Ethics And Social Responsibility In Business: Case Studies Of Coca Cola, BMW And Starbucks

Ethics in Business

Topic: Ethics and Social Responsibility in Business: Case Studies of Coca Cola, BMW and Starbucks.

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The term ethics refers to certain values that help one in distinguishing right from wrong. Ethics help us in making everyday value judgements and thereby, ascertain our necessary course of action. An organization can be regarded as an artificial person and ethics are very important for its operation. There are various aspects about its operation that shall require the organization to adopt an ethical standpoint and determine what is necessary to be done. Ethics aid in providing an idea to both employees and managers on how to act in the workplace. In times of crisis ethics act as a moral compass and gives an idea to leaders and managers regarding what they can do and what they cannot. It has to be kept in mind that an organization exists in relation to other organizations and consumers in market. Therefore, it would be wrong to act without any moral consideration for others as its actions might affect other entities. The organization has to exercise a certain bit of responsibility towards the society and its consumers as it is crucial for the organization to maintain a favorable public image so that it remain preferable to the consumers (Dierksmeier et al. 2016). The idea of ethics is closely related to the idea of social responsibility however, the former has larger implications as it not only encompasses social responsibility but also provides a basis or other aspects of an organization.  

Ethics relate to businesses in different ways depending upon the industry in which the business operates. For example, for a food and beverage company, the management has to maintain a strict ethical framework which shall supervise the use of only the best quality raw materials for its production processes. It is found out that the company uses inferior quality products then not only will its public image deteriorate; it shall also be subjected to legal action by government authorities. On the other hand, for an organization that produces non-renewable energy ethics shall apply to it in a very different way. Its main concern shall be to keep track of its carbon footprint and also the use of sustainable technologies for minimizing environmental degradation. Otherwise, it shall be answerable to regulatory organizations. Therefore, it can be observed that different organizations must have different approaches towards ethics depending upon the niche they operate in. However, this does not undermine the fact that maintaining an ethical framework while operating a business is immensely important for an organization in the modern world. In the age of globalization when knowledge is becoming freely accessible for all people are becoming more and more conscious about ethical issues relating to environment, human rights, social responsibility et cetera. They shall opt for using the products and services of organizations that they know are committed towards the preservation of the planet’s ecology and are motivated by a cause that is much bigger than securing monetary gains (Rossouw, and Van Vuuren, 2017).  

Social Responsibility in Business

Therefore, it can be observed that adoption of ethical objectives is directly related to the increase of profitability of the organization. An ethically righteous organization shall have a positive public image and this shall help in distinguishing itself from competitors in the market. It shall also become easier for the organization to secure investors as there are an increasing number of investors who are more interested in organizations that treat their employees with respect and carry out business in a sustainable manner.

There can be various philosophical justifications for an ethical outlook towards business as well. For example, the principle of utilitarianism which professes the maximum happiness for the maximum number of individuals can be extended to the domain of carrying out environment friendly business. It rests upon the premise that not only humans but all other sentient beings have the right to live freely without harm. Therefore, sustainable business practices shall ensure that animals and plants are not threatened because of the activities of man.

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Social responsibility in business or more importantly corporate social responsibility (CSR) refers to a business practice that is becoming increasingly popular in recent times. It attempts at integrating environmental, social and humanitarian issues within the business strategy of the organization. It is not only a voluntary part of business strategy but there are certain legal frameworks that make it mandatory for organizations to engage in social issues. The importance of social responsibility lies in the fact that organizations operate within a certain social framework which allows them to harness profits from the market. Therefore, as an act of good faith the organization should promote the betterment and the development of society (McWilliams, 2015). The relationship between society and the organization should be one of mutual respect and coordination.

As an extension of the argument for the necessity of an ethical framework for organizations, social responsibility too is very important for the maintaining of a good public image. Organizations that are committed to establishing inclusive practices both within and without the workplace often experience higher returns and greater employee engagement compared to its competitors as a 2015 survey by the Kenexa High Performance Institute in London reveals (Financier Worldwide, 2018). However, there is much to accomplish by organizations in this aspect even now. Most companies are not convinced of the benefits that CSR can have for organizations and have only engaged with it as a means of marketing their products. This shows that there needs to be sufficient knowledge and awareness about the need of CSR in business. This is why legal frameworks and regulatory bodies are being created by governments that make CSR a compulsory part of running a business. However, these regulations do not go a long way in compelling organizations to adopt CSR. It has to be realized that unless the initiative becomes purely voluntary there would not be any progress in making social responsibility a universal factor in business (Schwartz, 2017).

Case Studies

Although Coca Cola is one of the most valuable and well-recognized brands of the world it has a dark past regarding issues in its ethical framework. There have been several accusations against the organization of channel stuffing, racial discrimination, contamination and ill-treatment of union laborers. In June 1999 thirty youngsters in Belgium fell ill after consuming Coke. This resulted in a probe in the production systems of Coke all through Europe which has strict laws for contamination. In the same year 1,500 African Americans sued Coke for racial segregation. Furthermore, in India Coke has been accused of over-utilization of groundwater resources.

