Strategic Management: A Competitive

Advantage Approach, Concepts and

Cases
Eighteenth Edition

Chapter 10
Business Ethics,
Environmental Sustainability,
and Corporate Social
Responsibility

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Learning Objectives
10.1 Explain why good ethics is good business in strategic
management.
10.2 Explain why whistleblowing, bribery, and workplace
romance are strategic issues.
10.3 Discuss why environmental sustainability is a key
issue in strategic planning.
10.4 Discuss why corporate social responsibility (CS R) is a
key issue in strategic planning.

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Figure 10.1
The Comprehensive, Integrative, Strategic Management Model

Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 1 (February 1989): 91.
See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s
Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and
Technology no. 4 (October 2010): 20. Also Meredith E. David, Fred R. David, and Forest R. David, “Closing the Gap
Between Graduates’ Skills and Employers’ Requirements: A Focus on the Strategic Management Capstone Business
Course,” Administrative Sciences 11, no. 1 (2021): 10–26.

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Business Ethics
• Business Ethics
– principles of conduct within organizations that guide
decision making and behavior
Unethical business practices abound. Here a few:
1. Misleading advertising or labeling
2. Causing environmental harm
3. Producing unsafe products or services
4. Padding expense accounts
5. Insider trading

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Social Responsibility, Environmental
Sustainability
• Social Responsibility
– actions an organization takes beyond what is legally
required to protect or enhance the well-being of living
things
• Sustainability
– the extent that an organization’s operations and actions
protect, mend, and preserve rather than harm or
destroy the natural environment

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Table 10.1
Seven Principles of Admirable Business Ethics
1. Be trustworthy; no individual or business wants to
engage in business with an organization it does not trust
2. Be open-minded, continually asking for "ethics-related
feedback" from all internal and external stakeholders.
3. Honor all commitments and obligations.
4. Avoid misrepresenting, exaggerating, or misleading with
print materials, actions, or words.
5. Visibly be a responsible community citizen.
6. Use your accounting practices to identify and eliminate
questionable activities.
7. Follow the Golden Rule: "Do unto others as you would
have them do unto you."
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How to Establish an Ethics Culture
Code of Business Ethics
• To ensure that the code of ethics is read, understood,
believed, and remembered, periodic ethics workshops are
needed to sensitize people to workplace circumstances in
which ethics issues may arise.

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Four Practices to Adapt a Firm’s
Culture for Better Business Ethics
1. Identify and correct any inconsistencies between what’s
preached and what’s practiced.
2. Identify environmental changes that warrant new
behaviors and adjust strategies accordingly.
3. Create a supportive culture and internal whistleblower
process.
4. Encourage, reinforce, and reward desired behaviors.

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Business Ethics Topics That Have
Become Important
• Whistleblowing
• Bribery
• Workplace romance

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Whistleblowing
• Whistleblowing refers to employees reporting any
unethical violations they discover or see in the firm
• The Securities and Exchange Commission mandate that
anyone that sees unethical behavior must report it

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Avoid Bribery
Bribery
• the offering, giving, receiving, or soliciting of any item of
value to influence the actions of an official or other person
in discharge of a public or legal duty
• a crime in most countries of the world, including the United
States

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Workplace Romance
Workplace romance can be detrimental to morale and
productivity because:
1. favoritism complaints can arise
2. confidentiality of records can be breached
3. reduced quality and quantity of work could result
4. personal arguments can lead to work arguments
5. whispering secrets can lead to tensions
6. sexual harassment (or discrimination) charges may
ensue
7. conflicts of interest could arise, especially when the well-
being of the partner trumps the well-being of the
company

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Reasons to Develop Workplace
Romance Guidelines and Policy
1. Guidelines can enable the firm to better defend against and
avoid sexual harassment or discrimination charges.
2. Guidelines can specify reasons (such as the seven listed
previously) why workplace romance may not be a good idea.
3. Guidelines can specify resultant penalties for romancing
partners if problems arise.
4. Guidelines can promote a professional and fair work
atmosphere.
5. Guidelines can help assure compliance with federal, state, and
local laws, as well as recent court cases.
6. Lack of any guidelines sends a lackadaisical message
throughout the firm.

