BUS2003 Sustainability and Ethics Assignment Sample
Follow the below case study to complete the assignment -
The Chinese coffee chain, founded in 2017, described itself as "a pioneer of a technology- driven new retail model to provide coffee and other products of high quality, high affordability, and high convenience to customers". It had rapidly expanded to have more than 4,500 outlets by 2019. Luckin made false statements and fabricated its financial performance to lure in investors. Luckin failed to disclose accurate revenue and expenses, and also obtained money through false bank statements.
2. Purdue Pharma opioid marketing
Over the past 20 years, efforts have been made to hold Purdue Pharma and its owners liable for their contribution to the opioid epidemic. In a 2007 plea agreement with the United States, Purdue admitted that its marketing of the drug OxyContin was misleading and that it was addictive. Additionally, the vast majority of Purdue’s profits after 2007 resulted from its marketing of OxyContin. The wide use of opioids continued to grow, and in 2017, the U.S. Department of Health and Human Services declared the crisis a public health emergency
3. Theranos Fraud
Theranos was an American health technology company established in 2003, that claimed to have invented a device that could complete extensive blood tests with only one drop of blood. The company was not able to develop this technology properly and patients were misdiagnosed and given false test results. The founder Elizabeth Holmes misled investors and claimed much higher company profits than were achieved. She was 19 years old at the time of starting the company and was able to raise $700 million from investors. In 2022 Elizabeth Holes was found guilty of fraud and is awaiting her sentence.
4. CBS Sexual Harassment Scandal
The #MeToo movement saw millions of victims break their silence on stories of abuse, leading to convictions for some the most powerful men in politics, business and entertainment, and an improvement in sexual harassment awareness by the public. One of the largest institutions that faced widespread accusations of sexual misconduct was the American television and radio network CBS. High level players in CBS such as the CEO Les Moonves, TV anchor Charlie Rose, and executive producer Jeff Fager, lost their jobs after being accused of sexual misconduct, and a number of employees have spoken out about the company’s hostile culture.
5. Coca Cola greenwashing
Earth Island Institute filed a lawsuit against the Coca-Cola Company, the American multinational beverage corporation, for its false and deceptive portrayal as a sustainable and environmentally friendly company while in reality generating more plastic pollution than any other company in the world.
6. “996” overtime in Chinese tech companies
996’ work culture in China is the expectation in some industries, especially internet companies, that work should last from 9 am to 9 pm six days a week. Chinese company Pinduoduo took criticism for poorly handling the death of a staffer, only to face boycott calls a week later after the reported suicide of another employee. Other companies have also had deaths of young workers. Later, the Chinese Supreme People’s Court (SPC) and the Ministry of Human Resources and Social Security (MOHRSS) ruled 996 illegal, however many companies still pressure workers to follow this expectation.
7. Commonwealth bank financial planning scandal
Australia’s Commonwealth Bank customers lost hundreds of millions of dollars after financial planners put their clients' money into high-risk investments without their permission. The Senate committee looking into CBA's financial planning arm found the bank had not dealt appropriately with complaints over poor advice and alleged fraudulent practices by some of its planners.
8. Wells Fargo Fake Accounts
Wells Fargo is an American bank and financial company established in 1852. In 2016 it was revealed that the bank staff were opening additional accounts without the consent of the customers. The management of the bank had set very high sales goals for staff and many staff found the only way to meet sales targets was to create fake bank accounts. The bank fired approximately 5300 employees between 2011 and 2016 but claimed that upper management was unaware of the practices. The company faced civil and criminal suits reaching an estimated $2.7 billion by the end of 2018.
9. 3M ethical compliance
In 2021 3M was named as One of the World's Most Ethical Companies by Ethisphere Institute for 8th Consecutive Year. 3M's Code of Conduct is part of 3M's values and is a competitive advantage. It is what makes 3M's reputation as an ethical company among consumers and across many industries. 3M leaders create and promote a workplace environment where compliance and ethical business conduct are expected and encouraged by leading through example.
