The Possible Impacts of Developing Tea For All Ltd as an Ethical Organization - Term Paper Example

Business Ethics Introduction of ethics is extremely important for the growth of a company. Business ethics can be defined as principles and standards that determine the level of acceptable conduct in a business organization. A company is not only responsible for the amount of financial revenue it generates, but also for maximizing its positive impacts and minimizing the negative ones (Ferrell and Fraedrich, 2014). Adherence to the code of conduct contributes towards competitive advantage of the company and provides it with an edge over competitors. The purpose of this project is to show the possible impacts of developing Tea For All Ltd as an ethical organization and also, to realize its impact on the environment, fair trading and employee relationships of the company. The project also evaluates the code of conduct, which has been followed by Starbucks in dealing with its business partners. This is because Starbucks is the leading coffee shop company in the world, with a spectacular scale of operation. The ways through which Starbucks can improve its ethical operations have also been highlighted. The final segment of the project discusses possible ways of implementation of the code of conduct of Starbucks on Tea For All Ltd. Tea for All Ltd Tea for All Ltd. is a tea producing and supplying company, which wishes to emphasize on code of ethics for establishing itself as one of the successful global companies. This essay discusses the advantages and disadvantages that can be faced by the company, if it wants to position itself as an ethical organization. The first and foremost argument that can be put forward for establishing the company as an ethical organization is the fact that it will provide the company with a competitive advantage over the competitors. Ethical leadership can facilitate good business leadership in the company. The research conducted by James A. Mitchell shows that companies with an ethical advantage demonstrate better financial performance than those without it (Mitchell, 2001). The advantages of using a sound ethical code of conduct, as far as the environment, trading practices and workplace relationships are concerned, are highlighted below. Environment The ethical objective of the company is to reduce its adverse impact on the environment as much as possible. The problem of the company is that it involves extensive farming techniques which can have corrosive action on the soil and wastage of water Organizational culture can develop in the best way, only if business ethics is situated in the heart of the organization (Frederickson and Ghere, 2005). The options to overcome the problems are: Giving priority to interests of the shareholders. Leadership effectiveness, which expresses the mission and values of the company through actions of the top management. The ethical stances can be deeply ingrained in the organization, only if lower and middle level managers follow the code set by the top management. Ethical leadership is not a sufficient condition to create a successful business venture, but it is definitely a necessary one (Mitchell, 2001). The corporate strategy followed by a company will be less flawed, if shareholders are given importance and their problems are heard. The key stakeholders of the company include the customers, employees, owners and community at large. It is only when interests of this group are balanced perfectly, that the company can perform best. Ethical organizations always stand out from the competitors. The concept of environmental ethics is based on the idea of social and personal ethics. This ethical consideration is essential for Tea for All Ltd because the company will deal with the tea producers as well as suppliers of the products. This implies that the company will deal with wide range of tea farmers and therefore, their welfare should be kept in mind. This will involve the way in which the company treats its suppliers. The biggest impact of environmental ethical consideration is that it extends the concept of shareholders in order to include future generation as well as natural elements. This makes the natural environment an active participant in the production process (ETFP, 2010). The method of implementation of the ethical decisions is: Monitoring and certification: This will enable tea producers to meet the international standards, which can help to improve the workers’ lives, those working on tea plantations, thereby impacting both the social and environmental provisions. The social provisions include health and safety, abolition of child labor, reasonable wages and benefits and no working hour discrimination. The environmental provisions would include measures like, improvement of the working conditions of estates, soil conservation techniques, water conservation and optimum energy use. All these measures will positively contribute towards interest of the shareholders and endow the company with ethical leadership. Producer support: This includes offering producers with training programs, so that they can improve on-site health and working conditions. The families of the producers should be provided with facilities, like, education of their children and certain health benefits. Strategic sustainability: Tea production is highly sensitive to global climatic changes and social development. In order to handle this issue, the company needs to make sure that these changes should be minimized to the greatest possible extent. This is a necessary condition to make the production of tea