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Summary ethics, sustainability &responsibility (ERS)
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CHAPTER 1: ETHICS AND BUSINESS
Introduction
The course “Ethics, Responsibility and Sustainability” deals with topics of business ethics, corporate
social responsibility and sustainability.
There are at least three ways to approach such course:
1. A value-based perspective: approach based on values, principles, rights, applied ethical
theories. Values what is important in life such as respect, human rights, … applied to
economics and business
2. A transformative perspective: approach aiming at a fundamental paradigm shift (e.g. from a
neo-liberal paradigm towards an eco-centric paradigm or an outcome-egalitarian paradigm
or …). A paradigm is a system of concepts and theories that forms the conceptual framework
from which reality is described, analyzed and transformed. It’s a bunch of ideas we already
have in mind, from that bunch of ideas we try to understand the reality. We also shape
reality through those ideas and that’s also the way we try to analyze things in life. Some
tackle that from a paradigm and they want to change economics and business. Nowadays we
study reality from a neo-liberal paradigm (capitalism: is it bringing money or not). Some say
we can not look at this for our entire life and they encourage a different perspective for
example from an eco-centric paradigm. Where the ecology, planet, … is the center of hat we
do. Some say we should look at it from an outcome- egalitarian paradigm = everybody should
get the same opportunities, we should end up with equal outcomes.
3. A neo-classical perspective: approach aiming at introducing elements of ethics, responsibility
and sustainability within the logic of the free market paradigm. we accept the world as it
is today, but we want to change it. It’s not the best way forward. There are shortcomings of
the free market.
Approach 1 is often criticized for being too general, too theoretical, too vague to be applied to
business (‘Businesses should be more honest’, ‘Corporations should respect all human beings and
mother nature’). Question is how?
Studying Approach 2 might be intellectually satisfying (examining all the consequences of a paradigm
shift, designing a new paradigm, evaluating paradigms, …) but one cannot expect to have a paradigm
shift in the short run nor at once. Might have been discussed in courses like ethics, philosophy, CSR
(examples of paradigms: sharing economy, donut economy, purpose economy, …).
Approach 3 aims at introducing elements from approach 1 and 2 in day-to-day business decisions.
Pragmatism requires that we start now, within our current context, with making the right ethical and
sustainable choices now. This approach has guided us in choosing a suitable handbook. it’s not
saying that we are changing the world at once or totally.
We aim at training the managers and civilians of tomorrow (= you!) in making reasonable and
accountable decisions with fundamental respect for human well-being, the planet and the culture
wherein they operate.
Reasonable= not based on emotion, intuition, … based on reasoning.
Accountable= decisions that you can be responsible for, you made a decision and you should
also be able to explain “why”. You need to bear the consequences
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About the handbook
Aim: “to provide a comprehensive yet accessible introduction to the ethical issues arising in
business”. (HDM, viii)
“The questions today are less about whether ethics should be a part of business strategy and,
by necessity, the business school curriculum, than about which values and principles should
guide business decisions and how ethics should be integrated within business and business
education.” (HDM, viii) values and principles is the first approach. To avoid criticism from
first approach, how can we integrate values and principles within business/ on the work
floor.
Distinctive features of this handbook: “We emphasize a decision-making approach to ethics,
and we provide strong pedagogical support for both teachers and students throughout the
entire book.” (HDM, viii)
The authors approach business ethics as a form of practical reasoning, as a process for
decision making in business, which helps to make one’s decision more reasonable,
accountable and responsible.
Responsible is a moral concept. Accountable rather a non-moral way. You made a wrong
decision, but that doesn’t necessarily mean you are a bad person.
“Other approaches to ethically responsible decision making are possible, and this approach
will not guarantee one single and absolute answer to every decision. But it is a helpful
beginning in the development of responsible and ethical decision making.” (HDM, p. 49)
In ethics there isn’t such a thing as one single answer. You don’t have to follow his
arguments. The outcome is less important than the way in which you reason. The way in
which you make your arguments.
