Ethics, sustainability and ESG Flashcards
Ethics
Ethics are the moral principles governing or influencing conduct which
is deemed to be acceptable in the society or context in question.
Ethics in business
Ethics within a business can be deemed to occur on 3 levels.
These different levels of ethics can help to identify ethical issues from a scenario
Personal ethics
Business ethics
Corporate responsibility
Personal ethics –
Relate to the way in which individuals conduct themselves. This
may include professional ethics (for an ACA).
Business ethics
The way the firm as a whole behaves and whether it lives up to
society’s expectations.
Corporate responsibility
The belief that a firm owes a responsibility to society and
stakeholders.
Ethical tests
These three tests can help you to identify and explain ethical issues in the exam:
Transparency
Does the company mind others knowing about its decision?
Effect
Whom does the decision hurt? Are one or more stakeholder groups receiving a
negative outcome?
Fairness
Would the company’s decision be considered fair?
Ethical tests
Other issues to consider
The following other issues should be considered:
Legality
Confidentiality
Sustainability
Honesty.
Sustainability
Sustainability is the ability to meet the needs of the present without
compromising the ability of future generations to satisfy their own
needs
Sustainability issues
This is a wide concept and is not limited to ‘green’ issues. There are three main types
of issues to consider:
Social
e.g. negative impact on society, low paid workers, lack of diversity
Environmental
e.g. pollution, use of sustainable resources, climate change
Economic
e.g. economic stability, impact on local economy, provision of job
Natural capital
This considers the natural assets of the planet that provide the resources required by
people and organisations to survive. These include timber, land, fisheries, energy
and fresh water.
Increased focus on natural capital has moved businesses to improve their monitoring
and reporting of the impacts of their operations. This allows greater transparency and
allows more informed business decisions.
ESG
Environmental, Social and Governance (ESG) looks at how
organisations can approach sustainability-related issues. ESG looks at
the impact of such matters on the business i.e. the risks posed and the
impact on the value of the organisation.
ESG issues
The following are examples of issues that could be relevant under ESG for an
organisation:
Environmental:
Climate change
Waste
Biodiversity and land use
Air quality
Shareholder engagement
Social:
Human rights
Diversity and inclusion
Health and safety
Compensation
Labour standards
Governance:
Board accountability
Anti-bribery and corruption
Shareholder engagement
Compensation
Differences between sustainability and ESG
Sustainability is about considering successful economies and fair societies based on what the natural world can afford.
ESG is a strategic business issue; if organisations address successfully the impacts they will have on society and the environment, they can enjoy financial success as a
result.
Corporate Social Responsibility (CSR)
CSR is a belief that a firm owes a responsibility to society and
stakeholders. It is not just a public relations exercise; rather, it is a
strategically fundamental driver of value for an organisation.
Achieving CSR
A firm with good CSR goes beyond its minimum contractual obligations to its
stakeholders.
The benefits of good CSR are that this may help to gain good publicity for the
business.
The risks of poor CSR are long-term damage to the reputation of the business
caused by upsetting customers or receiving negative publicity
