Deck 2: Being Ethical and Socially Responsible

Question 1

Belu Water Aims to Change the World
Reed Paget was a journalist and documentary filmmaker when, in 2001, he covered the launch of the United Nations Global Compact. Paget was deeply impressed by this environmental initiative's call to "use capitalism to change the world." What better mechanism is there for change, he thought, than business, with its wide financial and entrepreneurial resources and its risk-taking mind-set?
Although he had no business experience, Paget was determined to start a company in the United Kingdom that would be both socially responsible and environmentally friendly. When he learned that a quarter of the world's people have no access to clean water, he decided to create a bottled water company, both to alert the public to the global water crisis and to show that bottled water could be manufactured and marketed in an environmentally sustainable way. Finally, Paget determined that all his company's profits would be donated to clean-water projects.
With start-up funding from the Idyll Foundation, a team of friends, and a stack of business how-to books, Paget sat down to develop a brand name, find a bottle design, work out a manufacturing deal, and find customers. Coming up with a name that was not already trademarked was a challenge, but the team settled on "Belu" (pronounced "belloo") to evoke the color of water and the idea of beauty. A deal with an upscale designer yielded an affordable glass bottle design. After taste-test visits to more than 70 sources of water around the United Kingdom, Paget selected Wenlock Water, a supplier of natural mineral water located in the Shropshire hills. Not only was the water great; it was more ecologically friendly for a U.K, company than bottling and shipping water from springs in the mountains of France, which is what competitor Evian does.
A marketing firm helped Belu land its first customer, the Waitrose supermarket chain. With additional funding to pay for the initial run of glass bottles, Belu delivered its first order in May 2004. Soon the company put up a Web site, obtained further funding, and secured distribution through Tesco, the leading U.K. supermarket chain. Sales increased as Belu, positioned as the first bottled water that does not contribute to climate change, began to prove its appeal to consumers.
Another breakthrough came when the company found a manufacturer to produce corn-based bottles for its water. The bottles are completely stable on store shelves but biodegrade back to soil in just eight weeks, under the right conditions of heat and humidity and with a little help from microorganisms. Although this compostable bottle is more costly than traditional plastic or glass bottles, the use of eco-friendly packaging is important to Belu and its customers.
Bottled water is a multibillion-dollar industry worldwide, with huge profit potential. Still, Belu faces intense competition from a number of multinational giants as well as from firms that serve local areas. One major rival is Nestle, which owns such water brands as Perrier, Pellegrino, and Nestlé Pure Life™. Another is Group Danone, which owns Evian and Volvic, among other brands. Belu must also consider competition from tap water and from beverages such as soft drinks and juices, which can be substituted for bottled water.
Thanks to its positioning on the basis of social responsibility and sustainability, Belu Water™ now reaches more than 500,000 consumers each month. Through a charity called WaterAid, the company has brought clean water, wells, and hand pumps to more than 20,000 people in India and Mali, with expectations of helping at least ten times this number in the coming years. It uses clean electricity, offsets its remaining carbon emissions, and has won numerous awards, including Social Enterprise of the Year and Social Entrepreneur of the Year (in partnership with Schwab Foundation). Backed by smart marketing, Belu will keep growing sales and generating more profits to help more people in the future. 18
For more information about this organization, go to http://www.belu.org.
Belu Water gives all its profits away and is the first firm to package water in corn-based bottles. Do you think its levels of eco-consciousness and social responsibility set a realistic model of environmental performance for other manufacturing companies? Why or why not?

Answer 1

Yes, B's level of eco-consciousness and social responsibility sets a realistic model of environmental performance for other manufacturing companies. The objective of the company was to generate money and give it back for a social cause. He created a bottled water company, both to alert the public to the global water crises and to show that bottled water could be manufactured and marketed in an environmentally sustained way.
It runs it manufacturing process in the best eco-friendly possible. For example, uses bio degradable bottles, uses clean electricity, etc. Though it faces intense competition, it positioning as a social responsibility and sustainability has provided an edge and turned huge profits for the company. B has proved to be successful both in terms of generating profits and also working towards it cause of donating for a social cause "Water Aid".

Question 2

When a company acts in an ethically questionable manner, what types of problems are caused for the organization and its customers?

Answer 2

Customers and investors expect the organization to act fairly and without prejudice. The following problems arise for the organization when they act in an ethically questionable manner:
1) A tarnished reputation and goodwill of the organization
2) Decrease in sales and earnings due to bad word of mouth
3) Increase in costs due to fines and other legal expenses
4) Trial and imprisonment of employees in cases of severe misconduct
The customers face the following problems when the organization acts in an ethically questionable manner:
1) Customer dissatisfaction from the use of the product or service of the organization
2) Paying higher price for a low quality product or service
3) Physical harm leading to death or injuries after using untested or bad goods, such as medications with major side effects.

