The Business Ethics Blog

From Reuters: UK shoppers want ethical food without paying more

They want ethical food, but don’t want to pay more. My, that is news. I guess shoppers in the UK are unlike the rest of us, who prefer unethical food and want to pay more for it.

Anyway, here’s the first bit of the story:

Britons have an appetite for ethical food, but as the recession bites shoppers are anxious to spend less.

Sales of ethical food, such as organic produce grown without chemicals, and Fairtrade products for which farmers in poor countries are paid more to help improve living standards, are both slowing.

“There is a huge propensity for people wanting things to be done in an ethical manner,” said Jonathan Banks, U.K.-based business insight director with market research firm the Nielsen Company.

“But they are not going to make repeat purchases on something that is not good value for money,” he said…

OK, funny headline aside, there’s plenty of interesting stuff, here.

First, there’s the oddness of the term “ethical food.” The article gives examples: organic produce, fair trade products, etc. (Presumably the list would include things like low-carbon-footprint food, union-made food, shade-grown coffee, etc.) Is each of those characteristics, on its own, sufficient to call food “ethical?” (I’ve blogged about this problem before: “Organic:” Not Synonymous With “Ethical”.) What about food priced low enough that a working-class family can buy it and still afford health insurance? Is that “ethical” food, too?

Second, there’s the fact that — my joke aside — some people really do want to pay more. Purveyors of various fair-trade (not necessarily just FairTrade) products do their best to convince customers voluntarily to pay more for products (such as coffee). It’s not just that such customers are willing to pay more; they’re volunteering to. (See also this new book: Cheap: The High Cost of Discount Culture, by Ellen Ruppel Shell, which I haven’t read yet.)

Finally, there’s the hard problem of how to translate even widespread concern for X into collective action on X. It’s relatively easy to get people to say they prefer to buy food with various ethical characteristics. But (even setting aside controversy over what counts as ethical food) it’s harder to get people to act on that preference. First, in many cases there’s the sense that individual choices don’t matter much; in others, there’s the sense that they don’t matter at all. It’s hard to motivate people under such circumstances, even if they want to do the right thing. Add onto that the issue of price, and it’s tempting for each of us to go for the cheap option, and let everyone else save the world. Of course, if enough of us think that way, the world just doesn’t get saved, even though we all want it to. (See also the “problem of collective action in the provision of public goods.”)

Money can’t buy love, but can it buy a conscience?

According to the Wall Street Journal, furs aren’t the only environmentally friendly (?) luxury good. Here’s the story:
Luxury-Goods Makers Brandish Green Credentials

The bad economy and a fundamental shift in the market for luxury goods are forcing an industry that reveres names like Chanel and Versace to embrace a different icon: Mother Nature.

Over the past year, many of the world’s best-known luxury labels have started to introduce ecofriendly products, snap up brands that tout their social responsibility and weave environmental themes into their advertising and marketing. In May, French luxury conglomerate LVMH Moët Hennessy Louis Vuitton took a stake in Edun, an organic-clothing company founded by the singer Bono and his wife.

Other companies have begun to advertise steps they took years ago to promote resource conservation. This summer, the windows of Tiffany & Co.’s retail stores world-wide feature images of coral reefs, publicizing Tiffany’s commitment since 2002 not to use coral in its designs….

I suspect many people’s reaction, here, will be similar to their reaction to the reaction to (Product) Red. Is this really supposed to do some good for the world, or is it just a way to make people feel better about rampant consumerism? Is this just high-end greenwashing?

I think we can usefully tease apart two questions here. First, what’s the motive behind the greening of luxury brands? And second, what will be the effect? As to the first question: well, who knows? We can make assumptions, but that doesn’t seem useful, except to the extent that we think the answer to the first question tells us something about the answer to the second. So, what will be the effect of greener luxury goods? A few points:

1) There’s been talk lately about how going green is itself a luxury: what people want during a recession is cheap goods, whether or not they are the most environmentally friendly products available. That probably doesn’t apply, though, to a $700 Louis Vuitton handbag. If the eco-conscious version happens to cost a few bucks more, the fashionista is unlikely to care.

2) On the other hand, the market for luxury goods is a tiny market. So how much effect can greening it really have?

3) In terms of promoting environmentalism as a trend, the greening of luxury brands has to be a good thing. After all, there are plenty of people out there who will follow faithfully whatever example Jennifer Aniston sets.

