San Pablo Diocesan Catholic Schools System

Diocese of San Pablo

Liceo de Calauan
Calauan, Laguna
Tel. No. 566-0783/568-0046
S.Y. 2021-2022

BUSINESS ETHICS
Module 1
WEEK 1

Objectives:

In this module, the student should be able to:

 Differentiate the forms of business organizations in terms of their purpose and role in socio-
economic development.
 Illustrate how fairness, accountability, transparency and stewardship is observed in
business and non-profit organizations.
 Formulate a “Code of Ethics” that reflect core principles derived from analyses.

Let’s Discuss!
LESSON 1: THE NATURE OF BUSINESS
1.1 What is a Business?
Believe it or not, you are surrounded by various artifacts of an activity that we call business.
Upon waking up in the morning, you get up from your bed and fix your beddings. Then, you brush your
teeth, take a shower, eat breakfast, and go to school. Beds, beddings, toothpaste, soap, water, food, and
clothes are items or goods you acquire through business transactions.
What is business? The word business has come to be associated with a number of meanings
and usages. Merriam-Webster Dictionary easily gives the following definitions:
a. the activity of making, buying, or selling goods or providing services in exchange for money;
b. work that is a part of a job;
c. the amount of activity that is done by a store, company, factory, etc.
Duska and Ragatz, two business ethics scholars, said that the original and primary meaning
of business is “to engage in purposeful activity.” Meanwhile, a group of business ethics textbook authors
said it this way, “The correct response to the question, ‘what is your business here?’ would be a description
of a particular task, not an organization.”
From a quick survey and look at a number of textbooks and the internet will give the
following definitions and descriptions of business:
1. An organization or economic system where goods and services are exchange for one another or money.
Every business requires some form of investment and enough customers to whom its output can be sold
on a consistent basis in order to make a profit.
2. The activity of making, buying, or selling goods or providing services in exchange for money.

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3. Business is a broad term encompassing a range of actions and institutions from hamburger stand to
giant corporations. The term covers manufacturing, finance, trade, service, and other economic activities.
The fundamental purpose of business activity is to satisfy human needs by creating products and services.
4. …there is a secondary meaning of the word business, which denotes activities that involve the
production and exchange of goods for economic purposes, primary among which is the generation of
profit. Consequently, business is often defined as economic activity engaged in for the sake of profit.

1.2 Business Person and Entrepreneur: A Distinction

Many times, business is taken as synonymous to entrepreneurship. While business and
entrepreneurship are closely related, there are significant differences between them.
Not all entrepreneurs are necessarily business persons. In the same manner, not all business
persons are necessarily entrepreneurs. The term “entrepreneur” which has a French origin was
popularized in the early years of the 19th century by French economist Jean-Baptiste Say. He defined the
entrepreneur as somebody who “shifts economic resources out of an area of lower and into an area of
higher productivity and greater yield.
However, American professor of economics Russell Sobel claimed that even prior to the
popularization of Say, the French verb entreprendre which means “to do something” or “to undertake”
was already used as early as the 13th century. He further observed that this verb is very closed in
pronunciation to the Sanskrit adjective Antha Prerna which means “self-motivated”. Thus, the
entrepreneur is a self-motivated person who is not afraid to undertake new ways of accomplishing
something.
The Business Dictionary defined entrepreneurship this way: “The capacity and willingness
to develop, organize and manage a business venture along with any of its risks in order to make a profit.”

Difference between an Entrepreneur and a Business Person

BUSINESS PERSON ENTREPRENEUR
1. Concerned with the “business aspect” of the 1. Concerned with the “insight aspect” or how
enterprise, how activities be arranged and new and private ideas can be applied so that it may
organized in such a way that guarantees profit. have more social utility.

2. Imitators and wait for the innovations made by 2. Innovators and observant.
the entrepreneur.

3. More likely to play safe. 3. More of a risk-taker but of course calculates it.
4. Motivated by the financial reward of the 4. Goes beyond the profit motive.
business activity.

5. Although some business persons are also 5. Founders of the companies and other forms of
owners of their business others are simply business organizations. They set the vision,
managers, employees, and agents of the business. mission, goals, and values of the companies; they
They are also called business professionals. set and envision the corporate culture.

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1.3 Capitalist and Entrepreneur: A Distinction
Have you heard somebody being called a capitalist? It seems that rarely do we call
somebody a capitalist. We may call one a business person or an entrepreneur but not a capitalist. The label
capitalist suggests an image of somebody who is greedy, unjust, manipulative and selfish.
It can truly be argued that there is further difference between a capitalist and an
entrepreneur. For this distinction, we will draw heavily from the ideas of David Schweickart, a professor
of philosophy and author of numerous books and articles on political, economic, and social philosophy.
He claimed that “a reasonable definition of ‘capitalist’ is someone who owns enough productive assets
that he can, if he so chooses, live comfortably on the income generated by these assets.” The capitalist
owns more than sufficient income-generating resources, and by virtue of this, he/she and his/her family
may not work and still live a comfortable and rich lifestyle.
The true-blooded entrepreneur does not receive economic reward by simply chipping in
capital. He or she contributes actively and positively for the benefit of the society. Entrepreneurial activity
is a necessary component of any form of society. On the other hand, the pure and plain capitalist has
become a passive recipient of the fruits of the toils of other stakeholders in the business activity – the
laborers and the entrepreneurs.

1.4 The Purpose of Business

What is the purpose of business? You would not be surprised if you hear the honest and
consistent answer: “To earn profit, of course! What else, but to make money!” It seems that the popular
belief as to the purpose of business revolves around this: money, profit, and financial returns. It is rare or
even impossible at all to encounter a business person who says that he or she does not care about profit
and that his/her only concern is to help and to be of service to the customers, consumers, employees, the
government, and the community.
In this chapter, we will explore some positions on the purpose of business. We will start
by discussing some subjective reasons for putting up a business. Then, we will delve into the thoughts of
some prominent scholars regarding the purpose of business.

1.5 Subjective Reasons for Putting Up a Business

Subjective reasons refer to reasons that motivate the individual to put up a business. They
are “subjective” because these reasons vary from one business person to another.
 The desire to make more income for oneself and his or her family.
 You want more independence. When you own a business, you are the boss.
 You may own a business probably because you are continuing the legacy of your family.
 You want to try a unique and novel idea. In other words, you have an entrepreneurial mind that
needs an outlet.
 Desire for competition. You realize that the other occupations do not thrill you at all.

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  A genuine desire to help people in your small community or the country in general, and find that
engaging in a business is a way to accomplish them.
 You may decide to start a business simply because you like it and you are attracted to the prospect.
You are not primarily moved by the profit that you may earn. You simply enjoy dealing with
people, employees and customers alike.
1.6 Objective Purpose of Business
In order to clarify our understanding of the objective purpose of business, we will explore
the ideas of three scholars: Milton Friedman, Paul F. Camenisch, and Ronald Duska. These three thinkers
attempted to explore what we can call as the objective purpose of business.
Milton Friedman: Profit as the Primary Responsibility of Business
Milton Friedman, known for his contributions to consumption analysis and the monetary
history and theory. He received the Nobel Memorial Prize in Economic Research in 1976.
From Friedman’s insights, we can probably deduce that the objective purpose of business
is to increase profits. For Friedman, this is not a bad thing. However, that is totally unfair for Friedman if
we will interpret him to be saying that business must not be concerned with ethics. According to him,
business must be played within the rules of the game. He declared: “There is one and only one social
responsibility of business – to use its resources and engage in activities designed to increase its profits so
long as it stays within the rules of the game, which is to say, engages in open and free competition without
deception or fraud.” Existing laws and moral codes of the society must consciously be considered by the
business entity.
Paul F. Camenisch: The Primacy of Business’ Social Function
Paul F. Camenisch graduated Summa Cum Laude with a degree in English. In 1981, he
published an essay titled: “Business Ethics: On Getting to the Heart of the Matter.” For him, Friedman
has put too much emphasis on the profit-motive as the social responsibility of business. According to him,
Friedman has forgotten the other essential element of business – which it exists to respond to the societal
needs for life sustenance and life enhancement.
Ronald F. Duska: The Motive is not the Purpose
Ronald Duska is a member of the board and past president and executive director of the
Society for Business Ethics. One of the main contributions of Duska in the debate regarding the purpose
of business is his argument on the distinction between purpose and motive.
Just like Camenisch, Duska believed that the primary purpose of business is neither
personal benefit nor the accumulation of profit. The purpose of business is to respond to society’s needs
for goods and services.
Some Further Thoughts

1987 Philippine Constitution

“The goals of the national economy are a more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit
of the people; an an expanding productivity as the key to raising the quality of life for all, especially
the underprivileged.”

