Economic Issues 6 Chapter Economic Issues Issues Corruption Ethical Consumption Ethical Sourcing Microfinance Profit Supply Chain * * 1. Corruption Corruption is a fact of life, it includes dishonesty, exploitation, bribery, fraud etc. * Costs associate with corruption:Operational costs: Corruption adds additional expense throughout the corporate value chain and can lead to costly operational disruptions.Legal risks: Corporations face substantial consequences if they engage in corrupt business conduct, including large fines and disqualification from future government procurement. For instance, the German engineering conglomerate Siemens recently agreed to pay a record amount in fines to settle bribery cases against the companyCompetitive risks: Companies can also be at a competitive disadvantage if they refuse to pay bribes. Companies that adhere to strict principles against corruption can find themselves losing business to less ethical competitors who are willing to pay to influence the procurement process. * Corruption also exerts significant costs on: society (including reduced government services for the disadvantaged, constraints on foreign direct investment in high-corruption countries, and crime and instability resulting from decreased trust in government). Corporations can play a greater leadership role and improve results in the broader anti-corruption effort by treating corruption as a strategic CSR issue and seeking proactive solutions to social problems critical to the business. * 1. Corruption Companies can perform specific actions against corruption like: i. influencing legislation: Companies can force the government to introduce new anticorruption laws. ii. Organizing workshops: that include government, private sector, and civil society in an open discussion of anti-corruption reform. • iii. Building capacity. Companies can lend expertise and help build skills in financial management, technology, or ethics (e.g., transparent procurement practices) to public agencies, or NGOs supporting public agencies. * 1. Corruption 1. CorruptionHow legitimate is it for companies to operate with different standards in different countries and cultures? Corruption means different things to different people. Some people argue that political campaign contributions are just another form of corruption. What is your reaction to this statement? Why do you think corruption is more prevalent in some countries than others? What should a company do when operating in such an environment? Is it better to abide by local custom or try to impose standards and values from home? * * 2.Ethical consumptionBeing an ethical consumer means buying products which were ethically produced and/or which are not harmful to the environment and society. Products which fall into the ethical category include organic produce, fair trade goods, energy-efficient light bulbs, electricity from rene ...

1. Economic Issues
6
Chapter
Economic Issues
Issues Corruption Ethical
Consumption Ethical Sourcing
Microfinance Profit
Supply Chain
*
*
1. Corruption
Corruption is a fact of life, it includes dishonesty, exploitation,
bribery, fraud etc.
*
Costs associate with corruption:Operational costs: Corruption
adds additional expense throughout the corporate value chain
and can lead to costly operational disruptions.Legal risks:
Corporations face substantial consequences if they engage in
corrupt business conduct, including large fines and

2. disqualification from future government procurement. For
instance, the German engineering conglomerate Siemens
recently agreed to pay a record amount in fines to settle bribery
cases against the companyCompetitive risks: Companies can
also be at a competitive disadvantage if they refuse to pay
bribes. Companies that adhere to strict principles against
corruption can find themselves losing business to less ethical
competitors who are willing to pay to influence the procurement
process.
*
Corruption also exerts significant costs on:
society (including reduced government services for the
disadvantaged,
constraints on foreign direct investment in high-corruption
countries, and
crime and instability resulting from decreased trust in
government).
Corporations can play a greater leadership role and improve
results in the broader anti-corruption effort by treating
corruption as a strategic CSR issue and seeking proactive
solutions to social problems critical to the business.
*
1. Corruption
Companies can perform specific actions against corruption like:
i. influencing legislation: Companies can force the government
to introduce new anticorruption laws.

3. ii. Organizing workshops: that include government, private
sector, and civil society in an open discussion of anti -corruption
reform. •
iii. Building capacity. Companies can lend expertise and help
build skills in financial management, technology, or ethics
(e.g., transparent procurement practices) to public agencies, or
NGOs supporting public agencies.
*
1. Corruption
1. CorruptionHow legitimate is it for companies to operate with
different standards in different countries and cultures?
Corruption means different things to different people. Some
people argue that political campaign contributions are just
another form of corruption. What is your reaction to this
statement?
Why do you think corruption is more prevalent in some
countries than others? What should a company do when
operating in such an environment? Is it better to abide by local
custom or try to impose standards and values from home?
*
*
2.Ethical consumptionBeing an ethical consumer means buying
products which were ethically produced and/or which are not
harmful to the environment and society.
Products which fall into the ethical category include organic
produce, fair trade goods, energy-efficient light bulbs,

