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International Business: The Challenges of Globalization Tenth Edition Chapter 2 Ethics, Social Responsibility, and...

International Business: The Challenges of Globalization Tenth Edition Chapter 2 Ethics, Social Responsibility, and Sustainability Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Learning Objectives 2.1 Summarize the main theories of ethics that are important to international business. 2.2 Explain ways to resolve ethical dilemmas and foster ethical business decisions. 2.3 Describe the main elements of corporate social responsibility and stakeholder theory. 2.4 Explain the importance international firms place on sustainability and climate change. 2.5 Describe several additional issues international managers can face daily in their jobs. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Tony’s Chocolonely Taking a stand against child labor in the chocolate industry – The Ivory Coast and Ghana employ child labor – Child labor is cheaper than adult labor US Supreme Court ruled that Big Chocolate is not legally responsible for child labor in foreign countries Is it socially responsible to continue the practice? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Being a Competitive Multinational Company The most competitive multinationals and global companies today go beyond legal compliance and prioritize ethical conduct, social responsibility, and sustainable business practices. – Being accountable – Moral issues Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 2.1: Where People Want to Shop and Work Source: Adapted from PriceWaterhouseCoopers Strategy+Business website, “Beyond Compliance: Consumers and Employees Want Business to Do More on E SG,” PwC Consumer Intelligence Series, June 2, 2021. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved The Importance of Competitive Advantage Competitive advantage Attribute that is difficult to imitate and enables a firm to outperform its competitors in the same industry – Trustworthiness – Integrity – Ethical behavior Do well by doing good! Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Why Be Ethical and Socially Responsible? Benefits of a competitive advantage that embraces ethical behavior and social responsibility include: – Greater brand loyalty, equity, and differentiation – Higher employee retention, loyalty, and morale – Increased sales, margins, and profits – Enhanced goodwill within the community – Lower risk of lawsuits, protests, and boycotts Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 2.2: People Want Business to Lead on Social Change Source: Compiled from the discussion in the 21st Annual Edelman Trust Barometer, Edelman & Data Intelligence website http://www.edelman.com//trust/2021-trust-baromete ), January 13, 2021, p p. 34-38 ( r Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Ethical Theories Ethical behavior Individual behavior in accordance with principles for good conduct or morality – Ethical dilemma ▪ Not a legal question Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Ethical Theories: Utilitarianism Utilitarianism Ethics theory advocating actions that foster happiness and opposing actions that cause unhappiness – Maximize good outcomes and minimize bad outcomes ▪ Unilever’s climate transition action plan Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Ethical Theories: Rights Theory Rights theory Ethics theory that says every human being has rights, and all governments are obligated to protect them – UN’s Universal Declaration of Human Rights ▪ All humans are born free and equal in dignity and rights Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (1 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Ethical Theories: Justice Theory Theory of justice Ethics theory that describes a society of free citizens who have equal basic rights and who cooperate within an egalitarian economic system – Finding solutions to ethical dilemmas that are most equitable and fair to all parties ▪ VF Corporation ▪ European Central Bank Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Ethical Theories: Cultural Relativism Cultural relativism Ethics theory that says the morality of an act depends on how the act is perceived within that specific culture at the time of the act – When in Rome do as the Romans do Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 2.1 1. Why is it important for firms to do business with integrity and earn the public’s trust in international business today? 2. Which theory says that an ethical action is one that brings the greatest good to the greatest number of people? 3. What is the rights theory of ethics and what kinds of rights does it cover? 4. What type of justice is the focus of the ethics theory of justice? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Business Ethics: Resolving Ethical Dilemmas Scenario: what wage to pay to workers in a maquiladora Two concepts to resolve ethical dilemmas: – Conflict of relative development – Conflict of cultural tradition Alternatively apply an ethical theory – Cultural relativism – Utilitarianism – Justice as fairness Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (2 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Business Ethics: Code of Ethics Code of ethics Formal statement that conveys ethical values and describes baseline professional conduct expected of individuals – Ethical imperialism A good global ethics code includes built-in flexibility to allow for some discretion of local subsidiary managers Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Academy of Management Code of Ethics The Academy of Management is a worldwide professional association for management professors, students, and practitioners. It developed a code of ethics that embraces three general principles: – Responsibility – Integrity – Respect for people’s rights and dignity Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Business Ethics: Sources of Unethical Behavior The two principal sources of unethical behavior are: – The moral integrity of individuals – A firm’s managerial setting or policies Leaders need to set the example of company expectations. – Moral integrity earns moral respect. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 2.2 1. What concepts can managers use to resolve ethical dilemmas between the home and host countries? 2. What is a code of ethics and why is it important for an international business to have one? 3. What are the principal sources of unethical behavior? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Corporate Social Responsibility: Efficiency and Profits as Social Responsibility Adam Smith – Competitive markets are the most efficient method of allocating resources and maximizing society’s well- being Milton Friedman – A company’s sole responsibility is to maximize profits for its owners (shareholders) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (3 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Corporate Social Responsibility: Business Responsibilities to Society Corporate social responsibility (CSR) Belief that a company should incorporate social objectives within its goals and policies and contribute positively to society Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 2.4: Pyramid of Corporate Social Responsibilities Source: Adapted from Archie B. Carroll, “Carroll’s Pyramid of C SR: Taking Another Look,” International Journal of Corporate Social Responsibility 1:3, 2016. