Companies I Talked About in Phase 1 Essay

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companies I talked about in Phase 1 was Costco. The big thing in this and other reports is that there are tradeoffs, but they are not necessarily ethical tradeoffs. Ethical dilemmas must have tradeoffs that are mutually exclusive and where the agent is thereby forced to do something wrong -- this is an established concept in philosophy (McConnell, 2010). Thus, in theory, the business must choose between sustainability and profit, if we assume Friedman's agency argument (1970). The problem is that this is a false dilemma, because sustainability and CSR are concepts that the firm is free to define itself. Any given scenario is set, and might create a dilemma, but the firm overall in its activities faces no such dilemma -- this is an important distinction.

The way business approaches the concepts of sustainability and corporate responsibility is to frame the "dilemma" as a question for a mutually beneficial solution. There is no such possibility in a true ethical dilemma. Costco's sustainability report discusses site design, carbon footprint and energy management among other concepts. There is a key trait to all of these concepts -- they are all tied to efficiency. What Costco and a lot of other companies have realized is that they benefit from efficiency. The fewer resources they use, the better it is for both their bottom lines and for the environment.

The same can be said of Costco's wages and benefits, which are unusually high for its industry. This seems like a dilemma because higher wages should lead to lower profits, but again that is a misconception that is taken as a mutually exclusive scenario. Costco management realizes that higher wages and higher profits are not mutually exclusive, because experienced employees contribute at a higher level than inexperienced ones, there are fewer training and error costs associated with low turnover rates and service standards are higher when employees are genuinely engaged in their work.

Thus, there are not genuine ethical dilemmas, because there is no condition of mutual exclusivity. Companies can and do find solutions that are mutually beneficial. Ok, not all companies do, but any company you would want to model your CSR program after takes this approach and many succeed at a high level by framing the "dilemma" not as a dilemma at all but as an opportunity to find a mutually beneficial solution where nobody has to lose. This is the opposite of an ethical dilemma, where there must be a loser. A positive frame of mind seems to work wonders for companies like Costco.

Part II. I covered the definition of an ethical dilemma above -- there must be mutually exclusive tradeoffs wherein no matter what the agent does, there will be a negative outcome. (Obviously if all outcomes are positive there isn't really a dilemma). A legal dilemma is similar, with one exception. An ethical dilemma is framed by some sort of ethical theory or guideline (there are several from which to choose) but a legal dilemma is framed by the laws of the land. In many cases, there is no dilemma. An example would be Enron -- that was always criminal so there was no legal or ethical dilemma. But as we all know, laws are not always clear.

A law might be vague in its wording, or in the ways that the courts have interpreted it. So there might be a situation where a company legitimately cannot determine whether a particular course of action is legal or not. Such scenarios would probably not be determined to be legal until it reached the court system -- and most companies are not keen on taking that risk. Alternately, there are legal dilemmas where someone is operating under two sets of laws. I can think of a couple of examples. Coca-Cola is available for sale in Cuba. It comes from the company's subsidiary in Mexico. Now, this is not illegal in Mexico, but it is illegal in the United States under Helms-Burton. Which law is more important, that of the company's country (Mexico), or the parent company's country (U.S.). The same can be said for the Foreign Corrupt Practices Act. Bribery might be legal in one country, but it is not illegal for an American company to do it anyway -- but which law is more important/relevant, and does the citizenship of the person paying the bribe matter? There are always legal grey areas that create legal dilemmas and their resolution is going to be similar to that of ethical dilemmas where there is some downside risk no matter what choice is taken.

Part III. Slaper and Hall (2011) outline the triple bottom line as striking a balance between shareholder value, social dimensions and environmental dimensions. The first major issue is finding the right definitions for these things. While we have spent decades refining different definitions for corporate financial performance, we have not done the same with respect to social or environmental performance. This leaves interpretation of success in these dimensions entirely dependent on the way that management defines them, and there is no real way to enforce consistency over time

Where there are set definitions, one of the biggest issues at that point is to get buy-in from the shareholders. Historically in all companies, and in many companies today, shareholders are used to being treated as the most important stakeholder in a business. This leads to things like a focus on quarterly results at the expense of long-term, a dilemma within managerial agency theory. Getting shareholders to view any attention to other needs is a challenge. Most companies seek to find definitions and programs that will deliver superior shareholder results along with other results, in order to get shareholder buy-in. In a sense, this is the entire point of triple bottom line, but it is not necessarily easy.

The third big challenge is selling the idea to the rest of the organization, meaning the employees and the managers. They are going to be the ones who are implementing the plan, and need to understand it clearly and support it. This again is not as easy as it sounds because it represents a shift in how they think about their work and the mission of the company. It is not that there is going to be active resistance, just that people need to understand the change, why it is good, and how they can work to making the change succeed.

Part IV.

Introduction to the Triple Bottom Line

Let's say that Costco wants to implement the triple bottom line. This means adopting a specific focus on social dimensions, the environment and shareholder value. So the first thing that the company needs to do at the high level is to understand the definition of triple bottom line. This understanding has to be something that the company can communicate throughout the organization. Remember that Costco has already to this point been a fairly good citizen with respect to social considerations and some aspects of environmental citizenship as well. So the company is halfway there, but it is important to get the people within the company to rally around a common definition of triple bottom line that will be differentiated from the existing efforts, in order to convince people to transition to the new plan. So before it even begins, management needs to define triple bottom line and the objectives that it wants to see from it.

Triple bottom line thinking is long-term thinking, but it must be translated into strategy and actions that are both short-term and long-term. It is important to recognize this when management is defining the time frames for triple bottom line implementation. Another key thing for management to understand is that with triple bottom line there are conflicts that might happen. Management needs to understand the best methods to deliver results to all three bottom lines, by resolving these tensions. This is the entire point of triple bottom line, so it is important that management does not deviate from that mission. Therefore, objectives for all three need to be taken into consideration and there should be measurable and achievable objectives for each, preferably when they are not in conflict with another.

Measures

Costco will need to be develop measures for each of the elements of the triple bottom line. For the environment, it is already focused on carbon footprint and energy usage. To this it should add waste generation and even spinoff carbon footprint -- like locating more stores in downtown areas where it can reduce the amount of vehicle trips to its stores. There also needs to be a social measures. Worker wages are one the company already uses, including things like benefits and turnover. Also worth considering would be external social outcomes. This can be things like the families of employees or even customers -- measures for social outcomes tend to include health, education and monetary measures. The key thing to the measures is that Costco needs to think about what measures are most important…[continue]

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