4. electricity from renewable energy, recycled paper and wood
products with Forest Stewardship Council approval.
Consumers have always cared about societal issues; those
concerns are now more frequently turning into action as the
more socially aware customer evaluates an enterprise’s CSR
profile before making purchasing decisions.
Today, this consumer influence in support of CSR can be seen
in marketplace trends, such as the growing number of hybrid
automobile models, the popularity of eco-tourism, and the
increasing availability of organic and fair trade foods.
*
2.Ethical consumption
3. Ethical Sourcing
Ethical Sourcing is the process of ensuring that the products
made are obtained through responsible and sustainable methods.
This includes ensuring that:the workers who make the products
are paid a fair wage and all human rights are met, the factories
are clean and safe environments to work in, and that all social
and environmental aspects of production to the workers and the
surrounding communities are consider.
https://www.dailymail.co.uk/news/article-8044079/George-
Clooneys-coffee-beans-picked-child-labourers.html
*
*
Brands continue to promote ethical

5. sourcing and sustainability efforts
Denney’s statement (Cage-free eggs)The humane treatment of
animals
remains an important part of our brand’s
sourcing strategy, and our commitment to
this transition underscores our confidence in the ethical
evolution of supplier capabilities.”Consumers would tend to buy
more when they would know that the products are being
ethically sourced and helped the farmers in the local community
and the social issues attached with the product
*
3. Ethical Sourcing
4. Microfinance
Micro finance is the support of entrepreneurs and small
businesses with small low-rate or no interest rate loans.Micro
finance is often associated with developing countries where
loans are provided to local artisans or farmers who need funding
to get a small business off the ground. Supporting micro finance
initiatives or creating your own program is a potential addition
to your company's social responsibility program.E xamples:
http://www.accion.org/https://www.kiva.org/
*
*
4. Microfinance
Companies can make micro finance part of their CSR initiative.
They can support micro finance is by supporting a nonprofit
that has an established micro finance program. Or company may

6. consider creating its own micro finance initiative to fund local
entrepreneurs. Micro-finance organizations have significantly
higher repayment rates (97% and above) than for-profit banks in
developed economies?
*
*
5. Profit
This issue forms an essential component of the CSR debate. The
best of intentions aside, a bankrupt company does not benefit
any of its stakeholders. Profits are essential to the survival of
the firm and, as such, form a core component of the strategic
CSR argument.The study of CSR and its relation to corporate
profits is growing.The companies that fail to maximize their
adoption of a CSR strategy will be left behind. Recently,
empirical evidence has shown that customers are willing to pay
a higher price for products with CSR attributes and that CSR
programs influence 70 per cent of all consumers' buying
decisions. As a result, many leading international brands, such
as Walmart, Nike, Adidas and Gap, have been compelled to
incorporate CSR in their complex supply chains via a code of
conduct
*
*
6. Supply ChainThis issue highlights the complexities of CSR

7. when dealing with conflicting values in different cultures. This
is a particular problem for multinational corporations that
source their products in many different countries, but need to
try and satisfy all stakeholders.
It focuses on a) supply of materials to manufacturers
b) manufacturing process
c) distribution of finished goods through a
network of distributors and retailors to a final
customer
*
*
Actual execution of socially-responsible business models
requires overcoming a variety of logistical complexities.
Environmental critics were skeptical that many of Unilever’s
products used palm oil, the production of which was responsible
for heavy deforestation in places like Indonesia.
*
6. Supply Chain
Companies are expected to be able to track the carbon footprint
not only of their own manufacturing activities, but also their
transportation, distribution and procurement activities, while
monitoring the related activities of their extended supply chains
as well
*
6. Supply Chain
CLO Reference:

8. 4
Description of CLO:
Understand the relation between organizations and their
responsibilities towards different societal issues
Description of Assignment
This assignment is designed to develop and test analytical skills
of the students. Students are required to visit the website of a
non-profit organization and analyze its approaches towards
CSR.
Requirements:
Visit the website www.kiva.org and answer the following
questions:
Questions
1.
What are the categories of loans provided by Kiva?
2.
Who provide the loans and how they collect the loans?
3.
Name the middle East regions in which Kiva operates?
4.
Write examples of the loans Kiva is providing in the following
categories:
a. Livestock
b. Food
c. Water and Sanitation

9. 5.
How you connect Kiva with concept of ‘Microfinance’ you
studied in Chapter 6?