Business Ethics and Environmental Laws: A Case Analysis
The issue of business ethics remains controversial. For businesses to operate in a conducive environment, there are a set of laws that must adhere to. Businesses operate under different kind of laws upon which a penalty is given if the business fails to adhere to the stipulated rules. Some laws are voluntary ,for example, contracts which are entered under the mutual understanding of two partners but once a contract is endorsed, it may be recognised by the legal system of the land and maybe enforced through the courts of law.
Business ethics are associated with meeting set standards regarding environmental, social and financial issues with major issues being, environmental pollution, briberly and financial scadals, sexual harassment at workplaces, unvirtous competition (Malachowski, 2001).
All businesses strive for success in terms of money, security, freedom and opportunity. Aristotle a Greek Philosopher believed that successful life is as a result of virtuous habits. Businesses work on the basis of contracts; delivery contracts, performance contracts, employment contracts and other forms of contracts. One major aspect of any form of contract is the virtue of trust. Under the law of contract, when a transaction is completed it is final. Koffmann and Macdonald defined a contract as a legally binding enforcable agreement giving rie to the obligations of the parties involved. Under the contract, the parties voluntarily assume their obligations or undertakings. Initially, there are no legal requirements needed for parties to enter in to a contract. The moment they choose to do so it will give rise to a legal obligation (Kofmann and Macdonald, 2007). This implies that if the business does not uphold the virtue of trust it will have to face the law of the land.
In their book “Business Ethics: Ethical decision making and cases, Ferrel, Fraedrich and Ferrell define ethics as “inquiry into the nature and grounds of morality where morality means moral judgments, standards and rules of conduct”. Considering that each organisation has its objectives, goals and values, there exist a conflict of profit maximisation in case an organisation choose to proritise on moral norms (Malachowski, 2001), Differences arise when the management is making crucial decisions as to wheather they are to give priority to the organisations own values or the moral requirements and practices within the organisation or outside society. Therefore, it is important to allign the company values with the natures acceptable standards just before the organisation starts to operate with continous and periodical review in future.
The primary goal for every business is to make a profit. It’s success and survival depends on how much profit it makes. However, if in the process of making a profit the company breaks some moral rules, its life becomes compromised. Ferrell et argues that many firms in the USA that were known for their misconduct failed to survive because of the legal and financial implications of their miscunduct.
As per the writers,balance should be striken by businessess between profit making aim visa viz the corporate social responsibility to their local societies. Maintaning this balance requires some compromises. In order to address these issues, society has come up with both legal and implicit rules to guide business in their efforts to earn profits in a manner that the do not cause harm to person or society at large. Business ethics comprise principles and standards that govern the behavior of businesses in their day-to-day activities. The key players in business ethics are investors, employees, customers, interest groups, the national and federal legal systems and the community at large. Though at times these players may not make the best judgment, their influence on the entire society usually determines the success or failure of the business.
It is important to note that though businesses that fail to comply with the laid code of ethics are harshly judged by the society and more impotantly by their customers, the cases of misconduct by businesses continue to be reported. They range from abusive behaviour within and outside organisations, harassment, accounting fraud, conflict of interests, defective products, bribery, employee theft and environment pollution. Breach of the contract either with the government, employees, or even the supplier amount to a legal misconduct by the business. In some cases, the business may fail to honour the agreement as per the warranties which are part of the business contract with the customers. A warrant in this case means a promise by the seller or manufacturer to take up the responsibility in case the product has certain defects or it does not function as per the specifications.
False advertising is also another form of business misconduct for a business to the customers. It is unethical and aganaist the law. These are cases where some businesses put false claims about their products or sevices as part of their advertisement.
The issue of business ethics started as early as before 1960s. In the United States of America, the issue was about environmemtal pollution attributed to nuclear waste deposition. The period also witnessed what was reffered to us, comsumerism a concept which entails activities undertaken by individuals, groups and organizations to fight their rights as consumers. The modern consumer movement is generally considered to have begun in 1965, with the publication of Raph Nader’s Unsafe and antispeed mesures which critsised the motor industry as a whole and General Motors Cooporation in particular for putting thre business ahead of life and safety (Ferrel, Fraedrich and Ferrel 2006). Nader’s consumer movement fought successfully for the legislation that required vehicles to be installed with safetybelts, padded datchboards and stronger door latches, head restraints, shatter proofs, windshields and collapsible steering collumns. Consumer activists also fought and successfully made it possible for the enaction of several consumer protection laws such as the Wholesome Meat Act of I967, the Radiation control for Health and safety Act of 1968, the Clean Water Act of 1972, and the Toxic substance act of 1976.
