Ethical environment in the organisation

Welcome to Global
Strategy and
Sustainability
Topic: Strategic Purpose – Ethics and CSR
Today’s Agenda
Quick Recap of Previous Week’s Topic (Sustainability and Corporate Performance)
Ethics in business
• Activity 1: Individual – CASE STUDY: Making ethical decisions
Ethical environment in the organisation
BREAK
The concept of Corporate Social Responsibility
• Activity 2 Group – CASE STUDY: Ethical decisions in practice: United Airlines case
Ethical challenges faced by global firms
• Activity 3: Group – CASE STUDY – Application of Carroll’s model: Ferrero, KLM and Bacardi
• Review of Apply Activity
• Recap, Q&A, Discussion
• Module summary and summative assessment
• Next steps

Previous Week Recap – Sustainability and
Corporate Performance
Recognise the concept of sustainable development
Analyse the three main pillars of sustainability, profit people,
planet
Assess the relationship between stakeholder management
and corporate performance
Evaluate the various governance mechanisms used to align
stakeholder interests

Today’s Learning Outcomes
Explore the main ethical issues that arise in business
Critically assess how managers can improve the ethical
climate of their organisation
Analyse the concept of CSR
Apply key theoretical models to assess issues that are faced
by global entities

Ethics in business
What is business ethics?
Does Frito-Lay (subsidiary of
PepsiCo) have any ethical
issues with the way it deals
with the two geographic areas?
Controversial chemical
compounds like ‘Red 40,
Blue 1 and Yellow 5’
This is where ethics in
business comes in.
Source: https://www.dailymail.co.uk/femail/article-7508903/Food-activist-shows-comparisons-U-S-U-K-ingredients-lists-products.html
What is business ethics?
Business
ethics is the
application of
ethical values
to business
behaviour.
It applies to any and all aspects of business conduct.
Ethiscore’s scoring system. Source: Ethiscore (2021)
Ethics principles for business
• Honesty
• Integrity
• Loyalty
• Fairness
• Respect
• Trustworthiness
• Responsibility
• Accountability
• Social and environmental consciousness
• Transparency
Pay fair wages
(fairness)
Reduce workforce
without layoffs
(loyalty, respect)
Political support
(honesty, integrity)
Good for customers
(social consciousness)
Ethical principles in business refer to the moral
standards set by a company.

Ethical dilemmas
It is through an ethical dilemma that most businesses and employees
experience business ethics.
What the ‘right’ thing to do.
Sometimes decision
between
right and right
Ignorance
Discrimination
Management pressure
Personal ambition

Ethical dilemmas
Ethical issues from the
nature of business
Client exploitation
Child labour
Ethical issues between
business and society
Donations
Animal testing
Total price
Deceptive advertising
Ethical dilemmas in
business marketing
Intracompany
ethics
Staff ethics
Business areas facing
ethical dilemmas

Importance of ethics for business: when it goes wrong
Unethical behaviour constitutes
a business risk and can lead to
significant costs
Investments in subprime mortgage-backed securities
notoriously misrated as “secure” by rating
companies.
Confirmed its systems had fallen to hackers with some
148 million consumers around the world were affected.
• Legal sanctions
• Commercial consequences
• Damage to brand reputation
• Employee dissatisfaction
• Staff absenteeism and retention
• Lower level of customer retention
• Negative reactions from the community

Importance of ethics for business: when it goes right
Ethical business practices can
bring about tangible business
advantages
Ethical companies out-performed a comparable
index of large cap companies
More employees would vote with their
feet if their organisation was involved in
a major fraud, bribery or corruption
scandal.
• access to opportunities
• assignment of preferential conditions
• improved market access
• higher reputation
• customer loyalty
• increased attractiveness to talented
employees

Individual Activity: CASE STUDY
Making ethical decisions
This Photo by Unknown Author is licensed under CC BY-SA
This Photo
by Unknown Author is licensed under CC BY-SA
Ethical environment in
the organisation

Promoting ethical conduct within the organisation
Ethical leaders
Moral people
Moral managers
Ethical practices
Recruitment and Selection
Orientation and Training
Policies and Codes
Reward and Punishment Systems
Accountability and Responsibility
Decision Making
Ethical climate
Explicit values
Incentives and recognition
Cultural norms
The organisational environment plays a critical role in
encouraging ethical conduct.

Examples: create the right ethical environment

Benefits Example
• The attention to the health and welfare of the surrounding community.
• Company leadership works to ensure that the company is an active member of
the communities support the most vulnerable.
• CEO’s focus on social justice issues.
• Furloughing or letting go of some of the team members, all the actions were
accompanied by tremendous hospitality, dignity and compassion.
• During COVID-19 pandemic, enhancing their communications, showing support
and empathy, not being shy of being vulnerable in front of others.
• The CEO has taken a clear stance to champion inclusion and diversity.
• Staff being encouraged and able to implement change in business units, speak
up, and provide opinions.
• Announced early on that there wouldn’t be COVID-related layoffs in 2020.
• Adobe has halted hiring to avoid layoffs during COVID-19 and that gives
employees a sense of security.
• All the trainings on emotional wellbeing and coping during this time shows that
Adobe cares about staff mental health.
• The timely messages from the CEO regarding current COVID-19 events and
how to react and behave.

