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AFM 132 > Unit 4: Ethics & Social Responsibility > Flashcards

Unit 4: Ethics & Social Responsibility Flashcards

- Outline how businesses can do the right thing and be responsible - Differentiate between the roles that ethics and legality play in decision-making - Describe a basic framework to navigate ethical dilemmas - Summarize the business case for Corporate Social Responsibility (CSR) and Sustainability - Describe the responsibilities organizations have to their internal and external stakeholders - Reflect on the future opportunities and challenges with approaches to evaluate and report on CSR

1
Q

what are some questions stakeholders would have for businesses?

A
  • Why does a business exist? (How are they fulfilling the needs and wants of customers & support the communities around them?)
  • How does the business operate? (What’s their impact on the community, or on the environment? How do they obtain their raw materials or select suppliers)
  • Who do they associate with? (How are they connected to other businesses? Or influential figures like politicians & celebrities?)
  • What do they believe in? (What’s their stance on social or political issues prevalent today?)
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2
Q

how do businesses know what is ethical

A
  • Much more difficult for businesses
  • If something is unethical or illegal in one place, it might be acceptable in another
    Ex. employee safety, and labour standards
  • Different countries have different values and standards to protect the environment
  • Businesses should use law and regulations, as guidelines for what is acceptable or not, when making decisions
  • Should also define core values they are willing to uphold
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3
Q

what does it mean for a company to be socially responsible

A
  • Consumers can now interact better with companies
  • Businesses are in the position where they can stand up to different causes or issues; held to higher standards
  • Expected to make responsible decisions and find ways to give back to the community
    Ex. what are they doing to help the environment, what do they have a proactive stance on
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4
Q

what role can a government play in keeping businesses ethical & socially responsible

A

introduce regulations
ex. Canada banning harmful single-use plastics and hold companies responsible for plastic waste

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5
Q

why is important for businesses to understand ethics

A
  • Important to think over an ethical decision before making one because the repercussions could live on for years
  • Impact of business decisions (how do customers feel about it, what happens to the brand of the business)
  • Moral decisions build trust for consumers
  • Trust is important for a loyal, growing consumer base
  • If there are concerns about how a business is run, it could reduce trust
  • If a business is running unethically, they can face legal considerations (ex. Violations, privacy laws)
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6
Q

what are laws

A

Established rules and regulations within a jurisdiction that governs actions

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7
Q

why are laws important

A
  • Recognizes and protects basic right and freedoms
  • Can protect citizens from fraud or harm
  • Laws are used to maintain social order and punish those that break them
  • Laws can be broken
  • The use of ethics comes in
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8
Q

what are ethics

A
  • Guiding principles that can help us navigate decision-making (what is good/bad or right/wrong) in a given situation or context
  • doing the right thing and holding everyone to a higher standard
  • standard for moral behaviour
  • Ultimately asking “how do we treat each other?”
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9
Q

how can making ethical decisions in a global business environment be complex

A
  • There are no global standards of what is right or wrong in society
  • Cultures have different values and beliefs that impact what they think is right or wrong
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10
Q

what examples of ethical values can transcend all cultural beliefs

A

respect, integrity, reliability & fairness

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11
Q

how are personal core values (our moral compass) shaped?

A

from what we learn from those around us & our experiences

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12
Q

what are things businesses can do that is legal but not ethical

A
  • Raising the price of a product; Businesses have the power to price their goods/services however they want. If it was a necessity, is it ethical for them to charge such high prices (ex. medicine)
  • Tax loopholes; Tax laws differ between countries. People find ways to avoid paying taxes through offshore companies
  • The use of child labour; Are outsourced manufacturers using child labour? It isn’t illegal in the outsourced countries but it is in Canada. Is it ethical?
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13
Q

what is something an individual might do that is ethical but not legal

A
  • Speeding/running through a red light in an emergency
  • Protests/social movements, which can obstruct the rights of people/groups
  • Euthanasia
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14
Q

what are some reasons why businesses make unethical decisions

A

when there’s limited time, incomplete information, or choice between equally good/bad options

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15
Q

how can business prevent making unethical decisions

A

Having clear, shared values can help with making economically sound, ethical, and responsible decisions