The I970s saw the introduction of Corporate social respossibility which is a concept where organizations have a responsibility to participate in impacting positively the lives of the societies where they operated. Companies became more concerned with their public images, and as social demand grew many organizations realized the need to adress social issues more directly. This particular decade sows the enactment of the act against corruption to foreigners which marked the end of bribery of foreign nations’government officers by the US businesses. In 1980, The defense Industry Initiative on Business Ethics (DII) and conduct were developed. Its major goal was to check the conduct of businesses. According to Ferrell, Fraedrich and Ferrell, The DII had six principles. First, it supports codes of conduct for the member companies, who are expected to provide ethics training for their employees, as well as continous support between training periods. The third principle is the defense contractor must create an open atmosphere, in which employees feel comfortable reporting violations without fear of retribution. The other principle is that companies must carry out extensive internal audits and develop effective internal reporting and voluntary disclosure plans. Fifth, member companies need to preserve the integrity of the defense industy and finally they should adopt a philosophy of public accountability. These principles were drafted in 1986 by 18 defense contractors.
The major Characteristic of 1990s business ethics in the United States Of America was the institutinalisation of business ethics. The government at this time supported self-regulation and free trade. The government’s efforts were also focused on health-related social issues such as teenage smoking. During this decade, the congress appointed The Federal Sentencing Guidelines for organisations which developed organisational ethical compliance program in the 1990s. These guidelines were based on the six principles of DII. These made it into law incentives to reward organizations for taking actions to prevent misconduct and establishing high ethical and legal standards at the sametime putting on notice the companies that lacked effective ethical compliance programs, and those whose employees violate the law for severe penalties. The guidelines focussed on firms taking action to prevent and detect business misconduct in cooperation with government regulations. Under these guidelines, companies had to develop corporaate values, enforce their own code of ethics and strive to prevent misconduct.
Although business ethics appeared to have become more institutionalised in the 1990s, it emerged that some business executives had not fully embraced the public desire for high ethical standards in the early years of 2000s. Some of the known companies chief executive officers faced charges for their personal misconduct in terms of misappropraition of companies finances and obstruction of justice. Other faced accounting scadals. Some of the misconduct originated from employees in an attempt to attain the performance objectives of the firm. Ferrell et.al records a case where an oil trader at Royal Dutch Shell created fictious sales that eliminated price competition and market risks for their companies. “Houston -based shell trading for the United States of America and the London-based Shell International Trading and Shipping company violated trading rules on New york Marcantile Exchange which resulted to a combined $300,000 in fines”.
Currently, businesses are working more closely to establish some acceptable behaviour. There have been collaborative efforts by different organizations to establish minimum levels of ethical behavior. Plans are underway to isolate businesses that do not comply with these set standards.
Businesses cannot be trusted to operate in a manner that will not abuse their employees, exploit their customers and impact negatively the community. They tend to ignore certain important issues such as consumer safety and environmental protection. It is in this context that many laws have been passed to resolve legal issues related to such misconduct. Laws establish the basic ground rules for responsible business activities. In the United States of America laws that govern business activities fall into five categories. These include; those that regulate competition, those that protect consumers the other category is the laws that promote equity and safety, there are also laws that protect the natural environment and finally there are incentives to encourage organizations’ compliance programs to deter misconduct (Ferrel, et al, 2006).
In the United States of America, Environmental protection laws were in response to the negative effects many businesses had on the environment. There were serious cases of environmental negligence, the oil spills at Three Mile Island and nuclear explosion in Chernobyl well illustrated how serious environmental issues had been neglected. The other form of environmental negligence that led to serious advocacy by environmentalists culminating in legislation was forest destruction. According to Rae and Wong, in the United State of America, they gave an example of the destruction of the Amazon forest. This destruction was done to give way to the economic development of Latin America. Environmental awareness has improved over the recent past with a wide range of what is reffered to as green products being advertised. The products under this category range from biodegradable laundry detergents and other types of household cleaners to a wide variety of recyclable products particularly paper products made from recyclable paper. These products are environmentally sensitive. Other products under this category include cosmetics (Rae and Wong, 2004).
Rae and wong observed that the well-known body products businesses, for example, “The Body Shop” which is a British chain made lumpsum profits in the late 80s and early 90s. Such businesses were using environmental awareness as a marketing strategy. However, it should also be noted that there exists a cotroversy between environmental concerns and economic growth since many environmental protective measures come at the expence of economic growth and many economic growth projects result in environmental degredation.
The result of industrial growth to the environment were enormous and very negative these included; oil fuelled oceans, extinction of rivers and eventually lakes that were fed by the waters of these rivers, foods poisoned with radioactive particles among others. The air was also contaminated. Eventually, drought and global warming that rose from the build-up of carbon dioxide gas in the air became global issues.
The quest for environment protection began in 1960s. In 1970, the Environmentsal Protection agency was formed to coordinate environmental agencies involved in enforcing the nation’s environmental laws. The major concerns then was to control of pollution to air, water and land. Coorporations were encouraged to promote pollution control measures and develope policies that would assist in the control of pollution.
Since then, a number of laws were developed in the United State with an aim of environmental protection. These laws have resulted to the elimination or modification of goods and services. One good example of this is phasing out of leaded gasoline in the 1990s due to catalytic converters required to reduce pollution resulting from automobile emissions as required by the law could not work well with leaded gasoline (Ferrel et al, 2006).
According to Ferrel et al, the following are laws protecting the environment that has been developed in the United States of America; Clean air Act; this act came into action in 1970 to establish air quality standards. In the same year, the national Environmental Policy act became a law establishing broad policy goals for federal agencies. It also created the council on environmental quality which acts as a monitoring agency.
