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Business Ethics – impact of the stakeholders

Business ethics- impact of the stakeholders

As we all know stakeholders have a huge impact on the business but it works both ways. The business and its ethical behaviour also affect the stakeholders and the business itself. Today I am going to evaluate the impact of Sainsbury’s ethical behaviour on its stakeholders and the business. In 2007 Sainsbury has acted very unethically. They sold around 20,000 cotton bags made by well-known designer. They wanted to make it fashionable to use cotton bags. As a result ‘The Evening Standard’ has revealed that the bags were made in China and the cotton which they used to make the bags was not organic. The aim of the bag was to promote green awareness but Sainsbury has admitted that it was made using cheap labour in China and was not fair traded. In my opinion, this situation had a big impact on the organisation and its stakeholders.

At that time, in 2007, Sainsbury was doing all they could in order to become more ethical than any other supermarket. The situation described above has changed customer’s opinion about the company and definitely ruined their ‘ethical’ reputation. Customers were very disappointed as they believed that the company they use to do their shopping is ethical and do not mislead the customers. Instead, they have been lied to and they bought the bags which were not ethical. Another group of the stakeholders seriously affected by the situation were shareholders. They like to invest in the company which is profitable but they also want the company to have a good reputation. In situation like the one described above the company is losing the customers, reputation and the profit at the same time so there will be less stakeholders willing to invest in the company and the existing ones will not be satisfied because they will not earn as much as the company promised. Also, the suppliers will be affected by the fact that Sainsbury acted unethically.

There are suppliers which do not want to work with businesses operating unethically. In case where Sainsbury cooperate with suppliers from other countries the company should be very strict about the rules of fair trade. On 28th of April 2007 the Sainsbury spokesman stated that the company was confident that the bags were sourced ethically and that they will take all the actions needed in order to investigate it. He has also apologised the customers for misleading them. (www.telegraph.co.uk) Another example of unethical behaviour of Sainsbury is when they mislead customers by advertising unhealthy products stating they are good for health. Sainsbury explained that the products advertised where healthier than other ones but they did not deny the fact the products were unhealthy. All they have stated was that they had less salt, sugar and fat then other ones. This situation could have a short term but serious effects on the company. It could lead to losing existing customers as they might not trust the company and their advertisements anymore. Most of their customers care about their health and they are interested in healthy products mainly to maintain well-being of themselves and their families and if the company will lie to them and provide with misleading information about the products they will simply change the company to shop with and Sainsbury will lose money and reputation.

The situation will also affect the competitors as in this case Sainsbury is acting unfairly promoting products as healthy even though the same products are not promoted this way in other supermarkets simply because they are not. At first Sainsbury might increase the number of customers because they are offering healthy products. Because of that competitors might lose some of the clients but we need to remember that at the moment when the issue was revealed Sainsbury lost some of their customers which most probably moved to their competitors. This situation also affects the UK Government as at the moment they are trying to do something about the problem and help people to eat healthier and be active. One of the Government actions is to improve labelling on food and drink among the retailers to help people make healthy choices. The Government also give people guidance on what to eat to stay healthy and how to become more active. Misleading customers and promoting unhealthy products as healthy is not helping the Government and making their actions more difficult to achieve the objectives.

When looking at the ethical behaviour of Sainsbury I also need to describe a good part of their practices and the ways that they are affecting the stakeholders and the organisation. At the moment Sainsbury do a lot of work in order to care for the environment. They are currently reducing their operational carbon by using solar panels in their stores and minimise their packing, keeping products healthy and fresh at the same time. Their main mission related to caring for the environment is to reduce the amount of carbon emission. Carbon emissions influence negatively on the quality of our air and increase the greenhouse effect which cause weather changes and increase in global temperature. The main proofs of their action helping the environment are their environmental awards. ‘Sainsbury’s has won both the Energy and Carbon categories in the Guardian’s Sustainable Business Awards, with judges recognising the retailer’s innovative and world-leading work’(www.j-sainsbury.co.uk).The most affected group of the stakeholders are not only customers or employees but all of the people. Carbon emission has a hazardous health effects to people. It was proven that increase of carbon emission might cause cancer and many different dangerous illnesses to people. This ethical behaviour has to be maintained in a long term. As we all know the environmental situation of UK and all the rest of the world will not get any better but people and organisations can do a lot to slow down the damage of the environment. It also affects the organisations taking care of the environment. Sainsbury is helping them in order to improve the quality of our life. ‘According to WRAP (Waste and Resources Action Programme) 18.4 million tonnes of waste, costing £17 billion is produced by the UK food and drink industry and UK households each year. Landfill space is becoming ever more scarce and expensive.

