Ethics

This section explores the key ethical considerations that arise in global industries and companies, focusing on stakeholder conflicts, pay and working conditions, environmental concerns, supply chain issues, and marketing practices.

In the modern global economy, businesses are increasingly under scrutiny for their ethical practices. The actions of multinational corporations (MNCs) and other large companies can have far-reaching consequences, not only for their profitability but also for their stakeholders, the environment, and the wider society. Ethical issues are at the forefront of business decisions, and businesses must balance their financial objectives with social and environmental responsibilities. 

Stakeholder Conflicts

Businesses, especially large multinational corporations (MNCs), must navigate the often conflicting interests of various stakeholders. Stakeholders include anyone with an interest in the company's activities, such as shareholders, employees, customers, suppliers, the local community, and the environment.

Shareholders vs. Employees: Shareholders are primarily concerned with maximising profits and shareholder returns, which might mean cutting costs, reducing wages, or outsourcing production to lower-cost regions. However, employees may prioritise fair wages, job security, and better working conditions. This conflict can be particularly pronounced when MNCs move operations to countries with cheaper labour costs, affecting local employees in their home country.

• Example: Nike faced criticism in the 1990s for moving its manufacturing operations to countries with lower wages, such as Vietnam and Indonesia, where workers were paid low wages and worked in poor conditions.

Environmental vs. Profitability: MNCs may face conflict between environmental sustainability and profitability. Adopting eco-friendly practices often requires substantial investment, which may reduce short-term profits. However, consumers and activists increasingly demand ethical environmental practices, such as reduced carbon emissions and sustainable sourcing of materials.

• Example: Shell has faced criticism for its environmental practices, particularly in the Niger Delta. The company has been accused of environmental degradation and failure to clean up oil spills, causing conflicts with local communities and environmental groups.

Consumers vs. MNCs: Consumers increasingly expect businesses to behave ethically. If a company’s actions harm the environment or exploit workers, it can lead to reputational damage and loss of consumer trust.

Pay and Working Conditions

Ethical concerns regarding pay and working conditions are significant, particularly for companies with operations in developing countries where labour standards might not be as strictly enforced.

Wages: One of the primary ethical issues is the payment of fair wages. In some countries, MNCs may pay workers far below the living wage, particularly in industries like manufacturing, agriculture, and textiles. Although these wages may be higher than those available locally, they often fail to meet basic living standards.

• Example: H&M and Nike have faced criticism for paying low wages to workers in Bangladesh, despite the companies profiting from cheap labour.

Working Conditions: Poor working conditions, long hours, and inadequate health and safety measures are another significant concern. Many MNCs outsource production to countries with less stringent labour laws, where workers may face unsafe or unhealthy working environments.

• Example: The Rana Plaza disaster in Bangladesh in 2013, where over 1,100 garment workers were killed when a factory building collapsed, was linked to poor working conditions in factories supplying major brands, including Walmart and Primark.

Environmental Considerations

As global industries expand, the ethical implications for the environment become more critical. Environmental concerns are at the forefront of business ethics, particularly with regard to emissions and waste disposal.

Emissions

MNCs are often major contributors to greenhouse gas emissions, particularly in industries like energy, transportation, and manufacturing. Businesses are under increasing pressure to reduce their carbon footprint and adopt sustainable practices.

• Example: Tesla has made significant strides in reducing emissions by producing electric vehicles, while oil companies such as ExxonMobil have been criticised for their role in climate change due to high levels of emissions from fossil fuel extraction.

Waste Disposal

Improper waste disposal and contamination of water, air, and soil are significant environmental issues. Many MNCs have faced allegations of irresponsible waste management in regions where environmental regulations are lax.

• Example: Nestlé has been criticised for its use of plastic packaging, which contributes to global plastic pollution. Companies like Coca-Cola and Pepsi have also faced similar scrutiny over plastic waste.

Supply Chain Considerations

Ethical issues in supply chains often centre around the exploitation of labour and child labour, particularly in developing countries where regulations may be weak or poorly enforced.

Exploitation of Labour

Exploitation of labour refers to situations where workers are paid extremely low wages, forced to work in unsafe conditions, or subjected to unfair working hours. This is a significant ethical issue in the supply chains of many global industries, particularly in the textile, electronics, and agricultural sectors.

• Example: Companies like Apple have been criticised for the exploitation of workers in factories in China and other developing countries, where employees work long hours in poor conditions.

Child Labour

Child labour is another critical issue in supply chains, especially in sectors like agriculture, textiles, and mining. The use of child labour is often prevalent in developing countries, where children are forced to work instead of attending school, depriving them of education and a future livelihood.

• Example: The use of child labour in the mining of coltan, a key mineral used in the production of electronic devices like smartphones, has been linked to companies like Samsung and Apple.

Marketing Considerations

Ethical concerns in marketing can arise from misleading product labelling and inappropriate promotional activities. MNCs often engage in global marketing, and ensuring that advertising and labelling is both truthful and culturally sensitive is paramount.

Misleading Product Labelling

Misleading or deceptive labelling practices can harm consumers and damage the trust between a company and its customers. For example, some companies may exaggerate the health benefits of a product or falsely claim that a product is organic or environmentally friendly when it is not.

• Example: Nestlé has faced criticism for misleading advertising of infant formula in developing countries, where it was suggested as a better alternative to breastfeeding, despite evidence that breastfeeding was the healthier option.

Inappropriate Promotional Activities

MNCs may also engage in inappropriate promotional activities, such as advertising products in ways that are offensive, insensitive, or culturally inappropriate. This includes marketing products that are not suitable for the local market or promoting unhealthy products, such as junk food or alcohol, in a way that targets vulnerable populations.

• Example: Coca-Cola has faced backlash for its marketing practices, especially in relation to promoting sugary drinks in schools and to children, contributing to concerns about rising obesity rates.

Summary

Ethical issues are an essential consideration for global businesses and industries, especially as companies operate across borders and interact with diverse stakeholders. Companies must carefully navigate ethical dilemmas related to stakeholder conflicts, pay and working conditions, environmental sustainability, supply chain practices, and marketing strategies.

Addressing these ethical concerns not only improves a company's reputation but can also contribute to long-term business success. In today’s increasingly socially-conscious marketplace, businesses that prioritise ethical practices are more likely to build trust with consumers, attract top talent, and maintain a positive brand image. Businesses must therefore integrate ethics into their decision-making processes, ensuring that they operate in a way that benefits both their shareholders and the wider society.