4) It’s also worth considering that environmental promises made by high-end brands may be among the most reliable such promises out there. They’ve presumably got the resources required to do very careful sourcing, in order to make sure that the organic, low-carbon, union-made, fair-trade cotton that goes into their $200 t-shirts really is what it claims to be. And furthermore, these brands also have plenty to lose if they don’t live up to their eco-rhetoric.

I like small businesses. They make me comfortable. My favourite coffee shop is small & independent — I only resort to Starbucks when I have to. My favourite pub is small. My favourite place to buy groceries is a small, independent greengrocer. I’ve never worked for a big company; I find them hard to relate to, hard to interpret. Small businesses are run by real, live people who you can talk to and relate to and understand.

The popular understanding of ethical and unethical behaviour in business happens to line up nicely with my own prejudices. Big businesses are supposed to be evil; small ones, benign. But is there good reason to believe that?

Certainly, I know of no evidence that small business generally behaves more ethically than big business. The fact that big business is responsible for all the business ethics headlines is of course not a reliable measure: Walmart, for example, is monitored much more closely than the thousands of small retailers who try to compete with the retailing behemoth, so you would expect Walmart’s transgressions to be made public more often. Headlines are a lousy measure of ethical conduct in business, just as they’re a lousy measure of airline safety or child abductions or shark attacks.

I was walking through a vibrant Toronto neighbourhood today, with literally hundreds of small retailers about whom I know next to nothing. Are they all ethical? All unethical? A mix? The latter is probably the case, but who knows? If you did investigate thoroughly, and found out that those small retailers were playing fast and loose with employment standards, with paying their fair share of taxes, or with health and safety regs, what would you want to do about it? One solution, of course, would (in theory) be to unite all those hundreds of small businesses into a single, larger business that you could monitor more closely. They’d lose much of their character, that way, much of their charm. They’d be less fun. But would they be less ethical, or more?

Sometimes it’s not all about character. Sometimes the solution isn’t to tell people, “hey, look inside yourself and you’ll see what’s right and wrong.” Sometimes, you just need to give people new pants.

From the BBC: Nepal bans airline staff pockets

Staff at Nepal’s main international airport are to be issued with trousers without pockets, in an attempt to wipe out rampant bribe-taking.

The country’s anti-corruption body said there had been growing complaints about staff at Kathmandu’s Tribhuvan airport.

A spokesman said trousers without pockets would help the authorities “curb the irregularities”.

I know what some of you are thinking: “Pockets don’t take bribes; people with pockets take bribes.” And since people are the problem, some of them may well find ways around Nepal’s proposed sartorial solution.

But the serious point here is about 2 different kinds of solutions to problems like corruption. On one hand, you use what might be called “people” solutions: you can hire carefully, give your employees ethics training, and try through leadership to instill and promote the right values. The other kind of solution we could call broadly “technological.” Like eliminating pockets, or making sure a safe can only be opened by a combination of 2 keys held by 2 different employees. Also in this category are rules about who may or may not be at the table while a particular decision is made, as a way of avoiding conflict of interest.

I think there’s a lot to be learned by thinking about the difference between those two types of solutions, and thinking about which one is appropriate for what kinds of ethical problems.

Two days ago, I blogged about Business Ethics and Science. I asked how businesses should deal with scientific controversy, and I offered a few possibilities for discussion. (Roughly: default to safety, default to freedom, and set some threshold for what counts as “serious” disagreement.) I didn’t get many comments.

Maybe a concrete example will help.

From the Wall Street Journal: The Climate Change Climate Change

…A growing number of Australian politicians, scientists and citizens once again doubt the science of human-caused global warming.

Among the many reasons President Barack Obama and the Democratic majority are so intent on quickly jamming a cap-and-trade system through Congress is because the global warming tide is again shifting. It turns out Al Gore and the United Nations (with an assist from the media), did a little too vociferous a job smearing anyone who disagreed with them as “deniers.” The backlash has brought the scientific debate roaring back to life in Australia, Europe, Japan and even, if less reported, the U.S.
…
The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. — 13 times the number who authored the U.N.’s 2007 climate summary for policymakers….

Now, this concrete example should serve to illustrate the kind of scientific disagreement I’m talking about (or one of the kinds, anyway). But my question isn’t about climate change per se. Presumably whatever your answer is regarding how business should behave in the face of controversy over climate change, your answer will be the same regarding how business should behave in the face of other scientific controversies, right? Or rather, the particular behaviour might differ, because the degree of controversy might differ; but the principle or standard applied should be the same.