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 The Corporation Code of the Philippines
“To establish a new concept of business corporations so that they are not merely entities established
for private gain but effective partners of the National Government in spreading the benefits of
capitalism for the social and economic development of the nation.”

1.7 FORMS OF BUSINESS ORGANIZATION

Traditionally, there are three major forms of business organizations in the Philippines
recognized by law: single/sole proprietorship, partnership and corporation. In recent years, a fourth
form of business organization was included in the list – the cooperative. These various forms of business
organizations are confronted with ethical issues of varying kinds and degrees.
1. Single or Sole Proprietorship
 Single proprietorship is defined as “a business unit where the manager is also the owner. Often,
the owner and the business are synonymous to one another.”
 This is the simplest form of business organization in the Philippines recognized by the law. It is so
simple that unlike the other form, there are no specific and strict laws that define and delineate the
policies for a single proprietorship.
 It must be registered under the Department of Trade and Industry (DTI) and the Bureau of Trade
Regulation and Consumer Protection (BTRCP).

https://happytimestoday.wordpress.com/2012/11/18/why-sari-sari-stores-only-exists-in-the-philippines/
2. Partnership
 The law on business partnership in the Philippines can be found in Republic Act No. 386, also
known as the Civil Code of 1949.
 A business is classified as a partnership does not mean that there are only two owners; it may have
more than two.
 Article1767 of the Civil Code says that the contract of partnership happens when “two or more
persons bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.”
 Article 1770 clarifies further that “a partnership must have a lawful object or purpose, and must
be established for the common benefit or interest of the partners.”
 It must be listed under the Securities and Exchange Commission (SEC).

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 Partnership Business Examples
 GoPro & Red Bull.
 Pottery Barn & Sherwin-Williams.
 Casper & West Elm.
 Bonne Belle & Dr. Pepper.
 BMW & Louis Vuitton.
 Uber & Spotify.
 Apple & MasterCard.
 Airbnb & Flipboard

3. Corporation
 The law on corporation can be found in Batas Pambansa Blg.68 otherwise known as The
Corporation Code of the Philippines.
 In the said code, corporation is defined as “an artificial being created by operation of law, having
the right of succession and the powers, attributes, and properties expressly authorized by law or
incident to its existence.”
 This type of business can either be a stock corporation or a non-stock corporation.
 The owners of stock corporation are called stockholders or shareholders; while those of nonstock
are simply called members.
 A corporation is required to be registered under the SEC where it will also file the articles of
incorporation.

https://aseanup.com/top-30-companies-philippines-psei/

4. Cooperative
 The Philippine Cooperative Code defines a cooperative as “an autonomous and duly registered
association of persons, with a common bond of interest, who have voluntarily joined together to
achieve their social, economic, and cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products and services and accepting a fair
share of the risks and benefits of the undertaking in accordance with universally accepted
cooperative principles.”
 Cooperatives are regulated by the Cooperative Development Authority.
 Some types of cooperative include credit cooperative, consumer cooperative, and producers
cooperative.
 The membership in a cooperative is voluntary and registered through its articles of cooperation.
 Members of a cooperative join by contributing a membership fee and building up share capital
over time. Whenever they want to leave the cooperative, they can redeem their share capital
contribution which has earned interest over time.

LESSON 2: THE NATURE OF ETHICS AND BUSINESS ETHICS

“Do the right thing. It will gratify some people and astonish the rest.”
-Mark Twain

Business owners need to make profits to sustain and grow their business. Sometimes they
have to make difficult decisions, especially when they reach a fork in the road: Shall I do the right thing

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but put my business in jeopardy? Shall I use bribery to facilitate or expedite routine procedures? Shall I
declare a lower income to pay less tax? Shall I start a smear campaign to destroy my competitor?

You probably have heard some controversies involving major or big companies that do
unethical business practices. Long work hours, unhealthy working conditions, low wages, unpaid
workers, inadequate benefits, and others are only some of the many issues that some companies face.
Although there are laws that protect the workforce, these are not always implemented; companies may
have codes of conduct, but these are not always observed.

2.1 Making Ethical Decisions

Ethics enables a person to discern right from wrong. Derived from the Greek word ethos
which means “character,” ethics is a branch of philosophy that involves “systematizing, defending, and
recommending concepts of right and wrong conduct.” It involves understanding the differences between
right and wrong concepts and actions, and using principled decision-making to choose actions that do not
hurt others (Weiss 2014).
Some business owners may not believe in applying ethics in business context because the
nature of business is to increase profitability. However, many have come to realize that unethical business
practices do not bring good to the company. For example, ignoring safety rules may result in incurring
losses due to lawsuits that may be filed against the company. Harming the environment through chemical
leaks and spills may force a company to close down. Unfair wages and labor practices give the company
a bad reputation.
The concern today is not about the need or the rationale for ethics to be part of a business,
but rather, about how ethics should be integrated in business practices. Business ethics gives emphasis on
ethical decision-making. All business decisions must consider ethics, remembering the greater good and
doing what is morally right.

2.2 Personal Integrity and Social Responsibility

Leaders and managers are responsible for creating a corporate culture. This is the business
environment (i.e., beliefs, values, attitudes, and behaviors) that characterizes the members of an
organization. Ethical business leadership creates an environment where ethical behaviour is encouraged –
good people are able to do good deeds and decisions, and bad people are prevented from doing bad deeds
and decisions.
Ethics covers how we act and how we live our lives. How we should live involves the
practical side of ethics, which covers how we act, choose, behave, and do things. How we should act is
the normative side of ethics, which deals with our reasoning on how we are supposed to act in certain
situations. Ethics being a normative discipline deals with the norms or those standards of appropriate and
proper (or “normal”) behaviour. On the other hand, social sciences, such as psychology and sociology,
look at the descriptive sense of people’s actions, that is how and why people act the way they do.
The “we” in how we should live maybe interpreted in two ways: “we” as a collective action
where individuals act and decide as a group, and “we” as individual actions based on a common
understanding of what is good. This meaning of ethics is based on one’s own values as defined by his/her
moral systems. This is sometimes referred to as morality, which is the aspect of ethics that pertains to
personal integrity.
Society and social institutions or organizations are supposed to mould their cultures in
consideration of justice, public policy, law, civic virtues, organizational structures, and political
philosophy. This moulding of cultures by society is called social ethics.
A person’s values are the basis for his or her personal integrity. There are different types
of values. Financial values are concerned with money matters; legal values uphold the law, and so on.
Ethical values, on the other hand, uphold human well-being. Actions and decisions must be based on
promoting human well-being through respect, dignity, freedom, and democracy. Ethics perspective
teaches that no one’s person’s welfare is worthier than others’, and thus, ethical acts and choices should
be acceptable and reasonable from all relevant points of view.

2.3 Ethics and Law

Laws govern our country, and the citizens are expected to follow what the law requires,
expects, or permits. Business organizations have to follow regulations and rules (e.g., taxation, social

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security, and health safety hazards) set by the government and other governing bodies. The law provides
important legal considerations to ethical decision-making. A company may pay entry-level workers with
salary based on what the law mandates as the minimum wage. However, the company may offer more
benefits (e.g., rice allowance, health insurance, etc.) to provide better compensation for minimum-wage
earners. Paying what the law mandates conforms to legal values, but offering more benefits to employees
who need them satisfies ethical values.

LESSON 3: THE ETHICAL CORPORATE CULTURE

“Let every man be respected as an individual and no man idolized.”
- Albert Einstein

When you join an organization, whether it is a school club, a hobby group, a social media group,
a church organization, or even just a group of friends hanging out together, you will notice that in the
group, there are certain accepted behaviors and unwritten rules to be followed. If you fail to follow these,
you will either be frowned upon or be kicked out of the group.
A certain culture exist in every organization. If you want to fit in, you try to follow the norms of
the group – the way the members act, dress, behave, speak, and other actions that may affect your
decisions.

3.1 The Corporate Culture

Every organization has a culture that consists of a shared pattern of beliefs, expectations and
meanings that influences and guides the thinking and behaviour of the members of that organization.
While culture shapes the people in the organization, the people also contribute in shaping, the culture of
the organization (Hartman 2014). Organizational or corporate culture is the system of the shared actions,
values and beliefs that develops within an organization and guides the behaviour of its members
(Schermerhorn, Osborn, Uhl-Bien, and Hunt 2012).
There are business organizations that expect employees to work for long hours and even on
weekends if needed. However, there are also those that value work-life balance, so they encourage
employees to leave work at the office so they can spend quality time with their families.
While corporate culture is built and moulded over time, it may change depending on the leaders
that move the company forward. Changes in policies (e.g., dress code) can alter the way people behave or
feel toward the company.

