The Ethicist's View

Do companies have an obligation to impose strict environmental and ethical standards on their operations and investments? Ethicist Dr JANNA THOMPSON offers her view.

IF GOVERNMENTS make laws or decisions about projects according to environmental and ethical guidelines then why should companies be expected to do anything more than comply?

There are two ethical reasons for companies to impose standards on themselves. First of all, a company is an agent with an ability to make decisions that can affect the wellbeing of others. Like other agents, it has a responsibility to work out its own ethical standards and to act on them. It cannot blindly follow the lead of others - even the lead of governments.

Furthermore, a company has a special responsibility to its stakeholders - its workers and members of the community in which it operates, as well as clients, consumers and shareholders - and needs to be able to justify its actions to them. They are not always going to be satisfied with a company that is merely law-abiding.

There is an additional, pragmatic, reason for companies to concern themselves with ethical standards. People who are worried about social and environmental problems want to know where companies stand on ethical matters. They expect them to show a concern. And those that do not are viewed with suspicion.

How strict should the standards be? Like individuals, companies often face situations where ideal standards are simply not realistic. A company should impose standards on itself that it is able to follow. There is no point in adopting requirements that no-one can take seriously.

But a company should continually look for ways to make its activities conform more closely to the ethically best practice. If it can make agreements with competing companies to conform to strict environmental and safety standards, then it has no excuse not to impose these requirements on itself.

If a company has an environmental or community charter then it has an obligation to take it seriously - to fulfil its requirements or to have a satisfactory justification for not doing so in a particular case. Companies have practical as well as ethical reasons for living up to their charter. If it is treated merely as a public relations stunt, stakeholders and lobby groups will soon find this out - to the detriment of a company's reputation.

The difficult question is how a conscientious company should apply its charter when the issues are complex and contentious. There is no formula for making a decision, but the following points are some of ethical considerations that need to be taken into account.

Independent and objective fact-finding

A conscientious company cannot simply adopt information provided by others. It must make an effort to determine the facts of the matter for itself and it must be as objective as possible in the gathering and assessment of information.

Consultation

It is important to consult with stakeholders - ensuring that their concerns are taken into account and keeping them informed about developments.

Accountability

A company should be prepared to put before the public, or relevant bodies, its reasons for making its decision and, so far as it can, the information that the decision is based on.

Loyalty

A long-term commitment to particular clients has an ethical weight, and companies should, if possible, negotiate with such clients, giving them a reasonable opportunity to change their operations to conform to the standards.

Concern for consequences

A company should aim for the best overall, long-term results in achieving compliance with its charter, even if this requires temporary compromises.


Dr Janna Thompson is the Deputy Director of the Australian Research Council Special Centre for Applied Philosophy and Public Ethics at the University of Melbourne. She is also Associate Professor of Philosophy at La Trobe University.


This article first appeared in Business Community Intelligence, February 2008