how ethics may influence business objectives and activities

Business Objectives – Objectives and Decision‑Making (Cambridge 9609)

1. The Decision‑Making Cycle – Why Objectives Matter

1. Identify the problem or opportunity – recognise a need for change (e.g., falling market share, new regulation). Objectives will later define what the firm wants to achieve from addressing this need.
2. Set objectives – formulate clear, measurable aims that will guide the generation of alternatives. Objectives give direction and a benchmark for success.
3. Generate alternatives – develop possible courses of action. The set objectives act as a filter, discarding options that cannot meet them.
4. Evaluate alternatives – assess financial, operational **and ethical** implications against the objectives.
5. Make the decision – choose the alternative that best satisfies the objectives.
6. Implement the decision – allocate resources, assign responsibilities and communicate the plan.
7. Review and monitor – compare outcomes with the original objectives; amend objectives if circumstances have changed.

Ethical considerations can be introduced at any stage, but they are most powerful when they shape the initial objectives and the evaluation of alternatives.

2. Setting Effective Objectives

2.1 SMART Objectives

2.2 Ethical Alignment with SMART

Ethical or CSR‑related aims can be written using the same SMART criteria. Example:

“By 2028, reduce Scope 1 carbon emissions by 30 % (Specific, Measurable, Achievable, Relevant to stakeholder climate concerns, Time‑bound).”

2.3 Converting a SMART Objective into a Budget Line and a KPI

Objective: Reduce manufacturing waste by 20 % by the end of 2026.

• Target (derived from the objective): 20 % waste reduction.
• Budget allocation: £ 50 000 for R&D of waste‑minimising technology and £ 30 000 for staff training.
• KPI: Monthly waste‑generated (tonnes) compared with baseline; target trend line shows a 20 % drop by Dec 2026.

3. Objectives for Different Types of Organisations (Cambridge 1.4.1)

4. Translating Objectives into Targets, Budgets & KPIs (Cambridge 1.4.2)

• Targets – numeric statements derived from SMART objectives (e.g., “£2 m of sales from eco‑friendly products by 2025”).
• Budgets – financial resources allocated to achieve the targets (e.g., R&D spend, capital for renewable energy).
• Key Performance Indicators (KPIs) – measurable data that monitor progress (e.g., % reduction in waste, employee ethics‑training completion rate).

5. Communicating Objectives to the Workforce

• Town‑hall meetings and leadership briefings.
• Intranet dashboards displaying real‑time KPI data.
• Performance‑related pay and reward schemes linked to objective achievement.
• Regular feedback loops (surveys, suggestion boxes) to ensure employee buy‑in.

6. Ethical Influences on Business Objectives and Activities (Cambridge 1.4.2)

6.1 Key Ethical Concepts

• Corporate Social Responsibility (CSR) – voluntary commitment to economic, social and environmental welfare.
• Stakeholder Theory – businesses have duties to shareholders, employees, customers, suppliers, community and the environment.
• Integrity & Transparency – honesty and openness in all transactions.
• Sustainability – meeting present needs without compromising future generations.

6.2 Ways Ethics Shapes Objectives

1. Broadening profit‑oriented goals to include social and environmental targets.
2. Selecting growth strategies that avoid harmful practices (e.g., no child labour, low‑carbon supply chains).
3. Embedding ethical performance measures (e.g., % of ethically sourced material).
4. Integrating ethical criteria into risk‑assessment, investment appraisal and budgeting.

7. Stakeholders – Roles, Rights, Influence & Conflict (Cambridge 1.5)

• Internal stakeholders
  • Owners / shareholders – right to profit, influence strategic direction.
  • Employees – right to fair pay, safe conditions; influence through unions or representation.
  • Management – responsible for implementing objectives; influence operational decisions.
• External stakeholders
  • Customers – right to quality, safety and value; influence through purchasing power.
  • Suppliers – right to fair contract terms; influence through reliability and cost.
  • Community / local residents – right to environmental protection and employment; influence via public opinion and local government.
  • Government & regulators – right to enforce law; influence through legislation, licensing and taxation.
  • NGOs / interest groups – advocate for ethical, social or environmental standards; can pressure firms through campaigns.

Conflicts arise when the interests of one group clash with another (e.g., shareholders seeking higher profits vs. employees demanding higher wages). Effective objective‑setting must balance these competing demands, often by prioritising stakeholder rights and seeking mutually beneficial solutions.

8. CSR and the Triple‑Bottom‑Line (TBL)

CSR is the practical expression of the TBL:

• Economic – profitable, sustainable business model.
• Social – positive impact on employees, communities and society.
• Environmental – responsible use of natural resources and reduction of ecological footprint.

Example: Unilever’s Sustainable Living Plan sets measurable targets across all three dimensions (e.g., 50 % of products with a reduced environmental impact).

9. Integrating Ethics into the Objective‑Setting Process (Cambridge 1.4.2)

1. Identify relevant ethical issues – use stakeholder mapping and sustainability audits.
2. Align issues with mission & vision – ensure ethical concerns support the core purpose.
3. Formulate measurable ethical targets – e.g., % waste reduction, number of community projects.
4. Embed targets in the Balanced Scorecard – add an “Ethical & Sustainable” perspective alongside Financial, Customer, Internal‑Process and Learning‑Growth.
5. Allocate resources & set budgets – fund initiatives required to meet ethical targets.
6. Communicate objectives – cascade through leadership briefings, intranet dashboards and performance contracts.
7. Monitor, report & review – use quantitative data (KPIs) and qualitative case studies; adjust objectives as needed.

10. Potential Challenges

• Conflict between short‑term profit pressures and long‑term ethical goals.
• Difficulty in quantifying ethical performance (e.g., measuring “reputation”).
• Risk of “green‑washing” – overstating ethical commitment.
• Ensuring consistent standards across multinational operations.
• Balancing diverse stakeholder demands that may be mutually exclusive.

11. Suggested Diagram

12. Summary

Objectives bridge a firm’s vision with its day‑to‑day actions. By embedding ethical considerations—drawn from CSR, stakeholder theory and sustainability—into the SMART objective‑setting framework, businesses can align profit motives with social and environmental responsibility. This alignment produces a triple‑bottom‑line outcome, enhances reputation, mitigates risk and meets the growing expectations of shareholders, employees, customers, regulators and the wider community.