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Environmental Sustainability
• Employees, consumers, governments, and society are
especially resentful of firms that harm rather than protect
the natural environment.
• Conversely, people today are especially appreciative of
firms that conduct operations in a way that mends,
conserves, and preserves the natural environment.

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Sustainability Reports
Sustainability report:
• reveals how a firm’s operations impact the natural
environment
• discloses to shareholders information about the firm’s labor
practices, product sourcing, energy efficiency,
environmental impact, and business ethics practices

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Possible Environmental Strategies
1. Developing or acquiring green businesses
2. Divesting or altering environment-damaging businesses
3. Becoming a low-cost producer through waste minimization and
energy conservation
4. Pursuing a differentiation strategy through green product features
5. Including an environmental or sustainability representative on their
board of directors
6. Conducting regular environmental audits
7. Implementing bonuses for favorable environmental or conservation-
related results
8. Becoming involved in environmental issues and programs
9. Incorporating environmental values in mission statements
10. Establishing environmentally oriented objectives
11. Acquiring “green” skills
12. Providing environmental training programs for company employees
and managers
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IS O 14000/14001 Certification
• The I S O 14000 family of standards concerns the extent to
which a firm minimizes harmful effects on the environment
caused by its activities and continually monitors and
improves its own environmental performance.

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IS O 14000/14001 Certification
(continued)
• I S O 14001 is a set of standards adopted by thousands of
firms worldwide to certify to their constituencies that they
are conducting business in an environmentally friendly
manner
• Results in an Environmental Management System (EM S)

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Reasons Why Preserving the
Environment Should Be a Permanent
Part of Doing Business
• Consumer demand for environmentally safe products and
packages is high.
• Public opinion demanding that firms conduct business in
ways that preserve the natural environment is strong.
• Environmental advocacy groups now have more than 20
million Americans as members.
• Federal and state environmental regulations are changing
rapidly and becoming more complex.

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Reasons Why Preserving the
Environment Should Be a Permanent
Part of Doing Business (continued)
• Many lenders are examining the environmental liabilities of
businesses seeking loans.
• Many consumers, suppliers, distributors, and investors
shun doing business with environmentally weak firms.
• Liability suits and fines against firms having environmental
problems are on the rise.

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Corporate Social Responsibility
• Ralph Nader proclaims that organizations have
tremendous social obligations.
• Milton Friedman asserts that organizations have no
obligation to do any more for society than is legally
required.

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Corporate Social Responsibility
(CS R) and Performance
• Research reveals a u-shaped relationship between CS R
and corporate financial performance, whereby firms with
the greatest CS R are generally also the firms with the
highest financial performance; firms with the lowest CS R
tend to have higher performance than those with moderate
social responsibility.
• Important to know that no social need can be met if the
firm fails.

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Food Suppliers and Livestock
Welfare
• Consumers expect humane treatment of animals.
• Consumers are flocking to organic products.

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Wildlife Welfare
• Consumers globally are becoming increasingly intolerant
of any business or nation that directly or indirectly destroys
wildlife, especially endangered wildlife, such as tigers,
elephants, whales, songbirds, and coral reefs.

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Table 10.5
Top-Rated Companies for Giving Back to Communities
1. Hewlett-Packard
2. Nvidia Corporation
3. Microsoft Corporation
4. Cisco Systems
5. Qualcomm
6. General Mills
7. Whirlpool Corporation
8. Illumina
9. Citigroup Inc.
10. Dell Technologies Inc.
11. Lam Research
12. General Motors Corporation
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Figure 10.2
How to Gain and Sustain Competitive Advantages

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