4 Ethics, CSR & Sustainability in International Business

Key Terms

• Ethics: Accepted principles of right & wrong guiding decisions and actions.
• Corporate Social Responsibility (CSR): Voluntary commitment to operate in an economically, socially & environmentally sustainable manner, beyond legal compliance.
• Sustainability: Meeting present needs without compromising future generations; focuses on three pillars—environmental, social, economic.

Why Ethics Matter in International Business

• Cross-cultural, legal & economic complexity.
• Long-term reputation & stakeholder trust.
• Rising global regulation on corruption, human rights, environment.
• Decisions impact multiple global stakeholders.
• Growing sustainability imperative.

Major Ethical / CSR / Sustainability Issues

• Employment Practices: Child/forced labour, discrimination, unsafe conditions, low wages; apply local vs. home-country standards.
• Human Rights: Free speech, association, movement; operate in countries with poor records?
• Corruption: Bribery, extortion, nepotism; conflict with \text{FCPA} & OECD Convention; debate over "grease payments".
• Environmental Pollution: Lax host-nation laws, "tragedy of the commons", global externalities.
• Moral Obligation: Power of MNEs in developing nations → duty to give back; balance shareholder value vs. societal good.

Recognising Ethical Dilemmas

• Trade-offs among economic, social, environmental goals.
• Lack of universal ethical standards.
• High stakeholder impact & difficult-to-quantify consequences.

Roots of Unethical Behaviour

• Personal ethics weakened by geographic/psychological distance.
• Decision processes omit ethical questions.
• Organisational culture that deprioritises ethics.
• Unrealistic performance goals creating pressure.
• Leadership example ("actions speak louder").
• Societal culture (e.g., individualism ↑ ethics emphasis; high power distance ↓).

Managerial Guidelines

• Set minimum global standards protecting basic rights & dignity.
• Regularly audit subsidiaries & suppliers; enforce corrective action.
• Hire & promote people with strong personal ethics.
• Build culture & codes of ethics; leaders must model behaviour.
• Develop moral courage to reject profitable but unethical choices.
• Use structured decision tools: stakeholder analysis, ethical frameworks.
• Appoint ethics officers; provide training & compliance monitoring.
• Implement CSR strategies: consider social consequences, practice noblesse oblige.
• Adopt sustainable strategies: profit + environmental stewardship + stakeholder welfare.

Takeaways

• Ethical, CSR & sustainability challenges are complex but critical for long-term success.
• Unethical actions carry legal, reputational & financial risks.
• Proactive, values-based management builds trust, brand value & positive impact.