Introduction - from Business and Its Environment (Baron, David P.)

Ethics issues abound within a country, but they take on added dimensions when a firm operates across national and cultural borders. Countries differ in the institutions that govern their political and economic activity as well as their customs and culture. Countries also differ in their capacities to address social and ethical issues. The capacities of many countries are limited by poverty, corruption, and political turmoil. Furthermore, their legal, health care, educational, and social services capabilities are often constrained by limited resources.

In contrast to the differences among countries, ethics principles are intended to be universal. Applying those principles in international settings with such differences among countries, however, presents major challenges. Are the costs and benefits resulting from the environmental protection in a low-income country the same as in a high-income country? Should a firm maintain the same safety and environmental standards in all countries? Should and do individuals in all countries have the same rights? If practices that are morally unacceptable in one country are acceptable and legal in other countries, which should a company follow? At a more general level, are the Western ethos systems applicable in countries that do not have Western intellectual and moral traditions?

Current Events Case Study: H&M and Chinese Cotton

Companies have long struggled to reconcile the economic opportunities of the Chinese market with the difficult ethical implications of working in the country. China boasts the world’s largest population at over 1.4 billion individuals [1]. With a growing middle class [2], the country presents an impressive market to countries looking to expand their consumer base. Furthermore, the country’s vast amount of raw materials, inexpensive workforce, and efficient supply chains offers cost-efficient manufacturing to companies looking to maximize profits [3]. As a result, multinational companies based in Western countries look to the market as a vast opportunity to promote company growth

In 2021, however, Western retailers faced both ethical and economic challenges of doing business in China [4]. The BCC released a story [5] detailing Dr. Adrian Zenz’s discovery that Uighur minority workers were forced by the Chinese government to pick cotton in Xinjiang in China.

“‘In my view the implications are truly on a historical scale,’ Dr Adrian Zenz, a senior fellow at the Victims of Communism Memorial Foundation in Washington who uncovered the documents, told the BBC.

‘For the first time we not only have evidence of Uighur forced labour in manufacturing, in garment making, it’s directly about the picking of cotton, and I think that is such a game-changer.

‘Anyone who cares about ethical sourcing has to look at Xinjiang, which is 85% of China’s cotton and 20% of the world’s cotton, and say, We can’t do this anymore.’” [6]

Although the Chinese government holistically denied the accusations of human rights violations, Western companies quickly released statements condemning the coercion [7]. Clothing companies — including Nike, Adidas, and most notably H&M — wrote that they were “concerned” about allegations that Uighurs were forced to pick cotton in the autonomous zone[8].

The Communist Youth League — a Chinese Communist Party group — spoke out against the H&M’s statement in a post on social media, writing “Spreading rumors to boycott Xinjiang cotton, while also wanting to make money in China? Wishful thinking!” [9]. The post catalyzed a cascade of Chinese criticism of the brands, with state media outlets defending Xinjiang cotton. Chinese celebrities chastised the brand, releasing statements saying that they were severing all ties with H&M. In response, H&M posted a second statement highlighting the importance of the Chinese market to the company.

“We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward.

China is a very important market to us and our long-term commitment to the country remains strong. Having been present there for more than thirty years, we have witnessed remarkable progress within the Chinese textile industry. Being at the forefront of innovation and technology, China will clearly continue to play an important role in further developing the entire industry” [10]

This second statement made no reference to the allegations of forced labor, instead emphasizing their commitment to being a “responsible buyer”. Despite the statement, however, Chinese buyers continued to boycott the brand. One post on social media read, “For you, China is still an important market. But for China, you are just an unnecessary brand.” [11]

Academic Review

Mind the Gap! The Challenges and Limitations of Global Business Ethics (Brenkert, G. G., 2019), Journal of Business Ethics, vol. 155, no. 4.

