The case study of unethical hazardous practices by top management of industrial companies highlights the necessity to introduce stricter regulation and integration of corporate social responsibility (CSR) into the strategic decision-making of businesses. It is a challenging and complex discussion that requires an evaluation of concepts and causes of conflict between individual and company interests. This report will seek to investigate and discuss potential improvements to corporate social responsibility in the global economy.
Corporate Social Responsibility
Business and society exist in a highly complex relationship and context, which creates barriers at every stage of interaction. Theoretically, business is focused on fulfilling its immediate and commercial interests without any other obligations since that is the basis of a capitalist economy. However, a debate arises around corporate contributions to society if there is to be sustainable social, economic, or cultural progress. Any organization, including commercial, government, or non-profit, engages in a business aspect of some type. For example, an organization in any sector contributes to employment prospects which impact social and cultural development as well as economic activity. An employer contributes to the development of a specific location through the multiplier effect. Economic growth implies certain social outcomes, creating a bond between business and society even if it is not intended (Pettinger, 2015).
Development leads to the formation of the business concept known as corporate social responsibility, which implies that enterprises should consider public interests beyond maximizing profit. This entices responsible citizenship and implementation of corporate standards which support sustainable development. Under CSR, company activities are encouraged to have productive impacts on society, including consumers, employees, stakeholders, and the environment. Social responsibility is a critical aspect of ensuring long-term financial sustainability for a corporation by fostering development in the globalized modern economy in a manner that protects the environment and vulnerable populations (Tai & Chuang, 2014).
Individual vs. Collective
Individually, most people voice opinions and behave in an ethical manner with values that consider the needs of other persons and society as a whole. However, collectively, particularly in business settings, this does not seem to be the norm, as exemplified by the case study. Many companies maintain compliance policies that employees sign with the intent to conduct all business affairs with ethical standards, as well as fulfill any moral and legal obligations. However, despite the organizational policy, corporations have become involved in tremendous ethical misdeeds such as the one outlined in the case study. That is due to the internal environment created within an organization which forces a collective behavior that significantly differs from individual values (Carucci, 2016).
One of the primary causes is excessive pressure from stakeholders to demonstrate performance and financial outcomes, which are highly unrealistic. Such targets create a tunnel vision that the outcome must be achieved no matter the costs, leading to compromising decisions that are potentially damaging or unethical. While ethics often become part of the discussion in the midst of the scandal, it is critical to consider them when performance targets are set. Management must balance fairness with the pursuit of growth. Another internal factor is that it becomes unsafe for an individual to voice an opinion that may raise ethical concerns. Even amongst top levels of management and all throughout the organization, there is an atmosphere that veering from the common goal or opinion is futile, or worse, can cause retaliation and alienation. Therefore, employees are fearful, and there is a lack of an ethical example being set (Carucci, 2016). As a result of collective pressure, the whole organization may be ethically compromised and corrupt.
Organizational structure and attributes contribute to the collective perception and steps of CSR that a company takes. Eventually, the personal morals, values, and interests of top executives and owners will determine the company’s actions. Since managers are the core decision-makers, personal moral values should reflect on the actions of the organization, as the managers guide the collective behavior in an ethical manner. This is particularly vital in situations where such ethical managerial guidance is required, but there is no inherent reward for socially responsible action (Mzembe, Lindgreen, Maon, & Vanhamme, 2016).
To incorporate corporate social responsibility, top managers must engage in a daunting task of a detailed examination of the company’s surroundings, including operating environment, culture, customer base, and availability of resources. It is a complex issue since understanding cultural and social intricacies means approaching the world with a basis of knowledge and empathy. The comprehension of environmental constraints presents a series of ethical challenges and controversies that senior executives want to avoid. Instead of dealing with ethical conundrums of climate change, waste management, and social responsibility, they rather focus on the economic and financial success of the company (Pettinger, 2015). Therefore, the aspect of CSR inherently clashes with the fundamental job purpose of top managers, forcing decisions that are socially irresponsible and unethical.
