Ethics, Corporate Social Responsibility,

Environmental Sustainability, and Strategy

CHAPTER 10—STRATEGIC MANAGEMENT

BAMBANG KUNCORO (1706997054)

TAMARA PUTRI ANDINI (1706997981)
Business ethics deals with the application of general ethical principles
to the actions and decisions of businesses and the conduct of their
personnel.

If dishonesty is considered unethical and immoral, then dishonest behavior

in business—whether it relates to customers, suppliers, employees,
shareholders, competitors, or government—qualifies as equally unethical
and immoral.
If being ethical entails not deliberately harming others, then failing to recall
a defective or unsafe product swiftly, regardless of the cost, is likewise
unethical.
There are three distinct schools of thought about the extent to which
ethical standards travel across cultures and whether multinational companies
can apply the same set of ethical standards in any and all locations where
they operate.

o The School of Ethical Universalism

o The School of Ethical Relativism
o Ethics and Integrative Social Contracts Theory
Adherence to universal or “first-order” ethical norms should always
take precedence over local or “second-order” norms.
Integrative Social Contracts Theory

According to integrated social contracts theory, universal ethical

principles based on the collective views of multiple societies form a
“social contract” that all individuals and organizations have a duty to
observe in all situations. Within the boundaries of this social contract,
local cultures or groups can specify what additional actions may or
may not be ethically permissible.
How and Why Ethical Standards Impact the Task of
Crafting and Executing Strategy
• Is what we are proposing to do fully compliant with our code of ethical conduct? Are there any areas
of ambiguity that may be of concern?
• Is it apparent that this proposed action is in harmony with our code? Are any conflicts or potential
problems evident?
• Is there anything in the proposed action that could be considered ethically objectionable? Would
our stakeholders or the media view this action as ethically objectionable?

While most company managers are careful to ensure that a company’s strategy is
within the bounds of what is legal, evidence indicates they are not always so careful
to ensure that all elements of their strategies and operating activities are within the
bounds of what is considered ethical.
 Drivers of Unethical Business Strategies and Behavior

 “Business of business is business, not ethics.”

 Faulty oversight, enabling the unscrupulous pursuit of personal gain
and self interest.
 Heavy pressures on company managers to meet or beat short-term
performance targets.
 A company culture that puts profitability and business performance
ahead of ethical behavior.
Why Should Company Strategies be Ethical?

1. Because a strategy that is unethical is morally wrong and reflects

badly on the character of the company and its personnel, and
2. Because an ethical strategy can be good business and serve the
self-interest of shareholders.
Why Should Company Strategies be Ethical?

Conducting business in an ethical fashion is not only morally right—it

is in a company’s enlightened self-interest.
Shareholders suffer major damage when a company’s unethical
behavior is discovered. Making amends for unethical business
conduct is costly, and it takes years to rehabilitate a tarnished
company reputation.
Strategy, Corporate Social Responsibility, and
Environmental Sustainability

Corporate social responsibility (CSR) refers to a company’s duty to

operate in an honorable manner, provide good working conditions
for employees, encourage workforce diversity, be a good steward of
the environment, and actively work to better the quality of life in the
local communities where it operates and in society at large.
A company’s CSR strategy is defined by the specific combination of
socially beneficial activities the company opts to support with its
contributions of time, money, and other resources.
What Do We Mean by Sustainability and Sustainable
Business Practices?

Sustainable business practices are those that meet the needs of

the present without compromising the ability to meet the needs of
the future.
A company’s environmental sustainability strategy consists of its
deliberate actions to protect the environment, provide for the
longevity of natural resources, maintain ecological support systems
for future generations, and guard against ultimate endangerment
of the planet.
Crafting Corporate Social Responsibility and
Sustainability Strategies

CSR strategies and environmental sustainability strategies that both

provide valuable social benefits and fulfill customer needs in a
superior fashion can lead to competitive advantage.
Corporate social agendas that address only social issues may help
boost a company’s reputation for corporate citizenship but are
unlikely to improve its competitive strength in the marketplace.
The Moral Case for Corporate Social Responsibility and
Environmentally Sustainable Business Practices

Every action a company takes can be interpreted as a statement of

what it stand for moral burden on a company to operate honorably,
provide good working conditions to employees, be a good
environmental steward, and display good corporate citizenship.
The Business Case for Corporate Social Responsibility and
Environmentally Sustainable Business Practices

The higher the public profile of a company or its brand, the greater the scrutiny
of its activities and the higher the potential for it to become a target for pressure
group action.
Socially responsible strategies that create value for customers and lower costs
can improve company profits and shareholder value at the same time that they
address other stakeholder interests.
There’s little hard evidence indicating shareholders are disadvantaged in any
meaningful way by a company’s actions to be socially responsible.