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Culture Insights: Speaking in Fewer Tongues Dozens of languages have just one native speaker still living. Here are the facts, the consequences, and what can be done. – Some are losing – Some are gaining – The consequences – What can be done – Want to know more? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Corporate Social Responsibility: Stakeholder Theory Stakeholder theory View of capitalism that stresses the interconnected relationships between a business and those who have an interest, or “stake,” in the organization Stakeholders All parties who affect, or are affected by, a company’s activities – Internal stakeholders – External stakeholders Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Corporate Social Responsibility: Stakeholder Theory – Benefit Corporations Benefit corporation Form of business entity that is legally empowered to pursue positive stakeholder impacts alongside profits – Certified B Corporation movement ▪ Patagonia ▪ Bancolombia ▪ Danone North America ▪ Tillamook ▪ Bigelow Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved The B Corp Declaration of Independence As B Corporations and leaders of this emerging economy, we believe: – That we must be the change we seek in the world – That all business ought to be conducted as if people and place mattered – That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all – To do so requires that we act with the understanding that we are each dependent upon one another and thus responsible for each other and future generations Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 2.3 1. How did Adam Smith and Milton Friedman believe companies best served their responsibilities to society? 2. What are the four categories of responsibility identified in the CSR pyramid of corporate social responsibilities? 3. Which parties are important stakeholders for an average company? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Sustainability Sustainability Development that meets the needs of the present without compromising the ability of future generations to meet their needs – Climate change ▪ Net-zero-emissions (carbon neutral) targets ▪ The Race to Zero Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Sustainability: Carbon Footprints and Climate Change Carbon footprint Environmental impact of greenhouse gases measured in units of carbon dioxide that are emitted by human activity – Primary footprint – Secondary footprint Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 2.6: Annual Total Carbon Emissions by World Region Source: Our World in Data website https://ourworldindata.org/co2-emissions ). ( Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Global Manager: Three Sustainable Strategies for Three Markets A company adapts its business strategy to the nuances of a market. The world’s population of 7.8 billion people lives in three very different markets: – Developed markets ▪ Toyota – Emerging markets ▪ Shree Cement – Traditional markets ▪ Blommer Chocolate Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Sustainability: A Circular Economy Circular economy Approach that designs products and components that can be reused, disassembled, and upgraded to minimize waste – Replace consumer with user – Increase the quantity of long-lasting things and reduce waste Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 2.7: Linear v s Circular Economy ersu Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Sustainability: Greenwashing (1 of 2) Greenwashing Providing false or misleading information that presents a business or its products as being environmentally friendly – Misleading labels disguising a product’s harmful environmental effects – Campaigns touting the environmental efforts of industries inherently negative for the environment ESG: a company’s efforts on matters of the environment Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (4 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Sustainability: Greenwashing (2 of 2) Environmental, Social, and Governance Funds ESG Funds are not always environmentally friendly One study of the world’s 20 biggest ESG funds found: – Each was invested in an average of 17 fossil-fuel producers – Six had invested in ExxonMobil – Two were invested in Saudi Aramco, the world’s biggest oil producer – One had invested in a Chinese coal-mining company Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (5 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 2.4 1. How are sustainability and the term Race to Zero relevant to the discussion of climate change? 2. What do we mean by the term carbon footprint and what are its two components? 3. What are the main differences between a linear economy and a circular economy? 4. Why might companies and investment funds engage in greenwashing? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Additional Key Global Issues: Bribery and Corruption Foreign Corrupt Practices Act (FCPA) Law that forbids US companies, subsidiaries, or citizens from bribing government officials or political candidates worldwide – Small “grease” (facilitating) payments to expedite a deal or transaction are permitted, but not to make a deal happen The Sarbanes-Oxley Act established stringent accounting standards and reporting practices for firms – Enron Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Additional Key Global Issues: Working Conditions and Human Rights Companies are monitoring the actions of their own employees and the employees of companies with which they conduct business – Levi Strauss’ “Terms of Engagement” But such efforts are not always well received – H&M Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Additional Key Global Issues: Diversity, Equity, and Inclusion (1 of 2) Diversity in the workplace means that a firm’s employees represent a limitless variety of social viewpoints, cultural perspectives, experiences, and identities. Equity in the workplace means that a company offers every employee an equal opportunity for work and advancement. Inclusion in the workplace means that a company welcomes every employee, whatever their identity, and helps them to feel they are an integral part of the organization. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (6 of 6) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Additional Key Global Issues: Diversity, Equity, and Inclusion (2 of 2) DEI Efforts Within Companies A diversity, equity, and inclusion statement can establish a company’s commitment to these ideals. – Apple – McDonald’s – Nike Impact sourcing – A practice that brings marginalized groups into the global business services workforce Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 2.5 1. What individuals and types of businesses can be charged under the Foreign Corrupt Practices Act (FCPA)? 2. What consequences might a firm face if it provides poor working conditions or violates human rights? 3. Why is it important for businesses to promote a diverse, equitable, and inclusive workforce in their operations at home and abroad? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Copyright This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved