Business can no longer afford to behave amorally; companies must take ethical issues into consideration. When things go wrong these days, they apologize and often try to improve the situation. Banks have compliance officers; many companies have moral codes. But is this enough? Innovative companies work more actively on soft and hard ‘controls’ in their company culture and supply chain. Hence, ethical awareness is growing and becoming ritualized. 

Our observations

  • Facebook is caught up in a major privacy scandal. Cambridge Analytica illegally mined the data of 50 million of its users. Facebook is accused of 1) the ‘leak’ itself, and importantly, 2) of not informing the public when it discovered this, two years ago already.
  • Last week, Facebook published major advertisements in UK and U.S. newspapers, informing users and making apologies. A comparable ‘media apology’ was recently made by Royal Dutch Shell regarding gas fields and the earthquakes triggered by gas production processes in the Netherlands.
  • Heineken is currently under fire for its decade-long marketing campaigns in African countries, with wide-scale exploitation and even prostitution of women.
  • BlackRock, an important investor for weapon manufacturers and distributors, shows critical awareness of the role this gun-industry has played in the many massacres in the U.S. It will not divest (yet), but it does raise questions.Ahold-Delhaize recently retracted customer profiles that could be discriminating; a similar issue was faced by Heineken.
  • Unilever’s CEO Paul Polman is actively advocating a sustainable product line and social (non-discriminatory, feminist) human resource management. He is often criticized, but arguably doing more than other CEO’s in the way of ethics.

Connecting the dots

Milton Friedman once wrote an (in)famous article with the title ‘the social responsibility of a company is to increase its profits’. Since the financial crisis of 2008, this article has been heavily criticized for vindicating a ‘greed is good’ mentality in business. The crisis has been transfigured into a new era in which business is required to act in an ethically responsible way. There is a constructive and a cynical interpretation of this trend.
In the cynical view, ethics is just a cover-up. Companies try to appear decent and have policy for ‘social corporate responsibility’, but they, in this view, do not genuinely care. Such a perspective seems to be applicable to the ‘rise and fall’ of Enron, which was praised for its ethics… before it turned out to be involved in many scandals. It is also the view one could take of Volkswagen (Dieselgate) or of Amazon (regarding working circumstances). Opposed to this cynical analysis – ‘Enron Ethics’: pretending to be good, but not actually being so –, there is a constructive analysis in which the step from an amoral self-perception of business towards a moral one is positively rewarded, not only by citizens but also by customers, as in the case of certain coffee, chocolate and clothing brands.

The constructive perspective is spreading, although still in small steps. Why is it spreading? (1) The (social) media are everywhere and companies can no longer ignore their societal impact. Even though companies may not intentionally ‘act good’, they fear the criticism of journalists and politicians, and therefore seriously aim to improve the ethical quality of their business. (2) Societal roles are more fluid and transparent. Employees realize that they themselves wear different hats – for instance, as a father, brother, colleague – and that the term ‘stakeholders’ is an abstract way of saying that they are themselves part of the society in which their company operates. Take, for instance, bankers, who also have families and who want a convincing story, about what they sell and how they profit, at the dinner table. People can hardly ignore their personal and family values while at work. (3) Although ethical consumption remains a marginal issue, it continues to grow – both in high-end supermarkets, such as Marqt, and in the bargain stores, such as Lidl. An important accelerator of ethical change might be festivals – for instance, the international music festival DGTL – which offers cutting edge quality food and waste management. (4) Ethical consumption is something the younger generations prefer. When younger people have more to spend in their 30s and 40s, they will probably spend more on food labelled ‘good’.

Implications

  • It remains unclear by which criteria to judge whether certain goods are produced in an ethically responsible way. Companies that can assure this responsibility, while also remaining relatively normal, will attract customers.
  • Consumer goods will be produced in sustainable chains: from field, processor, transport to shop and consumption.
  • Organizational goods (Who to hire? Who to cooperate with? Who to outsource to?) will be judged more in terms of social goods (quota of women at work, discrimination-policy, policy history, etc.)