3.2 Functions of a Corporate Culture

A company’s culture guides the thinking, behaviour, and decisions of its members according to
the company’s beliefs and values. According to Edgar H. Schein, author of Organizational Culture and
Leadership (2010), the two main reasons why culture develops in an organization is because of external
adaptation and internal integration.

1. External Adaptation
 Requires the organizational culture to determine ow the company will reach its goals, accomplish
its tasks, use methods to achieve its goals, and place measures to cope with success or failure.
 The members of the organization may develop a common views and goals through their shared
experiences. For example, reaching sales targets is a goal shared by all the members of the
organization.
 External challenges, such as economic downturn, extreme weather events, political issues, and
government regulations, will have to be dealt with in accordance with the company’s culture.
 For example, if there is a delay in the release of imported raw material from customs, should the
company bribe customs officials to expedite the process? The company’s corporate culture will
determine the answer to this question.
2. Internal Integration
 Starts with the establishment of an identity that is unique to the business organization. Members
acquire this identity through their interaction with each other.

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  Enables the members to work harmoniously toward advancing the company’s goals.
 There are three important aspects of working together:
 The members decide who is a member of the group and who is not;
 The members develop an informal understanding of acceptable and unacceptable
behaviour; and
 The members separate “friends” from “enemies”.

3.3 Understanding Corporate Culture

A person who recently joined a business organization may not easily figure out and adapt to the
corporate culture. Understanding organizational culture involves layers of cultural analysis.

Layers of Cultural Analysis

https://drvidyahattangadi.com/edgar-scheins-three-levels-organizational-culture/
1. Observable Aspects of Culture (outer layer)
 Refers to the way things are done in an organization.
 This can be observed in daily activities or specific instances which include unique stories
according to the company’s history, ceremonies, and corporate rituals.
 The story on how a company was founded may explain the owner’s ideals, vision, and the reason
why the company was established. Its reason may be to serve a previously unmet need, to offer
solutions to common or not-so-common issues, or to give better options to the consumers.
Example:
Bingo, a search engine company, is known for its conducive work environment where employees
feel like they are just in the comfort of their home. The office houses a game room, and large pantry
with free food and beverages. The company’s rationale for this is that happy employees are
productive employees.
2. Shared Values
 Refer to the core values that are meant to be followed by the members of the organization when
acting on behalf of the organization.
 These describe what the company stands for and guide all of a company’s action.
Example:
Happy Filipino is committed to creating social value by helping housewives become financially
independent and entrepreneurial. To achieve its goal, the company believes in treating everyone
with care, respect, and dignity; it fosters partnerships – more can be achieved if people work
together; and it believes in offering only the best and continuous improvement and growth.
3. Common Cultural Assumptions
 Include the taken-for-granted truths that the members share as a result of a collective experience
with the organization.

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  These assumptions are at the core of corporate culture, and thus are difficult to discern and
understand because they exist at a largely unconscious level, yet they provide the key to
understanding why things happen the way they do.
 As employees become totally immersed in the company’s culture, their actions that are based on
the company’s beliefs and values become everyday routines.
 These include quality of output, morality of employees, and innovativeness and excellence in
carrying out tasks.
Example:
Orange Company, a telecommunications company, has ingrained to their employees the value of
innovation. Every time employees meet in the elevator, talk over lunch, or are anywhere else in the
building, they are unknowingly talk about the latest trends in technology, specifically smartphones,
tablets and the current trends in the telecommunications.

3.4 Setting a Corporate Code of Conduct

A code of conduct or code of ethics is a list of guidelines and protocols based on the organization’s
values. It articulates how an employee should behave and imbibe the value of the organization at all times,
and it also serves as a reference when certain decisions are to be made.

Guidelines in developing a code of conduct for an organization:

1. Understand the mission and vision of the organization. This will set the tone for the conduct and
behaviour that the members know by heart.
2. Identify the values that the organization stands for. Specify the different values that an employee must
embody as a member of the organization.
3. Ensure proper enforcement of the code of conduct to maintain the ethical culture within the
organization.
4. Outsiders, such as suppliers, distributors, subcontractors, and customers, must also be aware of and
understand the organization’s code of conduct in order to avoid any actions that go against the code.
Below is a sample code of conduct.
Baby Food Corporation
CODE OF CONDUCT
Baby Food Corporation upholds the distribution of healthy and safe baby products (e.g., clothes,
bath and baby products and accessories) in the market. This code of conduct strengthens the
company’s ideals in serving our customers well and in giving only the best products to our most
important customers – the babies.

Company Values
 Customer-centered – We are committed to continuously listen to our customers and to respond
positively to their needs.
 Excellence – We strive to provide the best service and products to our customers and maintain
the highest excellence in our products.
 Safety – We assure that our products are safe from harmful chemicals.
 Integrity – We practice integrity in all our actions, and we promise an honest and fair service
to all our employees, customers, and suppliers.

Code of Conduct
Employee Decorum
1. Employees must show respect toward one another in the workplace. The company does not tolerate
spreading of rumors or stories that may taint the reputation of its employees.
2. Employees must use a professional tone in communicating with colleagues, whether oral or written.

Use of Company Property

1. Employees must use company property only for official business purposes only.

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 2. Employees must use company property with care. Everyone must use or operate physical assets
(e.g., computers, printers, copiers, telephones) responsibly.

3.5 Ethical Issues

In organizations, employees will face ethical issues in their career at some point. An ethical issue
is an identifiable problem or situation that requires a person to make an action or decision that must be
evaluated as right (ethical) or wrong (unethical). It usually concerns financial matters in a business setting.
Leaders and employees must know how to deal with ethical issues. The code of conduct, which
reflects the family culture, serves as a guide for handling ethical issues in the workplace.

Some Examples of Common Ethical Issues in Business Organization

Some salespeople makes false promises or overstate product benefits in
Misrepresenting the order to make a sale. Misrepresenting a product (e.g., saying that it can
benefits of a product make your skin lighter without any substantial research to back up) is an
ethical issue.
Some employees engage in activities that are unrelated to their jobs (e.g.,
Misuse of company time surfing the internet, posting on social media, socializing with co-
and resources workers) during office hours. Using company time and resources for
personal purposes can affect employee productivity.
Harassing a colleague by using threats or violence, false accusations,
Abusive behavior profanity, etc. may result conflicts within the department or
organization. This disruptive behavior may demotivate employees and
may even put the business at risk.
Conflict of interest when an employee takes action that would result in
Conflict of interest a personal or financial gain, whether direct or indirect. For example, an
employee may choose to deal with a supplier that provides substandard
products because the supplier is a close family friend.

LESSON 4: FOUNDATIONS OF THE PRINCIPLES OF BUSINESS ETHICS

“Management is doing things right; leadership is doing the right things.”
-Peter Drucker
4.1 Philosophical Ethics
Oftentimes, when faced with an ethical dilemma, people uneasy or uncomfortable because of their
objectivity, credibility, and dignity maybe compromised. In times when they need to assess a situation
before making a decision, most people would find the answer in their religious beliefs or the value system
they grew up with.
Unlike religious ethics, which explains human well-being in religious terms, philosophical ethics
provides justifications that must be applicable to all people regardless of their religious viewpoints
(Hartman, DesJardin, MacDonald 2014).
Study the following statements:
1. I will donate to Marawi siege victims to help them rebuild their lives.
2. I will donate to Marawi siege victims because God expects me to help other people.
Booth involve the same action (i.e., the act of donating), but the first statement is a philosophical
justification for an ethical judgement, while the second statement is primarily a religious reasoning behind
the action.
Three Ethical Frameworks
Ethical Framework Source of Moral Activity
- Making decisions based on ethical consequences
Utilitarianism - Results-based approach

