MAR4480 Chapter 8 Ethics and Social Responsibility

What is the Purpose of a Corporation?

Delivering value to customers.

Investing in employees.

Dealing fairly and ethically with suppliers.

Supporting communities.

Generating long-term value for shareholders.

ESG Framework

Defines ESG investing as considering environmental, social, and governance risks/opportunities. Socially conscious investors use ESG criteria to choose companies that align with their values

Environmental

Land, air, and water protection

Social

How a firm treats stakeholders (e.g., product liability)

Governance

Legal, regulatory, and business ethics

Dimensions of Social Responsibility

Defines social responsibility as maximizing positive impact and minimizing negative impact on society. It introduces the four-dimension pyramid

Economic

Be profitable

Legal

Obey the law

Ethical

Do what is right

Philanthropic

Be a good corporate citizen

Economic responsibility

Firms must be responsible to all stakeholders for financial success

Legal Responsibility

The minimum expectation to obey all laws and regulations

Ethical Responsibilities

Marketing ethics refers to principles and standards defining acceptable marketing conduct

Case Study: Nutella

If advertising Nutella as a "healthy breakfast" is unethical, illegal, or okay, noting it contains 21g of sugar—similar to a 3 Musketeers bar

Case Study: The Honest Co

Mentions issues with volume (24oz instead of 26.5oz) and the use of the word "natural" despite containing certain chemicals

Ethics and Compliance

• Ignoring ethical issues can destroy stakeholder trust, prompt government intervention

• Discussing, addressing potential problems during strategic planning could save a company millions

• More and more companies create extensive ethics and compliance programs

• Ethical and socially responsible behavior requires commitment

Philanthropic Responsibilities

Defines philanthropy as promoting human welfare above other responsibilities

Cause-related marketing

Linking products to a specific social cause

Strategic philanthropy

Using core competencies to address stakeholder interests

Social entrepreneurship

Founding an organization to create social value rather than just profit

Cause-related Marketing Examples

Includes Finish (Reckitt) and Mastercard (donating 10,000 meals for goals scored by Messi/Neymar Jr.)

Strategic Philanthropy Example

Shows a partnership between Dulux and a community foundation

Social Entrepreneurship: Love Your Melon

Gives 50% of net profits to pediatric cancer nonprofits and has donated over 250,000 beanies and 9000000 dollars

Sustainability

is the improvement of business strategies, economic sectors, work practices, technologies, and lifestyles all while maintaining the natural environment

Green marketing

A strategic process to create long-term customer relationships while supporting the environment

Greenwashing

Misleading consumers to think a product is more eco-friendly than it is

Ethical Issues

An identifiable problem, situation, or opportunity that requires an individual or organization to choose from among several actions that must be evaluated as right or wrong, ethical or unethical

Product, Pricing, Supply Chain, and Promotion.

Product-Related Ethical Issues

Failing to disclose risks or succumbing to pressure to reduce costs (common in toys, cars, and pharmaceuticals)

Counterfeit Products

Can leach profits, harm brand health, loss of tax revenue for governments, can be made with substandard materials, poor quality causing risk of injury (e.g., fake AirPods or Tweezerman tweezers)

Price fixing (collusion)

Rivals collaborating to set prices (Illegal under the Sherman Act)

Price gouging

Excessive price increases during emergencies

Predatory pricing

Charging very low prices to drive out competition

Superficial Discounting

Advertising a sale price that isn't actually a reduction from the normal price

Supply Chain-Related Ethical Issues

Complexity with global subcontractors, variations in regulations, companies conduct regular ethics audits for compliance, and the tension between low sourcing prices and ethics

Promotion-Related Ethical Issues

False communications or ambiguous statements (e.g., "Helps" you lose weight) and risks of bribery in personal selling

Self regulation

Self-regulation (e.g., Better Business Bureau) is often less costly and more practical than government regulation

industry trade association

Companies may join their industry trade association and adhere to guidance

Many have codes of ethics mandating behaviors

Many have industry reviews of practices

Membership is contingent upon adherence

Codes of Conduct

Formalized rules describing company expectations. They should be understandable, examine high risk areas, state values, address ethical issues, link to stakeholder orienation, frequently communicated, and revised often

Ethical Leadership

Leaders must be role models, create a common vision, obtain buy in from stakeholders, employ relevant resources, maintain tenacity and passion, and motivate toward ethical conduct

Marketing Ethics and CSR

Edelman trust data:

• 74% of Americans believe companies can improve society while increasing profits

Ethical companies benefit:

• More customer trust/loyalty

• Less employee turnover

• Greater profitability

Profitable Companies Can Do Both

Highlights Ben & Jerry’s (fair trade), Seventh Generation (carbon neutral), and Patagonia (recycled materials)

Marketing Financial Performance

Ethics and social responsibility are the most important factors in gaining stakeholder trust

Strong association between social responsibility and customer loyalty, reputation, and brand image