Question 3

Why might an individual with high ethical standards act less ethically in business than in his or her personal life?

Answer 3

The following are the reasons that led an individual with high ethical standards to act less ethically in business than his or her personal life.
(1) An individual on a personal front might possess a strong character, ethics, values, and commitment. There have been many incidents where in, a business person has to put his or her personal welfare above the welfare of the organization.
(2) An individual who is bound to make decisions that affect the organization is expected to act within his ethical boundaries and deliver in the interest of the organization.
(3) However, if the individual is able to derive any kind of benefit either in terms of cash or kind is tempted to take a biased decision, even if it not beneficial to the organization.
(4) Factors that influence the ethical behavior of persons in organizations are individual, social, and opportunity.
(5) Some external factors influencing such decisions are management pressure, political issues, employee demands, etc.
(6) In view that a personal decision will affect only his/her personal life and immediate family, might be a driver for being less ethical in business.
(7) Under certain circumstances, an individual is forced to make an erroneous decision as he is less informed about the subject or scenarios that lead to an ethical dilemma.
(8) In interest of organization and due to situational demand an individual although has strong ethical values in personal life is forced to make decision that are less ethical in business.

Question 4

Scholfield Honda-Going Green with Honda
Signs of green marketing can be found everywhere today: reusable shopping bags are the rule rather than the exception, organic and natural products fill grocers' shelves, and socially responsible companies are increasing their efforts to reduce pollution, conserve water and energy, and recycle waste paper, plastic, and other reusable materials.
Of course, some companies have always been ahead of the curve. Since the early 1970s, Honda has been producing the low-emissions, fuel-efficient Civic model, and the company has never strayed from its roots. Today's Honda line consists of four classes of vehicles: Good, Better, Best, and Ultimate. Its regular gas cars are Good, with about 30 mpg; hybrids are Better at about 45 mpg; and its Best solution is a natural gas-powered Civic GX, which gets about 220 miles to a tank. Honda also has Ultimate solutions in the works, such as the new Honda FCX Clarity-a hydrogen fuel cell car that uses hydrogen and oxygen to create electricity. Although the Civic GX and Clarity models are available to consumers, neither vehicle is practical for the average driver as fueling stations are scarce.
Alternative energy vehicles are making their way to the Midwest. Lee Lindquist, an alternative fuels specialist at Scholfield Honda in Wichita, Kansas, was researching alternative fuel vehicles for a local Sierra Club meeting when he learned that municipalities in New York and California used the natural gas Civic GX to address air-quality issues. Although Lee recognized that his own Wichita market was not teeming with green consumers, he knew that people needed ways to combat rising fuel prices-so he proposed the Civic GX for use at his dealership.
Lee's boss was skeptical of the idea. Although management was open to clever ways to promote the dealership, owner Roger Scholfield did not want to risk muddying the waters with a new and somewhat impractical vehicle. Nevertheless, he agreed to offer the car to his fleet and corporate customers, and in time fate offered another opportunity for Scholfield Honda to go green.
In May 2007, a devastating tornado hit the nearby town of Greensburg, Kansas, leveling the area. Once again Lee Lindquist approached his boss. This time, he proposed donating both a Honda Civic GX and a natural-gas fueling station to Greensburg as a way of helping the town rebuild. Upon careful reflection, Roger realized that Lee's idea would benefit his dealership through good publicity and higher awareness of alternative fuel vehicles. Scholfield made the Civic model and fuel station available to Greensburg residents free of charge, and the dealership has been on the green bandwagon ever since.
Although there are more cost-effective ways of advertising, Roger Scholfield notes that customers are becoming more interested in alternative fuel vehicles since he donated the Civic GX. In addition, his dealership has generated plenty of goodwill in the press and among local residents-Scholfield Honda has developed a good reputation for its commitment to the environment and the people of Greensburg, even opening a "Honda Green Zone" conference room on the premises. The room can hold several hundred people. It includes a digital projector, sound system, and kitchenette and is available free to local firms and organizations for meetings and conferences. Its chairs, tables, tiles, and flooring are all made from recycled materials. 17
How would you rate Scholfield Honda's sense of social responsibility? Does the dealership meet all the criteria for a socially responsible company?

