbury Report, 1992). Purpose: Ensures accountability and transparency for shareholders and other stakeholders. Models: Anglo-Saxon: Single-tier board structure. European: Two-tier structure (executive and supervisory boards). The primary purpose of fiduciary duties is to ensure that board members act in the organization’s best interest, prioritizing long-term value and balancing shareholder and stakeholder needs when necessary. Principal-Agent Theory Principal (Shareholder): Seeks profit and rising share prices. Agent (Manager): Pursues personal goals (remuneration, power). Challenges: Conflict of Interest: Misaligned goals. Information Asymmetry: Agents have more information than principals. Ethical Issues in Financial Markets Executive Remuneration: Excessive CEO pay is linked to inequality and poor shareholder returns. Ethical concerns with linking ESG targets to bonuses (e.g., Deutsche Bahn controversy). Board Diversity: Promotes fairness, better decision-making, and ESG performance. Shareholder Activism Definition: Shareholders that actively influence corporate governance. Types: Social Reasons: Promote ethical practices, e.g., climate action. Financial Reasons: Improve profitability or governance. Methods: Buying shares to gain a voice at meetings. Publicly challenging management for media attention. Challenges: Limited to wealthier individuals or groups.  Globalization of Financial Markets The globalization of financial markets raises ethical concerns such as unfair competition, financial instability, worker exploitation, and increased opportunities for illegal activities like money laundering. These challenges highlight the need for robust governance and oversight to mitigate risks and ensure fairness. Steward-Owned Companies vs. Traditional For-Profit Companies Traditional for-profit companies prioritize maximizing shareholder returns, while steward-owned companies focus on long-term social responsibility, reinvestment of profits, and maintaining independence. This model emphasizes sustainable business practices and the well-being of all stakeholders. Shareholder Democracy The core argument for shareholder democracy is that shareholders, as owners, have the right to participate in governance. This ensures the company operates transparently and in their best interests, fostering greater accountability and alignment with shareholder values. Friedman-Freeman Debate & ESG Investing The Friedman-Freeman debate centers on whether a company’s primary responsibility is to maximize shareholder profits (Friedman) or to consider the broader interests of all stakeholders (Freeman). ESG investing reflects this tension by incorporating financial, social, and environmental considerations, balancing profit with ethical responsibilities. Shareholder Activism vs. Socially Responsible Investing (SRI) Shareholder activism targets specific corporate issues (e.g., executive pay or climate policy) through direct engagement with management and public actions, often seeking immediate changes. SRI takes a broader ethical approach by integrating multiple social and environmental criteria into investment decisions without direct intervention in company operations. ESG Ratings Concerns about ESG ratings include transparency, difficulty verifying company-provided data, and a lack of standardization across rating agencies. These issues challenge the reliability of ESG metrics, as firms must balance ethical considerations with financial performance. Rights of Shareholders Shareholders possess key rights, including voting at general meetings, selling shares, receiving company information, and taking legal action against management misconduct. However, they do not directly control company strategy, which remains the responsibility of the board and management.  Session 6: Working Conditions & White Collar Crime Key Issues of Employees as Stakeholders Employees are critical stakeholders with rights (e.g., fair pay, equal opportunity) and duties (e.g., completing work, upholding company reputation). Global dynamics and cultural variations significantly impact how these rights and duties are interpreted, creating ethical challenges. Fair Pay Fair pay is a key ethical concern focusing on equity, reciprocity, and impartiality. Issues: Living Wages: Can employees sustain themselves on their earnings? Wage Inequality: Disparities between the highest- and lowest-paid employees. Gender Pay Gaps: Influenced by sector segregation, unpaid work burdens, and systemic barriers like the glass ceiling. Solutions: Transparency, quotas, accessible childcare, and encouraging shared family responsibilities. Maslow’s Hierarchy of Needs Employers should address both basic needs (e.g., fair pay, safety) and higher-level needs (e.g., belonging, esteem, and self-actualization) to foster meaningful work and