Ethics, corporate social responsibility and global outsourcing: MedClean Ltd Company - Research Paper Example

?ETHICS, CSR AND GLOBAL OUTSOURCING ID number Unit Unit of Submitted TABLE OF CONTENTS ETHICS, CSR ANDGLOBAL OUTSOURCING 1 TABLE OF CONTENTS 2 2 EXECUTIVE SUMMARY 3 INTRODUCTION 4 ETHICS AND CORPORATE SOCIAL RESPONSIBILITY 4 Corporate Social Responsibility: Definition 4 Corporate Social Responsibility Activities 5 CSR Assessment Criteria 6 Importance of Ethical Practice and CSR 6 CSR AND GLOBAL OUTSOURCING 7 Definition 7 Reasons for Global Outsourcing 8 Achievement of CSR in Global Outsourcing 9 Global Business Ethics in Outsourcing 10 Measurement of CSR in Global Outsourcing 11 CONCLUSION 12 RECOMMENDATIONS 13 References 13 EXECUTIVE SUMMARY Ethical business practice contributes to the adherence of a company to its corporate social responsibility. A company which is compliant to its corporate social responsibility upholds social values in its goals and in activities such as philanthropic funding and ethical operations which adheres to the legal and environmental regulations of the host country. The assessment of CSR compliance is made possible through the working environment of the manufacturing premises. The reputation of a company within the local and international environment and its standard certification is also used to measure the compliance of ethics and corporate social responsibility. Ethical practice is important in CSR of a company because compliance to CSR does not guarantee that ethical practice is valued. Global outsourcing enables a company to extend its operations into the international market and allows it to enjoy the advantages associated with internationalization. Through global outsourcing a company is enabled to reduce the manufacturing cost and the costs related with compensation of staff. Moreover, through global outsourcing a company is allowed to compete favorably in international business in addition to expanding its market share into international market. An important consideration in global outsourcing is the adherence of the social values of the community in which the company and its global partners operate as a way of ensuring that business ethics and CSR are upheld by a manufacturing company. INTRODUCTION Corporate social responsibility determines the perception of the community on a manufacturing company which determines its success in business operations. Activities a company which demonstrates its compliance to business ethics and CSR such as philanthropic funding and environmental friendliness are described as performance beyond expectation which builds the reputation of a company. Global outsourcing of a company which reduces manufacturing costs is usually successful if it incorporates ethics and CSR. This paper presents a report of critical analysis of the corporate social responsibility of MedClean Ltd Company, which is a manufacturing company in vacuum cleaners for the medical industry and hospitals. The decision of the company to venture into global outsourcing is also discussed in this paper which leads to the recommendations for the best business practices of the company as a tool for success in the achievement of goals and objectives. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility: Definition Corporate social responsibility is defined by Hemphill (2004, p. 62) as a group of processes through which companies and business organizations negotiate the responsibilities and roles that they play within the society in which they operate. Ethics is a component of CSR and it represents actions and decisions of a company which affect the perception of the community on its business operations. According to Kleinrichert (2008, p. 475), ethics represents a group of appropriate actions which demonstrates morality of a company. Ethical business operation therefore includes correct decisions on how business activities are to be done as a measure of avoiding adverse effects of business operations on the surrounding community. Palugod & Palugod (2011, p. 14) explain that CSR and ethical business operation are interrelated concepts and they are usually linked. However companies may participate in CSR activities but exhibit non ethical business functioning. Therefore the corporate social responsibility of a company does not guarantee that its business activities will be conducted in an ethical manner. In line with these arguments, MedClean Ltd Company should ensure that its CSR is interlinked with ethical practice in manufacturing vacuum cleaners for the medical industries across the world. Corporate Social Responsibility Activities The activities which comprise of corporate social responsibility include engagement of a company in philanthropic activities such as funding social work. The company should more than its business activities through promoting social work. For example the company can engage in promoting community health through funding of campaigns against the spread of diseases such as HIV/AIDS. Through provision of the best business practices through ethical management of business activities a company is considered as serving its social responsibility well as explained by Aggarwal (2011, p. 142). Within the company’s objectives, social values must be upheld. More importantly, a company must comply with the legal framework and the legal requirements of the country of its operation. This means that a company