🖇️Principles of International Business Unit 13 – Global Business Ethics & Social Responsibility

Key Concepts in Global Business Ethics

• Ethical relativism suggests moral standards vary by culture and society, while ethical universalism proposes universal moral principles applicable across all cultures
• Stakeholder theory emphasizes considering the interests of all parties affected by business decisions (employees, customers, suppliers, local communities) rather than just shareholder profits
• Triple bottom line framework balances economic, social, and environmental considerations in measuring corporate performance and making business decisions
• Deontological ethics focuses on the inherent rightness or wrongness of actions based on moral rules, while consequentialist ethics judges actions by their outcomes and consequences
• Virtue ethics emphasizes moral character development and ethical decision-making based on virtues like honesty, fairness, and compassion
  • Encourages individuals to embody and enact core ethical values in their professional roles and conduct
• Ethical dilemmas arise when different moral considerations conflict, requiring difficult trade-offs and judgment calls in global business contexts
• Codes of conduct establish written standards, values, and guidelines for ethical behavior, decision-making, and practices within organizations operating internationally

Cultural Influences on Ethical Decision-Making

• Cultural dimensions like individualism vs. collectivism, power distance, uncertainty avoidance, and long-term orientation shape ethical norms, expectations, and practices across societies
• Individualistic cultures (United States) prioritize individual rights, autonomy and achievement, while collectivistic cultures (Japan) emphasize group harmony, loyalty and consensus
• High power distance cultures (Mexico) accept hierarchical inequalities and centralized authority, while low power distance cultures (Sweden) value egalitarianism and participative decision-making
  • Influences perceptions of leadership ethics, subordinate voice, and organizational justice
• Uncertainty avoidance reflects a society's tolerance for ambiguity and comfort with unstructured, unpredictable situations
  • High uncertainty avoidance cultures (Greece) rely on strict rules, planning and expertise, while low uncertainty avoidance cultures (Singapore) are more flexible and open to risks
• Long-term oriented cultures (China) take a pragmatic, future-focused view valuing thrift and perseverance, while short-term cultures (Canada) prioritize quick results, social obligations and respect for traditions
• Ethical decision-making often involves balancing potentially competing cultural values, norms and stakeholder expectations across diverse international contexts

Corporate Social Responsibility in International Context

• Corporate social responsibility (CSR) refers to a company's commitment to managing its social, environmental and economic impacts and contributing to sustainable development and societal well-being
• Encompasses responsible business practices related to human rights, labor standards, environment, anti-corruption and community engagement
• Multinational corporations face heightened CSR expectations and scrutiny given their scale, influence and cross-border impacts on diverse global stakeholders
• CSR approaches range from reactive compliance with minimum legal standards to proactive shared value creation benefiting both the company and society
• Stakeholder engagement involves actively communicating, consulting and partnering with relevant stakeholder groups to understand and address their concerns and expectations
  • Includes multi-stakeholder initiatives and dialogue forums to tackle complex global challenges collaboratively
• Sustainability reporting discloses a company's CSR performance, impacts and progress to stakeholders using international frameworks (Global Reporting Initiative)
• Critics argue CSR can be mere "greenwashing" to boost corporate image without substantive changes, while proponents view it as a business imperative for long-term success and legitimacy
• Contextual factors like institutional voids, civil society activism, and socio-economic needs shape CSR priorities and strategies in different international markets

Ethical Challenges in Global Supply Chains

• Global supply chains involve coordinating worldwide flows of goods, services, information and finances across fragmented production networks and trading relationships
• Ethical risks arise from complex, opaque multi-tier supplier networks spanning countries with weak regulations, institutional capacity and governance standards
• Common supply chain ethics issues include worker exploitation, unsafe conditions, environmental degradation, and human rights abuses
  • High-profile scandals have exposed forced labor, child labor, excessive overtime and negligent safety practices in suppliers of major global brands
• Responsible sourcing practices involve setting supplier codes of conduct, auditing and monitoring compliance, building supplier capacity, and partnering with industry and civil society groups
• Traceability challenges complicate verifying ethical practices and origins of raw materials and intermediate inputs across sprawling supply chains
  • Blockchain technology offers potential for enhanced transparency and accountability in supplier management and provenance tracking
• Purchasing practices of lead firms, like aggressive price negotiations, short lead times and last-minute order changes, can exacerbate supplier ethical violations in meeting buyer demands
• Power imbalances between global buyers and local suppliers inhibit effective resolution of supply chain ethics issues, requiring collaborative multi-stakeholder efforts
• Governments are imposing supply chain due diligence and reporting requirements to combat forced labor and increase visibility of corporate supply chain practices