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 - The end justifies the means
- Making decisions based on principle, and not just on
Ethics of Principles and Rights consequences
- The end does not justifies the means
Virtue Ethics - Grounded on character traits and emphasizes moral character in
contrast to moral rules or consequences of actions.
1. Utilitarianism: A Consequentialist (Results-based) Approach
Utilitarianism holds that an action is judged based on its overall consequences. It is also called the
consequentialist approach to ethics and social policy – that each person should act in ways that produce
better consequences or results regardless of the means taken to achieve those results. “Better
consequences” are results that promote human well-being such as happiness, dignity, health, integrity,
freedom, and respect of all the people. This approach also upholds the following principles:
 A decision is morally right of it promotes the greatest good for the greatest number of people.
 A decision is morally right if the net benefits over costs are greatest for all people affected,
compared with the net benefits over cost of all other possible choices.
 A decision is morally right if its benefits are greatest for each individual and if these benefits
outweigh the costs and benefits of alternatives.
2. Ethics of Principles and Rights
Considering the greatest good in decision-making is definitely an ethical way of arriving at a
decision, but it is also important to consider principles and not just consequences. This explores the
relationship between the legislative and judicial branches of the government – the legislative branch
creates policies and regulations based on utilitarian principles, while the judicial branch enforces these
laws to achieve justice and fairness. The second framework in ethical philosophy provides that some
decisions need to be made based on principles rather than consequences.
3. Virtue Ethics
Virtues can be described as the character traits that would constitute a good and meaningful life.
Being happy, friendly, joyful, and calm; preserving integrity and dignity; having a good relationships; and
possessing modest things are a few of the characteristics of having a meaningful life.
Virtue ethics emphasizes moral character in contrast to moral rules (deontology) or consequences
of actions (consequentialist approach in utilitarianism). It has its roots in ancient Chinese and Greek
philosophy and is recognized to have been established by Plato and Aristotle. It focuses on the type of
person you want to be – grounded on good character, motives, and core values – and not on the actions
you should take.
4.2 Impacts of Different Belief Systems on Business Ethics
People from different cultures and backgrounds have different belief systems. This diversity in
belief systems or religious orientations can influence a person’s business ethics. And can have an impact
on business organizations as a whole.
Buddhism
Buddhism is a religion that originated in India. Centered in Buddhism belief are the five precepts
or training rules, which helps promote peaceful coexistence and harmony in the society. These principles
are the minimum moral obligations of Buddhists, which they fulfil by refraining from
1. harming or taking lives of beings;
2. taking what is not given;
3. engaging in sexual misconduct;
4. lying or spreading gossip; and
5. taking intoxicating substances such as alcohol and drugs.
These Buddhist principles can be applied in business. For example, in conducting its business, an
organization must ensure the sustainable use of natural resources so as not to endanger wildlife and the
environment.
Islam
Shariah, the Islamic law based on the religious precepts of Islam, is applied in all Muslim-
dominated countries. Islam favors trading or business, but the conduct of the business has to conform to
rules, and most importantly, must be guided by honesty. Cheating or deception in economic transactions
is strictly prohibited and condemned in Islam. Possible gains from the trade and business should not result
in materialism, which is considered as diverting the attention from more important spiritual concerns.
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Christianity
Christian beliefs are based on the Bible. Christian who considered that God called them to a
particular occupation or business were naturally concerned that their actions involving their work or
business must be conducted in an ethical manner and for the good of the community. Stewardship is
another Christian concept were Christians see themselves as stewards of God’s creation which means they
have responsibility to care for the environment. The environment is God’s gift to everyone, and in using
it, Christians have a responsibility toward future generations and toward humanity as a whole.

4.3 Impact of Filipino Practices and Belief Systems on Business Ethics

As with any culture, Filipinos have distinct beliefs and practices. These form part of who you are.
With a very rich cultural heritage, you may have a diverse set of practices or beliefs. Some of these Filipino
practices or beliefs are evident in business organizations.
Filipino Time
The phrase Filipino time describes the Filipino trait of being habitually late. This is often use as
an excuse for being tardy in meetings, events, and other social affairs, whether formal or informal. It
reflects unprofessionalism and lack of respect for other people’s time. Tardiness is a major productivity
loss in business. It can also create a bad impression in business transactions.

Padrino System
The padrino system or patronage happens when one gains favour, promotion, or political position
through family affiliation or friendship, as opposed to earning merit for one’s own efforts, skills, and
abilities. For example, a person may be given a promotion in the office not because he or she deserves it,
but because she is a friend or a relative of the business owner. Aside from denying the rightful person the
position he or she deserves, it may also foster ill feelings among other employees in the department.
Utang na Loob
Utang na loob or debt of gratitude is the concept of “repaying” a person for what he or she has
done in nonmonetary terms. The good deeds that has been received will be paid back with a good deed as
well. While this may seem as a harmless and even a thoughtful practice, in a business setting it may cause
ethical dilemmas such as giving a promotion or a special favour to an undeserving employee.
Pakikisama
Pakikisama is a Filipino trait that describes how Filipinos take care of their interpersonal
relationships, that is, by agreeing to what the majority wants or by getting along with others. While this is
a positive trait, it may have its drawbacks when it is used to force someone to do something not because
he or she wants to, but because he or she wants to fit in. In the business setting, a person may do a favour
for another out of pakikisama.
Bahala na and Mañana Habits
Bahala na is a phrase that can loosely translated as “whatever happens, happens.” In business, one
cannot leave big decisions up to fate. Business owners need to know and analyse the needs of the market
first before they come up with a product that the customers would want to buy.
The mañana (mamaya na) habit is delaying to do things instead of doing things now. This habit
has a negative impact on business because it leads to low productivity and poor performance or service.
Filipino Hospitality
Filipinos are known worldwide for their warm hospitality. This trait is best manifested in the
hospitality and tourism industries such as hotels, resorts, airlines, travel agencies and the like where these
entities stretch themselves to deliver services to their clients in ways distinctly Filipinos. They aim to give
their clients a unique experience of having availed of their services. Showing Filipino hospitality to foreign
visitors makes their stay in the country not only enjoyable but unforgettable as well.

13
References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 3-78
http://bit.ly/diwa-BUSETHICS2ED
https://www.entrepreneur.com/slideshow/289426#1
https://www.entrepreneur.com/article/289431

Module 2
WEEK 2

Objectives:

In this module, the student should be able to:

 Discuss the responsibilities and accountabilities of entrepreneurs to: employees,
government, creditors, suppliers, consumers, general public, and other stakeholders.
 Give examples of major ethical issues in entrepreneurship.
 Explain the different models and frameworks of social responsibility in the practice of
sound business.
 Observe and promote policies and practices in environmental management.
Let’s Discuss!
LESSON 5: CORPORATE SOCIAL RESPONSIBILITY
“Good people do not need laws to tell them how to act responsibly, while bad people will find
way to go around the law.”
- Plato
Companies are accountable for their actions and decisions, and for the outcomes of those actions
and decisions. Responsibilities are the things that you ought to or should do, even if you prefer not to.
5.1 Corporate Social Responsibility
Corporate Social Responsibility (CSR) refers to practices and activities that business organizations
adopt in the course of their operations which have social and environmental impacts and relevance.
Practicing CSR means that a business organizations commits to developing policies and business practices
that ensure sustainability of environmental resources, ethical treatment of employees, and protection of
community welfare, among others.
Business organizations have at least three social responsibilities that are described in three levels
based on how demanding or binding the responsibility is, that is, how much effort a business organization
should put into carrying out the responsibility.
1. Duty to Not Cause Harm
A business organization has a duty to not cause harm, even if an action that may result in avoidable
harm is not explicitly prohibited by the law. If a company caused harm to a property or a person, and if

14
the harm could be avoided by exercising due care or proper planning, then both the law and ethics would
deem that the company should be held liable for violating its responsibilities.