10. Lego sustainable materials
Three years ahead of schedule, the LEGO Group achieved its ambition to balance 100% of its energy use with energy from renewable sources. Lego then invested about $150 million in the establishment of a Sustainable Materials Center at it Danish headquarters in Billund which set more than 100 employees on the task of Lego using fully sustainable materials in its products by 2030. They aim that by 2025 all LEGO packaging will be made from renewable or recycled materials, will be made as efficiently as possible, and will be easy for consumers to recycle.
Ethics and culture are important parts of any business unit. It helps to create and build trust amongst different stakeholder groups, thus, improving longevity in competitive market share. To obligate businesses to follow ethics, not only do owners and business people establish morally obligated rules; even national and international governments have created rules for enabling individuals and businesses to follow ethics.
Through this marketing case study help , the aim is to define the importance of ethical corporate culture and its linkage with stakeholder theory. It is very important as unethical practices impact business growth and influence society. The case study will help to understand the importance of ethical practices and why the fabrication of accounts is detrimental to business as a whole. The analysis will be done by obtaining information through secondary sources by exploring literature through websites, peer-reviewed journals and others.
Financial scandals have been part of businesses and corporates for a longer time. This has created impacts on economies and societies. In the past decades, fraud in financial scandals has had disastrous consequences, resulting in huge losses for vital stakeholders like investors, creditors, and the business. Financial fraud deals with the misappropriation of accounts, assets and balance sheets which gives a fake representation of the company to investors, which in the long run will result in loss, impact on brand reputation, and criminal and legal charges (Giroux, 2013). Luckin Coffee Chain has falsified accounts, thus creating a situation of distrust amongst different stakeholder groups. The company fails to implement ethical corporate culture, which will impact the business in the long run. The company also fails to build interconnections with stakeholders, investors, customers, banks, and others.
Ethical Corporate Culture and its importance
Toms (2019) examined all the incidences of financial fraud occurring from 1720 to 2009, the paper aimed to highlight regulatory responses for implicating reporting in accounting and finances. The review suggested that all evidence related to frauds and financial scandals was skewed particularly towards banking and finance-related sectors.
Darwish & Abdeldayem (2019) aimed to study and examine the relationship between managing risks and business ethics within GCC areas. The authors highlighted that financial crises, scandals and unethical compliance of corporations had raised awareness of business ethic compliances. The study used surveys from more than 970 individuals from Gulf countries, including Bahrain, Saudi Arabia, Kuwait, Oman and UAE. The empirical findings indicated that ethics mediate strong relations with risk management and business ethics as efficient managing of different business risks is highly reliant on ethics. Thus, the evidence revealed that it is important for all managers to maintain an ethical culture that will ensure that employees follow, thus creating an ethical culture. The study also highlighted that business ethics and risk management should rely on models and frameworks that will cover all phases related to identification, assessing and solving issues of unethical ones.
In this view, humility has been increasingly recognized as one of the important attributes at all levels of employees for building successful and ethical organizations. The research focused by Cortes-Mejia, et al. (2022) on humility mediated by CEO and its impacts on collective perceptions to indulge in strategic decision making. The secondary research indicated that CEO humility influences decision-making that promotes ethical organizational culture. The secondary research was supported by survey results conducted on 120 small and medium firms. Thus, the authors highlighted that humility and strategic leadership greatly impact business ethics.
Additionally, businesses operate in a dynamic business environment requiring managers and owners to make continuous improvements to build a competitive edge. Jurcevic (2022) conducted a literature review that indicated several factors influencing the development of integrated management systems. To ensure an integrated management system, it is important to embed organizational culture with values and integrity. Quality culture is a subset of overall organizational culture, which implies acceptance of quality patterns. Thus, the article highlights the importance of organization for influencing quality working patterns in a morally and ethically way.
In another article by Asher & Wilcox (2022), financial risk management practice was explored using the vertical ethical lens. The article highlighted that managing risks should be embedded in organizational culture, building on virtue ethics, value alternatives and normative expectations. Application of virtues in organizational culture needs reflective and collaborative practice from employees at all levels, while risk culture should be developed by reviewing virtue ethics. In contemporary organizations, risk cultures could be developed with leadership cultures not constructed on monetary capital. Organizations need to recruit and retain financial managers who have developed ethical virtues, while they should not be overwhelmed with legal requirements and compliances. Developing virtue ethics becomes important during leadership and risk failure; internal ethical values help organizations conduct functions on moral and ethical grounds.
