Global Business Ethics Issues
Large multinational companies affect a variety of stakeholders such as customers, creditors, investors, employees and the communities in which they operate. Responsibility to their stakeholders is demonstrated through strong environmental, social and governance (ESG) performance, sometimes described as corporate social responsibility. This can have positive impacts on profitability, by making the business sustainable and improving its reputation, but it can also increase costs. Cost cutting can lead to poor ESG performance.
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Environmental Protection
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Companies have a range of impacts on ecosystems through mining and extraction, the use of water supplies, waste disposal and pollution. Companies often operate in developing countries where regulations are weak. As a solution to this, attempts have been made to put in place market-based transparency mechanisms to encourage companies to report on their environmental impact. The Carbon Disclosure Project has encouraged companies to report on greenhouse gas emissions as well as water use and impacts. Strong environmental performance is often essential to having a sustainable business model, especially where companies risk degrading inputs, such as fishing stocks.
Corporate Social Responsibility
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The activities of multinationals impact the communities where they operate, especially employees of the company and its suppliers. Problems can arise from an unequal distribution of power between employers and workers, especially in poor areas with high unemployment. This may result in unfair wages and poor working conditions, for example in sweatshops. Initiatives such as Fair Trade accreditation have arisen in response to these problems.
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Governance Issues
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Suppliers, customers, creditors, investors and employees have an interest in a company being governed responsibly, so that it is profitable and does not go bankrupt. Scandals such as the collapse of Enron demonstrate the problems that can arise where companies are not governed responsibly.
Responsible Investment
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Responsible investment is a rapidly growing trend. Its core values are laid out in the UN Principles for Responsible Investment, and its essence is investment in companies with strong ESG performance. Investors are interested in this not only for ethical reasons, but because it can lead to increased returns through reputational and sustainability factors.
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References
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