Sunday, November 16, 2014

P&G: Unethical Scandal (2014)

P&G Corp. logo

Procter & Gamble Corp., otherwise referred to as P&G, is an American multinational consumer goods company founded by William Procter and James Gamble in the year 1837. Palm oil is a common substance found in P&G’s line of beauty and household care products. In being one of P&G’s major suppliers of palm oil, BW Plantations is said to operate in the region of Kalimatan, located in Indonesia (GeenPeace pdf). However, BW Plantation and its subsidiaries are among the top companies known for their unethical practices of deforestation in the global business world. More precisely, their unethical practices of rapid deforestation of the Sumatra Jungle have caused endangered species such as the Sumatran Orangutan and Tiger to unjustly face the brink of extinction. Environmental friendly organization, GreenPeace, have reported that, “The palm oil sector is currently the greatest single driver of deforestation in Indonesia, accounting for about a quarter of all forest loss.” The organization also reported the number of these endangered species thought to remain living in the Sumatra Jungle. The report stated that as few as 400 Sumatran Tigers are thought to remain in the jungle and a postdated report of five years ago stated that the Sumatran Orangutan population was thought to be around 6500 (GreenPeace pdf). As a mass producer of common household products, P&G deceptively included their consumers to contribute to the unethical practices of deforestation by allocating consumer profits to fund BW Plantation and their subsidiaries.

In supporting the unethical practices of its major palm oil supplier, BW Plantations, Procter and Gamble have extended those affected by the unethical situation. There are various stakeholders to be considered when analyzing this case. Internally, P&G’s A.G. Lafley who serves as Chairman of the Board, President and Chief Executive Officer and Werner Geissler who serves as vice chairman and advisor to the CEO are stakeholders within the upper level management of the company (P&G executive team). They are among the few people that have knowledge of such wrongdoings and by running the company in such an unethical manner, their reputation and credibility can be ruined along with the company name. The company’s functioning employees that produce the products are also stakeholders who serve to have an interest in the company’s practices. Although they may be unaware of the unethical practices that occur to source the palm oil they use to produce P&G products, they still contain an interest in the company and are affected in some way when such ethical wrongdoings are revealed. They may feel deceived and uneasy about the practices of the company’s supply chain which can hinder their decision as to sustaining employment at P&G. Furthermore, those who invest in P&G and own stock in the company are among another group within the internal boundaries of the company that are affected by such unethical wrongdoings. The value of the company’s stock may decline due to the deficient reputation of the company’s supply chain which directly affects those stockholders who hold stock in the company. BW plantation, the peer company of P&G is another member affected by this case. Since their unethical wrongdoings are now exposed, their reputation and credibility will worsen as well and they may find themselves to be undesirable by other companies who are in search for suppliers of raw materials. Therefore, their interests and the way in which they conduct their practices will be affected by this case.
A.G. Lafley, former CEO of P&G Corp.
Externally, there are various groups affected by the case, some of which include: customers, the community, the environment, and those species in endangerment due to these practices. Customers have interests in the company’s in which they purchase from; therefore, being exposed to the wrongdoings of P&G and its suppliers may hinder their decision when purchasing products. The community is directly affected as well because the community is made up of those customers who purchase P&G products, therefore, if customers choose not to purchase P&G due to the awareness of their wrongdoings, the structure and concerns of the community will change due to the change in the company’s reputation. Lastly, the environment and the Sumatran Orangutan and Tiger species are those who are affected most by the unethical practices of P&G and their peer supply company, BW Plantation. The environment within Indonesia is being decimated each day. What once was a land full of rain forests and natural beauties is now a battered wasteland that serves as a goldmine for sourcing raw materials. The beautiful species of the Sumatran Tiger and Orangutan that once flourished in this region are at the brinks of extinction due to the destruction of their homelands. Each day, another tiger or orangutan is lost and the road to extinction is a short ways away for these poor and helpless species.