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16
Q

what are the benefits of keeping ethical practices

A
  • Keep/attract customers
  • Maintain a strong reputation
  • Retain/attract employees
  • Avoid government intervention
  • Avoid legal action
  • good ethics = good business
  • Good behaviour can impact profitability in the long run
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17
Q

what are ways businesses can support ethics

A
  • tone at the top; management embraces & modelling actions and behaviours they want to see, be aware of pressures of employees & alleviate them
  • support for a code of conduct; create, communicate, and adopt codes of conduct, provide compliance-based (penalties) or integrity based (values to folow) guidance
  • training (& retraining); on ethical decision making
  • adequate ethics resources; opportunities for people to communicate concerns
  • inform stakeholders; about the code of conduct & values, less pressures from the outside
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18
Q

how are whistleblowers protected

A

Are some legislation in Canada to protect whistleblowers
But not all are protected across all industries or jurisdictions
So what can companies do to build up protection for whistleblowers?
Whistleblower policies can hold employees accountable and allow they to express any concerns or feedback

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18
Q

what is a whistleblower

A

Those who step up to report illegal or unethical behaviour

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19
Q

are managers responsible for ethical behaviours of their employees

A
  • Employee’s view on their ethical responsibilities are influenced by personal values and experiences
  • Managers can also play a role in guiding ethical behaviour:
  • Modelling ethical behaviours as employees watch from them to decide what is considered acceptable
  • Influence the design of processes that support ethical decision
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20
Q

what is an ethical dilemma

A

Problem where a difficult choice has to be made with potentially no desirable alternatives

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21
Q

what is the ethical dilemma in the pharmaceutical industry

A
  • Many ethical considerations when introducing a new drug to the market
  • Drugs require huge investments of money, time, and expertise
  • They have to go through tests to assess the effectiveness and potential side effects
  • The stakes are high, and if they don’t pass the tests, there are large financial losses
  • These can add pressure around business activities:
  • Pressures to release the product early; Minimizing or hiding certain effects or accepting lower levels of safety to have an earlier release of the product to earn profit
  • Testing practices; Is testing on animals humane? Is testing on willing participants (clinical trials) okay? How and when is it safe enough to test on humans when there are potential risks for injury or death?
  • Pricing; Companies are investing in the creation of new drugs to make a profit. How much costs being passed on to consumers through the price is being fair? Should they make it more accessible to all that need it?
22
Q

what are the questions to ask when navigating ethical dilemmas

A
  • Does it violate any laws/policies?
  • Are the alternatives fair for all parties involved?
  • How will you or others feel about the decision?
23
Q

why is ethics important in the accounting profession

A
  • creates trust
  • without trust, there is no credibility and no value to the public
24
Q

what is corporate social responsibility (CSR)

A

A positive role a company should play in the community towards environmental and social issues

25
Q

what do critics of CSR say about CSR

A

that businesses should focus on maximizing profits for shareholders, and following CSR takes that away (wasting money)

26
Q

what do supporters of CSR say about CSR

A

that following CSR actually benefit the business, providing more profits in the long run as CSR attracts more customers, investors, and retains employees

27
Q

how will being socially responsible be beneficial

A
  • Investors and customers these days look for companies with good social/environmental records (ESG)
  • Being responsible has a competitive advantage
  • It builds an overall positive image of the company, attracting customers and employees, and increasing brand power in the market
  • Companies who are socially responsible and have high sustainability practices outperform those who don’t, by stock performance
  • Companies grow and find success when they create value for not just shareholders, but also society
28
Q

what are the benefits for investing in socially responsible behaviours

A

Financial
- Increased market value (up to 6%) and shareholder value long term
- Avoid market losses from crises
Marketing & Sales
- Increased revenue up to 20%
- Increased price premium up to 20%
Human Resources
- Reduced turnover rate up to 50%
- Increased employee productivity and engagement

29
Q

what is corporate philanthropy

A
  • Donating money or time and skills to various causes
  • Can be one-time initiatives or ongoing support for certain causes
30
Q

how can businesses be socially responsible by revising policies or adapting their practices

A
  • Hiring diverse workers to represent and understand perspectives of all customers
  • Gender-balanced leadership opportunities
  • Supporting safe work environments in all facilities (domestic or abroad)
  • The position taken on social or political issues
    Ex. Dove providing the message of positive body image through marketing campaigns that use models of all shapes and backgrounds
31
Q

how can businesses be socially responsible

A
  • corporate philanthropy
  • Revise policies or adapt their practices
  • integrate social responsibility into their business strategy
  • evaluate employee experience
  • who a company associates with
32
Q

how can businesses be socially responsible by integrating social responsibility into their business strategy