enhance employee well-being. Workplace Discrimination Discrimination is unfair treatment based on characteristics unrelated to job performance (e.g., gender, race, age, disability). Types: Gender Discrimination: Includes the glass ceiling, sticky middle, and bamboo ceiling. Ageism: Biases against younger or older workers. Intersectionality: Compounded discrimination based on multiple identities. Ethical Concerns: Discrimination hinders talent acquisition, diversity, and creates unjust advantages. It can lead to legal consequences for companies. Challenges: Policies correcting past injustices risk reverse discrimination, creating additional unfairness. Different Forms of Justice Procedural Justice: Ensures fair processes in decision-making (e.g., hiring or promotions). Distributive Justice: Focuses on fairness in the allocation of resources and rewards. Retributive Justice: Addresses past injustices through corrective actions. Equity vs. Equality: Balancing fairness (equity) by addressing individual needs versus treating everyone the same (equality). Brown Eye, Blue Eye Experiment (Jane Elliott) This experiment demonstrated how prejudice and discrimination can arise from social conditioning. By dividing participants by eye color, the "superior" group exhibited increased confidence and performance, while the "inferior" group’s performance declined. It underscores the power of labels and leadership in shaping behavior and reinforcing discrimination.  Hawthorne Effect The Hawthorne Effect shows that individuals change their behavior when they know they are being observed. In the Hawthorne Works Study, worker productivity increased during observed changes but declined afterward, suggesting that attention and validation from observers drive motivation more than external conditions. Employee vs. Non-Employee Roles Not all workers are classified as employees: Volunteers: Typically unpaid and lack employee benefits. Contractors: Independent workers with distinct rights and duties compared to employees. Glass Ceiling The glass ceiling is a metaphor for systemic barriers preventing women from advancing into leadership roles. Women can "see" leadership opportunities but face obstacles that hinder their progression. Meaningful Work and Employee Well-Being Studies show that meaningful work improves employee engagement, productivity, and sense of purpose. Positive outcomes benefit both individual fulfillment and organizational performance. Employee Monitoring Monitoring practices raise ethical concerns, including: Invasion of Privacy: Employees feel their autonomy is compromised. Distrust and Stress: Monitoring fosters a negative work environment. Unfair Discipline: Data from monitoring may be misused or misinterpreted. Unemployment vs. Misemployment Unemployment: Lack of a job. Misemployment: Being in a role misaligned with one’s skills or aspirations, negatively impacting both the employee and the organization.  Session 7: Gig Economy, Migrant workers, modern slavers The Gig Economy Definition: Temporary, task-based employment without long-term contracts (e.g., Uber, delivery services). Characteristics: Workers set schedules, use personal resources, and lack employee benefits. Relaxed hiring criteria, less control over work processes. Increased economic uncertainty and dismantling of employment rights. Ethical Issues: Lack of job security, healthcare, pensions, and fair pay. Dependence on gig income creates worker vulnerabilities. Potential Benefits and Risks of the Gig Economy Benefits: Flexible work opportunities. Entry for less-qualified workers. Cost-efficient labor for businesses. Risks: Exploitation due to lack of regulations. Economic instability for workers. Gender and pay disparities among drivers. Uber Case Study History: Founded in 2009 in San Francisco; grew despite regulatory challenges. Key Themes: Redefined transportation through technology but faced lawsuits over worker classification and safety concerns. Global expansion brought protests and bans in cities like Berlin and Paris. Driver Challenges: Average wages after expenses are significantly lower than advertised. No benefits like health insurance or pensions. Recent improvements include agreements for minimum revenue per trip in France and employee classification in the UK. Ethical Issues: Aggressive market tactics, surge pricing, data privacy breaches, and safety concerns. Ethical Issues Linked to Migrant Workers Migrant workers, especially in agriculture and domestic work, face: Low wages, unsafe working conditions, and exploitation. Debt bondage and inadequate social protections. COVID-19 exacerbated vulnerabilities (e.g., lack of food and accommodation). Modern Slavery Characteristics: Forced labor under threat, ownership or control by employers. Dehumanization and restricted freedom of movement. Economic exploitation, underpayment, and coercion. Global Statistics: 50 million people affected; 86% in private sectors like manufacturing, agriculture, and domestic work. Women and children are disproportionately impacted.  