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Summary: Ethical and sustainable business
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Ethical and sustainable business: SummaryLecture 1: Introduction to sustainability in business
I. Introduction
> Sustainability: In business, it refers to practices that ensure long term viability by
balancing economic, social, and environmental concerns (*). It is about meeting our needs
without compromising the ability of future generations to meet theirs.
(*) triple bottom line: people, planet & profit
Why is it important? As global challenges like climate change, resource depletion, and
social inequality intensify, sustainability has become a crucial aspect of business strategy,
influencing operations, products development, and corporate governance
1.1 DEFINING SUSTAINABILITY
> Triple bottom line: Sustainability often revolves around the “triple bottom line” principle-
people, planet, profit - aiming for a balance that ensures social equity, environmental
protection, and economic viability.
> Sustainable development: The Brundtland commission’s 1987 report
“our common future” introduced sustainable development as
“development that meets the needs of the present without compromising
the ability of future generations to meet their own needs.
Relevance to business… Businesses adopt sustainability to
reduce risk, improve efficiency, foster innovation, and
enhance brand reputation among increasingly conscious
consumers and stakeholders
1.2 HISTORICAL CONTEXT
Historical sustainability concepts can be traced back to forestry management practices in the
18th century, emphasizing the need to use resources at a rate where they can regenerate.
Throughout the 20th century, environmental movements and global references, such as the
Stockholm conference (1972), club of Rome and the Rio Earth Summit (importance of
capitalism) (1992), expanded sustainability’s scope to include economic and social
dimensions. Today, sustainability encompasses a broad range of issues from climate change
mitigation to social justice, influencing global policies, corporate strategies and individual
actions.
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, II. Sustainability in business
Modern businesses view sustainability as a strategic imperative, not just for ethical
reasons but also for its potential to drive growth, innovation, and competitive advantage.
Sustainable practices, such as energy efficiency and waste reduction, help businesses
reduce costs and improve their operational efficiency. The rising consumer demand for
sustainable products and services pushes businesses to integrate sustainability into their
core operations and value proposition.
- Sustatool is our own Flemish tool that covers the optimization side.
- Share value creation covers the innovation side.
2.1 BUSINESS ETHICS AND SUSTAINABILITY
> Business ethics: It refers to the study of proper business policies and practices regarding
potentially controversial subjects including corporate governance, insider trading, bribery,
discrimination, corporate social responsibility, and fiduciary responsibilities. The importance
of ethics in business sustainability cannot be overstated; it provides a framework for
businesses to follow to ensure trust with consumers, employees, and the broader
community.
Sustainability inherently involves ethical considerations - decisions today affect the
resources and wellbeing of future generations. Ethical business practices involve making
decisions that are not only profitable but also good for the environment and society.
Key ethical theories in business:
- Utilitarianism: This principle advocates for actions that maximize overall happiness
or reduce suffering. In sustainability, this might involve balancing short term profits
with long term environmental health.
- Deontological ethics: Focuses on the rightness or wrongness of actions
themselves, as opposed to the rightness or wrongness of the consequences of those
actions. For business, this could mean adhering to principles of fairness and justice,
even if it is not the most profitable route.
- Virtue ethics: Emphasizes the virtues, or moral character, of the person carrying out
an action. For businesses, this translates into cultivating a culture of responsibility,
care for the environment, and ethical leadership.
Ethical decision-making in business requires considering the impacts of decisions on all
stakeholders, including employees, customers, the community and the environment. This
holistic approach ensures that business practices contribute positively to sustainable
development goals.
Case study: Patagonia, an outdoor clothing brand, exemplifies ethical business practices by
committing to sustainable materials and processes, fair labor practices, environmental
activism. Their business model shows that profitability and sustainability can go hand in
hand, challenging the traditional view that businesses must choose between ethics and
profits.
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, 2.2 ETHICAL CONSIDERATIONS IN SUSTAINABLE BUSINESS
Businesses face numerous sustainability challenges that require ethical considerations,
such as resources depletion, pollution and social inequality. Addressing these challenges
ethically involves making choices that consider the long term impacts on the planet and
society.