2. Responsibility to Prevent Harm

There are instances when a company does not cause harm but has the potential or the capability to
prevent harm from occurring. It is a company’s ethical responsibility to prevent harm from happening.
This is often referred to as the duty of care of an organization. All organizations have the duty of care to
their stakeholders – employees, stockholders, and society, in general. A positive action such as having an
organizational policy or specific rules and regulations is an example of addressing this level of social
responsibility.
Companies create and implement programs and protocols not only to maintain the quality of their
products and services but also to ensure the health and safety of their employees.
3. Responsibility to do Good
Business organizations have the social responsibility to do good things by making the society a
better place. Providing solutions to social issues (e.g., lack of access to education, poor hygiene) and
giving support to education, arts, and culture are some examples of activities or programs that business
organizations can do in line with this responsibility.
In recent years, companies have taken CSR initiatives to positively impact the environment,
people, and overall, the society. Some shopping mall have e-waste recycling programs that accept
discarded electronic devices. Established partnerships with NGOs to create social change. There are those
that provides school supplies and hygiene kits to indigent children, while others carry out medical and
dental missions.
1.2 Models of Corporate Social Responsibility
These are different views on how companies can integrate and execute CSR. The different models
of CSR include the economic model, philanthropic model, social web model, and integrative model.
Economic Model
The Economic model of CSR is based on the traditional view that a business’s raison d’ etre
(reason for existence) is to respond to the demands of the market by providing products or services and to
earn profits for its shareholders. This model posits that the society benefits from the success of business
organizations which are indirectly fulfilling their social responsibility by contributing to the growth of the
economy and by providing jobs to more people as they grow and expand.
Philanthropic Model
Philanthropy, as defined in Merriam-Webster Dictionary, is “an act or gift done or made for
humanitarian purposes.” It is the practice of doing or giving something (e.g., money, time) to help make
life better for other people. The philanthropic model of CSR describes the free will of business
organizations to contribute to social causes as a matter of philanthropy. Just as individuals are not
obligated or required to donate to charitable institutions, business organizations likewise have no strict
obligation to contribute to social causes.
Several reasons why a company gets involved in charity work:

15
1. It gives the company positive publicity while providing its stakeholders, such as employees and
customers, the chance to participate in philanthropic activities.
2. They earn tax holidays or deductions when they do such activities. The government grant tax relief,
which is deductible by expense to reduce taxable income, by claiming donations as charitable
contributions.
3. Some companies that contribute to a social cause without seeking any reputational benefit (e.g.,
companies that donate anonymously). These companies do not seek business pay off when they contribute
to social cause; they simply want to truly give back to the community.
Social Web Model of CSR
The social web model views business organizations as citizens of the society in which they operate.
As members of the society, business organization must conform to the normal ethical duties and
obligations that are expected from them.
Companies have social responsibility to uphold welfare of their employees, ensure a safe and
healthy workplace, and observe other human rights, whether or not these are specified or required by law.
They also have the responsibility to cause no harm to consumers and uphold consumers’ right by providing
safe products and not overstating or exaggerating the value or capabilities of their products.
Embedded within the social web model of CSR is the stakeholder theory, which states that every
business decision has an impact on a wide variety of people, that is, providing benefits to some and
imposing cost on others. Stakeholders are defined as any group of individuals that can affect or be affected
by the organization. They can be suppliers, employees, customers, investors, owners, competitors, the
government, or the general public.
Integrative Model of CSR
While non-profit organizations focus on fulfilling their mission to provide solutions to social
issues, there are also for-profit organizations that do the same. These organizations include social
entrepreneurship and sustainability at the core of their business model.
A social enterprise is a for-profit business organization that seeks solutions to pressing social
issues. This type of business organization brings social goals into the core of its business model and fully
integrates economic and social goals; thus the CSR model is referred to as the integrative model of CSR.

LESSON 6: EMPLOYER RESPONSIBILITIES AND EMPLOYEE RIGHTS

“Always treat your employees exactly as you want them to treat your best customers.”
- Stephen Covey
Business organizations will not exists without their employees. Business organizations need
employees to ensure that they will be able to deliver products and services to their customers, and more.
An employee will have to make decisions on how to treat others in the workplace and how he or she wants
to be treated.
6.1 Ethical Issues and Challenges in the Workplace
Business organizations face ethical challenges in the workplace and in managing their employees.
Research shows that business organizations that place employees at the core of their strategies produce
higher long-term returns to shareholders.

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 One of the most controversial employment-related issues in the Philippines is the
contractualization of employees (colloquially known as “endo”- end of contract or 5-5-5). “Endo
employees receive the social and welfare benefits required by law, such as SSS, PAG-IBIG, and
PhilHealth. However, they are not entitled to other benefits, such as paid vacation/sick leave, maternity
leave, solo parent leave, retirement, and separation pay.
Employees hired under “endo” arrangements are hired 5 months and rehired for another 5 months,
sometimes under a different agency or with a gap period. Employers effectively avoid paying certain
benefits granted to permanent hires, and deprive “endo” employees of job security.
Reports noted that the greatest influence on employee work commitment is fairness at work,
followed by care and concern for employees, which are all key components of an ethical work
environment. The incentives (bonuses), recognition (awards), and benefits (health insurance, retirement
program) that the employees receive from the company also increase employee motivation and
engagement. Employees who are motivated, engaged, and responsive become more productive, produce
higher-quality products, and are likely to stay with the company.
6.2 Employment Relationship (Employer Responsibilities and Employee Rights)
Companies have a responsibility to take care of their employees and to provide for their needs in
the workplace. When an employer hires an employee, an employment relationship is formed. Employment
relationships may give rise to ethical issues of power, authority, obligation, responsibility, fair treatment,
and expectations.
Termination of Employment Due to Authorized and Just Causes
Under the Labor Code of the Philippines, an employer can only terminate its relationship with an
employee if there is a just cause or an authorized cause. In both cases, employers need to practice due
process prior to termination or separation.
Just Causes of Termination:
 serious misconduct
 willful disobedience
 gross and habitual neglect of duty
 fraud or breach of trust
 commission of a crime of offense against the employer, his or her family or representative and
other similar cases.
Authorized Causes of Termination:
 installation of labor-saving devices
 redundancy
 retrenchment to prevent losses
 closure and cessation of business
 disease/illness
(Source: Labor Code of the Philippines, Book VI)
Due Process Requirement for Termination of Employment
Termination of employment based on just causes also requires the observance of due process. In
labor law, it is important that an employer follows the due process procedures. If not, the employee can
17
contest the termination as not being in accordance with the law. The termination process must meet the
substantial and procedural requirements – the reason or cause for the termination and the procedure of
how the termination decision has been reached and communicated.
In the dismissal of an employee, due process entails the twin-notice rule:
1. A notice apprising the employee of the act or omission for which his or her dismissal is sought.
2. A notice informing the employee of the employer’s decision to dismiss him or her, after being afforded
a fair and reasonable opportunity to be heard.
Termination of employment based on authorized causes requires the employer to serve a written
notice of termination to the employee at least 30 days before the effectivity of the termination. This will
allow the employee to find a new job or make other necessary arrangements. A separation pay is usually
given to the employee after separation from the service.
Health, Safety, and Security
Employers have a responsibility to protect the employees’ health, safety, and security while at
work. Health, safety, and security are intangible assets the employees have and are valued both as a means
for attaining other valuable ends and as ends in themselves. They have both instrumental and intrinsic
values.
Instrumental and intrinsic values may be viewed in business perspective this way. If, for example,
a construction worker dies in an accident while at work, the instrumental value of the employee can be
measured in part by the lost wages that would have been earned had that person lived. However, the
intrinsic value is much more abstract – what is a person’s worth, and how do you measure it.
The Department of Labor and Employment (DOLE) formulated the Occupational Safety and
Health Standards (OSHS) in compliance with the constitutional mandate to safeguard the workers’ social
and economic well-being as well as their physical safety and health.
6.3 Discrimination and Diversity
Discrimination
Discrimination is being in favor of or against a person based on group, age, social class, gender
orientation, race, religion, or any category to which that person belongs rather than on individual merit.
In recent years, the Philippines has been losing experienced workforce to other countries as it has
become difficult for those 30 years and older. In 2017, Republic Act No. 10911 or the Anti-Age
Discrimination in Employment Act was passed. Rather than age, potential employees should be evaluated
based on their abilities, knowledge, skills, and qualifications; thus promoting equal employment
opportunities for everyone.
Diversity
Diversity refers to the presence of differing culture, race, religion, language, ethnicity, gender,
ability, experience, age, social class, and other categories in the workplace. Workforce diversity is
important in organizations because it helps enhance competitiveness, expand organizational capabilities,
encourage sharing of expertise and skills from past experiences, and enhance access to markets. Although
workforce diversity greatly benefits a company, conflicts may also arise due to misunderstanding among
the culturally diverse employees.

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LESSON 7: BUSINESS AND ENVIRONMENTAL SUSTAINABILITY
“For it matters not how small the beginning may seem to be; what is once well done is done
forever.”
- Henry David Thoreau
Earth is facing a wealth of environmental issues today – pollution, global warming,
overpopulation, poor waste management, depletion of natural resources, and biodiversity. Many of these
environmental problems contribute to climate change. Every individual or corporation must make a
conscious effort to protect and save the environment. Most business organizations now integrate
environmental sustainability in their business decision.