Session 8 - Consumers Consumers as Stakeholders Consumers have inalienable rights to fair treatment, including the right to truthful information and safety. Historically, the "caveat emptor" principle placed responsibility on consumers, but evolving laws and expectations have shifted this balance. Businesses now have a duty to treat consumers as ends, not means, as outlined by Kant’s 2nd Maxim. Ethical Behaviors in Marketing Misleading and deceptive advertising interferes with consumers' ability to make rational decisions. Marketing often promotes materialism, reinforces stereotypes, and creates insecurity, particularly affecting vulnerable consumers such as children, the elderly, or the ill. A relevant example is the Tide Pods case, where candy-like packaging led to poisonings among children and dementia patients. Procter & Gamble addressed this by implementing safer packaging, warning labels, and awareness campaigns. Greenwashing Greenwashing refers to misleading consumers about a product’s environmental benefits or a company’s sustainability practices. Companies often exaggerate or fabricate eco-friendly claims to attract environmentally conscious buyers. Regulations such as the EU directive now require verifiable claims to protect consumers from such deceptive practices. Inclusive Marketing Inclusive marketing aims to reflect diversity across gender, ethnicity, and abilities, ensuring all demographics are represented. However, ethical concerns arise when brands exploit social issues solely for profit without genuine commitment, a practice known as tokenism. Deception in Marketing Deceptive marketing occurs when false beliefs are created that interfere with consumers' ability to make rational choices. Examples include hidden costs (e.g., flight pricing) and exaggerated product benefits. Ethical Issues in Pricing Price fixing is a common ethical issue, where businesses collude to set prices, reducing competition and harming consumers. Targeting vulnerable consumers with discriminatory or excessive pricing, such as health-related price exploitation, disproportionately impacts already disadvantaged groups. Moral Complications of Contemporary Consumerism Contemporary consumerism often creates artificial wants, perpetuates dissatisfaction, and reinforces stereotypes, fostering a culture of excessive consumption. This raises moral concerns about the sustainability of such practices. Microcredit Programs Microcredit programs aim to provide small loans to low-income individuals lacking access to traditional banking services. However, when such loans are used for consumption rather than productive activities, repayment problems can arise, worsening financial hardship. Summary of Ethical Marketing Issues Ethical marketing challenges span across product policy, marketing communications, pricing, distribution, market strategy, and market research. These include issues like product safety, deceptive communication, price fixing, targeting vulnerable consumers, and invasion of privacy. Consumers have rights to safety, fairness, honest communication, and privacy protection, which marketing practices must respect.  Session 9: Suppliers and the Supply Chain Suppliers and Competitors as Stakeholders Suppliers and competitors are integral to the supply chain. Suppliers have legal rights, such as fair pricing, and moral claims, like fair treatment and honoring agreements. Competitors are stakeholders when ethical competition is maintained, respecting intellectual property and patents. However, unethical practices, including predatory pricing, sabotage, and industrial espionage, undermine fair competition. Ethical Issues in the Global Production Network The global production network connects suppliers, workers, and consumers across borders, creating new challenges: Race to the Bottom: Companies exploit lower environmental and labor standards in developing countries, leading to unsafe conditions, low wages, and child labor. Globalization Impact: Local industries struggle against multinational corporations, fostering exploitation and environmental degradation. Gifts, Bribes, and International Business The ethics of gifts and bribes depend on intent, effect, and perception. Some cultures, like Guanxi in China, view gift-giving as a tradition, while Western norms often consider it unethical. Codes of ethics emphasize transparency to avoid conflicts of interest and ensure ethical procurement practices. Consumption and the Tragedy of the Commons The tragedy of the commons arises when individuals act in self-interest, depleting shared resources, such as through