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ethical enterprise

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Ethical enterprise development

Ethical enterprise development is essential to ensuring that economic development meets the challenges of poverty elimination, equity and human rights and environmental sustainability.

Ethical concerns are now espoused by most donor agencies as part of the agenda for pro-poor growth.

Most large companies, including Transnational Enterprises now have corporate ethical policies of some sort. International movements of NGOs and civil society have grown rapidly with improvements in electronic communication enabling rapid exchange of information and media publicity. Some companies are also developing a pro-active approach to developing consumer products which can benefit poor people.


rise of ethical enterprise

Ethical business principles have a long history and are by no means a Northern invention. They have been advocated by most major religions, including Islam, Hinduism and Buddhism as well as Christianity. In many cultures it is market individualism rather than ethical principles which are seen as external Northern impositions. There is also a long history of charitable or philanthropic activities by mainstream businesses, for example the work by the Rowntree Foundation in Britain and the Tata Institute in India since the early Twentieth Century. Many of the large US-based multinationals started with philanthropic and social goals.

Ethical principles have further developed since the beginning of the twentieth century through grassroots struggles, trade union organisations, the international co-operative movement, indigenous philanthropy and national movements like the anti-colonial struggle in India led by Mahatma Gandhi. All of these have seen themselves in various ways as champions of human rights and poverty elimination through alternative forms of enterprise development. These have contributed to the development of international conventions through the International Labour Organization.

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Why ethical enterprise?

  • ethical enterprise practice is a moral responsibility in meeting international human rights and environmental standards and agreements.
  • there are positive market opportunities from brand respectability, producing green products and those needed by poor people.
  • bad ethical practice is also bad management leading to high levels of staff turnover and lower productivity.
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Cooperative Development

Co-operatives are widely seen as a key example of ethical enterprise. The Internation Cooperative Alliance defines a cooperative as 'an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise'. Co-operatives are based on the values of self-help, self-responsibility , democracy, equality, equity, and solidarity.

A total of 740 million women and men are currently members of co-operative business enterprises associated through national federations and unions which are members of the International Co-operative Alliance (ICA). It is estimated that the total number of co-operators is 800 million persons world-wide, with a further 100 million persons employed by co-operatives.

For more information and links see the International Cooperative Alliance website

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Corporate Social Responsibility

Covers all the voluntary initiatives which companies can take to reinforce ethical values over and above compliance with compulsory legislation. It applies throughout the value chain from raw materials to final consumption.

CSR principles are enshrined in a series of ILO Conventions and UN Global Compact 2000. They are backed by reporting and auditing standards like SA8000 and the Global Reporting Initiative (2002) and in some cases by participatory auditing.

For more about CSR see links from British Council India website.

Ethical Trade

Ethical trade focuses on renegotiating values at different stages of the marketing chain to increase profits/incomes/price savings to primary producers/employees and consumers.

See for example the UK Ethical Trade Initiative website and links therefrom.

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Fair Trade

Fair Trade is defined as:

" an alternative approach to conventional international trade. It is a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning."

Definition agreed by FINE, a loose network of umbrella bodies -
Fair Trade Labelling Organizations International (FLO),
International Federation for Alternative Trade (IFAT),
Network of European World Shops
(NEWS)
European Fair Trade Association
(EFTA).

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Ethical Investment

Ethical investment is concerned with:

  • changing the investment policies of companies to reflect ethical principles.
  • changing investment decisions of shareholders to favour ethical investment companies.

For more see UK Ethical Investment Research and Information Service website.

There are also an increasing number of EI advice companies which can be accessed through a web search on 'ethical investment'.

Ethical consumerism

Ethical consumerism is concerned with putting market pressure on businesses place through changing the choices made by consumers.

For more see the UK Ethical Consumer website.

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Key Challenges

  • there are often initial and ongoing costs to implementing ethical codes
  • the degree to which any one company can make changes without losing market competitiveness may be limited
  • there is a significant ethical gap between what consumers say and what they do
  • how to ensure that goods sold to people are benefiting them rather than just producing profits
  • who wins most from 'win-win'
  • how can inherent conflicts and trade-offs be addressed?
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