Question 5

Belu Water Aims to Change the World
Reed Paget was a journalist and documentary filmmaker when, in 2001, he covered the launch of the United Nations Global Compact. Paget was deeply impressed by this environmental initiative's call to "use capitalism to change the world." What better mechanism is there for change, he thought, than business, with its wide financial and entrepreneurial resources and its risk-taking mind-set?
Although he had no business experience, Paget was determined to start a company in the United Kingdom that would be both socially responsible and environmentally friendly. When he learned that a quarter of the world's people have no access to clean water, he decided to create a bottled water company, both to alert the public to the global water crisis and to show that bottled water could be manufactured and marketed in an environmentally sustainable way. Finally, Paget determined that all his company's profits would be donated to clean-water projects.
With start-up funding from the Idyll Foundation, a team of friends, and a stack of business how-to books, Paget sat down to develop a brand name, find a bottle design, work out a manufacturing deal, and find customers. Coming up with a name that was not already trademarked was a challenge, but the team settled on "Belu" (pronounced "belloo") to evoke the color of water and the idea of beauty. A deal with an upscale designer yielded an affordable glass bottle design. After taste-test visits to more than 70 sources of water around the United Kingdom, Paget selected Wenlock Water, a supplier of natural mineral water located in the Shropshire hills. Not only was the water great; it was more ecologically friendly for a U.K, company than bottling and shipping water from springs in the mountains of France, which is what competitor Evian does.
A marketing firm helped Belu land its first customer, the Waitrose supermarket chain. With additional funding to pay for the initial run of glass bottles, Belu delivered its first order in May 2004. Soon the company put up a Web site, obtained further funding, and secured distribution through Tesco, the leading U.K. supermarket chain. Sales increased as Belu, positioned as the first bottled water that does not contribute to climate change, began to prove its appeal to consumers.
Another breakthrough came when the company found a manufacturer to produce corn-based bottles for its water. The bottles are completely stable on store shelves but biodegrade back to soil in just eight weeks, under the right conditions of heat and humidity and with a little help from microorganisms. Although this compostable bottle is more costly than traditional plastic or glass bottles, the use of eco-friendly packaging is important to Belu and its customers.
Bottled water is a multibillion-dollar industry worldwide, with huge profit potential. Still, Belu faces intense competition from a number of multinational giants as well as from firms that serve local areas. One major rival is Nestle, which owns such water brands as Perrier, Pellegrino, and Nestlé Pure Life™. Another is Group Danone, which owns Evian and Volvic, among other brands. Belu must also consider competition from tap water and from beverages such as soft drinks and juices, which can be substituted for bottled water.
Thanks to its positioning on the basis of social responsibility and sustainability, Belu Water™ now reaches more than 500,000 consumers each month. Through a charity called WaterAid, the company has brought clean water, wells, and hand pumps to more than 20,000 people in India and Mali, with expectations of helping at least ten times this number in the coming years. It uses clean electricity, offsets its remaining carbon emissions, and has won numerous awards, including Social Enterprise of the Year and Social Entrepreneur of the Year (in partnership with Schwab Foundation). Backed by smart marketing, Belu will keep growing sales and generating more profits to help more people in the future. 18
For more information about this organization, go to http://www.belu.org.
Why does Belu Water produce a saleable product instead of just asking the public to donate money for clean-water projects?

Question 6

How can an employee take an ethical stand regarding a business decision when his or her superior already has taken a different position?

Question 7

How would an organizational code of ethics help to ensure ethical business behavior?