overconsumption and environmental harm. Regulatory Solutions: Interventions like the Montreal Protocol or COP21 agreements aim to address collective resource mismanagement. Responsible Consumption Both businesses and consumers have responsibilities: Businesses: Use choice editing to limit harmful options (e.g., removing single-use plastics or discouraging overconsumption through pricing). Consumers: Drive accountability through informed purchasing, boycotts, and buycotts to influence markets and demand transparency. Circular Economy The circular economy shifts away from the linear "take-make-dispose" model toward a regenerative system. Principles: Reuse, recycle, repair, and share resources to reduce waste. Case Study: A jacket manufacturer in Aosta, Italy, designed products for recyclability, offering discounts for returning old items, creating a closed-loop production system. Ethical Sourcing Ethical sourcing integrates social, ethical, and environmental criteria into supply chain management. It extends responsibility beyond local factory owners to global corporations, emphasizing traceability. Certifications like ISO 14001 encourage compliance and reduce information asymmetry, especially where suppliers depend on buyers. Fair Trade Fair trade systems empower disadvantaged producers by guaranteeing fair prices and safe working conditions, fostering community development and poverty alleviation. Although fair trade may include environmental standards, the primary goal is worker protection and economic equity.  Triple Bottom Line and Sustainable Supply Chains The triple bottom line encourages companies to consider their impact on people, planet, and profit, moving beyond purely financial goals to include social and environmental factors in supply chain practices. Global Production Network A Global Production Network is a web of interconnected firms, suppliers, and competitors operating globally. While efficient, this network raises ethical concerns around labor practices, environmental degradation, and economic dependency in less developed regions. Choice Editing for Sustainable Consumption Choice editing involves restricting harmful options to promote sustainability. Drawbacks: Higher prices, implementation challenges, perceptions of manipulation, and reduced consumer choice. Consumers' Role in Ethical Supply Chains Consumers can influence ethical supply chains by: Making informed decisions. Demanding transparency from companies. Supporting ethical practices through boycotts and buycotts. Race to the Bottom Phenomenon The Race to the Bottom occurs when countries lower labor and environmental standards to attract foreign investment, often leading to worker exploitation and significant environmental harm. Global ethical regulations are crucial to counteract this trend. Session 10: Civil Society Organizations and Social Entrepreneurship Civil Society as a Stakeholder Civil society operates as the "third sector"—neither business nor government—comprising organizations like NGOs, charities, and pressure groups. These entities advocate for causes such as environmental protection, social justice, and public health. Civil society organizations (CSOs) hold indirect stakes in business behaviors, influencing transparency, accountability, and societal acceptance. Why CSOs Matter: Government and market failures in addressing social and environmental issues. Increasing skepticism and mistrust in governments and corporations. Growing role in fostering collaboration and addressing diverse societal concerns. How CSOs Work with Companies CSOs engage with businesses in several ways: 1. Accountability: Acting as watchdogs to ensure companies meet ethical standards. 2. Collaboration: Partnering with companies to address social issues, often through social licenses to operate. 3. Tactics: Direct actions: Protests, boycotts, stunts, and non-violent sabotage. Indirect actions: Public awareness campaigns, lobbying, and research. 4. Examples: Ethical Trading Initiative and Marine Stewardship Council collaborations.  Different Types of Activism Boycotts: Refusal to purchase products to drive change (e.g., ExxonMobil and climate change policies). Types: Instrumental (policy changes), catalytic (raising awareness), expressive (displeasure), punitive (punishment). Buycotts: Encouraging consumers to support ethically aligned companies. Radical Activism: Aggressive tactics, often targeting highly visible industries like fashion and energy. Social Entrepreneurship Definition: Businesses that aim to solve social, cultural, or environmental issues through sustainable models. Unlike NGOs, they balance a mission-driven purpose with sustainable revenue generation. Examples: Europe: Refugee integration, waste management. Global South: Basic healthcare, education, and clean water access. Models of Social Entrepreneurship: 1. Entrepreneurial Nonprofits (ENP): Nonprofits developing earned-income businesses. 