Check out this press release from Starbucks: Starbucks Coffee Company and Rwandan Government Discuss ongoing Partnership

Today during his third visit to Rwanda, Starbucks Coffee Company (NASDAQ:SBUX) chairman, president and ceo, Howard Schultz, met with Rwanda’s President Paul Kagame to discuss and build on the investments Starbucks has made in East Africa over the past five as well as future opportunities. Additionally, Schultz will participate in the upcoming grand opening of the Starbucks Farmer Support Center in Kigali.

“Through our commitment to, and partnership with, the Rwandan government, local NGOs and coffee farmers throughout East Africa, Starbucks hopes to participate in a market ecosystem that benefits all partners involved,” Schultz said.

Some questions worth pondering:

• Starbucks has, over the last 5 years, given “More than US$6.4 million to help East African coffee farmers and communities through grants focused on education, health services and capacity building.” If such spending helps stabilize Starbucks’ access to a good source of coffee beans, does that justify the spending as a good investment, rob the spending of its value as a social contribution, or both, or neither?
• In general, is a big, efficient organization like Starbucks likely to treat farmers, and the environment, better or worse than a few dozen smaller/independent buyers of coffee?
• Is it reason for concern that Rwanda’s nominal Gross Domestic Product (US$4.459 billion) is considerably less than Starbucks’ operating Revenue (US$9.411 billion)?

(Thanks to Kim for the story.)

Facts alone are never enough to tell us how we should behave. But facts do matter.

This means that, sometimes, the right thing for a business to do will depend on what the relevant science says. But scientists often disagree with each other. (That in itself is not something to lament, but something to celebrate. Orthodoxy is anathema to scientists, and it is only grudgingly that scientists, collectively, declare one particular point of view “proven.” That’s part of the power of science.)

So, what should businesses do in the face of scientific disagreement? Here are a couple of possible approaches to consider:

1) Default to safety. If there’s any scientific disagreement over whether a particular food additive is dangerous, for example, then don’t use it in your product.

2) Default to freedom of commerce. If there’s any scientific disagreement over whether a particular herbal remedy is useful, for example, then let consumers (and whichever advisors they trust) decide for themselves.

Both of those are ethically questionable, for reasons that are probably obvious. Insisting on total agreement, one way or the other, is impractical, not least because there’s always the chance that the one or two holdouts just haven’t thought things through, or are even insane. It happens.

But those aren’t the only options. One other solution (or cluster of possible solutions) would involve determining a threshold for what should count as “substantial” scientific disagreement. One loony scientist saying X is safe isn’t very reliable, just as one loony scientist saying X is dangerous isn’t very worrisome. But things are different if a substantial, credible minority — perhaps even a very small minority — disagrees with the majority of scientists. Now, just what should count as a “substantial, credible minority” is not an easy question. But I can at least imagine a well-reasoned, reputable account of corporate decision-making that appealed to such a standard in the face of scientific (and social) disagreement.

Of course, all of this can be rendered moot if government decides to “settle” controversy by imposing regulations. But note the important asymmetry here: government forbidding something as too dangerous, in spite of (or because of) scientific controversy effectively settles the matter, as far as business is concerned. If it’s legally forbidden, businesses shouldn’t do it. But an explicitly permissive regulation — such as the FDA’s or Health Canada’s approval of the use of a particular plastic in baby bottles — doesn’t necessarily settle the matter. It’s always possible that the relevant regulatory agency isn’t on the ball, or is subject to pernicious influences. And so businesses are still ethically obligated, in the face of scientific disagreement, to think through just what their obligations are.

I’ve blogged about the ethics of executive compensation before, and I likely will again. It’s a great topic. But I’m the first to admit that it’s not something I know a lot about. It’s a fairly technical matter — which is one of the main points I like to make about it. Any analysis that boils the issue down &as many of them seem to — to “they’re paid a lot and do lousy work” is bound to be inadequate.

But there are people out there who at least understand what the relevant pieces of the puzzle are, even if they don’t claim to be able to give precise prescriptions. Witness this very nice, short piece by Harvard Business prof V.G. Narayanan, writing on the Harvard Business Review Blog: Executive Pay: It’s About “How,” Not “How Much”

It seems we are moving from an era when “greed was good” to one in which “jealousy is justified”–the executive-compensation regulations being considered now by the government and advocated by shareholder activists aren’t very thoughtful, and I believe they’re born out of jealousy and misinformation.