Environmental Sustainability and Global Business

• Growing ecological crisis, including climate change, biodiversity loss, pollution and resource depletion, creates material risks and ethical imperatives for global businesses
• Direct environmental impacts of multinational firms stem from natural resource consumption, waste and emissions in worldwide operations and supply chains
• Indirect environmental impacts occur through financing high-carbon industries, influencing consumer behavior and shaping public policies and institutions
• Linear "take-make-waste" production models deplete finite resources and overwhelm natural systems, necessitating a shift to circular economy principles
  • Circular approaches prioritize regenerative design, renewable inputs, product life extension, and recycling to decouple economic growth from resource use
• Sustainable innovation and clean technologies (renewable energy, green chemistry, biomimicry) offer opportunities for firms to create value while reducing environmental footprint
• Robust environmental management systems, science-based emissions reduction targets, and sustainability governance structures demonstrate corporate commitment to environmental stewardship
• Greenwashing, or misleading environmental claims and symbolic actions without meaningful impact, undermines credibility and progress on sustainability issues
• Planetary boundaries framework defines a safe operating space for business and humanity across nine critical Earth system processes to avoid catastrophic tipping points

Human Rights and Labor Practices Across Borders

• Universal Declaration of Human Rights and ILO fundamental conventions establish global standards for human dignity, equality and decent work that businesses have a responsibility to respect
• Multinational firms impact human rights directly through their treatment of workers, communities and consumers, and indirectly through their business relationships and economic influence
• Common business human rights abuses include forced labor, human trafficking, child labor, discrimination, poor working conditions, and suppression of freedom of association and collective bargaining rights
  • Extractive industries, agriculture, garments and electronics manufacturing are high-risk sectors for labor exploitation
• UN Guiding Principles on Business and Human Rights outline corporate responsibility to respect human rights, conduct due diligence, and provide remedy for abuses
• Human rights due diligence involves assessing actual and potential impacts, integrating and acting on findings, tracking responses, and communicating performance
• Access to remedy remains a persistent challenge, with barriers like weak judicial systems, corporate legal tactics, and power imbalances preventing effective grievance resolution for affected workers and communities
• Respecting labor rights requires upholding standards on wages, hours, safety, non-discrimination and social dialogue across global operations and supply chains
  • Includes preventing precarious work arrangements and ensuring living wages and freedom of association
• Engagement with workers, trade unions and labor rights organizations is critical for understanding and addressing workplace issues in different national contexts

Corruption and Bribery in International Business

• Corruption, or abuse of entrusted power for private gain, distorts markets, undermines institutions, and erodes public trust and ethical business culture
• Bribery, or offering or accepting improper payments for business advantages, is a prevalent form of corruption in international trade and investment
  • Can include cash, gifts, entertainment, kickbacks, facilitation payments and political contributions
• Sectors with high corruption risks include construction, defense, extractives, and healthcare given government touchpoints and opaque deal-making
• Foreign Corrupt Practices Act (US) and OECD Anti-Bribery Convention prohibit bribing foreign officials, with extraterritorial reach and hefty penalties for violations
• Effective anti-corruption compliance programs include clear policies, training, reporting channels, third-party due diligence, and tone from the top
  • Requires customizing to local cultural norms and business practices while upholding global ethical standards
• Transparent procurement practices, civil society monitoring, and multi-stakeholder initiatives (Extractive Industries Transparency Initiative) combat public sector corruption
• Facilitation payments to speed up routine government actions remain ethically fraught and legally risky despite some allowances under anti-bribery laws
• Corruption enables other unethical business practices like money laundering, tax evasion, organized crime and environmental crime, compounding its societal harms

Implementing Ethical Standards in Multinational Corporations

• Tone from the top and ethical leadership are critical for embedding ethics in corporate purpose, values, strategy and culture across global operations
• Centralized ethics and compliance functions oversee design and implementation of ethics programs, investigation of misconduct, and reporting to executive leadership and the board
  • Requires authority, independence, and resources to effectively identify and mitigate global ethics risks
• Ethics codes and policies must be clearly communicated, trained on, and enforced consistently across geographies, business units and hierarchical levels
  • Should be available in local languages and tailored to cultural contexts while upholding non-negotiable global commitments
• Recurring ethics training reinforces standards, builds awareness and ethical reasoning skills, and surfaces gray areas and emerging challenges
  • Includes general onboarding and refreshers as well as targeted training for high-risk roles and regions
• Confidential, accessible speak-up channels and robust non-retaliation policies encourage employees to report ethical concerns without fear
  • Requires timely, thorough investigations and fair, consistent disciplinary action to build trust
• Performance management and incentive systems should reward ethical conduct and avoid pressures or temptations for unethical behavior in meeting targets
• Hiring and promotion practices should screen for character and emphasize ethical competencies and accountability alongside other qualifications
• Ongoing monitoring through employee surveys, audits, and data analytics proactively identifies gaps and risks in the ethical culture and controls
• External stakeholder engagement provides insights for improving and aligning ethics programs with societal expectations in diverse global contexts