Perhaps, we have all heard about this adage: “The business of business is business.” Some would take this phrase to mean that there is a certain evil, or at least an amorality, that is inherent in any business that cares only about its own survival. It is why the phrase “business ethics” seems to convey a certain paradox. Is there such a thing as an ethical business anyway? If an ethical activity creates profits for companies, then these companies would surely pursue this activity anyway without further prodding, would they not?
Traditionally, the act of generating value in the marketplace has already been seen as a great boon for society. The creation of new jobs and products, the fostering of innovation, and the efficient improvement of the quality of life are all highly desirable benefits produced primarily by competition in an accessible market that reduces economic barriers. Humanity has benefitted from trading goods and exchanging services—long before there were nations and states as we know them today.
In fact, entrepreneurial activities already bring many out of poverty through the development of livelihoods. One can readily see the role of diverse and many micro, small, and medium enterprises in a healthy economy—something that is now, regrettably, stifled due to lockdown policies. When commercial activity is slowed down, it causes a noticeable negative impact. So, should we not consider that the mere existence of business already creates a social good?
Yet, nowadays, people concern themselves with the idea of a still greater role for corporations in society. The destruction of the environment is among the perceived ills of the world, and it is said to be exacerbated by, allegedly, reckless capitalism and consumerism. In many European countries and the developed world, corporate social responsibility—the practical application of business ethics—is tied primarily to sustainability and offsetting waste produced by economic activity.
In a developing country like the Philippines, business ethics can come in a variety of flavors to address a multitude of other social issues, too. Therefore, the proposed Corporate Social Responsibility Act includes a list of things—other than environmental sustainability—that may also be considered as activities of responsible firms: charitable works, employee welfare programs, developing scientific research, or even promoting culture and education, among others.
Can we claim that all these activities are desirable means and ends of ethical business practices? Depending on personal beliefs, consumers might be inclined to agree or disagree with some or all of those. This often means that a business practicing any of these initiatives may be forced to contend with critics who would accuse it of not actually practicing what it preaches. What, then, is a business to do when it must manage resources while addressing so many social issues?
Another marriage of ethics and business could come from the voluntary philanthropic contributions of those benefiting from profit generation, or even from creating a strategy that uses the competencies of a business to address a specific social problem by treating it like any other market demand. However, forcing a company to engage in a certain kind of responsibility, especially one that does not make business sense, tends to reduce efficiency and destroy value instead.
In general, ethical acts in business are meant to be an application of practical philosophy to management decisions. In the same way that it is impossible to simply reach into the minds of others and glean their true motivations, it becomes exceedingly difficult to judge enterprises based on intent alone. Likewise, many actions that individuals routinely perform can be regarded as unethical depending on the approach used. Thus, we should evaluate actions based on costs and tangible results.
Economic activity is a part of life and will likely always continue to be. It is right to think about the greater needs of individuals, and managers ought to be wary of these so that they can continue to meet demands in the marketplace, which can include the call for better business practices. Still, if enterprises are meant to continue their traditional role of producing economic value, they need to be allowed to examine what best allows them to remain competitive and efficient as well.
In the end, there might not be any real paradox, after all. For example, one thing that the businessperson and the environmentalist can generally agree upon is that the cost of inefficient production is a deadweight loss. There are many studies that show how businesses can generate even more profits while reducing waste and creating innovative processes. If this can apply to other initiatives, then we must truly reevaluate if the concept of “ethical business” is an oxymoron.
The author, Mr. Harald Eustachius A. Tomintz, teaches at the Department of Economics of the Ateneo de Manila University.