Ethics in Business Models
By Jean LW Lequeux in http://www.weltram.eu
What is Ethics?
The right question would be: "What is ethics for you and what is Ethics for your enterprise?".
Ethics consists in behaving in accordance with moral, philosophy and, for believers, with religion. So, answers to the question depend on how these three domains are perceived collectively.
Before all, on an individual point of view, choosing an ethical referential system is a personal and intimate conviction. It's also a free choice. The main issue is: What ethical bases should be proposed for sharing with a group of people who work for the same enterprise and who have various ethnical and cultural backgrounds?
In the ancestral times of humanity, commerce meant peace and, therefore, was an activity, which basically complied with the ethics of those times. Even today, very few codes of ethics forbid commerce, although the way to conduct it and the expected finality are most different from one group of people to another, even when they claim to belong to a common ethical community.
Business Ethics has three pillars: Business Equity, Business Trust and Business Liabilities, on which the Ethical Chart of the Enterprise could be build. Today, a fourth pillar should be considered: Business Sustainability.
When considering Business Ethics, the entrepreneur has to pass from a personal approach to an enterprise acceptation. However, in modern societies, legal constraints do help, at international, national and local levels:
- Compliance with laws is always mandatory,
- Metier and Business regulations are codified, although in some cases they are not efficient enough,
- In addition, on a quality point of view, adoption of norms and standards is compulsory for launching products and services on the market.
Any entrepreneur must also take into account the effects of globalization force him to trade with people having multiple cultural values. As a consequence, the only ethical rules widely accepted are the common denominators of the various social human societies living in the countries where the company is operating. In addition, the larger the number of geographical areas, the smaller the ethical sets of practices, which could be adopted globally. Of course, local ethical rules may apply separately in each country… providing they do not hurt other people's ethics!
Ethical issues
There are different possible ethical approaches according to the points of view:
- In metier practices, deontology is applicable;
- In management, company policies should comply with ethics;
- In company governance, compliance to regulations.
Trade basically means exchanging goods and foods between two parties: a seller and a buyer. The first rule of ethics is: Equity between the parties! However, this equity may hide eventual spoliations of other parties; Example: the producers. Fair Trade is an ethical practice, which guaranties that coffee or tea, or cereal producers have been treated fairly. But, did the producer pollute a river providing drinking water to a village below his acres? If the answer is yes, the model is not complying with ethics! Sustainable Economy appears as a major issue in Business Ethics…
Fair Trade, Sustainable Economy, Ethical Business show that Business Models aren't working anymore in a two-party mode. There're always third parties, which might be men or nature. And among them, are some organizations more or less widely recognized as "Authorities of Ethics". They may act at different levels in Business transactions, medical issues, social affairs, religious matters, etc.
Degrees of Ethics in Business
It is the entrepreneur's choice to determine the level of ethics he will fix to his Business activities. The best for him is to validate a Chart of Ethics in the early stages of the conception of his Business Model. There are different levels of Business Ethics:
- 1st Level: Average Ethical Model
The mandatory minimum requirements are compliance with laws and regulations which may require or not a certification by an official Certification Authority.
- 2nd Level: High Ethical Model
Companies that choose this level of ethics, generally adhere to causes. They may contribute and help through foundations supported by sponsors. Sometimes, they create their own foundation (For example and SEEDS) or their founder launches and develops his own NGO (Non Governmental Organization) or foundation.
Important note: These foundations are not part of the company's Business Model. However, they definitely contribute to forge an image, which reflects the company's corporate values.
- 3rd level: Specific Ethical Models
Primarily, this model serves a cause. Its Business materialization is an organization such as an NGO, a welfare association, etc. It is managed as an enterprise but, in many countries, especially in the European Union, their officers must adhere to a Chart of Ethics and manage in transparency. The governments order their audits and controls, as the biggest of them are draining huge amounts of money.
- 4th Level: Strict Ethical Model
Other types of models are managed in strict observance of a doctrine. They may concern a community or a religion and they are submitted to an "authority" that professes the doctrine. These models could be applied partially or totally to social life.
• Partial applications generally relate to some economic segments, such as the Business of food, clothing, finance, education, press, etc. Examples: The Business Models for kosher food, Islamic finance, catholic schools, religious editions, etc.
• Some companies that operate a communitarian or a religious model, are aggregating activities in various economic sectors. A typical example is the French Group Bayard (catholic press, schools, real estates) founded in a laic state by Father Dalzon in the 19th century.
• Any citizen of countries where entrepreneurship is free may choose for him and his family a confessional way of living buying products and services that are compliant with his belief. This is one way to apply total doctrinal observance, on an individual level
• Total application of a strict doctrinal model needs a theocratic political structure on top of which is built a global system — social, economic, educational, cultural, etc.
These "Theocratic Business Models" may apply to a region or a country.
Examples:
- The Amish communities have established a complete local specific economic system;
- The State of Vatican has a globally non-merchant economic system.
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