Break Time – 15 minutes
The concept of Corporate
Social Responsibility

Corporate social responsibility (CSR)
A self-regulating business model that helps
a company to be socially accountable — to
itself, its stakeholders and the public.
Different
stances
on CSR
Source: Johnson 2017
CSR and competitiveness: Creating Shared Value
Shared Value: policies and
operating practices that
enhance the competitiveness of
a company while
simultaneously advancing the
economic and social conditions
in the communities in which it
operates.
Source: Porter and Kramer, 2011
Ethical challenges faced
by global firms

The pressure to bend the rules
Source: Ethics & Compliance Initiative (2020)
The pressure employees
may experience to
compromise their
organisation’s ethics
standards, policies or the
law is linked with an
increased likelihood to
observe misconduct.

The pressure to bend the rules: who and where
• meeting performance goals
• attempting to save one’s own and others’ jobs
• supervisory pressure
• advancing one’s career or financial interests
• demands from people who support or invest in the
• organisation.
The pressure to
bend the rules

Managing profit / responsibility: creating shared value
The public perceives the
pressure to bend the rules
in business.
Attitudes of the British public to business ethics
Group activity: Case Study
Ethical decisions in practice: United Airlines case
This Photo by Unknown Author is licensed under CC BY-SA
Models to assess firms’ CSR efforts
Some corporates use recyclable materials whereas others contribute
their profit to charity. Some pay incentives to workers for working in
dangerous environments whereas others establish charity programs.
The question is, how do we measure these different approaches?

Carroll’s model for CSR
Carroll’s model outlines four
essential areas in a company’s
corporate social responsibility.
These elements are organised
in order of importance and
presented visually in what is
now known as the Pyramid of
Corporate Social Responsibility.
This Photo by Unknown Author is licensed under CC BY-SA-NC
Carroll’s pyramid: examples
Ethical
Legal
Economic
Philanthropic
• Bank or America committed $1 billion
to help tackle the country’s racial and
economic injustices.
• 97% of managers are trained to the Principles of
Conduct and Action.
• 96% of managers are trained on competition rules.
• 30% of all new positions in the U.S. would be filled
with Black and Latino people.
• Committed to finance 50 university scholarships for
Black students each year for the next five years.
• Help fund the education and advancement of our
neighbours.
• Projects focusing on education, environment, children,
the disabled, youth activities.

Corporate social responsibility: Reporting
The purpose of a CSR report is to improve the transparency of organisations’
activities. The goal is twofold:
• to measure the impact of firm’s activities on the environment, on society and on the
economy (the famous triple-bottom-line).
• to externally communicate with their stakeholders what are their short, medium and longterm goals regarding sustainable development and CSR.
• ISO 26000
• the Global Reporting Initiative (GRI)
• the Integrated Reporting
• the B-Corp Certification or the
• FTSE4GOOD Index
Link CSR initiatives to UN’s
Sustainable Development Goals

Corporate social responsibility: Reporting
Source: https://www.danone.com/content/dam/danone-corp/danone-com/rai/2019/pdf/un-sdgs-danone-contribution-2019.pdf
Danone’s 2030
Goals aligned with
the 2030 United
Nations SDGs, thus
adopting a language
that is universally
understood.

Group Activity: Case Study
Application of Carroll’s Model
This Photo by Unknown Author is licensed under CC BY-SA
Review of Apply
Activity

Apply Activity Instructions
Discussion Forum (100 words)
1. Why is sustainability a critical element for a firm’s strategy?
(max 50 words)
2. Why do businesses have an important role in tackling global issues?
(max 50 words)

Assessment Instructions
For this assessment, in the role of a Management Consultant, you are required to undertake an overall strategy
review of Tesla and provide a business report and a PowerPoint presentation to the CEO on further growth
opportunities using the techniques and concepts you have covered in the module. Background reading has
been provided for the case study which you can access via links on the HUB and via the core textbook also.
The business report comprises of 4 tasks (this task is part of the summative assessment):
LO4: Assess and apply suitable frameworks and ideas to formulate and control sustainability for organisations in
a global context.
Task 4 – Strategic Purpose – Ethics and CSR (15 Marks)
• Using relevant theoretical models analyse and evaluate Tesla’s CSR strategy.
• Identify and critically discuss the main ethical issues which Tesla currently faces and provide
recommendations as to how they can address these.
Support your arguments with academic literature and references to other similar real companies.
Recap, Q&A,
Discussion

Key Takeaways
You should now be able to:
• Explore the main ethical issues that arise in business
• Critically assess how managers can improve the
ethical climate of their organisation
• Analyse the concept of CSR
• Apply key theoretical models to assess issues that
are faced by global entities

SWOT
Competitive
Advantage
Module summary and summative assessment
Topic 2
External
analysis
PESTEL
5 Forces
ILC
Strategic Group
Topic 3
Internal
analysis
Value Chain
VRIO – RBV
Building Blocks
Topic 7
Ethics and
CSR
Vertical/horizontal integration
Diversification
Analysis,
evaluation &
Competitive
Advantage
Topic 6
Sustainability
Topic 5
Corporate
strategy
Topic 4
Global
strategy
Corporate
strategy
analysis
CSR
strategy
analysis
Sustainability
analysis
Internalisations strategies
Entry modes Carroll’s model
SDGs
Triple Bottom Line 3Ps
Task 1 Task 2 Task 3 Task 4 Presentation
Global
strategy
analysis
Summative assessment
Next Steps
• Review this topic
• Go through the Preparation and Apply part of this week (if
not done yet)
• Go through the Consolidation part of this week
Write and submit your Summative Assessment