At the same time the concept of waste as a valuable resource to be reused is causing businesses to think differently about how to move beyond waste reduction to actively eliminating waste from the supply chain.’ (www.j-sainsbury.co.uk) Another, very similar behaviour of Sainsbury is making sure that they have strict policies about recycling their wastes. They make sure that their waste is recycled properly. Wrong recycling of wastes in a long term could cause running out of the resources. The owners of Sainsbury know that if everyday resources become scarce prices for the products will go up. They have a clear idea of what possible causes of not recycling could be. Sainsbury has also launched a recycling scheme which allows customers to bring their old batteries to the store.

They are ensuring that the batteries are recycled the way they should be as they know that batteries can release toxic wastes and metals into the ground water and into the air if they are not dealt with properly. One of the most important groups of the stakeholders affected by this are the local communities. Recycling the supermarket wastes properly minimize the risks of rats and mice in the area of the store. It also do good for the environment so the Government is also affected by the behaviour of the Sainsbury as they are cooperating in order to improve the environmental ‘health’ of the country. Similar to the previous behaviour of the Sainsbury it is something that has to be practiced in long term. The fact that Sainsbury case for the environment affects the organisation as it improves the image and the reputation of the company. One of the most important ethical behaviour of the supermarket is the fact that they are promoting healthy food and active lifestyle.

After their ethical issue of misleading customers in selling and advertising unhealthy products as healthy they are trying to do their best to improve and persuade people to be active. At the moment, the company do everything to promote active lifestyle and healthy, balanced diet by campaigns, offers and promotions on healthy products. They also advertise active lifestyle to children by sponsoring sport events in schools and donating money for sport equipment. They believe that ‘healthy children will become healthy adults’ and it will bring social and economic benefits. Again, one of the most important stakeholders affected by this is the Government as they are also trying to do something about unhealthy eating habit of people living in UK.

Sainsbury is also leading in providing clear nutritional information about the products enabling the customers to make informed and healthy choices. This way they are complying with the standards set out by the Government. The customers are also affected as they have a chance to improve their knowledge and the standards of their life by eating healthy and being active. The organisation is also affected as they are able to improve their profits and reputation. By doing that they also increase the number of stakeholders interested in the company. It’s a matter that Sainsbury has to take care of in a long term. It will take time to change the habits of people and if it will happen eventually Sainsbury will have to continue their actions in order to stay profitable. Another, important stakeholder affected by these actions is The British Nutrition Foundation.

They are very happy with that the supermarket is promoting and with the fact that they are helping them in meeting their objective. Recently they have stated that: “The British Nutrition Foundation actively encourages efforts to reformulate products, encourage healthier choices and improve employee health and wellbeing. We welcome this commitment from Sainsbury’s. particularly the new elements, which builds on a strong track record of initiatives over a number of years to reduce the amount of salt, sugar, fat and saturated fat in its products and to provide clear nutrition information for customers” (www.nutrition.co.uk) As we can see ethical behaviour of Sainsbury is very important for their stakeholders but it’s also important for the business itself. When a business is known for dealing fairly with all people, from its employees and customers to shareholders and suppliers, it is more possible to become successful. As a matter of fact, almost all stakeholders want to act morally right and that’s what they look for when starting their connection with the company. Businesses that operate unethically might cause their stakeholders to break the relationship with the company. People are more likely to shop in the supermarket which operates ethically.