Opening decision point (case study)
Zika Virus and Olympic Sponsors (HDM, 2-3)
Problem? In 2016 in south and Latin America the Zika virus was going around. A virus transmitted by
mosquitos. A group of more than 200 scientists signed a letter to ask the Olympic committee to
postpone the Olympic games. If we bring in tourists and athletes and then they all go home, that
could spread the virus over the whole world. So the scientists wanted to avoid that by postponing
the games. The committee didn’t follow this advice. One of the main players that we shouldn’t
overlook are the sponsors. They spend huge amounts of money, not only to be visible during the
games, but they also spend a lot of money on their international marketing campaigns. For example,
Coca Cola: you can participate to win a specific product of the Olympic games if you buy a specific
product of Coca Cola for example. So all these efforts would have been useless. Another aspect that
should be stressed is that there was no unanimity around the experts. Some said the games will help
to spread the virus, while others said there is no problem at all. There is uncertainty.
1. How much responsibility do sponsoring corporations bear for the outcomes of things like
the Olympic Games? All the sponsors are doing is paying money to have their logos
featured at Olympic venues and the right to use the Olympic logo in their advertising. The
Rio sponsors wouldn’t be directly spreading Zika. Does that indirectness matter, ethically?
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2. One danger is that the decision would not be based on ethics at all, and that the
organizations involved would fall prey to a general “the Olympics must go on!” attitude (= a
“can-do” attitude, Challenger 1986).
Similar the NASA space shuttle. The managers knew there were problems. The managers said we will
solve that on the way. We can do that, we are so clever that we can do it and we can’t fail. They did
not think that there were seven people inside the challenger. They didn’t imagine the challenger
would explode some seconds after the launch. There were no ethics involved in the decision making
process. They were basing their decision on their attitude: a move on attitude.
3. Does the lack of full agreement between experts absolve Olympic sponsors of blame if the
Rio Olympics ended up contributing to the spread of the Zika virus? Would it be ethically
correct of the sponsors to say, after the fact, “We didn’t know for sure there would be a
problem.”?
Ethics and business
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do
things differently.” you can have a perfect run for twenty years but only one decision can ruin your
reputation. Buffett says that anyone's reputation can quickly take a hit and to always act with
integrity. Otherwise, a whole career can be ruined easily no matter the effort over the years
Making the case for business ethics
Business ethics is a process of responsible decision making.
– Scandals are brought about by ethical failures: people doing bad things. Sometimes
it’s an accident but most of the time a scandal is based on ethical failures.
– Cases: Enron/Arthur Andersen, Madoff, BP Deep Water Horizon, Volkswagen.
Enron: energy company which had huge ethical standards but they had a number of issues with
finances; some losses and they wanted to get rid of those loses in their balance sheet. They didn’t
want to show the public and stockholders that there was an issue. They created a company and they
put all the losses in that company and then it was not longer on their balance sheet. They could
present a nice balance sheet. Nothing wrong with that. You are allowed to have a daughter company,
but the reason why was already going in the wrong direction. It was to mislead the public about the
financial health of the company. It didn’t stop with the creation of one special purpose vehicle (SPV)
They set up more entities and they ended up with more than 100 special purpose vehicles. Arthur
Andersen one of the leading accounting firms in that time, they were the auditors of Enron. They
didn’t say anything. They grew with Enron in doing wrong. They were following the same way and
believing that what was happening was fine. No one was seeing it. In the end Enron went bankrupt.
Madoff: investor that set up a financial pyramid system offering huge amounts of interest to people.
But he could not pay those interest so he used new incoming money/ capital to pay those interests.
The pyramid scheme collapsed as well.
BP deep water horizon: drilling of oil in the Mexican gulf in very deep waters. Something went wrong
and there was a huge oil spill in the Mexican gulf and on the beaches of Texas. This was not simply an
accident, but also a number of ethical issues were involved leading up to that disaster.
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