Abstract: Though this paper acknowledges the progress made in business ethics over the past several decades, it focuses on the challenges and limits of global business ethics. It maintains that business ethicists have provided important contributions regarding the Evaluative, Embodiment, and Enforcement aspects of business ethics. Nevertheless, they have not sufficiently considered a fourth part of a theory of moral change, an Enactment theory, whereby the principles and values business ethicists have identified might actually be followed. Enactment theory argues that appeals to ethical leadership, moral imagination, and communicative participation have been insufficient to the task of closing the gap between what businesses do and what they ought to be doing. To address this problem, a theory of moral change focusing on the relations of power within which individuals and businesses operate needs to be developed. Drawing on the work of John Gaventa, the paper sketches some directions in which business ethics should proceed to help diminish this gap. The upshot is that business ethics needs greater connection with economic, social, and political theories. It also suggests that there are important limits to fostering the ethics of global business.

“Global Economic Ethic” — Consequences for Global Business: A Response (Werhane, P. H., 2015), Business & Professional Ethics Journal, vol. 34, no. 1.

Abstract: Global Economic Ethic is a stunning set of principles. However, in this response I shall raise some questions concerning its implementation. First, from the perspective of a global Western-based transnational corporation, there are ambiguities in the principles and implementation in practice. Second, from a non-Western cultural perspective, one has to to think about whether and how these principles could be interpreted in different non-European/non-North American cultural settings. Finally, the biggest challenge is whether or how we as individuals, as executives and managers, and as part of the global community work to change political climates of corruption, domination, patronage, and protectionism, climates that hinder or preclude going forward with the adoption and operationalization of these principles everywhere.

“Grand” corruption and the ethics of global business (Rose-Ackerman, S., 2022), Journal of Banking & Finance, vol. 26, no. 9.

Abstract: The paper explores the ethical obligations of global business to refrain from corruption. Corruption is harmful for the growth prospects of host countries and can introduce inefficiencies and inequities. I argue that business corporations have an obligation to refrain from illegal payoffs as part of the quid pro quo implied by the laws that permit corporations to exist and to operate. The paper goes on to consider how firms might respond, and isolates situations where anti-corruption policies can be profitable for firms. It concludes with an analysis of international efforts to deter transnational bribery and with suggestions for additional international initiatives.

East Meets West: Toward a Universal Ethic of Virtue for Global Business (Koehn, D., 2013) Journal of Business Ethics, vol. 116, no. 4

Abstract: Rudyard Kipling famously penned, "East is East, West is West, and never the twain shall meet." His poetic line suggests that Eastern and Western cultures are irreconcilably different and that their members engage in fundamentally incommensurable ethical practices. This paper argues that differing cultures do not necessarily operate by incommensurable moral principles. On the contrary, if we adopt a virtue ethics perspective, we discover that East and West are always meeting because their virtues share a natural basis and structure. This article sketches the rudiments of what a universal virtue ethic might look like. Such an ethic is especially relevant and valuable in this era of global business.

When ethos travel: The promise and peril of global business ethics (Donaldson, T., & Dunfee, T.W., 1999). California Management Review, vol. 41, no. 4.

Abstract: The central challenge in managing business ethics in a global economy is to navigate cross-national cultural differences. This article proposes an approach called Integrative Social Contract Theory (ISCT) in order to assist managers in avoiding the perils of both ethical relativism and global ethical uniformity. ISCT allows for tolerance without amoralism. It can be applied to help managers distinguish between those business practices that reflect legitimate differences in local customs-which must be respected -and those which violate "hypernorms" held by all cultures and organizations. Bribery generally falls into the latter category.

References

[1] https://www.worldometers.info/world-population/china-population/

[2] https://www.brookings.edu/articles/chinas-influence-on-the-global-middle-class/#:~:text=China%20is%20experiencing%20the%20fastest,of%20its%20neighbors%20like%20India

[3] https://bestdiplomats.org/why-is-it-cheaper-to-manufacture-in-china/

[4] https://edition.cnn.com/2021/04/02/business/nike-china-western-business-intl-hnk/index.html

[5] https://www.bbc.co.uk/news/extra/nz0g306v8c/china-tainted-cotton

[6] Ibid.

[7] https://www.nytimes.com/2021/04/06/business/xinjiang-china-cotton-brands.html

[8] https://www.bbc.com/news/world-asia-china-56519411

[9] Ibid.

[10] https://hmgroup.com/news/statement_hm_china/

[11] https://www.nytimes.com/2021/04/06/business/xinjiang-china-cotton-brands.html