Ethics, Sustainability and CSR

Question 1

Safeguards (11)

Answer 1

The employing organisation’s systems of corporate oversight or other oversight structures

The employing organisations ethics and conduct programs

Recruitment procedures in the employing organisation

Strong internal controls

Appropriate disciplinary processes

Leadership that stresses the importance of ethical behaviour and leads by example

Policies and procedures to implement and monitor the quality of employees’ performance

Timely communication of the employing organisation’s policies and procedures

An open culture that encourages employees to communicate to senior levels within the employing organisation any ethical issues that concern them without fear of retribution

Consultation with another appropriate professional accountant

Question 2

Simple ethical tests for a business decision

Answer 2

Transparency: Do I mind others knowing what I have decided?

Effect: Who does my decision affect or hurt?

Fairness: Would my decision be considered fair by those affected?

Question 3

Impact of ethics on strategy

Answer 3

In the formulation of strategic objectives - some firms will not consider lines of business for ethical reasons

External appraisal will need to consider the ethical climate in which the firm operates. This will raise expectations of its behaviour.

Internal appraial: Managemetn should consider whether present operations are sustainable ie consistent with present and future ethical expectations.

Strategy selection: Management should consider the ethical implication of proposed strategies before selecting and implementing them.

Question 4

Potential areas for conflict between ethics and business strategy

Answer 4

• cultivatin and benefiting from relationships with legislators and governments
• fairness of labour conracts
• privacy of customers and employees
• terms of trade with suppliers
• prices to customers
• managing cross cultural business

Question 5

Ethical issues and the marketing mix

Answer 5

Product issues - some products are dangerous eg cigarettes, krispy kremes

Price issues - pricing them out of reach of many who want them. Where products essential eg drugs this is a clear ethical problem

Promotion issues - brainwashing by advertising.

Place issues - sweets at eye level leading to parents being pestered

Question 6

Ethical marketing

Answer 6

personal choice
codes of practice
social marketing

Question 7

Sustainability (learn by heart)

The Bruntland Report

Answer 7

The ability to meet the needs of the present without compromising the ability fo future generations to meet their own needs

Question 8

Sustainable development

Answer 8

The process by which we achieve sustainability

Question 9

Sustainable enterprise

Answer 9

A company, institution or entity that generates continuously increasing stakeholder value through the application of sustainable practices

Question 10

Corporate responsibility

Answer 10

the actions, activities and obligations of business in achieving sustainability

Question 11

Different strategic approaches to corporate responsibility

Answer 11

Proactive - a business is prepared to take full responsibility for its actions (eg a company that finds fault in a product and recalls without being forced)

Reactive - allowing a situation to continue unresolved until the public, government or consumer groups find out about it

Defence - minimising or attempting to avoid additional obligations arising from a particular problem. Eg a company that refutes customer suggestions that there is a fault with a product.

Accommodating - taking responsibility for actions, probaaly with encouragement from special interest groups or a perception that a failure to act will result in government intervention.

Question 12

Firms that misbehave will find

Answer 12

Fewer trading partners
Consumers will stop buying their products
Impose fines
Licences withdrawn
Local communities becoming hostile
Workers become demotivated and unproductive
Investors will stop buying their stock
Existing shareholders will sell
Banks will increase lending rates and cost of capital will increase

Question 13

Benefits of adopting CSR

Answer 13

lower cost base through efficient use of resources
opportunities to enter new markets or attract new ethical customers
Providing solutions to existing business problems - eg food waste
Protect company’s licence to operate and reputation
Opportunities to build new core competences
more finance from ethical investors eg a listing on FTSE4Good

Question 14

Scope of CT

Answer 14

Health and safety
Environmental protection
Staff welfare
Customer welfare
Supply chain management
Ethical conduct
Engagement with social causes