> Corporate social responsibility (CSR): CSR itself is a self regulated business model that
helps a company be socially accountable - it itself, its stakeholders, and the public. By
practicing CSR, companies can be conscious of the kind of impact they are having on all
aspects of society, including economic, social and environmental.
Ethical sustainability practices demand transparency in how products are made, services
are delivered, and how companies are reducing their environmental footprint. Transparency
builds trust with consumers and stakeholders, ensuring that sustainability efforts are genuine
and not just marketing tactics (greenwashing).
Engaging with stakeholders is crucial for understanding the ethical implications of
business practices. This includes dialogue with customers, employees, local communities,
and even critics, to make informed decisions that respect the interests and well-being of all
parties.
> Ethical supply chain management: This involves ensuring that a company's supply
chain operates in a manner that is consistent with the company's ethical principles and
sustainability goals. It includes fair labor practices, environmental responsibility, and respect
for human rights along the entire supply chain.
Case study: IKEA’s commitment to sustainable sourcing of materials, such as using only
cotton from more sustainable sources and aiming for all wood to come from more
sustainable sources (fsc-certified or recycled wood), illustrates how ethical considerations
are integral to sustainable business operations.
2.3 BUSINESS AND SOCIETY
> Interconnectedness: The relationship between businesses and society is inherently
interconnected. Businesses not only provide goods and services,e employment and
contribute to the economy, but they also have a significant impact on the community and
environment. This interdependence means that the actions of businesses can have
widespread implications on societal well being and environmental health.
> Corporate citizenship: This concept reflects the extent to which businesses are socially
responsible for meeting legal, ethical and economic responsibilities placed on them by
stakeholders. The idea extends beyond charity and requires companies to act with
awareness of the impact they have on all aspects of society, including economics, social and
environmental
> Social contract theory: Businesses operate under a social contract with the society they
serve. This unwritten agreement implies that businesses should contribute to the welfare of
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, society, respecting the environment and ethical norms, in exchange for legitimacy and
operating space. Violating this contract can lead to distrust, social backlash or stricter
regulation.
The concept of sustainability embeds the idea that businesses have a social responsibility to
pursue growth in a manner that is sustainable for the planet and beneficial to society. This
involves adopting practices that promote environmental stewardship, social equity, and
economic development.
Case study: Ben & Jerry’s commitment to social justice, environmental sustainability, and
supporting local communities exemplifies how a business can actively contribute to societal
well-being while still being profitable. Their efforts include sourcing fairtrade-certified
ingredients and engaging in activism to address issues such as climate change and social
inequality.
2.4 ETHICAL RESPONSIBILITIES
Businesses face a range of ethical responsibilities, from ensuring fair labor practices and
protecting consumer rights to environmental stewardship and community engagement.
These responsibilities can be guided by ethical frameworks such as consequentialism
(assessing the outcomes of business actions), deontology (adhering to duties and rights),
and virtue ethics (fostering ethical corporate cultures).
> Environmental ethics: This involves recognizing the intrinsic value of the natural world
and considering the environmental impacts of business operations. It calls for sustainable
resource use, reducing pollution, and contributing to conservation efforts.
Social equity and justice: Businesses have a responsibility to promote social equity and
justice, addressing issues like income inequality, workplace diversity, and inclusion. This
extends to ensuring that global supply chains are free from exploitative practices and
contribute positively to the communities in which they operate.
Accountability and governance: Ethical responsibility also entails corporate governance
structures that promote transparency, accountability, and ethical decision-making. This
includes implementing policies that prevent corruption, unethical behavior, and ensuring that
sustainability commitments are met.
Case study: The Body Shop’s pioneering role in promoting ethical consumerism through
campaigns against animal testing, commitment to fair trade, and focus on sustainability
showcases how businesses can fulfill their ethical responsibilities while engaging consumers
in their ethical journey.
III. The tragedy of the commons
> Tragedy of the commons: Garrett Hardin’s “tragedy of the commons” (1968) describes a
situation where individuals, acting independently according to their own self-interest, behave
contrary to the common food of all users by depleting or spoiling shared resources through
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