7.1 Environmental Issue and Sustainability

One of the environmental issues that directly concerns business organizations is the depletion of
natural resources. Joseph Weiss, in his book Business Ethics: A Stakeholder Issues Management
Approach, identified the six pervasive factors that contribute to the depletion of natural resources.
1. Consumer Affluence. The increase in individual income has led to increased and indiscriminate
spending and consumption, which produce waste. As a democratic country function based on the law of
supply and demand, their economy produces what is wanted by people who are willing and able to
purchase the product or service, and not what might be needed by those who lack the money to purchase
the product or service. This results in easy access of affluent consumers to all products, necessary or trivial,
at their own disposal. This promotion of consumerism leads to increasing pollution, resource scarcity, and
other forms of environmental degradation around the world.
2. Materialistic Cultural Values. Many people have acquired the mentality of consumption over
conservation, and the “throwaway culture.” With access to retail stores everywhere, acquiring goods has
never been easier. This promotes the practice of overconsumption and excessive production of disposable
or single-use items. Take for example the myriad of instant products in supermarkets. Their packaging
(e.g., Styrofoam cups, plastic containers) contributes to the wastes that are generated every day.
3. Urbanization. The concentration of people in cities changes the environment. More people in the cities
means more cars or modes of transportation, which contribute to air pollution. More people also means
more demand housing, which drives developers to clear forests or reclaim land from bodies of water. More
people means increased consumption of food, water, and energy, which results in inadequate food and
water supply, and spread of diseases. Urbanization likewise has social consequences, such as increased
demand for social services, stiffer competition for employment opportunities, higher incidence of crimes,
and growth of informal settlers, among others.
4. Population growth. The country’s population continues to grow albeit at a slower pace than it was in
the 1960s. The current population is comprised mostly of individuals below the age of 25 years old. Given
the finite land resources which are used for agriculture to produce food and for building houses, the
growing population of the country has become a central issue for long-term development plans and

19
sustainability. This means that more natural resources need to be allocated to support the growing needs
of the people, and that more people will contribute to environmental degradation.
5. New and uncontrolled technologies. Some companies that prioritize profits, convenience, and
consumption over environmental protection disregard the impacts of the technologies they use and
develop. Although many business organizations that focus on technological advancements are now more
aware of their environmental and social responsibilities, it is still not a mainstream concern for most
companies. The use of GMOs in food, for example, has sparked a lot of controversy over recent years due
to its environmental implications.
6. Industrialization. Industrial activities deplete natural resources and cause environmental degradation.
Air, water, and soil pollution and global warming, which are caused by manufacturing processes, improper
waste management, use of toxic chemicals, and burning of fossil fuels, are some of the ill effects of
industrialization on the environment.

7.2 Environmental Values

Why should business organizations value the environment and be concerned with the need to
protect it. The answer is simple: environmental concerns are relevant to businesses and to everyone
because human beings depend on the environment to survive. The environment is not an unlimited
resource. Future generations will depend on the environment that people are destroying now.
According to The Natural Step (TNS), the resources necessary to sustain life are decreasing, while
the worldwide demand for these resources due to population growth and consumerist lifestyle is
increasing.
TNS uses back casting, a process which examines what the future will be when we emerge through
the funnel. The process includes the following steps:
1. Begin with the end in mind. “What do we have to do today in order to be successful in this endeavor?”
2. Move backward from the vision to the present.
3. Move step by step toward the vision.

7.3 Approaches to Environmental Sustainability

To protect and enhance the quality of environment, there are three different approaches to
environmental sustainability that business organizations can practice, namely,
The Market Approach
The market approach in achieving environmental sustainability focuses on the efficient markets
that seek profits but allow for the efficient allocation of resources. The business fulfills its goal within a
market system which in turn serves the goals of the greater good.
Market-based approaches to the environmental protection are premised on the idea that it is
possible to involve corporations, individuals and government agencies by using prices that force them to
economize. They try to put the powerful advantages of markets to work for the benefit of the environment.
The Regulatory Approach
Every country implements its own laws and regulations on environmental protection. In the
Philippines, the DENR is responsible for the “conservation, management, development, and proper use of

20
the environment and natural resources” and for guaranteeing the “equitable sharing of the benefits from
all natural resources for all the welfare of the present and future generations of Filipinos”. It is tasked to
regulate the use of natural resources, issue permits to businesses that require the use of these resources,
and implement policies to prevent pollution and abuse of natural resources.

The Sustainability Approach

Sustainability, or sustainable development, is “development that meets the needs of the present
without compromising the ability of future generations to meet their own needs” (Hartman, DesJardins,
MacDonald 2014).
1. The Circular Flow Model

https://commons.wikimedia.org/wiki/File:Circular_flow_of_goods_income.png

According to economist Herman Daly, a major paradigm shift is needed in our understanding of
economic activity. The problem with the circular flow model is that it does not differentiate natural
resources from other factors of production, and it does not identify the origin of the resources. It just
assumes that resources are provided by households for the businesses. It also fails to note that resources
are finite and just assumes that natural resources are infinite resources that can be used by companies.
Another thing to note is that the circular flow models treats economic growth as limitless. To keep
up with the population growth, the economy must grow. To improve a country’s standard of living, the
economy must grow.
2. The Sustainable Model

https://bluetribe.co/business-model-innovation-the-secret-weapon-of-your-sustainability-strategy/

21
 The sustainable model recognizes that the economy exists within the biosphere with finite
resources. From the first law of thermodynamics (the conservation of matter/energy), you learn that neither
matter nor energy can truly be “created”. It can only be transformed from one form to another. The second
law of thermodynamics (entropy increases within a closed system) will explain that energy is loss at every
stage of an economic activity, and the amount of usable energy decreases over time, with “waste energy”
leaving the economic system continuously requiring low-entropy energy to constantly flow into the
system. The sustainable model recognizes the input of natural resources and the presence of wastes
produced at each stage of an economic activity that are dumped back into the biosphere.
7.4 Principles for Business Sustainability
The sustainable model provides a general picture of how business organizations should conduct
their businesses in consideration of their environmental responsibility.
1. Eco-efficiency Principle
Practically “doing more with less,” and has been an environmental guideline for decades. For
example, riding a bike is better than riding a bus; riding a bus or train is better than flying on a plane in
terms of carbon footprint, or the amount of greenhouse gases produced directly or indirectly support
human activities. Business organizations can improve energy efficiency in their offices through energy-
efficient lightning, better building designs, environmentally friendly product designs, and more efficient
distribution channels.
2. Biomimicry Principle
The waste materials of one company are turned into resources by another company. The ultimate
goal of this principle is to eliminate waste instead of just reducing it. For example, a closed-loop
production, a manufacturing or production system that seeks to integrate what is presently considered as
waste back into the production.
3. Serviced-based Economy Principle
Interprets consumer demand as a demand for services – transportation, laundry, and maintenance
of cars and appliances, among others. This principle produces incentives for product redesigns that create
more durable and more recyclable products. For example, consumers may choose to have their clothes
washed by a laundry service company instead of buying their own washing machines. To do the laundry,
the company will have to purchase industrial-grade washing machines, which are more durable and will
last longer than consumer-grade ones.

References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 87 - 133
http://bit.ly/diwa-BUSETHICS2ED
hhtps://www.equalrights.org/legal-help/know-your-rights/sex-discrimination-at-work/
https://commons.wikimedia.org/wiki/File:Circular_flow_of_goods_income.png

22
 Module 3
WEEK 3

Objectives:

In this module, the student should be able to:

 Identify ethical issues in marketing and promote practices that advocate responsible
marketing.
 Explain green marketing.
 Explain the importance of establishing and sustaining business enterprises as source of job
opportunities and financial freedom.
 Develop ideas for a social enterprise and assess the viability and potential of a social
enterprise idea.

Let’s Discuss!
LESSON 8: ETHICS AND MARKETING
“Advertising doesn’t create a product advantage. It can only convey it.”
- William Bernbach
Imagine seeing a commercial of a new shampoo that promises shiny, silky hair in just one week
of using the product. Since you have always had problems with your dry hair, this seemed like it is worth
a try so you bought the product. After using it for weeks now, you are still waiting for the promise of a
shiny, silky hair. How would you feel about the product?
Marketing is defined as a business activity that aims to build the value for the customers and
manage customer relationships in order for a company to gain value in return. This exchange process
involves convincing the customers of a product’s value through various marketing activities like
advertising, events, sponsorships and many others. To make the customers believe the value of its product,
a company must be able to showcase the best features of the product in the most creative and convincing
way. This may lead to the company overstating the benefits of its product or worse, saying something that
may not be true about the product just to be able to gain consumers’ attention and establish brand
awareness.
8.1 Product Safety and Liability
Business organizations have an ethical responsibility to design, manufacture, and promote their
products in ways that do not cause harm to consumers.
In the Philippines, the Bureau of Product Standards (BPS) under the Department of Trade and
Industry (DTI) is responsible for developing, promulgating, implementing, and promoting standardization
activities as mandated by Republic Act No. 4109 (Charter of BPS) and Republic Act No. 7394 (Consumer
Act of the Philippines).
Business organizations have the responsibility to provide goods at an agreed-upon price. They
usually follow the caveat emptor approach, which assumes that consumers have the responsibility to look
out for their own interests and protect their own safety when buying a product. The problem with this
approach is that unless the company ensures that a product is safe, the buyers are liable for any harm they
suffer.

