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CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment

A chemical firm discovers that its effluent is slightly harming a nearby river. Cleaning it will cost money, but the current discharge is not yet penalised by any regulator. From a business ethics viewpoint, which action is most appropriate?

The most appropriate action is to install effluent treatment voluntarily. Business ethics expects a firm to avoid harming the community and environment whether or not a regulator penalises it, whereas delaying, lobbying for weaker standards or concealing data places short-term gain above stakeholder interests.

  1. AContinue discharge until a regulator imposes a penalty
  2. BInstall treatment on its own initiative to avoid harm to the communityCorrect
  3. CShift the cost of damage to the local residents by lobbying for lower standards
  4. DHide the discharge data to protect the share price

Explanation

Ethical conduct requires avoiding harm to stakeholders even when the law does not yet compel it. Waiting for a penalty, lobbying against standards or concealing data all put the firm's interest ahead of stakeholders and are unethical.

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