It can thus be understood that Coca Cola has indulged in a substantial amount of unethical activities. It is often the case that organizations, when they grow too large, stop caring about humanitarian considerations in their pursuit of profit. Regulatory bodies fall short of controlling organizations of this size. However, as the twenty-first century ushered in, we witnessed rapid technological advances which makes access to knowledge and communication much easier. I believe that this shall be instrumental in raising the level of awareness among consumers and they shall make informed choices while buying their products.

BMW is a well-known automobile company that has headquarters both in the United States and Germany. It is an organization known for promoting equal rights and an inclusive work culture in the workplace. It even signed the German Diversity Charter in 2011 which aimed at encouraging diversity in the workplace. However, in 2013, BMW got into a legal problem regarding issues of racial discrimination in the United States. The Equal Employment Opportunity Commission (EEOC) filed a lawsuit against BMW for being racially prejudiced in the process of hiring employees. BMW has a policy to check the criminal backgrounds of prospective employees before hiring them. When 88 applicants were rejected out of the 645 that applied it was revealed that 70 of them were black. The EEOC claims that the criminal conviction policy was just a pretext that the company used to not hire those 70 employees.

There are a lot of gray areas that emerge after the study of this case. While the EEOC can be justified in its own line of enquiry, BMW cannot be blamed either. BMW has had the policy of criminal conviction since 1994 and have used to ensure that their workplaces are safe and not susceptible to criminal activities. Therefore, BMW was justified to act in the way it did.

Coca Cola

Starbucks started in Washington in 1971 and since then it has grown exponentially only to have stores scattered all over the world. There have been a number of ethical issues regarding the mode of operation of Starbucks. In the United States Starbucks had to face a lawsuit for using anti-competitive tactics against local competitors. Starbucks would lease properties for its stores at three times the market price so that property owners would not lease their properties to local coffee shops that could not afford such prices. Moreover, Starbucks employees would hand out free coffee samples to the customers who would be going to the local coffee shops.

This mode of operation is unethical in the sense that Starbucks is using all means necessary to destroy local products in the market. While Starbucks is a large corporation with huge amounts of resources, local coffee shops are not. Starbucks is using its resources to marginalize the local companies. Local companies often exhibit a lot of diversity in their products which are necessary to exist in order to maintain a healthy and competitive market condition. There might be a lot of consumers who would be more keen to getting coffee from local shops where prices are moderate compared to that of Starbucks where coffee is overpriced. Therefore, Starbucks’ practices shall add to the distress to consumers who are not affluent.

From the case studies it can be inferred that there is a lot to achieve for organizations in the world in the field of ethics and social responsibility. At the same time, it has also to be understood that ethics, being a subjective idea, there is no definite standard to determine whether an action is actually moral or immoral. For example, on the basis of deontologism, BMWs action can be justified morally. BMW was seeking for immediate concerns regarding the maintenance of safety in their workplace by not hiring black employees having criminal backgrounds. However, it must also be kept in mind that crime rate is higher among blacks because of rampant discrimination, unemployment and poverty. It is a vicious cycle that is being perpetuated by social factors. Therefore, keeping in mind the larger concerns for society BMW could have provided employment to them in an effort to promote justice in the larger context.

However, there should be a minimum ethical standard that organizations should follow in order to ensure that employees are treated with respect and the needs of consumers met. The role of the government becomes especially important in this aspect. The government should have regulatory bodies that shall supervise the operations of the organizations and aid in the maintenance of ethical standards.

Conclusion

The case studies reveal the practical nuances and pragmatic aspects of ethics in business. It is a problematic domain which can be subject to varied and conflicting interpretations. Yet the necessity of ethics cannot be denied. It would be no exaggeration to say that without ethics it would be impossible to operate a business. Ethics help in establishing a good opinion about the organization in the minds of customers. Therefore, by the adoption of an ethical system and proper execution of social responsibilities shall only help it in growing in the market and outdoing competitors. The ethical aspect should be not only in relation to customers but also in terms of other organizations as well. The way Starbucks in destroying local businesses in clearly not an example to be followed. Competition should exist for a healthy market conditions and consumers need more choices available to them.  

References

Dierksmeier, C., Amann, W., Von Kimakowitz, E., Spitzeck, H., Pirson, M. and Von Kimakowitz, E. eds., 2016. Humanistic ethics in the age of globality. Springer.

Financier Worldwide. (2018). The importance of corporate social responsibility. [online] Available at: https://www.financierworldwide.com/the-importance-of-corporate-social-responsibility#.W8dgMvZuLIV [Accessed 17 Oct. 2018].

McWilliams, A., 2015. Corporate social responsibility. Wiley encyclopedia of management, pp.1-4.

Rossouw, D. and Van Vuuren, L., 2017. Business ethics. Oxford University Press.

Schwartz, M.S., 2017. Corporate social responsibility. Routledge.