Business Management Teach Yourself Series Topic 8: Ethical and Social Responsibility

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1 Business Management Teach Yourself Series Topic 8: Ethical and Social Responsibility A: Level 14, 474 Flinders Street Melbourne VIC 3000 T: W: tssm.com.au E: TSSM 2011 Page 1 of 6

2 Contents Ethical & Social Responsibility... 3 Initial terminology... 3 As it appears in Units Definition... 3 As it appears in Units Review Questions... 4 Ethics &Social Responsibility and Marketing... 5 As it appears in Unit Advertising... 5 Packaging... 5 Selling... 5 Ethics & Social Responsibility and Communication... As it appears in Units 2 & 3... Ethics &Social Responsibility and Operations... As it appears in Unit 3... Ethics &Social Responsibility and Human Resources... As it appears in Unit 4... Ethics &Social Responsibility and Change Management... As it appears in Unit 4... Ethics & Social Responsibility as a cause for change... Ethics & Social Responsibility as a consideration during change Ethics & Social Responsibility and Performance Indicators... As it appears in Units Solutions to Review Questions... 6 TSSM 2011 Page 2 of 6

3 Ethical & Social Responsibility In 1999 BHP a large Australian company, made headlines due to the environmental damage caused by the Ok Tedi mine it operated in Papua New Guinea. In 2010, BP made headlines when one it s oil drilling platforms in the Gulf of Mexico exploded and caused a major oil spill. How the public react to these instances and how the organisations react has changed over the years. Organisations are expected to be more responsible in how they deal with such events. Initial terminology As it appears in Units 1 4 Society has developed a notion that all organisations should act in an ethical and socially responsible manner to all stakeholders. The success an organisation has in the area of ethical and social responsibility can be measured by the triple bottom line economic, social and environmental performance of an organisation. Economic performance was discussed in TYS6. This TYS deals with evaluating how organisations implement ethical and socially responsible management in their dealings with all stakeholders. Definition As it appears in Units 1 4 Social responsibility can be defined as the obligations of an organisation over and above its legal responsibilities. The legal system provides minimum standards of behaviour for organisations in certain areas. What an organisation does over and above these requirements is an important consideration for any organisation. Ethical management is the process of abiding by moral standards and doing the right thing in the interests of all stakeholders. It is the balancing of all stakeholder interests that is the issue for an organisation and how it is possible to do the right thing so all stakeholders are satisfied. Management ethics refers to the moral and ethical standards applied to the behavior of managers and management of an organisation. Ethical and socially responsible management can be applied to a number of situations and the following sections will review how E&SR can be applied to those situations. TSSM 2011 Page 3 of 6

4 Review Questions 1. Provide a list of benefits to an organisation of acting in an ethical and socially responsible manner. TSSM 2011 Page 4 of 6

5 Ethics &Social Responsibility and Marketing As it appears in Unit 2 Marketing is a broad term to describe the total activities undertaken by an organisation to achieve its objectives. These activities include: Advertising the product Identifying the needs of the customers Packaging the product Selling the product Determining the price of the product Delivering the product to the customer Marketing can be undertaken in an ethical and socially responsible manner and linked to all the activities identified above. Advertising A business should be aware of the influence its advertising may have on consumers. It affects the decisionmaking of consumers and can create social trends. Advertising a product as being something that it is not, not being truthful about qualities or components of the product is considered unethical consider a recent example where the ACCC announced that manufacturers of the balance bracelets had made claims about the benefits of the bracelets without appropriate substantiation. Packaging Packaging aims to allow identification of the product, contain and protect the product before use, attract customers and ensure the products are safe. Labelling of the product is part of the packaging. It is important that labels are accurate and not misleading. There are numerous examples where consumer groups, such as Choice, publish accurate information about labels that sellers don t provide. Correct labelling builds confidence and trust between sellers and consumers correct labelling of where the product was made, correct fat and sugar content are important. Packaging the product itself can also be undertaken in an ethically and socially responsible way. Packaging a product in a way that takes advantage of recycling and recyclable materials is an environmentally friendly approach to adopt that is being seen more and more as the right thing to do. Selling Ethical and socially responsible selling of a product refers to informing potential customers of the actual price of the product something that seems obvious but isn t always. Many products come with hidden extras on-road costs when buying a car, waiting periods on certain areas when buying health insurance, buying interest-free. An ethical and socially responsible approach is to fully disclose the final price at the start of the relationship with the customer. This builds trust and confidence and can lead to customer loyalty and an increase in the number of repeat customers leading to increased sales and profit. TSSM 2011 Page 5 of 6

6 Solutions to Review Questions 1. Benefits include: Increased sales Improved public image Decreased staff turnover Improved benefits for society 2. Unethical advertisements may contain offensive language or images, poke fun at an individual or group, minimize the risk involved in using a product, contain misleading or false information about the product/service, price, features or availability 3. Corporate Social Responsibility refers to the idea that businesses act in a manner that meets community standards and contributes to the welfare of the community as a whole. It is about acting in a moral and ethical manner that is further than the legal requirements. In terms of marketing, social responsibility is seen in the sponsorship of community events or sporting clubs, or the establishment of environmental programs in the community. 4. Fair representation in advertising Viral marketing Honesty in business dealings 5. Ethical communication means the communication is open and honest and the motives are transparent. This builds a trusting relationship between the business and its stakeholders 6. Communicating in a socially responsible manner means to communicate in a manner that is not discriminatory or misleading. TSSM 2011 Page 6 of 6