must ensure that all its business activities are legally binding. According to Ruud and Ruud (2011, p. 7) the compliance of a company to its corporate social responsibility if demonstrated through activities which balance the need to maximize profits with social values within the society in which it operates. MedClean Ltd Company should therefore integrate its business goals with social objectives so that it can be able to adhere to its corporate social responsibilities. CSR Assessment Criteria The corporate social responsibility of a company is rated in relation with its social behavior and responsibility to the community. Rao (2008) asserts that the working environment within a company must be good because it acts as a criterion of rating or evaluating the corporate social responsibility of the company. This means that the MedClean Ltd Company must provide good working conditions for the human capital within its manufacturing plants. A good working environment means that all workers are free from the dangers associated with the manufacturing of goods. The working environment within the manufacturing firm of the company should thus be motivating to the employees. The workers of a company who are usually drawn from the community of a company’s operation determine the perception of the community of the company. Van (2009) emphasizes that the social responsibility of a company involves treating the employees well by ensuring that they work during appropriate hours and around appropriate environment. According to Oshri, Kotlarsky and Willcocks (2009), the reputation of the company is a criterion which is used in the assessment of its social responsibility and ethical operation of its business activities. This means that the adherence of MedClean Ltd Company to its social and corporate responsibility because it will give it a good reputation. Importance of Ethical Practice and CSR Hemphill (2004, p. 68) asserts that CSR activities which a company is expected to undertake are important because they determine the success of the company in managing its staff. Through proper ethical practice in the manufacturing activities, the company is able to hire and retain its staff. Non ethical behavior and mistreatment of workers through poor compensation means that they are likely to be taken by the competing firms. The adherence of business ethics contributes to the promotion of the reputation of a company. To achieve business success through increased market share and profits, the company should thus adhere to its corporate responsibilities. Through a good reputation, the company will be able to receive more orders for its products and expand its market into international environment. Additionally the suppliers of raw materials for the company are likely to be influenced by the company’s reputation. Ruud & Ruud (2011, p. 7) explain that through a good reputation which is a product of adherence to ethics and social responsibility, a manufacturing company is guaranteed a constant supply of raw materials. Furthermore, poor reputation which results from non ethical practice and disregard of the corporate social responsibility may cause legal action of the governing authority against the company. In general the business performance is promoted by the corporate social responsibility activities. CSR AND GLOBAL OUTSOURCING Definition Global outsourcing is the extraction of a company’s business functions from other parts of the world as defined by Wettsein (2010). In global outsourcing a company enters into a contractual agreement with an overseas firm to manufacture or supply specific goods or services on its behalf at an agreed cost. The decision of MedClean Ltd Company to outsource its manufacturing function from foreign firms means that it must integrate its corporate social responsibility into the global environment for success. According to Chen, Tu and Lin (2002, p. 102), the integration of a company’s CSR into a global scale means that its social values must be included in the global outsourcing agreement. This is made possible through incorporating a company’s values into its international operations. Reasons for Global Outsourcing In accordance to Wettsein (2010), global outsourcing reduces the manufacturing of a company. The production costs are associated with the proximity of global partners to the raw materials of manufacturing various goods. Therefore by engaging in global outsourcing, MedClean Ltd Company will maximize profits through reduced cost of manufacturing. However it is important to note that the profits of the company may crush if the operations of its global partners do not follow the ethics of business practice. Moreover, lack of consideration and adherence to the corporate social values may lead to losses to the company regardless of the reduced cost of production in global outsourcing. Trough global outsourcing, a company is able to make use of human expertise within the partnering company and thus reduce the expenses of hiring new staff of its own. In addition, the legal obligation of a company for the staff of a global partner is not binding. As long as there is a contractual agreement with a global manufacturing company, the outsourcing firm is not responsible for business operations of the partner. On the other hand Rao (2008) argues that a global outsourcing company must ensure that the social values are adhered to by its global partners. This responsibility