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 A warranty gives the consumers assurance that the company will be held liable for product
damages or failure for a certain period of time. This is common in electric gadgets and appliances.
The Tort Standards, or the quasi-delict as it is called in the Philippines, covers the liabilities of
companies. Liability for quasi-delict under the Civil Code of the Philippines requires the following
conditions:
1. an unlawful act or omission amounting to a fault or negligence, imputable to the defendant
2. damage or injury to the plaintiff
3. such damage or injury being the natural and probable, or direct and immediate consequence of the
defendant’s wrongful act or omission
4. there being no pre-existing contractual relation between the plaintiff and the defendant
To simply put it, a company can be held liable for the actions of its employees. For instance, if a
bus driver accidentally hits a pedestrian, resulting in injury, the bus company could be liable for the actions
of the driver. The company would have to cover hospital, medical treatment, and rehabilitation expenses
caused by the accident.
8.2 Ethical Issues in Advertising
Advertising is an important tool in marketing that is used to introduce a product or inform
consumers about product updates, and to influence or persuade the consumers to buy the product.
Consumers benefit from this tool by receiving information so they can make better, informed choices
when they shop.
The most common issue in advertising is the truth or how much of the truth is declared in
advertising materials. For example, a company may claim that its product can do various things, but in
fact, the product can only do so much. Worse, the company may claim that the product has certain benefits
when it really does not or the company has no evidence that such benefits can be attained.
Tobacco advertising on mass media has been banned in the Philippines. Tobacco companies are
directed to use shock advertising, which requires them to put graphic or disturbing images related to the
consequences of cigarette smoking on cigarette packs to discourage people from smoking.
Infant formulas are also not allowed to be advertised on mass media unless the advertisement is
approved by an interagency committee. Executive Order No. 51, or the Milk Code, encourages mothers
to breastfeed their babies to ensure that they receive the best nourishment.
The portrayal of women in ads in a sexual tone is also a controversial issue in the country. For
example, many liquor ads show women in sexy outfits while posing seductively and holding a bottle of
liquor. Unfortunately, the phrase “sex sells” may be true in some occasions.
8.3 Sustainable Marketing
Sustainable or green marketing focuses on actions that promote sustainable ways of marketing a
business organization’s product or service. Remember that there are four P’s of the traditional marketing
mix: product, price, place, and promotion. Each element must contribute to the practice of green
marketing.
The Four Ps of Traditional Marketing and Green Marketing
Products go through changes throughout their availability in the market.
Through innovation, a company can implement more sustainable ways of
manufacturing them. For example, many companies now use biodegradable
Product and environment-friendly packaging. Other examples:
 Most cellphone companies no longer include a user manual in their
product pack instead, consumers are directed to the company website
to download or read the user manual.
 Some companies encourage recycling by offering discounts to
consumers who return empty containers.

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  Some coffee shops offer discount to customers who bring their own
mug or tumbler.
Price Price is an important component of marketing simply because it is the only
element among the four Ps that affects revenues rather than costs. Customers
consider the price of the product before buying it, and companies consider
the price of the product to ensure profitability.
Place The channel of distribution can be turned green by using cost-efficient
delivery systems and energy-efficient vehicles. For example, a company can
reduce carbon footprint by having a well-planned delivery schedule.
Promotion Capitalizing on green marketing efforts is one way to create positive image
for the company. Using eco labels such as eco-friendly, natural, organic, and
energy-efficient to promote products may influence the purchase behavior
and decisions of consumers; that is, green products are often more appealing.

LESSON 9: SOCIAL ENTREPRENEURSHIP

“Spectacular achievement is always preceded by unspectacular preparation”.
- Robert H. Shuller
Social entrepreneurs want to create a widespread change. They look for new ways to address
pressing social issues (e.g., lack of access to clean water supply, poor sanitation, etc.) They are driven by
something much more than making profits; they are out to make a difference in the world.
The past few decades have seen a tremendous growth of social enterprises. There is a noticeable
shift toward better business models. More and more businesses are being put-up with purpose-driven
initiatives.
9.1 Defining Social Entrepreneurship
The word social comes from the Latin word socialis, which means, “an associate, ally, or
companion.” It suggest an organization of people who belong in interdependent groups that live and work
together cooperatively in a community or society.
Meanwhile, entrepreneurship may be defined as promotion innovation by seizing opportunities to
provide a new product or implement a new production method, and then organizing the needed production
inputs and assuming financial risk. The key terms in the definition are innovation, which seeks to find
improvements; and financial risks, which is a challenge that every entrepreneur has to face to earn profits
for the business venture.
Social entrepreneurs play the role of change agents in the social sector through various means. Among
which are the following:
 Adopting a mission to create and sustain social value (not just private value). The mission of social
entrepreneurs is to provide solutions to challenges facing society today – from poverty to illiteracy
to environmental sustainability. Making profits and providing what the market needs are means to
a social end, not the end in itself like how business enterprises see things. Social entrepreneurs
look for long-term return of investment, rather than being concerned with business return of
investment.
 Recognizing and relentlessly pursuing new opportunities to serve that mission. Social
entrepreneurs see the opportunities, not just the problems. They are visionaries who are determined
to explore the opportunity they see and to make it work.
 Engaging in a process of continuous innovation, adaptation, and learning. Innovation does not
have to mean creating something new. It can simply involve applying an existing idea in a new
way or situation.
 Acting boldly without being limited by resources currently in hand. Social entrepreneurs use
resources efficiently; they do not let their own limited resources keep them from pursuing their
social mission. They have a clear vision of what they want to achieve, and they work hard, take
risks, and develop strategies in order to achieve their goals.

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  Exhibiting heightened accountability to the constituencies served and for the outcomes created.
Social entrepreneurs take steps to ensure that they are creating social value. They seek to provide
real social improvements, and they work hard to be able to do what they set themselves to achieve.
Social entrepreneurs are regarded as change agents as they make a difference through changing,
reforming, or revolutionizing solutions in the social sector. They seek to create systematic changes
and sustainable improvements.
9.2 Modeling the Social Entrepreneurship Process
Social entrepreneurship is the process of recognizing and pursuing opportunities to create
social value, that is, to develop and implement solutions to social, cultural, and environmental issues.
It involves the interaction of the individual entrepreneur, the enterprise itself, and the context in which
the entrepreneur and social enterprise operate.
The Timmons Model of the Entrepreneurship Process
According to the Timmons Model of the Entrepreneurship Process, the three key components of a
successful business venture are opportunity, team, and resources.

https://venturefounders.com/timmons-model-of-new-venture-creation/
The figure above shows that entrepreneurship is opportunity driven, or that the market shapes the
opportunity. The entrepreneurs has to be able create value for the consumers at the right price in order for
the opportunity to become viable. Once the opportunity is deemed viable, the entrepreneur forms a team.
The size of the tem is based on the size and the nature of the opportunity. Timmons considers a good team
as a requirement for the venture to succeed. The entrepreneur also has to be able to choose the right
members of the team to contribute to the success of the business. Identifying the resources is also important
so the company can create a competitive advantage for its products. The resources must also match the
requirements of the opportunity.
The PCDO Framework
The PCDO framework presents four interrelated elements of social entrepreneurship; people,
context, deal, and opportunity. People represents the human resource needed to successfully run the
enterprise. The collective skills that the people are needed to fully operate the business. People also include
the investors in the enterprise.
Context includes elements in the environment where the entrepreneurship takes place. It includes
factors that are beyond the control of the management, such as political, demographic, cultural, and
economic factors.
Deal includes transactions involves in determining how and to whom the benefits of the
entrepreneurial activity are dispersed. It is the substance of the bargain that defines who gives what, who
gets what, and when those deliveries and receipts will take place.

