Being Ethical

Date: 2015-10-07; view: 580.

Being ethical can be a clever marketing strategy. Increasingly, consumers are influenced by ‘non-commercial' factors, such as whether a product harms the environment. Firms such as Ben & Jerry's, an ice cream maker, and Body Shop International, a cosmetics retailer, have strengthened their brands by publicizing their ethical standards. Cummins Engine, a maker of diesel engines, made its products greener while lobbying for stricter pollution laws.

But such ethical self-promotion can be dangerous. Body Shop was publicly forced to change a claim that its products were not tested on animals (some of the ingredients in its cosmetics had been tested on animals by other firms in the past). The error led many consumers to question Body Shop's ethical standards.

Some think that the best way to persuade man­agers to think more ethically is to take more account of stakeholders. Laura Nash of Boston University's Institute for the Study of Economic Culture argues that managers should see their role in terms of 'covenants' with employees, customers, suppliers and so on. Such covenants should have a single goal: to ensure that a business creates long-term value in a way that is acceptable to all of these ‘stakeholders'. A manager would view his business in terms of relationships rather than products; and see profit as a result of other goals rather than an objective in itself. But such ideas tend to go against shareholder capitalism.

The best answers may be simple ones. Ethics rules should be clear (for instance, should an employee pay bribes where this is accepted business practice?) and they should be regularly tested. Some companies are turning to 'ethical audits'. In its annual report Ben & Jerry's carries a ‘social performance report' on the firm's ethical, environmental and other failings. Carried out by Paul Hawken, a ‘green' entrepreneur, the audit has sometimes frustrated Ben Cohen and Jerry Greenfield, the company's founders. So far, however, they have always published it. That may be why Ben & Jerry's reputation remains good where others fade.