DQ - Strategic Planning
Strategic Planning and Ethics, Corporate Social Responsibility, and Sustainability
Ethics are not universal. Ethics are driven by culture, religion, and the environment. However, many companies do have an ethics statement that employees need to respect. With this construct in mind, it may be assumed that senior leadership will follow the same code of ethics for the company.
In times past, there were US companies (and other countries) that did not respect the environment, employees, the law, and regulations. In fact, today, there are still incidents where companies are fined or are called to task in the media. In 1984, Union Carbide had a gas leak in Bhopal, India, which resulted in over 5,000 deaths and countless injuries. The laws in India were more lenient than in the US. Union Carbide specifically had a presence in India because the company was not obligated to follow the same safety protocols as it would have in the US. The company broke no laws. However, ethically this was wrong.
Did Union Carbide have a strategic initiative to build manufacturing plants in countries where the environmental and safety laws/regulations were less stringent? Probably. However, Union Carbide was not the only company that followed this strategic initiative.
Let’s look at the retail industry. As recently as 2006, several US retail firms were caught using child labor (children 11 years and younger) in Bangladesh (http://www.law.harvard.edu/programs/lwp/NLC_childlabor.html). The companies involved were Wal-Mart, Hanes, J.C. Penney, and Puma. The children worked more than 10 hours a day and only had one day off. This was only 10 years after Kathie Lee Gifford was publicly humiliated for using child labor for her fashion line. There was nothing illegal. However, the media backlash for using children in such a manner was ethically disgusting to many Americans.
As with Union Carbide, these companies made a decision to use cheaper labor without checking the manufacturing plants. In the long run was it a good strategic move. Perhaps for the bottom line. But the amount of money that it took to address the media backlash and the need to start to oversee the manufacturing plants for more than quality of craftsmanship probably cost more than the cheap labor.
Have companies learned a lesson? Possibly. The incidents mentioned above and others that have made the news has led companies to introduce Corporate Social Responsibility (CSR) and Sustainability. What is CSR? CSR is a manner where companies’ self-regulation is integrated into its business model and hence, into the strategic objectives. Most US companies have embraced CSR but argue that they can only go so far. Why? Because it affects the bottom line or profitability. Whether the company is a for-profit or a non-profit, it needs to have enough revenue generated to pay for CSR.
In theory, companies that have an active CSR monitor their activities against social norms, domestic and international, ethical standards and laws. Some companies may do more than the minimum required by law and social norms. These companies view CSR as enhancing long-term profitability and enhancing their relationships with shareowners (Lindgreen & Swaen, 2010). However, it does come at an internal cost, but there are strategic initiatives to support CSR.
Last week, Unilever was discussed. The vision maintained by Unilever was safe and sustainable living. This means that all strategy developed by Unilever must map back to this vision. But what does it mean for a business to be sustainable? Think of the three Ps: profits, people, planet. In other words, the company actively manages the three areas for obligations and opportunities Nidumolu, Prahalad, & Rangaswami, 2009). When companies have sustainability in the forefront incidents that happened in Bhopal and Bangladesh would have been minimized or eliminated.
There are naysayers to sustainability. As with CSR, there is a cost for being a sustainable company. There are CEOs of major western (US and Europe) companies that feel that becoming more sustainable is a disadvantage. Why? The competition from companies located in countries that do not have laws or regulations that are environmentally safe or people friendly (Nidumolu, Prahalad, & Rangaswami, 2009). Hence, the companies in these countries can provide competing services and products at a reduced rate.
But, there are those CEOs that view sustainability as an opportunity. Proctor & Gamble and Unilever are two companies that have done so. Another example was Hewlett-Packard in the 1990s realized that lead was toxic. The company realized that laws would eventually ban the use of lead to solder. Indeed, this came about when the European Union (EU) banned lead. Hewlett-Packard was able to comply immediately as it had been using alternative solder agents.
Make sure to review the Videos and PowerPoint materials to further information in various trends in the areas of CSR and sustainability. There are values-driven leadership and conscious capitalism. What are some other trends that you have observed?
References:
Lindgreen, A. & Swaen, V. (2010). Corporate social responsibility. International Journal of Management Reviews: British Academy of Management. DOI: 10.1111/j.1468-2370.2009.0027.x.
Nidumolu, R., Prahalad, C. & Rangaswami, M. (2009). Why sustainability is now the key driver of innovation. Harvard Business Review.
PowerPoint/Lecture Materials (These materials integrate with the weekly topic(s), but also provide some additional instruction that may go beyond the lecture):
Values-Driven Leadership (click to view)
Conscious Capitalism (click to view)
Video/YouTube (These videos are typical of media that may assist you in the synthesis of key instructional materials into your understanding and practice):
Lemonade Stand - Promised Land--movie clip (click to view)
Conflict in the Jungle - Tears of the Sun--movie clip (click to view)
A Call for Militia - The Patriot--movie clip (click to view)
Articles: Draw from the articles provided in the Reading & Resources page (the previous page before this Lesson page). The articles given are good samples of the many current scholarly resources that contribute in some way to this week's theme. You should skim these for basic familiarity, and read deeply those areas (as needed) that assist you in the connection with content. Some of the articles may serve as resources in some of your writing for the week.
FOR FURTHER CONSIDERATION:
Ethical Universalism: Holds that common understandings across multiple cultures and countries about what constitutes right and wrong give rise to universal ethical standards that apply to all societies, all firms, and all businesspeople.
Effect on Business Ethics:
Whether a business-related action is right or wrong is judged by universal standards.
Is what we are proposing to do fully compliant with our code of ethics? Are there areas of ambiguity?
Is this action in harmony with our core values? Are any conflicts or potential problems evident?
Is there anything in the action that is ethically objectionable? Would our stakeholders, our competitors, the SEC, or the media view this action as ethically objectionable?
Environmental Sustainability Strategy - Consists of the firm’s deliberate actions to:
Protect the environment.
Provide for the longevity of natural resources.
Maintain ecological support systems for future generations.
Guard against ultimate endangerment of the planet.
Increased reputation and buyer patronage
Reduced risk of reputation-damaging incidents
Lower turnover costs and enhanced employee recruiting and workforce retention
Increased opportunities for revenue enhancement due innovation in support of sustainability and CSR
Support for the long-term interests of shareholders