sustainable (Santa Clara University, 2014). The impact on the shareholders in this case the soil, water (natural environment), the producers, suppliers and the community at large is that The soil would be conserved which will help in conservation of earth. The quality of life of the producers will improve. The customers will be able to consume products that are eco friendly. The whole community will be better off. Bio diversity will be promoted. Trading fairly The objective of the company for trading fairly is that it wants to provide maximum benefits to the all the stakeholders. The way by which the company can do this is to produce its products in an environment friendly manner. If Tea for All Ltd chooses to consider both ethical and environmental impact of their business, then it will result in fair trading by the company in a number of ways. The impact on the stakeholders is: To build a strong base of customers, who base their purchasing decisions on factors involving more than financial variables. Opens new avenues of investment from investors, who are ethically motivated. The loyalty of workers can be extremely beneficial for building a robust group of producers, who remain respectful to the company and dedicate themselves towards producing finest quality of tea. The confidence of consumers is greatly restored if the company uses ethical trading practices in the supply chain. Workplace Relationships The ethical objective of the company is to create cooperation and development among all its employees. The way to implement this is to create a work environment in the company which will allow all the workers to work freely by sharing their knowledge and taking part in the major decisions of the organization. The workplace relationships are highly altered if organizations follow an ethical code of conduct. This not only improves productivity of the company, but also enhances human relations system. Ethical code of conduct is strongly linked to career skills, self-direction and accountability (Dalton, Hoyle and Watts, 2010). The reach of Tea for All Ltd. goes beyond the corporate office and affects lives of thousands who are associated with it. The impacts can be on the stakeholders as: Producer support can lead to a loyal group of producers producing finest quality products. The health and education benefits provided to the workers improve their productivity level. The coordination between the top management and medium and lower level managers, employees and producers results in formation of a strong human capital, that is required for the growth of any company. A loyal and efficient workforce raises productivity and efficiency of a company. The only disadvantage that can be faced by a company, while trying to become an ethical organization, is the fact that the liberty to maximize its profits gets limited and the company is constrained by external variables, other than the financial ones. This is, however, only restricted to the short-run. In the long run, this situation will not persist and the company can reap the benefits of following an ethical code of conduct. Managers are sometimes driven by the incentive of making profits in the short run, thereby letting the long run opportunities go. But this can only undermine performance of the company in the long-run and therefore, it is wise to adhere to the code of conduct. Advantages and Disadvantages of tea supply The advantages include: Adding value to the supply chain. Potential of impacting the quality of life of the suppliers beyond the business. Improving the system of eco-friendly agriculture. The disadvantages include: The variation of labor laws in the tea growing region. The legal and the political issues that may be faced by the company in obtaining tea from supplier country. The unfavorable taxation policy of the government. Ethics and Starbucks Starbucks is the largest coffeehouse company in the world with stores operating in multiple countries. Ethical issues play a significant part in a company of such a magnitude. Starbucks has realized the importance of ethics for the well-being of an organization and has, since its inception, been trying to incorporate ethical stances into corporate strategies. In 1998, the company started to pay a premium above the market price and donated proceeds obtained from it for improving lives of the coffee workers. This program was a part of the larger plan, “Framework for Action”, which was put up to implement the code of conduct in 1995. The implementation of the fair trade program, by 2004, had greatly helped farmers, trading with the company, to attain a sustainable way of living. Starbucks Fair Trade Certification program helped to improve income of the farmers and the company continued to pay the premium to these farmers. The supplier code of conduct implemented by the company has also been effective in making suppliers comply with the code of conduct of Starbucks; in order to become a preferred supplier for the company (Carroll and Buchholtz, 2008). Compliance to the code of conduct becomes a necessity for new suppliers, who desire to establish a business with Starbucks. Despite best efforts, the company has often come under huge criticism that it has been using unethical practices, while purchasing coffee from third world countries. Ethical consumer magazine has voted the company as the most unethical in business, most of it directed towards its operations in America. The company was also blamed for serving genetically engineered growth hormone in milk in the US and blocking improvement of livelihood of the farmers working in Ethiopia (Christopher, 2012). Practices of the company Starbucks is a company that has actively propagated a strong code of conduct, in terms of product quality, economic accountability, social responsibility, and environmental leadership. The company has, over the years, tried to develop its corporate social responsibility by implementing various measures in its corporate strategy: Firstly, the company has made huge donations for a wide variety of social causes and charitable works to improve lives of the workers associated with it. This is not difficult for the company, considering the economies of scale enjoyed by it in its wide scale of operation. The revenue earned by the company has been effectively utilized for developing the ethical perspective. Secondly, human resource strategy of the company has also been quite successful in promoting well-being of the employees and this has allowed it to develop a productive workforce with high retention rates. Thirdly, the company has attached itself with social works, like, helping coffee farmers of Mexico and Guatemala, after the occurrence of Hurricane Stan in 2005 (Robbins and Coulter, 2008). Finally, Starbucks has made the top level management with financial responsibilities sign the “Code of Ethics”, which will enable these employees to balance, protect and preserve interests of the shareholders. This also plays an integral part in boosting the interest of investors of the company, thereby propelling organizational growth. Ways to improve Firstly, the company should try to clear its name from allegations that it has faced regarding use of genetically modified milk as well as violations of labor law in Ethiopia. The company should immediately launch a social program in Ethiopia so as to improve conditions of coffee farmers in the country. Secondly, the company can enroll under the organic certification program, apart from the existing Fairtrade certified program. International Federation of Organic Agriculture Movements (IFOAM) is the organization that guides with the basic standards, which should be considered as a baseline reference standard for organic agriculture worldwide. This can be achieved through biodiversity preservation, soil and water conservation as well as prohibition of clearing primary ecosystems and use of genetically modified organisms, to name a few. Thirdly, the company has already taken initiatives to improve the rainforest in its effort to promote biodiversity. However, it can improve this program by following guidelines of the SMBC “Bird friendly” project. This propagates the cultivation of coffee that is economically, environmentally and socio-culturally viable. These coffee plantations are home to a wide variety of species and a hub of biodiversity. Fourthly, the use of UTZ certified crop producers can also better Starbucks’ ethical code of conduct, given that adherence to these ensures minimized and documented use of agrochemicals for crop protection, protection of labor rights, access to health care and education for employees and their families. Implications of Research and Conclusion This study suggested that Starbucks has been extensively incorporating ethical standards into its corporate strategy for achieving the business goals. The strategy has been extremely advantageous for the company as it has been able to build a strong image of its brand. Starbucks has been greatly successful in creating a loyal group of suppliers, who provides competitive advantage to the company. Starbucks has engaged itself in societal and environmental parameters in order to create value for its suppliers. This has become essential because operations of large scale companies affect a number of economic agents. Starbucks has realized fast that in order to place itself ahead of the competitors, the key to success lies in improving lives of the people who are associated with the system. Using this background, a similar impact on Tea for All Ltd. has been estimated, along with the possible advantages that can be enjoyed by the company by implementing ethical code of conduct. The paper also focuses on the few improvements, which can be made by the company in issues related to ethics. The recent allegations on Starbucks, regarding unethical behavior, has maligned the brand’s image and tinted its reputation. This clearly implies that for establishing itself ahead of its competitors, Tea for All Ltd must adopt the ethical code. Implementation of the model of Starbucks can be quite useful for Tea for All Ltd. Reference List Carroll, A. and Buchholtz, A., 2008. Business and society: Ethics and stakeholder management. Connecticut: Cengage Learning. Christopher, E. M., 2012. International management: Explorations across cultures. London: Kogan Page Publishers. Dalton, M., Hoyle, D. and Watts, M., 2010. Human relations. Connecticut: Cengage Learning. ETFP, 2010. Assuring Consumer Confidence in Ethical Trade. [pdf] ETFP. Available at: [Accessed 11 February 2014]. Ferrell, O. C. and Fraedrich, J., 2014. Business ethics: Ethical decision making & cases. Connecticut: Cengage Learning. Frederickson, H. G. and Ghere, R. K., 2005. Ethics in public management. New York: M.E. Sharpe. Mitchell, J. A., 2001. The ethical advantage. [pdf] Centre for Ethical Business Cultures. Available at: [Accessed 11 February 2014]. Robbins, S. P. and Coulter, M., 2008. Management. New Delhi: Pearson Education India. 3 Santa Clara University, 2014. Who, When, Where and How: The Distinctiveness of Environmental Ethics. [online] Available at: [Accessed 11 February 2014]. 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