Question 8

Scholfield Honda-Going Green with Honda
Signs of green marketing can be found everywhere today: reusable shopping bags are the rule rather than the exception, organic and natural products fill grocers' shelves, and socially responsible companies are increasing their efforts to reduce pollution, conserve water and energy, and recycle waste paper, plastic, and other reusable materials.
Of course, some companies have always been ahead of the curve. Since the early 1970s, Honda has been producing the low-emissions, fuel-efficient Civic model, and the company has never strayed from its roots. Today's Honda line consists of four classes of vehicles: Good, Better, Best, and Ultimate. Its regular gas cars are Good, with about 30 mpg; hybrids are Better at about 45 mpg; and its Best solution is a natural gas-powered Civic GX, which gets about 220 miles to a tank. Honda also has Ultimate solutions in the works, such as the new Honda FCX Clarity-a hydrogen fuel cell car that uses hydrogen and oxygen to create electricity. Although the Civic GX and Clarity models are available to consumers, neither vehicle is practical for the average driver as fueling stations are scarce.
Alternative energy vehicles are making their way to the Midwest. Lee Lindquist, an alternative fuels specialist at Scholfield Honda in Wichita, Kansas, was researching alternative fuel vehicles for a local Sierra Club meeting when he learned that municipalities in New York and California used the natural gas Civic GX to address air-quality issues. Although Lee recognized that his own Wichita market was not teeming with green consumers, he knew that people needed ways to combat rising fuel prices-so he proposed the Civic GX for use at his dealership.
Lee's boss was skeptical of the idea. Although management was open to clever ways to promote the dealership, owner Roger Scholfield did not want to risk muddying the waters with a new and somewhat impractical vehicle. Nevertheless, he agreed to offer the car to his fleet and corporate customers, and in time fate offered another opportunity for Scholfield Honda to go green.
In May 2007, a devastating tornado hit the nearby town of Greensburg, Kansas, leveling the area. Once again Lee Lindquist approached his boss. This time, he proposed donating both a Honda Civic GX and a natural-gas fueling station to Greensburg as a way of helping the town rebuild. Upon careful reflection, Roger realized that Lee's idea would benefit his dealership through good publicity and higher awareness of alternative fuel vehicles. Scholfield made the Civic model and fuel station available to Greensburg residents free of charge, and the dealership has been on the green bandwagon ever since.
Although there are more cost-effective ways of advertising, Roger Scholfield notes that customers are becoming more interested in alternative fuel vehicles since he donated the Civic GX. In addition, his dealership has generated plenty of goodwill in the press and among local residents-Scholfield Honda has developed a good reputation for its commitment to the environment and the people of Greensburg, even opening a "Honda Green Zone" conference room on the premises. The room can hold several hundred people. It includes a digital projector, sound system, and kitchenette and is available free to local firms and organizations for meetings and conferences. Its chairs, tables, tiles, and flooring are all made from recycled materials. 17
What is Scholfield Honda's primary ethical responsibility in situations where a proposed green initiative is cost-prohibitive or even detrimental to the company's bottom line?

Question 9

Belu Water Aims to Change the World
Reed Paget was a journalist and documentary filmmaker when, in 2001, he covered the launch of the United Nations Global Compact. Paget was deeply impressed by this environmental initiative's call to "use capitalism to change the world." What better mechanism is there for change, he thought, than business, with its wide financial and entrepreneurial resources and its risk-taking mind-set?
Although he had no business experience, Paget was determined to start a company in the United Kingdom that would be both socially responsible and environmentally friendly. When he learned that a quarter of the world's people have no access to clean water, he decided to create a bottled water company, both to alert the public to the global water crisis and to show that bottled water could be manufactured and marketed in an environmentally sustainable way. Finally, Paget determined that all his company's profits would be donated to clean-water projects.
With start-up funding from the Idyll Foundation, a team of friends, and a stack of business how-to books, Paget sat down to develop a brand name, find a bottle design, work out a manufacturing deal, and find customers. Coming up with a name that was not already trademarked was a challenge, but the team settled on "Belu" (pronounced "belloo") to evoke the color of water and the idea of beauty. A deal with an upscale designer yielded an affordable glass bottle design. After taste-test visits to more than 70 sources of water around the United Kingdom, Paget selected Wenlock Water, a supplier of natural mineral water located in the Shropshire hills. Not only was the water great; it was more ecologically friendly for a U.K, company than bottling and shipping water from springs in the mountains of France, which is what competitor Evian does.
A marketing firm helped Belu land its first customer, the Waitrose supermarket chain. With additional funding to pay for the initial run of glass bottles, Belu delivered its first order in May 2004. Soon the company put up a Web site, obtained further funding, and secured distribution through Tesco, the leading U.K. supermarket chain. Sales increased as Belu, positioned as the first bottled water that does not contribute to climate change, began to prove its appeal to consumers.
Another breakthrough came when the company found a manufacturer to produce corn-based bottles for its water. The bottles are completely stable on store shelves but biodegrade back to soil in just eight weeks, under the right conditions of heat and humidity and with a little help from microorganisms. Although this compostable bottle is more costly than traditional plastic or glass bottles, the use of eco-friendly packaging is important to Belu and its customers.
Bottled water is a multibillion-dollar industry worldwide, with huge profit potential. Still, Belu faces intense competition from a number of multinational giants as well as from firms that serve local areas. One major rival is Nestle, which owns such water brands as Perrier, Pellegrino, and Nestlé Pure Life™. Another is Group Danone, which owns Evian and Volvic, among other brands. Belu must also consider competition from tap water and from beverages such as soft drinks and juices, which can be substituted for bottled water.
Thanks to its positioning on the basis of social responsibility and sustainability, Belu Water™ now reaches more than 500,000 consumers each month. Through a charity called WaterAid, the company has brought clean water, wells, and hand pumps to more than 20,000 people in India and Mali, with expectations of helping at least ten times this number in the coming years. It uses clean electricity, offsets its remaining carbon emissions, and has won numerous awards, including Social Enterprise of the Year and Social Entrepreneur of the Year (in partnership with Schwab Foundation). Backed by smart marketing, Belu will keep growing sales and generating more profits to help more people in the future. 18
For more information about this organization, go to http://www.belu.org.
Do you agree with Reed Paget that business is ideally suited to "change the world"? Explain your answer.