The described cases of Rongping and Luliang will have profound impacts on the evolvement of corporate social responsibility in China and other developing countries. Despite lackluster payouts in comparison to the case in California, they still resulted in a court victory for the environmental group and the shutting down of the plant, which suggests to corporations that there are consequences to unethical practices. The status quo is rapidly changing without any signs of slowing down. Although the enforcement of corporate social responsibility regulations is sporadic and selective, the rates are increasing (Littenberg et al., 2018). While a few years ago, CSR was a potential benefit, it has now become a critical compliance requirement in many jurisdictions. Corporate legal departments are forced to actively engage in CSR-related issues due to increased global regulation and social responsibility (particularly on environmental issues) becoming a mainstream aspect for investors, managers, and the public (Littenberg et al., 2018).
A series of high-level scandals in recent years emphasize the risks and costs that corporations face from lack of corporate social responsibility. These include reputational loss, litigation, stricter regulation, as well as fraud and corruption charges. CSR has become a fundamental aspect of risk management since it mitigates stakeholder expectations while maintaining public relations. Faced with the risk to lose an operational license as well as tremendous financial losses associated with fines, litigations, and decreased consumer participation (due to poor reputation), companies are forced to implement CSR initiatives as a method of survival and legitimacy in the modern economy (Mzembe et al., 2015).
When discussing this topic of corporate social responsibility and the environmental consequences of unethical decisions, it is easy to become detached from reality. When asked whether they would support the dumping of chemicals into local waterways, most everyone would vehemently argue against such unethical practices. However, as evident in the discussion of individual opinions versus team management, actions differ significantly from words and public statements. From an ethical standpoint, I would not be convinced to conduct operations that are detrimentally harmful to the environment and society. Even with a tremendous amount of money and potential career-threatening pressures being involved, this specific action crosses a line that I have personally established for myself as the extent to which I can allow my morals and opinions to remain flexible.
The dumping of chemicals in waterways is not a decision with ambiguous outcomes, it has been historically and scientifically proven to have adverse consequences for the ecology, health of local citizens, and social development. Considering that financial and stakeholder pressures may be causing a management team to consider such practices, it would still be a detrimental decision because it is unsustainable to the business. Despite a short financial benefit that may result from improper disposal of hazardous waste, the long-term adverse outcomes for the business are significantly more expensive.
Causes and Solutions for Change
Change can come as businesses embrace corporate responsibility and sustainability as part of the corporate agenda. There has been a gradual progression in this aspect worldwide as companies view sustainability as an investment into the future rather than a direct cost. In the long-term, it is strategically and financially more effective to include proactively integrated sustainability into corporate planning instead of a reactive approach to environmental risks that have been common until recently. Corporative executives begin to realize the environmental consequences of hazardous practices and water scarcity in many areas of the world, which cause social conflict (ADEC Innovations, 2016).
Therefore, to avoid crises and promote corporate stewardship, companies begin to steer away from industrial practices of profit at any cost. It has become an economically viable practice from both social and commercial standpoints to engage in environmentally friendly practices and attain revenue from sustainable products and services (ADEC Innovations, 2016). Moving forward, companies should assess the environmental footprint of any activities, particularly risks associated with water resources. Businesses should maintain responsibility for any decisions and communicate with the public and stakeholders on any practices which may pose a risk to the local ecology or population. Furthermore, it is vital to integrate environmental issues into business strategies and consider corporate social responsibility as a critical aspect of growth.
ADEC Innovations. (2016). Water and corporate responsibility: What can companies do? Web.
Carucci, R. (2016). Why ethical people make unethical choices. Harvard Business Review. Web.
Littenberg, M. R., Berg, N. M., Dale, A. J., Dische, I. K., Higgins, K. F., Raad, A. N., … Torode, J. (2018). Corporate social responsibility compliance in 2018, and beyond – An overview for in-house legal counsel. Web.
Mzembe, A. N., Lindgreen, A., Maon, F., & Vanhamme, J. (2015). Investigating the drivers of corporate social responsibility in the global tea supply chain: A case study of eastern produce limited in Malawi. Corporate Social Responsibility and Environmental Management, 23(3), 165-178. Web.
Pettinger, R. (2015). Business and society: Collective and individual corporate social responsibility. In B. Fryzel (Ed.), The true value of CSR (pp. 247-263). London, United Kingdom: Palgrave Macmillan.
Tai, F., & Chuang, S. (2014). Corporate social responsibility. IBusiness, 6(3), 117-130. Web.