should be included in the contractual agreement between the company and its international partners. Global outsourcing means that a company has expanded into the international market. The global partners manufacture goods which are sold within their host country and as such the outsourcing company is allowed to compete with other companies in the world. The participation of a company in the global economy and the advantages associated with international expansion are enjoyed by a company through global outsourcing. According to Aggarwal (2011, p. 149), global outsourcing should include adherence of the legal business practices of a company and its partners to laws on issues such as environmental conservation and labor. MedClean Ltd Company should thus enjoy the advantages of global outsourcing but its decisions of expanding into the international market must not supersede its social values within the community its business activities and those of the partners are run. Achievement of CSR in Global Outsourcing The outsourcing partnerships of a CSR adherent company must be made with companies or firms that share the same values. Hall (2007, p. 7) explains that the global manufacturing partners of a company influence its image. Therefore if a company’s global partners do not share its social values in within the regions of their operations, it means that the bad reputation which result from unethical business practices will also affect its success. Ruud and Ruud (2011, p. 7) assert that for a company to achieve corporate social responsibility in global outsourcing, it must engage with all its stakeholders. This includes both primary and secondary stakeholders within the countries where its partners operate. The stakeholders of a manufacturing firm include the community, the government, suppliers, distributors and customers. MedClean Ltd Company must engage with Hospitals and all other medical industries who are its customers for its industrial vacuum pumps. Ethical and social responsibility should be practiced by the company in conjunction with the medical centers into its supplies its products. The engagement of the company with the medical industry means that environmental friendliness is practiced in the use of the vacuum cleaners in addition to provision of safe working environment for the cleaning staff. Rao (2008) explains that a company which is engaged in global partnering should ensure that it adheres to its social values regardless of its country of operation. The manufacturing partners of MedClean Ltd Company should therefore be monitored to ensure that the manufacture safe and environmentally friendly vacuum cleaners. This demonstrates that the company is engaged in global upholding of the social values. Additionally, the legal framework on business and manufacturing of the company’s goods must be adhered to by its international partners. To preserve its reputation, MedClean Ltd Company must therefore withdraw partnership with international manufactures of vacuum cleaners that operate against the legal policies of the country of their operation. Global Business Ethics in Outsourcing According to Chen, Tu and Lin (2002, p. 108), the development of business ethics in the international business operations is essential because a corporate social responsibility of a company with global partnership depends on ethical practice for success. The social values may vary from one region to another. Therefore business ethics must be considerate of the community in which a company performs its business activities. For example the social values of the role of gender in the manufacturing activities may vary from one region to another. As a result a company must consider the ability of its global partners in adhering to the social values of the community before approving the partnership. The management of a manufacturing farm influences the ethical practice and thus the social ethics as part of social corporate responsibility of the company must be initiates and implemented by the management. The outsourcing management of MedClean Ltd Company should thus put due consideration of the ethics of managing suppliers and distributors within various regions of the world. The necessity of ethical management is demonstrated by the importance of good management in the success of a company. It is the management who define the working conditions of its workers and waste disposal methods. Poor social ethics such as disregard of the community’s needs would lead to a poor perception of a company and non acceptance by the surrounding community. The consequences of lack of ethical practice include legal action against the company by members of the community or government intervention which may take the form of nullification of the operation license. Oshri, Kotlarsky and Willcocks (2009) say that in global outsourcing the context of ethics is evolving in that the ethics of various manufacturing companies in the world are not shared. Therefore a company should assume that the basics ethical values are the same across the world. This assumption will not allow an outsourcing company to adapt non ethical practices of its potential business partners. However the relative nature of ethical practice in business should enable a company to adapt to the values which communities within its partnering operations are run. Such values include the management of employees and the relationship of the