An act providing for the setting aside resources financially to states to boost protection of coastal regions against being overpopulated was enacted in 1972. Then there is Federal Water Control Act which also came into effect in the same year. The aim of this act was to prevent, reduce or eliminate water pollution. In the same year, the noise pollution control act was affected. This act was meant to control the noise emission by manufactured goods. In 1974, the Safe Drinking Water Act was put into effect. This act was established to protect the quality of drinking water in the United States of America. The legislation touched on drinking water sourced both from the ground and under the ground. The law came up with a safe standard of purity. The law had a requirement for every one owning and/or operating public water systems do it work with sanitation standards.
Other laws that protect the environment in the United States of America are; the toxic substance control Act of 1976, which made it mandatory for the testing of toxic chemicals in certain substances like cosmetics. It also restricts the use of certain chemical substances for the purpose of protecting human health and the environment.
A legislation was enacted in 1976 proviting environmental management agencies to manage environmental dangerous waste together with ways used to manage such as to generate, transport, treat, store and dispose of the infectious waste. The 1980 saw the development of Comprehensive Environmental Response, Compensation, and Liability Act. This legislation provided for taxation of petroleum as well as chemical industries and had the fderal government enforce by monitering the threating release of the infectious wastes or substances that is a threat to public or environment.
Another Act that was enacted in the same decade was the Emergency Planning and Community Right-to-know Act of 1986. The law protects public health, safety and the environment from chemical hazards. Between 1990 and 1996, three laws were passed by the U.S.A congress to protect citizens from environmental hazards. Among this two were enacted in 1990 including; oil pollution act that gave a full mandate to the environmental management authorities to prevent and act when catostrophic spills happen, come up with trust fund from oil taxation to clean up oil spills where the victim is unable. The pollution prevention act that safeguards the government, public and industries freom pollution of the environment througth effective cost transformations in production, operating and using raw materials.
Its effects included the introduction of safety standards that ensured the best application of pesticides applied on foods. The existence of these laws has not fully prevented environmental pollution by businesses. Some continue to dispose their waste carelessly into rivers and lakes inhabited by fish and other aquatic creatures. Few disposal sites meet Environment Protection Agency’s standards. Some businesses have resorted to illegal or unethical measures, for example, dumping toxic wastes along highways, improperly burying drums containing toxic wastes, and discarding hazardous wastes to the sea. Congress continuously reviews legislation to increase penalties for those firms that do not comply with the set standards by disposing toxic waste carelessly. It should be noted that whereas everyone accepts proper waste management is a very crucial issue. There is no particular community that has taken up the challenge by accepting waste to be dumped at their own backyard. One of the major environmental issues currently is how to deposit computers that have been rendered obsolete. They contain toxic substances such as lead and mercury and polyvinylchloride. These toxic substances can leach in to the soil and contaminate groundwater. Dell computer has for a long time been criticized for not taking a leading role to reduce the use of the toxic substance in the manufacture of computers and in the recycling of used computer parts (Ferrel et al, 2006).
If businesses have gone beyond to break environment protection law even at a time where such laws exist, how can the businesses are made to be ethically responsible beyond obeying environmental law? Many coop rations are making environmental friendly decisions where they see there are profits to be made in doing so (Rae and Wong 2004). Most of these firms have come up with new strategies to make profits by becoming environmental conscience”. Environmentalists are also using the same strategy to encourage businesses to become environmental concious. To this end, many organisations have been improving on their balance sheets by undertaking environmental friendly initiatives. Rae and Wong continue to give examples of a recent initiative known as new enviromentalism, which induces corporations to do things for the environment by appealing to their self-interest. They gave examples of Environmental Defense Fund which has been encouranging agribusinesses in Southern California to irrigate more effectively and profit by selling water saved to the city of Los Angeles.
The fund is also lobbying for emissions trading that would allow utility companies under their mission allotment to sell their “pollution rights” to those companies which are over their allotments. This is for the purpose of reducing acid rain. Therefore, this strategy helps businesses solve environmental problems by finding profitable or virtually costless way for them to paticipate.
In conclusion, firms should coexist with the communities in a shared, ecologically sustainable manner founded on an ethic of care for the environment. This ethic requires firms to account for the mainatanance, continuation and repair of the environment and to treat it with respect. If the environment has to be the common ground between the firm and the stakeholdes, the firm must incooporate the environment as part or extension of itself as its inner voice or conscience (Sharma and Starik, 2004).
Reference List
Ferrell.O, Fraedrich J and Ferrel L, (2006). Business Ethics; Business decision making and Cases.George Hoffman Boston USA.
Koffman L and Macdonald E (2007). The Law of Contract 2007. 6th Edition. Oxford University Press.
Malachowski A, (2001). Critical Perspectives on Business Management. Routledge, 11New Fetter, London EC4P 4EE.
Rae S and Wong K, (2004). Beyond integrity: a Judeo-Christian approach to business ethics. Zondervan. Great Rapids, Michigan.
Sharma S and Starik M, (2004). Stakeholders the Environment and Society. Edward Elgar Publishing Limited Glos GL50 1UA UK.