A

Ex. tentree commits to planting ten trees for every article of clothing purchased

33
Q

how can businesses be socially responsible by evaluating employee experience

A
  • Are employees getting the proper benefits they deserve?
  • How are they being treated at work?
34
Q

how can businesses be socially responsible by determining who they associate with

A
  • are they using fair trade?
  • Businesses that use fair trade ingredients are supporting increased living standards and building stronger communities across the world
  • Those who actively seek out fair trade goods are willing to pay more to help society and support these objectives
35
Q

what is fair trade

A

Producers in developing countries are ensured to be paid a fair price for goods that are purchased from them

36
Q

what is sustainable development

A

Determining if business operations support needs for current and future generations without negative consequences
ex. using wind & solar power instead of oil and gas

37
Q

what are SDGs

A
  • the United Nations (UN) 17 sustainable development goals
  • for solving global problems like poverty, climate change, and tackle inequalities
38
Q

what is a circular economy

A
  • Rethinking the linear economy of take, make, and dispose
  • Looks at how we can eliminate waste through the design of products and services, & influence business models to focus on better approaches for disposal by repurposing or reusing parts
39
Q

how can businesses support sustainability

A
  • Sustainability within a business can be done through the actions of employees
  • Based on what they care about and do, businesses can reduce waste and/or save money
40
Q

what are examples of how businesses can support sustainability

A
  • Planned spending in budgets - Dedicating funds to be used for sustainability purposes every year
  • Recognition and reward systems - Recognizing and rewarding employees that contribute to sustainable efforts
  • Regular accountability meetings - Employees regularly connect about sustainability
  • Regular reporting of progress and next steps - Voluntary reporting on a company’s social, environmental, and economic impact
41
Q

what are examples of internal & external stakeholders businesses have responsibility for

A
  • employees
  • customers
  • investors
  • lending institutions
  • communities
  • governments
42
Q

why do businesses have responsibility to employees

A
  • they keep the business running
  • Do they have meaningful jobs that have growth potential
  • Are they fairly compensated for their efforts
  • Is well-being and safety is prioritized
43
Q

why do businesses have responsibility to customers

A
  • The reason companies exist
  • How are their needs and wants met
  • Provide safe and quality products and services
44
Q

why do businesses have responsibility to investors

A
  • What does the company’s ESG look like
  • High rating drives shareholder wealth, driving profitability
  • Current rise of social conscious investors
45
Q

why do businesses have responsibility to lending institutions

A
  • like banks, and credit unions
  • Are affected through the performance of companies
  • Give loans and lines of credit given to companies to operate or expand
  • New agreements to incentivize companies to be more socially responsible (ex. If they produce only x amount of production, there will be a deduction in interest fees)
46
Q

why do businesses have responsibility to communities

A
  • Businesses of any size can impact local or global communities they are apart of
  • The success of a company considers how they can thrive in their communities & how they can make their communities thrive
47
Q

why do businesses have responsibility to governments

A
  • Governments are tasked with driving positive change in the business environment
  • Actions companies take can affect various levels of government and assist them in navigating social and environmental issues that impact every stakeholder
48
Q

what is a social audit

A

Evaluating and reporting on how a company makes progress towards their social responsibility priorities

49
Q

what is triple bottom line (TBL) reporting

A
  • Framework that can help with reporting progress on social, economic, and environmental results
  • “Bottom line” refers to net income
  • Triple bottom line is going beyond financial performance, and considering social, and environmental parameters
  • TBL improves transparency of business operations and impact on society
50
Q

what does triple bottom line reporting address

A

People - social issues
Planet - environment issues
Profit - economic issues

51
Q

what are the challenges associated with TBL

A
  • Lack of consistency in reporting; No laws that companies should have a social audit. No widely agreed upon measurement standards. Can’t compare the reporting across companies
  • Subjective reporting; Some things can’t be measured in numbers/dollar value. Reporting can be self-serving
  • Time involved and expertise required
52
Q

what stakeholders would strongly advocate for companies to report on their social and environmental performance in addition to traditional financial reporting

A
  • Socially conscious investors — Want to see that the company and those they associate with have responsible business practices.
  • Environmentalists — Want to see that companies don’t have a damaging impact on the environment.
  • Customers — If they don’t believe a company takes care of those around them, they can take their business elsewhere.

AFM 132 (12 decks)

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