Question 10

Overall, would it be more profitable for a business to follow the economic model or the socioeconomic model of social responsibility?

Question 11

How and why did the American business environment change after the Great Depression?

Question 12

Scholfield Honda-Going Green with Honda
Signs of green marketing can be found everywhere today: reusable shopping bags are the rule rather than the exception, organic and natural products fill grocers' shelves, and socially responsible companies are increasing their efforts to reduce pollution, conserve water and energy, and recycle waste paper, plastic, and other reusable materials.
Of course, some companies have always been ahead of the curve. Since the early 1970s, Honda has been producing the low-emissions, fuel-efficient Civic model, and the company has never strayed from its roots. Today's Honda line consists of four classes of vehicles: Good, Better, Best, and Ultimate. Its regular gas cars are Good, with about 30 mpg; hybrids are Better at about 45 mpg; and its Best solution is a natural gas-powered Civic GX, which gets about 220 miles to a tank. Honda also has Ultimate solutions in the works, such as the new Honda FCX Clarity-a hydrogen fuel cell car that uses hydrogen and oxygen to create electricity. Although the Civic GX and Clarity models are available to consumers, neither vehicle is practical for the average driver as fueling stations are scarce.
Alternative energy vehicles are making their way to the Midwest. Lee Lindquist, an alternative fuels specialist at Scholfield Honda in Wichita, Kansas, was researching alternative fuel vehicles for a local Sierra Club meeting when he learned that municipalities in New York and California used the natural gas Civic GX to address air-quality issues. Although Lee recognized that his own Wichita market was not teeming with green consumers, he knew that people needed ways to combat rising fuel prices-so he proposed the Civic GX for use at his dealership.
Lee's boss was skeptical of the idea. Although management was open to clever ways to promote the dealership, owner Roger Scholfield did not want to risk muddying the waters with a new and somewhat impractical vehicle. Nevertheless, he agreed to offer the car to his fleet and corporate customers, and in time fate offered another opportunity for Scholfield Honda to go green.
In May 2007, a devastating tornado hit the nearby town of Greensburg, Kansas, leveling the area. Once again Lee Lindquist approached his boss. This time, he proposed donating both a Honda Civic GX and a natural-gas fueling station to Greensburg as a way of helping the town rebuild. Upon careful reflection, Roger realized that Lee's idea would benefit his dealership through good publicity and higher awareness of alternative fuel vehicles. Scholfield made the Civic model and fuel station available to Greensburg residents free of charge, and the dealership has been on the green bandwagon ever since.
Although there are more cost-effective ways of advertising, Roger Scholfield notes that customers are becoming more interested in alternative fuel vehicles since he donated the Civic GX. In addition, his dealership has generated plenty of goodwill in the press and among local residents-Scholfield Honda has developed a good reputation for its commitment to the environment and the people of Greensburg, even opening a "Honda Green Zone" conference room on the premises. The room can hold several hundred people. It includes a digital projector, sound system, and kitchenette and is available free to local firms and organizations for meetings and conferences. Its chairs, tables, tiles, and flooring are all made from recycled materials. 17
Should the government regulate companies' claims that their products are green? Should official classifications for environmental friendliness be defined?

Question 13

Why should business take on the task of training the hard-core unemployed?

Question 14

What are the major differences between the economic model of social responsibility and the socioeconomic model?

Question 15

To what extent should the blame for vehicular air pollution be shared by manufacturers, consumers, and government?

Question 16

What are the arguments for and against increasing the social responsibility of business?

Question 17

Why is there so much government regulation involving social responsibility issues? Should there be less?

Question 18

Describe and give an example of each of the six basic rights of consumers.

Question 19

There are more women than men in the United States. Why, then, are women considered a minority with regard to employment?

Question 20

What is the goal of affirmative action programs? How is this goal achieved?

Question 21

What is the primary function of the Equal Employment Opportunity Commission?

Question 22

How do businesses contribute to each of the four forms of pollution? How can they avoid polluting the environment?

Question 23

Our environment can be cleaned up and kept clean. Why haven't we simply done so?

Question 24

Describe the steps involved in developing a social responsibility program within a large corporation.