Stakeholder Theories is a branch of capitalism which puts stress on interconnected relations among the business and important stakeholder groups like customers, suppliers, employees, investors, and others (Zoghbi-Manrique-de-Lara & Viera-Armas, 2017). R. Edward Freeman developed this theory in 1984 to address moral and ethical values that should be applied when managing organizational functions. It is important to create value for each stakeholder group to cope with competition and survive all stages of the business cycle.
Kim (2022) analyzed news articles that reported South Korean firms' CSR activities. The findings revealed that companies like LG, Samsung and Hyundai had conducted CSR activities during Covid- 19. The companies rapidly identified requirements from routine business activities and responded quickly and flexibly. It was revealed that stakeholder theory was aligned with the CSR activities of those companies as they adopted agile and systematic approaches for targeting specific stakeholder groups for contributing to the creation of social values.
Valentinov & Hajdu (2021) claimed that stakeholder theories usually encompass an instrumental and normative variety, of which the relationship is very unclear. This exhibits classic tensions amongst aspects like self-interests and moral obligation. Valentinov & Hajdu (2021) developed strategies through the study for directing the classic tensions. The study's findings revealed that systematic theoretic information would reflect the functions of real-time institutions. Thus, normative and instrumental stakeholder theories reflect modern organizations' institutional structure. The practical implication of the findings is that managers should be able to adjust complexities when moral dilemmas. Hence, it becomes important for the organization to embed normative and instrumental aspects of stakeholder theory when devising strategies for ethical conduct. Although Waheed & Zhang (2022) the study created arguments that corporate social responsibility embeds three theories: legitimacy, stakeholder and institutional and others. The findings revealed that all the theories are interrelated; hence, underpinning theoretical underpinnings is important for indulging in ethically and morally binding practices.
In addition, Fernando & Lawrence (2014) explored stakeholder theory and practices by evaluating the impacts of corporate socially responsible practice, sustainable competitive performance, and ethical and cultural practices. The empirical and secondary data collection methods revealed that corporate socially responsible practice positively relates to ethical and cultural practices in countries like China and Pakistan. Thus, the findings concluded that sustainable performance of the firms could be achieved by embedding ethical, cultural practices and corporate social responsibility.
The case study chosen for this assessment is Luckin Coffee house. The Lucking Coffee Chain was established in the year 2017. The coffee chain is determined to be a technological pioneer in driving new retail models for providing high-quality and affordable products and customers' convenience. Rapidly the chain was expanded to 4500 outlets, although it had made false statements. It had fabricated its financial performance to attract investors. This failed to disclose accurate information on revenue, costs, and different sources of income. To attract investors, it forged its accounts, while it fabricated bank statements to obtain investments in its business.
To find relevant articles for this study, renowned portals like Proquest, Sage and Google scholar were used. Phrases like "the importance of ethical culture," "Stakeholder theory," and "ethical business practice" were used. The timeline from 2012 to 2022 was selected to acquire updated insights, out of which articles published from 2015 to 2022 were chosen. Each article with pdf access was chosen to allow the scholars to review the entire article through qualitative descriptive techniques. While browsing Proquest, all the relevant articles were found on the first page. Hence, the majority of the information was selected from this portal. Other portals like Google Scholar and Sage were also used for collecting information on the topic.
The articles were selected on their publication date, covered concepts, and linked with the topic. More than 20 articles were searched for literature review, although only 12 could be used within the study.
Case Findings and Recommendations
Ethical conducts are an important part of any organization as it impacts related businesses, employees and important stakeholder groups. The case study revealed that Lucking Coffee had forged its income and bank statement to secure money from the stakeholders. It has highlighted underlying factors like lack of ethical organizational culture, issues while managing ethical dilemmas and false targeting of the stakeholder group.
Firstly, literature identified that fraudulent activities and financial scandals had increased worldwide in 10 years. This suggests a lack of ethical climate within the organizations. Ethical and moral dilemmas of employees at all levels are guided through strong organizational norms and inspirational examples from top management. In the case of the scandal of Luckin Coffee Chains, it is evident that the organization of more than 4000 stores lacks strong organizational norms, due to which employees in the accounts department were encouraged to forge income and bank statements. It might also be the case if they are encouraged and ordered by senior authorities to misguide the stakeholders through enhanced profits and fake disclosure of financial accounts. In addition, the company lacked employees with strong eternal virtue for ethics. Hence they did not protest the management team that persuaded them to follow unethical conduct.