company with the community and the governing councils. Hall (2007, p. 5) explains that an integrative ethical approach in global outsourcing is the most appropriate way of ensuring that best practices are upheld in the business activities. In its decisions of outsourcing manufacturing from global partners, MedClean Ltd Company should thus integrate its social values with those of its partners so that its corporate social responsibility is adhered to. In return the reputation of the company in the global vacuum cleaner manufacture will grow and thus enable the company to gain a larger market share in the international business in addition to enhancement of its competitiveness. Measurement of CSR in Global Outsourcing The evaluation of a company to determine its compliance with the CSR in its global outsourcing venture is through international standardization as explained by Palugod & Palugod (2011, p. 13). Programs which certify organizations such as the International Standards Organization (ISO) are important in determining whether a company meets its social and ethical responsibilities. Therefore MedClean Ltd Company should maintain its stand in the adherence of ethical practice and its corporate social responsibility so that it can attain international standard certification by ISO. The certification of the company’s manufacturing activities means that it meets the required standards in production of quality. As a result of standard certification, the company will be credible and reputable which will significantly boost its success. The professional codes of the manufacturing company must be followed by the company and will reflect its compliance with its corporate social responsibility. The company should thus partner with manufacturing firms that follow the codes of professional conduct in the countries of their operation. Global outsourcing of a company means that it has to adopt the global codes of business practice because it is this ability which measures its adherence to its CSR. As a result of international standardization and proper code of conduct, a company will be accepted in the communities in which it operates and that of its partners and hence acting as an accurate measure of compliance to its corporate social responsibility. CONCLUSION The corporate social responsibility and ethical practice of a company are essential in the achievement of its business goals and success of the business. Through CSR activities the reputation of a company is enhanced and acceptance in the community is made possible. The advantages of global outsourcing such as reduced cost of manufacturing and international growth encourage companies to make global partners. In the global outsourcing, the social values of a company should not be ignored because they represent its compliance to its social corporate responsibility which is measured by international certification of business standards. RECOMMENDATIONS MedClean Ltd Company should adhere to the ethics of business practice and its social corporate responsibility to enhance its reputation within the local and international economic society. This will be made possible through CSR activities, good working environment and compliance to the environmental friendly activities in addition to the adherence to the legal framework of the governing authorities. The advantages of global outsourcing should motivate the company to engage with partners in the global vacuum cleaner manufacturing. However, the benefits of the global outsourcing should not make the company ignore its corporate social responsibilities. The contractual agreement of the company with its global partners should provide for adherence to the social values of business practice. This will be a way of enabling the company to be internationally reputed and thus its market share and compete favorably with rival firms across the world. References Aggarwal, S 2011, 'Corporate Governance, Social Responsibility and Business Ethics', Journal of Business & Retail Management Research, 5, 2, pp. 142-153 Chen, Q., Tu, Q. & Lin, B. 2002, "Global it/is outsourcing: Expectations, considerations and implications", Advances in Competitiveness Research, vol. 10, no. 1, pp. 100-111 Hall, D 2007, Business ethics and corporate social responsibility. Teaching Business & Economics, 11(2), 5-7 Hemphill, T.A 2004, "Global outsourcing: effective functional strategy or deficient corporate governance?” Corporate Governance, vol. 4, no. 4, pp. 62-68 Kleinrichert, D 2008, Ethics, power and communities: Corporate social responsibility revisited. Journal of Business Ethics, 78(3), 475-485 Oshri, I, Kotlarsky, J, & Willcocks, L 2009, Handbook of Global Outsourcing and Offshoring, Palgrave Macmillan (UK) Palugod, N, & Palugod, P 2011, 'Global Trends in Offshoring and Outsourcing', International Journal of Business & Social Science, 2, 16, pp. 13-19 Ruud, J, & Ruud, W 2011, 'Law and ethics: society and corporate social responsibility: is the focus shifting?’ Journal of Academic & Business Ethics, 4, pp. 1-31 Rao, A.N 2008, Global outsourcing relationships: Testing the effects of culture and market pressures on outsourcing performance, University of California, Irvine Van A. P 2009, "Global Outsourcing", Pharmaceutical Technology, no. 15432521, pp. S26-S26 Wettsein, F 2010, 'For Better or For Worse: Corporate Responsibility Beyond "Do No Harm"', Business Ethics Quarterly, 20, 2, pp. 275-283 Read More