But “How much should CEOs be paid?” is the wrong question to be asking right now. The right questions are: “How should they be paid?” and, just as important: “Should changes in the way CEOs are paid be mandatory or voluntary?”…

Its worth reading the whole thing (it’s quite brief). And do note that Narayanan is strongly in favour of reform in how CEOs are paid. It’s just that he eschews simplistic solutions.

Narayanan’s main point is roughly that appropriate executive pay depends on corporate strategy, something which is (and should be) highly variable. Government-imposed one-size-fits-all pay structures are more likely to do harm than good. I’d only add that, to the best of my knowledge, there simply is no well-worked-out theory of the “true” value of labour. It’s kind of hard to argue coherently that a particular CEO’s salary is unethically high when you can’t give a reasoned account of what the “right” salary is. And doing that requires looking at the details.

Was it malicious encroachment on intellectual property, or lack of imagination?

From MastheadOnline: Corporate Knights challenges Maclean’s on coporate citizen list

For eight years, Corporate Knights magazine has published a list of the “Best 50 Corporate Citizens in Canada” and this year’s edition is scheduled for distribution to 95,000 subscribers through the Globe and Mail on June 22. The current issue of Maclean’s, dated June 22, also features a story on “Canada’s 50 best corporate citizens.” Yesterday morning, Toby Heaps, editor-in-chief of Corporate Knights, issued a press release arguing that the Maclean’s feature encroaches on his magazine’s trademark….

A lawsuit is even underway, or at least being threatened.

I’ll let the lawyers squabble over intellectual property law, and whether a phrase like “50 best corporate citizens” can be a legally-protected trademark or not. But an argument could be made that muscling in on KN’s well-established terminology is at least ethically dodgy. Couldn’t Macleans have used a different, equivalent title? I mean, surely there are other ways of expressing the same idea. More on this below.

Now, as it happens, the online version of Macleans’s list doesn’t seem mention citizenship at all, but is instead called Jantzi-Macleans 50 Most Socially Responsible Corporations. It seems, for whatever reason, that Maclean’s editors have had a change of heart.

(The latest Corporate Knights list is due out in a few days. Here’s the link to their methodology, etc.)

Of course, just what either list has to do specifically with citizenship — as opposed to merely being good — is still quite unclear, a fact that’s only emphasized by the fact that Macleans has so easily changed the title of the online version of its report. Oh, heck…”social responsibility,” “citizenship”… what’s the difference? Good question.

A debate over healthcare is currently raging in Washington. Health professionals are rightly being consulted. President Obama recently spoke to the American Medical Association about it. The AMA has plenty to say about how healthcare should be structured. What do non-physician health practitioners have to say? In particular, how would practitioners of Alternative Medicine advise the President?

(One month ago today I asked Homeopaths and Naturopaths to help protect consumers from less-scrupulous folks hawking “remedies” that don’t work. How, I asked, can consumers avoid being taken in by snake-oil salesmen? I got very little uptake. I’m hoping my next plea will be more successful.)

So, my question: Which “alternative” health services ought to be covered by insurance plans (private ones, or public ones like Medicare), and which ones should not? Presumably all practitioners of alternative medicine would agree with this: some alternative or “natural” therapies probably work, and some probably don’t. How can insurers (public and private) tell the difference? Presumably Homeopaths believe Homeopathy should be covered, and Chiropractors think Chiropractic should be covered, and so on. That’s understandable. But what other services do Homeopaths and Chiropractors think should or shouldn’t be covered?

In fact, to foster discussion, let’s stipulate (even if only for sake of argument) that Chiropractic, Homeopathy, and Naturopathy should be covered. I don’t want to get dragged into current debates over those. I want practitioners of those disciplines to be able to help with my question, without having to debate the merits of their own fields.

This is a serious matter. If insurance companies cover things they shouldn’t, they’ll end up having to reduce coverage on things that truly help people. And if public insurers like Medicare cover things they shouldn’t — well, we all know the kinds of financial difficulties governments are facing these days. Every dollar spent on ineffectual healthcare is a dollar not spent on education, etc etc.

So, to the practitioners of alternative medicine out there: Help! It’s your patriotic duty!