Darwish & Abdeldayem (2019) highlighted strong relations between risk management and business ethics. Thus, the case study reveals that the coffee chain giant lacked proper risk management techniques, which impacted following ethical conduct while managing operations and seeking investments. By forging the revenue and income statement, Luckin Coffee house created a higher risk for the business by adopting unethical practices for seeking investment to support its business. Since the document produced for the investors were forged, the business could fall into serious legal charges and penalties. Also, distrust amongst the investor stakeholder group would impact its future investments and influence its survival and expansion strategies. The legal litigations would impact its brand reputation, thus impacting its capability to attract a customer base. Since the CEO did not mediate ethical behavioural patterns, the employees lacked moral persuasion to produce a report on forged data.
In addition, the company lacked CSR responsibilities, impacting its target of stakeholder groups. As Waheed & Zhang (2022) evidenced that CSR and stakeholder theories are interconnected. Besides stakeholder theories. This statement was further evidenced by Fernando & Lawrence (2014), who argued that corporate socially responsible practice is positively related to ethical and cultural practice. Stakeholder theory reveals that organizations operate ethically and morally to create values for different stakeholder groups. The company failed to apply underlying principles of stakeholder theory. By forging the documents and misrepresenting the figures, Lucking Coffee house did not aim to create value for its investor stakeholder groups, as the company's poor financial performance would result in losses for all.
Lucking Coffee House has adopted unethical practices for conducting business which will impact its business growth in the long- run. The unethical practices will impact stakeholder relations, backed by a lack of ethical corporate culture. The literature has evidenced that ethical culture is important for long-term business growth while adopting CSR practices enables the companies to create value for stakeholders, fulfilling underlying principles of stakeholder theory.
Luckin Coffee House needs to embed ethical corporate culture. Thus, the CEO and top management are recommended to enrol in training and mentoring session, which will provide insights on the importance of business ethics. The sessions will help modify the perceptions of unethical practice, enabling the senior team to establish ethical culture by setting examples for themselves.
The organization is recommended to develop strong operating procedures requiring each employee to abide by ethical and moral conduct of the responsibilities strictly. External auditors should develop the store operating procedures to reduce any biasness while recording figures or performing any financial activity (Zoghbi-Manrique-de-Lara & Viera-Armas, 2017).
Luckin Coffee House is recommended to employ technological tools for recording all the transactions without manual interferences. One software type for recording, managing, and sharing financial data should be used across all 4500 stores to maintain ethics and the same accounting principles. The updates on the financial position of the company should be updated with important stakeholder groups frequently. This will help to embed on transparency principle.
Also, it is recommended to Lucking Coffee House that underlying principles of corporate social responsibility should be embedded within the operational fronts to follow ethical conduct. This will include inviting external and independent auditors to validate the ethical and moral conduct of the operations (Kleyn et al., 2012). All the directors should be independent, thus following the transparency principle under CSR activities. Since CSR and stakeholder theory are interlinked, it will help to create value for specific and general stakeholder groups.
Luckin Coffee House requires ethical culture; hence, it is recommended that employee meetings should be conducted frequently. The meetings would include communication of ethical expectations, deployment of punishment and rewards on such behavioural patterns, and creating perceptions to follow ethical conduct when faced with dilemmas. Ethical training programs should be established through seminars, workshops and others for all employees.
Luckin Coffee house was founded in 2017 to provide good quality and affordable coffee to its clients. Despite a huge expansion of more than 4000 stores across the region, the company failed to meet stakeholder expectations and adopted unethical means of raising funds. The literature discussed that underlying factors of unethical conduct are lack of ethical corporate culture, risk management techniques and reduced application of stakeholder theory. It is recommended that Lucking Coffee house undertake steps for improving ethical and moral compliance through offering ethical training, conducting external audits and deeming all the board of directors independent. It is also recommended that Luckin Coffee House should use strategic options for acquiring profits and meeting stakeholder requirement which will reduce the impetus of unethical conduct.
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