3. Business (including business organisations): innovation, participation and organisation
The price that can be achieved in the market is the key incentive for offering products. Through product innovation, companies gain a competitive advantage that enables them to charge higher prices. Alternatively, they may seek to remain competitive by reducing production costs through process innovation.
Social-ecological product or process innovations occur when changes to products or production processes reduce or even eliminate the negative external effects of economic activity (e.g. environmental impacts). To this end, pioneering companies with a strong ethical commitment implement environmental and social management systems. If socio-ecological innovations are also economically advantageous, they will be emulated by others. If they involve significant costs, however, the pioneer will find it difficult to maintain its leading role in the long term against aggressive competitors. If there is no compensation for this from consumers in the sales market, there is a risk of being forced out of the market.
Responsible companies then become involved in regulatory policy: they campaign to ensure that social and environmental standards are made generally binding within the regulatory framework set by the state, so that compliance no longer represents a competitive disadvantage. Alternatively, they join together in business associations and collectively commit to adhering to these standards (= a self-imposed regulatory framework).
Organising responsible conduct is a management task. Compliance systems are designed to ensure that employees comply with the law (= legality), whilst ethics management systems ensure adherence to ethical values and standards (= legitimacy).
Ethical malpractice in business practice points to organisational failure.
Didactic Principles
- Market
- Government regulatory framework
- Businesses & Associations
- Economic citizens
- The public and NGOs