PESTLE: Ethical Factors

What are Business Ethics?

• Ethics are the moral principles that shape the way that a business behaves.

Corporate Social Responsibility

• CSR is the wider responsibilities of a firm to other stakeholders and society

• Social enterprises achieve their financial goals while minimising any negative impact on society/the environment

What does Corporate Social Responsibility do?

• Working in partnership with local communities

• Socially responsible investment (SRI)

• Building relationships with staff & customers

• Environmental protection and sustainability

Business and CSR

• Some firms use CSR as a marketing or PR tool to enhance their image rather than substance e.g. ‘greenwashing’

CSR Examples:

• Nestle

• The Body Shop

• MARKS & SPENCERS

• Shell

Ethical Issues Facing Business:

• Environmental

• Animal Rights

• Treatment of Workers

• Treatment of Suppliers

• Treatment of Customers

Animal Rights

• Animal welfare is a key element of many firm’s ethical policies. The likes of free-range chicken and the mistreatment of livestock

Treatment of Workers

• There is no excuse for exploitation even if this occurs lower down the supply chain in a less developed country where a business source their goods from

Treatment of Suppliers

• Supermarkets often exploit and pressure UK dairy farmers but the growth of the Fair Trade movement has helped to limit the problem globally

Treatment of Customers

• A recent example of customer exploitation was the PPI selling scandal by the banks, where customers who took out loans/financial products where pressurised into also buying additional (unnecessary) insurance.

Analysis of CSR:

Disadvantage:

• Reduced profitability

• Unhappy shareholders

• Is CSR a genuinely held belief

• Does a firm act consistently in all countries that they operate in?

Advantage:

• Improved Brand Image

• Marketing Advantages

• Reduced labour turnover & absenteeism

• Improved staff motivation

• Attract top candidates for jobs

Final Evaluation

• Ethics can provide firms with a USP but only if the sentiment is genuine

• Will social responsible behavior be maintained if the business is facing a battle for survival?

• It is not cheap to be ethical but in the long-term it is likely to generate stronger levels of growth given how socially aware and informed the modern consumer is.