Business Ethics, Climate Change, and Corporate Environmental Responsibility

Global Environmental Risks

Climate change affects all countries, with particular relevance to low-lying coastal regions. Island nations in the Indian Ocean and the dozens of nations in the Caribbean, for example, are at risk of inundation not only from constantly rising sea levels caused by melting glacial ice in polar regions, but also from the effects of warming ocean waters, which produce more frequent and more severe storms. In addition to island nations, low-lying coastal regions on mainland continents will also become increasingly vulnerable to the effects of climate change. Climate change also impacts other regions of the globe, as shifting weather patterns affect precipitation levels, which could lead to more severe drought conditions in some regions and increased flooding in others. Some regions may also incur greater damage from forest fires due to persistent lack of precipitation. The risks of climate change are therefore genuinely global.

In addition to climate change, pollution is a major environmental risk affecting population health throughout the world. Related to climate change, pollution refers in part to the carbon dioxide emissions that result from business practices such as factory operations and the use of transportation fleets. These emissions could be curtailed through alterations to business practices and collaborative partnerships with logistics firms. Similarly, organizations that pollute directly are adversely impacting public health in their communities. Environmental concerns such as poor air quality and poor water quality are evident almost everywhere in the world, but are especially pronounced in countries with weak regulatory environments and poor governance, including the United States, China, India, and Brazil. Generally, any nation with a robust manufacturing base will harbor underlying culprits contributing to environmental degradation, climate change, and deleterious public health outcomes. Organizations in those countries are also uniquely positioned to intervene by changing their business practices to become more aligned with ethical principles.

The Role of Ethical Decision-Making

All organizations have a direct responsibility to perform ethically and to engage in ethical business practices. Ethical decision-making starts with senior management, which sets the ethical tone for the entire organization. Even when strong codes of ethics are in place, leaders have the power and ability to engage in unethical business practices. The normative environment in the organization must reflect the values and principles established by its leaders. Leaders serve as role models for others in the organization, and through collective, collaborative decision-making, all senior managers can work together to develop ideal strategies and solutions. Organizations that fail to take action on business practices that exacerbate climate change — that fail to address problems like carbon dioxide emissions or pollutants — are direct culprits in creating the devastating effects felt by residents of nations around the world. Because climate change is a global issue that knows no geopolitical boundaries, organizations in one country can have a major impact on countries on the other side of the globe.

Ethical decision-making affects business practices that impact environmental risks at every level of the organization. From the decision to manufacture cheap disposable products made from plastic, to the decision not to invest in alternative energy options for manufacturing and transportation, organizations and their leaders contribute to the environmental risk factors driving climate change and other problems. When organizations defer responsibility — claiming that they are acting within the boundaries of the law or pointing fingers at their suppliers or logistics companies — they are making a deliberate choice to disregard the interests of their primary stakeholders around the world.

The Impact of Business Ethics on Stakeholder Relationships

Business ethics affect stakeholder relationships in significant ways. Ethical business practices demonstrate respect for stakeholders. Known as the stakeholder systems approach to business ethics, taking stakeholders into account is one way organizations can shift their moral reasoning to better reflect the mission, vision, and values embedded in the company's ethical code (Mason & Simmons, 2013). Corporate social responsibility and environmental responsibility are both becoming strategic business practices that improve relationships with stakeholders by demonstrating respect. Research shows that businesses demonstrating openness to change, flexibility and adaptability, and an ongoing commitment to innovation are uniquely positioned to promote environmental sustainability at all levels of business practice (Pedersen, Gwozdz & Hvass, 2016). Stakeholders may also respond to ethical decisions by altering their own behaviors, resulting in a domino effect of changing values and social norms. Organizations are in a position to set new standards of behavior among their peers in the industry and across competing stakeholder groups in government, target consumer audiences, and the supply chain. Because of their power, experience, and role, organizational leaders have a direct impact on improving stakeholder relationships through the practice of corporate social responsibility.

Organizations that actively pursue innovative transportation and manufacturing solutions, and that change their business practices to reflect environmental ethics, will also develop a reputation that resonates with the stakeholders of the future. Companies that resist change, lack foresight, or are unwilling to work collaboratively with members of the community to resolve environmental crises are those that will ultimately fail to compete in the global market.

Creating an Ethics Program with Training and Compliance Auditing

One way organizations can better respond to the need for improved corporate social responsibility with respect to the environment is through the creation and implementation of an ethics program. An ethics program can include training that helps inculcate environmental ethics and values among employees, empowering each person to take action accordingly. Such a program is not merely lip service to raising environmental sustainability standards; it is dedicated to change and to achieving desirable, measurable outcomes. Compliance auditing serves as a means to assess the efficacy of any environmental ethics program and to determine which training methods are working and which need to be improved or replaced.

According to Heyler, Armenakis, Walker, et al. (2016), ethical decision-making is "the process of recognizing a need, considering alternatives, identifying a morally acceptable option (i.e., what is considered right in a given culture) and implementing it" (p. 788). The implementation of the acceptable solution is the ultimate goal of a training intervention used within the organization. Training programs can be adapted to suit their respective audiences, with different programs designed for managers in different departments and their employees. Some training will cover specific, practical steps needed to reduce pollutants or emissions, while others will require creative thinking and innovative practices to stimulate new approaches to transporting goods or developing products.

Compliance auditing is a critical step in the ethical decision-making process because it provides essential assessment and evaluation. An ineffective training program wastes company resources and can ultimately harm the organization's reputation if it fails to achieve goals such as emissions reduction or a reduction in pollutants. Organizations with the power to impact public policy can also participate more broadly in compliance auditing across their sector.