Ethics in business involve an organization’s duties and obligations to its stakeholders, for example, suppliers, customers, employees, and communities. Companies take measures to improve ethical compliance in business dealings. However, certifications, such as the “fair trade” help protect farmers from exploitation by companies, which might hinder the realization of some stakeholder goals. The fair trade-certification model pays farmers an above-market fair trade price to empower them and boost the sustainable development of their produce (Marconi et al., 2017). In a case whereby a coffee distributor is notified of its suppliers who are unfairly compensating the small bean farmers of their crop, it is important that the company design the most ethical way to ensure that the farmers get value for their crops.
Ethical Approach
The ethical approach that would guide the actions of the U.S.-based coffee distributor is the consequentialist approach of act utilitarianism. Act utilitarianism involves making ethical decisions based on the consequences of one’s actions (Smart, 2020). It entails weighing the good and bad and opting for the best action that produces the most good or does the least harm. A business exists to meet the goals of its stakeholders for it to stay afloat. Therefore, its actions will be right if most of the stakeholders are happy (Smart, 2020).
According to act utilitarianism, humans are rational and rational behavior involves value maximization (Smart, 2020). A business aims to maximize profits, thus ethical business practice involves profit maximization. Since the aim of the business is to make profits to meet the objectives of the stakeholders and the “fair trade” certified beans are more expensive and increase overall import costs, the company has been forced to use cheaper suppliers who have access to competitive coffee bean crops.
Considerations to Influence Decision
Following the labor group’s concern, the U.S.-based coffee distributor would consider financial, operational, and ethical issues to decide on what to do next. The financial considerations would be based on the cost-benefit analysis which involves scrutinizing the potential rewards from using the cheap local suppliers and opting for the more expensive “fair trade” certified coffee beans (Mishan, & Quah, 2020). The company would decide on the option that maximizes the happiness of the most of the stakeholders while ensuring that the farmers get value for their produce.
The operational considerations would involve the best strategies to reduce costs by decreasing direct costs and stock control to ensure the business does not run at a loss. It would be important to ensure that the right suppliers are selected for the business and negotiate for better prices to maximize profits. Further, it is the duty of distributor’s managers to ensure that the organization follows ethical behaviors and practices. There is a need to create an ethical climate to address the issues of the farmers with smaller operations.
Explanation to the International Labor Group
The company would explain to the international labor group that it uses the local middlemen to access coffee bean crops that competitors cannot. However, it should make it clear that it will craft a code of ethics for middlemen to follow when compensating the small bean farmers for their crops. The code would help ensure that the farmers are compensated fairly at a price that is reasonable to every party involved. The farmers must not suffer loss for their produce while the middlemen should not exploit the farmers. Since farmers have access to fluctuations in coffee prices on their cell phones, this would compel the middlemen to pay fair prices for the coffee bean.
Conclusion
The business dealings of the company would be based on the principles of act utilitarianism, which seeks to maximize the value for most of the business stakeholders. Since the law demands that managers should serve the interest of a company’s stakeholders, it is important that the company come up with a code of ethics for suppliers of the coffee bean to ensure that the middlemen do not exploit the farmers.
References
Marconi, N. G., Hooker, N. H., & DiMarcello III, N. (2017). What’s in a name? The impact of “fair trade” claims on product price. Agribusiness, 33(2), 160-174.
Mishan, E. J., & Quah, E. (2020). Cost-benefit analysis. Routledge.
Smart, J. J. (2020). Utilitarianism and its applications. In New directions in Ethics (pp. 24-41). Routledge.
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