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 Lastly, opportunity creates an avenue for the enterprise to offer something of value to the market.
It is the essence of the framework.

https://www.researchgate.net/figure/People-context-deal-and-opportunity-PCDO-framework-Source-Austin-et-al-
2006_fig15_316739915

The CASE Model

The CASE model developed by Guclu, Dees, and Anderson of the Center for the Advancement of
Social Entrepreneurship (CASE), presents the process of creating a social opportunity. The first stage
involves generating promising ideas, while the second stage focuses on the development of promising
ideas into attractive opportunities.
In the first stage, the opportunities in the community are generated based on social needs and social
assets. The opportunities need to be viable as a business and as a strategy for creating an impact on social
transformation. The second part, which covers the social impact theory, includes a working hypothesis on
the social outputs, outcomes, and impacts that are achievable when the opportunities are actively pursued.

https://www.researchgate.net/figure/The-opportunity-creation-process-Guclu-Dees-and-Anderson-2002-
2_fig2_255574243
The Social Entrepreneurship Framework
This is a modification of the PCDO framework. This framework identifies three elements:
opportunity, people, and capital. Opportunity and people represent exactly the same variables discussed
in the PCDO framework, but finance providers are no longer part of people; instead, they fall under capital.
This framework captures the synergy of the three elements in order to fulfill the social value proposition
(SVP). The SVP is at the heart of the social entrepreneurship process where the three elements overlap in
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the Venn diagram and is the reason why target beneficiaries of a social enterprise choose a company’s
products over its competitors.

https://www.researchgate.net/figure/Social-Entrepreneurship-Framework-Note-SVP-social-value-
proposition_fig2_307773106
The Social Entrepreneurship Process Model
This model attempts to put together the best of both the CASE and the social entrepreneurship
framework. In this model, the social entrepreneurship process takes place in two stages and starts with
idea creation similar to the first step in the CASE model.
In stage 1 (idea creation), ideas are generated based on the entrepreneurs motivation, the identified
social need that has to be addressed, and the current capacity of the society to fulfill the need. The
entrepreneur’s motivation is influenced by his or her background – geography, history, politics, etc.
In stage 2 (mission achievement), the three elements, opportunity, people, and resources –
converge in the fulfillment of the mission or purpose of the social venture.

https://www.researchgate.net/figure/Social-entrepreneurship-Process-Model-adopted-from-Flament-
2012_fig1_332379829
LESSON 10: CREATION OF A SOCIAL ENTERPRISE
“Ideas are the root of creation”.
- Ernest Dimnet
Many big companies came from small beginnings. Some started as a dream which became a
reality. Some were realized because of one’s passion, while others were materialized out of necessity.
Indeed, ideas come in many forms and sizes, in different places, at different times.
10.1 Social Idea Generation

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 A social enterprise starts with the recognition of a need in society, driven by a motivation to initiate
social change. Social entrepreneurs are often on the lookout for ideas that can be offered to the market to
address the needs of society.

Common sources of entrepreneurial ideas:

 Personal experiences. These are a common source of entrepreneurial ideas which may come from
solving problems or having unresolved issues encountered at home, at work, or in school.
 Hobbies or passion. A person’s passion or interest may inspire an idea that can be turned into a
business.
 Accidental discovery. Some ideas can come about completely by accident. A company may be
seeking to innovate a product, yet accidentally discovers something else through the course of
product development.
 Systematic or intentional search. Some entrepreneurs find ideas by actively and intentionally
searching for them. They look at the list of unused patents or search on the internet for ideas that
have yet to be turned into a reality.
 Awareness through different channels. Entrepreneurs may find inspiration from watching the
news, reading articles, or through professional or social networks.
According to Longenecker et al, ideas maybe classified into three categories:
Type A identifies a new market for existing product. For example, a burger patty is served as a main dish
paired with soup and rice, especially for rice-loving Filipinos.
Type B develops an entirely new product, which can be based on a technological breakthrough.
Type C seeks ways to find more efficient or more effective ways pf producing an existing product.

10.2 Innovation
Creativity and innovation are often used synonymously, but these words have different meanings.
Creativity is the development of original ideas or inventions, while innovation is the implementation of
these inventions.
Seven Types of Innovation
This refers to making available products that have not been
Creation of New Products previously conceived of or offered to the market.

The term product includes goods, services, programs, or projects. It

New Process for Producing an can be an existing product, such as shampoo, but does not use
Existing Product chemicals such as sodium lauryl ether sulfate (SLES), which is
deemed harmful to humans.

Natural or organic products are often expensive. When a social

Delivering an Existing Product to enterprise offers a more affordable lineup of products that do not
a New or Underserved Market contain harmful chemicals, it is able to tap into a market that is not
used to buying natural products because these are out of their
budget.

A social enterprise tapped the residents in Payatas to produce

Utilizing a New Source of Labor saleable items made out of trash.

Social enterprise usually start small and are manned by only a

Implementing a New handful of people. Some may work as volunteers, which is usually
Organizational Structure not common in traditional organizational structures.

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 Implementing New Ways of Microfinance institutions do not operate like commercial banks.
Engaging Customers or Target While their main function is to lend money to microenterprises,
Beneficiaries most of them do not require collateral.

Despite the seemingly philanthropic nature of social enterprises,

Utilizing New Funding Models they do not rely on donations. Instead, they generate their own
income to finance their social causes.

10.3 Opportunity Recognition

According to Timmons and Spinelli, ideas are turned into opportunities when they have the
following characteristics:
 Ability to add value for the customer
 Creating value by solving a customer problem or fulfilling a customer need
 Ability to capture a market and generate profits
 Compatibility with the skill set of the entrepreneurs who pursue them
The value added for the customer is known as the value proposition. This is the value that
customers seek in a product a product over its competitors. Opportunity can be defined as “a business
concept for a product or service that adds value to the lives of its customers by uniquely addressing an
identified need or desire in a way that takes advantage of existing market conditions and the skill set of
the entrepreneur and ensures the financial viability of the enterprise delivering the product or service”.
10.4 The Social Enterprise Plan
The Social Enterprise Plan can assist you in formulating and finalizing your social venture.
The parts of a social enterprise plan are given below.
I. Situation Analysis
A. Social Issues
B. Social impact
C. Market Analysis
II. Social Enterprise
A. Products
B. Mission and Vision
C. Target Beneficiaries
D. Customers
E. Competitors
III. Operations
IV. Financial Plans

The situation analysis gives you an overview of the environment in which the social enterprise
will be operating. You could include analysis of current trends that are related to the enterprise you are
proposing, the social issue that you want to address, and the social impact that the enterprise could have
on the society. You may consider the following when deciding on the social issue you want to help resolve:
 Prevalence – Is the social problem rampant in the society?
 Relevance – How can the social entrepreneur help solve the problem? Does he or she have the
necessary skills and knowledge to manage the social enterprise?
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  Radicalness – What are the proposed solutions of the social enterprise? How innovative are they
to address the social problem?
 Urgency – How quickly can the social enterprise respond to the social problem?
 Accessibility – What are the challenges in providing logistical support, mechanisms, and/or
operations of the social enterprise? How can these be resolved?
The second section of the plan requires you to describe in detail the specific features of your social
enterprise. What product (or service) will you be offering to the market? You may also discuss here your
product’s competitive advantage. The mission and vision will serve as the guiding light for your social
venture. The target beneficiaries and customers will give a clearer picture of who will benefit from the
enterprise, what exactly they will need, and who will be patronizing the product. Identifying and analyzing
competitors will let you know how to make your product stand out and will give you insights as to what
your competitors are doing and what they are planning to do.
The third section of the plan should provide specific details about the operations of your social
enterprise. Some questions that must be answered in this section include the following:
 Where will your enterprise operate?
 How many people do you need to manage and run it?
 Where will your raw materials come from?
 How long will it take for you to produce and make it available to the market?
The last section will show the viability of your social enterprise plan.

References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 134-160
http://bit.ly/diwa-BUSETHICS2ED
https://venturefounders.com/timmons-model-of-new-venture-creation/
https://www.researchgate.net/figure/People-context-deal-and-opportunity-PCDO-framework-Source-Austin-et-al-
2006_fig15_316739915

https://www.researchgate.net/figure/The-opportunity-creation-process-Guclu-Dees-and-Anderson-2002-
2_fig2_255574243
https://www.researchgate.net/figure/Social-Entrepreneurship-Framework-Note-SVP-social-value-
proposition_fig2_307773106
https://www.researchgate.net/figure/Social-entrepreneurship-Process-Model-adopted-from-Flament-
2012_fig1_332379829

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