2. Social Cooperatives (SC): Democratically controlled mutual-interest enterprises. 3. Social Businesses (SB): Mission-driven, profit-reinvesting businesses. 4. Public Sector Social Enterprises (PSE): Spin-offs from public policies. Benefits: Scalable, tackle social issues innovatively, and reduce dependency on donations. Case Study: Grameen Danone Foods A partnership between Grameen Bank and Danone to address child malnutrition in Bangladesh. Key Product: Shoktidoi yogurt, enriched with nutrients to combat anemia and stunted growth. Business Model: Joint venture with profits reinvested. Local sourcing: Over 500 farmers supply milk. Low-cost pricing adapted to regional income levels. Challenges: Access for the extremely poor. Environmental concerns with packaging. Maintaining cold chains in rural areas. Outcomes: Improved child nutrition and local employment, with 350+ factory jobs created. Ethical Issues with CSOs and Social Enterprises CSO Independence: Partnerships with corporations can compromise the neutrality and moral authority of CSOs. Mission Drift: Balancing market demands with social goals can lead to diluted focus. Sustainability: Difficulty maintaining long-term impact without compromising core values. Catalytic activism focuses on raising awareness and educating the public, aiming to spark change by influencing perceptions and encouraging broader societal engagement, rather than directly targeting specific companies or entities.  Session 12 - Government, Regulation and Business Ethics Government as a Stakeholder Governments serve as both representatives of citizen interests and direct stakeholders in businesses. They: 1. Restrict Business: Through regulations and sanctions. 2. Enable Business: By creating a conducive environment through subsidies, infrastructure, and legal frameworks. 3. Depend on Business: For tax revenues, economic growth, and employment. 4. Compete with Business: In sectors like utilities and infrastructure. Governments balance laissez-faire policies with active industrial roles, defining the "license to operate" for businesses. Imperative vs. Private Regulation Imperative Regulation: Enforced by governments, backed by sanction mechanisms like military, police and courts; includes laws and sanctions. Private Regulation: Issued by companies, industry associations, or civil society groups. It relies on softer enforcement mechanisms like social pressure and certifications but can still be binding. Regulation is defined as rules issued by governmental actors to constrain, enable, or encourage specific business behaviours. Modes of Government Intervention Governments intervene to correct market failures such as: Market failures describe situations of inefficient distribution of goods and services in the free market ○ Profits at the expense of others due to information asymmetry ○ Negative Externalities (causing damage and not paying for it) ○ Overuse of public goods Policy Instruments used: 1. Standards: Regulate fair play, marketing, data protection. 2. Restrictions: Ban harmful substances or behaviors (e.g., microplastics). 3. Encouragement: Subsidies for sustainable practices (e.g., electric vehicles). 4. Transparency: Require energy labeling or disclosure of carbon footprints. Market-Based Instruments: Taxes/Fees: Discourage harmful behaviors (e.g., sugar tax). Tradable Permits: Allow trading of quotas for carbon emissions. Lobbying Definition: Direct attempts by organizations to influence government decision-making. Ethical Perspective: Lobbying is integral to democracy but raises concerns over transparency and accountability. Types: 1. Atmosphere setting. 2. Monitoring. 3. Information provision. 4. Advocacy and persuasion. 5. Pressure application. Key concern: Corruption risks when lobbying is opaque, leading to potential manipulation of public policies. Corruption Definition: The abuse of entrusted power for private gain.  State Capture: Businesses shaping regulations through bribes, undermining fairness. Public Corruption: Politicians or officials accept payments to favor private interests, harming public trust and governance. Corruption thrives where political elites are distant from citizens, creating pacts of silence and scapegoating. State capture occurs when businesses or individuals use bribes or undue influence to shape laws, policies, or regulations for their own benefit, undermining fairness and public trust. Race to the Top vs. Race to the Bottom Race to the Bottom: Governments lower labor and environmental standards to attract business, sacrificing ethics. Race to the Top: Inspired by higher standards like the Brussels Effect, global companies align with strict EU regulations across all operations.