Individualism is the ethical theory that values the business, the owner’s choices, and business profits. The ethical rule within individualism is that business actions should aim to maximize profits for the owners of a business, but do so within the constraints of the law (Case Manual). As the original inventor of the theory, Milton Friedman forcefully argued that businesses should not attempt to be “socially responsible” and that spending money on resources, employees, and donations to causes is wrong because it is essentially stealing from the owner or owners of the company (Case Manual). Friedman contained a sole focus on the profitability of the business. Therefore, in the Individualistic eyes of Friedman, P&G is not in the wrong for the unethical practices of its suppliers. This can be argued because by outsourcing its palm oil from suppliers of foreign nations, P&G is able to acquire massive amounts of palm oil at moderate to low prices. Therefore, by reducing the costs of producing their products while obtaining a steady inflow of raw materials required to produce the products, P&G can efficiently sell their products in mass quantities throughout various specters of the world. In turn, the sales and profitability of the company will increase which will intuitively increase and or maximize the wealth of the owners of the company. Furthermore, Procter and Gamble is not violating any laws by obtaining their Palm oil in the foreign nation of Indonesia. There are little to no regulation of deforestation in Indonesia, therefore, P&G is operating to maximize its owner’s wealth without violating any major laws, so they are exercising effective business strategy to maximize their profits and are not unethical in doing so in the eyes of the Individualist, Milton Friedman.

Utilitarianism is the ethical theory that values the “happiness of all conscious beings, often interpreted hedonistically as pleasure and the absence of pain, but also sometimes interpreted as the satisfaction of desires.” The ethical rule within the Utilitarian framework is that “Business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action” (Case Manual). The stress of concern is on the long term costs and benefits of actions. From a Utilitarian standpoint, P&G is behaving unethically by supporting and conducting business with BW Plantation. P&G is failing to realize that the Sumatran Tiger and Orangutan species are in fact conscious beings capable of experiencing happiness. Furthermore, it can be argued that the destruction of their native homeland as a means of obtaining raw materials does not promote happiness in any degree; rather it is causing pain and fear to two species that now face the danger of becoming extinct. It was reported that “as few as 400 tigers are thought to remain in the rainforests of Sumatra and the endangered Orangutan species were estimated to contain 6500 Orangutans five years ago” (GreenPeace). Therefore, by failing to value the happiness of these species in their procedure of obtaining palm oil used to produce their products, P&G is performing in an unethical manner.

Flyer protesting P&G's deforestation

Originating with Philosopher, Immanuel Kant, Kantianism is the ethical theory that values rational decision-making, autonomy of individuals, honesty and freedom. The ethical rule within this framework states to “Always act in ways that respect and honor individuals and their choices. Don’t lie, cheat, manipulate or harm others to get your way. Rather, use informed and rational consent from all parties” (Case Manual). This theory also shows a strong concern with the moral permissibility of an action and the moral worth in the motivation of the action. An action is morally permissible if it is said to be rational. A rational action with the right motivation driving such action is the key evaluating factors when analyzing whether an action is morally permissible in the eyes of Kant. When producing and marketing their products, P&G fails to provide information as to where they obtain their raw materials and from whom. Failing to provide substantial information in relation to their production can be seen as a manipulative tactic towards consumers who purchase the products and to the employees who produce the products that do not contain the information as to how the Palm oil is obtained. Essentially, P&G is wrongfully using these groups of people in a manipulative way to get what they want; a mass produced product that does not render high production costs and could be sold at moderate prices to sustain a substantial level of sales volume. Therefore, from a Kantian standpoint, the actions of P&G cannot be seen as rational and do not contain the right motivation behind them.

Virtue Theory
Originated by the Greek philosopher, Aristotle, Virtue Theory is the ethical theory that values character traits that promote wellness or flourishing of individuals within a society. The ethical rule within the framework states “act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits” (Case Manual). Aristotle states that “we all need to exercise our rationality in whatever talents we have and to relate to others in the world in a way that brings balance into our relationships” (Case Manual). Furthermore, when analyzing an individual’s character, the character traits of the individual must be evaluated and classified individually. Virtues are those character traits that aid to the flourishing of the individual whereas vices are those traits that inhibit flourishing (Case Manual). Through the usage of their deceptive tactics, P&G included its consumers and its own employees to become a part of such a devastating environmental scandal. Therefore, it could be said that P&G and its representatives have been dishonest, selfish, and greedy in regards to their consumers and employees. These vices are inhibiting the flourishing of the company and have created a negative relationship between the company and its consumers. It can be argued that P&G has not been taking any measures in balancing their relationships between themselves and consumers. As stated in the GreenPeace article titled, “Pulling back the shower curtain: Find out about P&G's dirty secret!” , researchers of the organization have stated “We've confronted P&G for the last eight months with how it is exposing consumers to forest destruction. Instead of taking urgent action it is trying to greenwash its actions.” Therefore, P&G is not acting virtuous or rationale in regards to their relationship with their consumers and due to their lack of virtue in their actions, it can be concluded that P&G is behaving unethically based on the framework of Virtue Theory.

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