Baines & Fill: Marketing, Chapter

3rd edition 18: Marketing, Sustainability, and Ethics

 Learning Outcomes

• Define sustainable marketing and its implications for

marketing practice.
• Define marketing ethics
• Explain the common ethical norms applied in marketing
• Describe the role of ethics in marketing decision-
making
• Understand how ethical breaches occur in marketing
programmes and activities

Baines & Fill: Marketing, 3rd edition

 Case Insight – innocent

• Purpose at innocent to make healthy, natural food and drinks that help
people live well and die old. Accompanied by five company values
which are to be responsible, generous, commercial, entrepreneurial,
and natural.
• Central value shared by all three founding members, and subsequently
by all employees.
• To give substance to values, there is a permanent sustainability team,
and champions in each part of business. They’ve tried therefore to
make packaging as low-carbon as possible.
• The essential problem is that as customers perceive highly
recycled bottles to be low quality, how do they stick to their
principles and ensure a high level of recyclable content without
losing sales?

Baines & Fill: Marketing, 3rd edition

 Sustainable Marketing

• Sustainable marketing attempts to broaden the concept of

marketing, beyond simple economic development. Introduces
the three ‘E’s of sustainability:

1. ecological—marketing should not negatively impact upon the

environment;
2. equitable—marketing should not allow or promote inequitable
social practices; and
3. economic—marketing should encourage long-term economic
development as opposed to short-term economic development
(as we have seen in the late 2000s with the global credit crunch
arising as a result of poor financial regulation in world financial
services markets).

Baines & Fill: Marketing, 3rd edition

 Some Unsustainable Marketing Practice

• 2010: BP —More than 200 million gallons of oil were released into the Gulf of
Mexico after an oil rig explosion in the Macondo Well killed 11 people. The oil
spill affected around 1,000 miles of shoreline, killing thousands of birds, around
153 dolphins and other local wildlife. The disaster caused BP to lose half its
share value and estimated costs for the disaster total $40bn (Bryant, 2011).

• 2005-2012: News International—row over hacking of phones by investigative

reporters, including those of (British) Prince William and murdered schoolgirl,
Milly Dowler, whilst working on stories for British weekly News of the World
(NOTW) between 2006 and 2011 led to: the closure of the NOTW; the failure of
News Corporation’s bid for satellite broadcaster, BSkyB; the establishment of the
Leveson Inquiry into press standards; several arrests of key company figures;
and the probable break-up of News Corporation, its parent company, into two
separate groups (BBC News, 2013b)

• In 2012: Standard Chartered - the UK bank - fined around $670m by US

Federal Reserve, New York’s Department of Financial Services, the US Treasury
Department’s Office for Foreign Assets Control (OFAC), and the US Department
of Justice to settle charges that it violated US sanctions on Iran, Burma, Libya
and Sudan by undertaking thousands of illegal financial transactions between
2001 and 2007 (BBC News, 2012a).

Baines & Fill: Marketing, 3rd edition

 Corporate Social Responsibility

The rationale for developing CSR initiatives irrespective of their

financial contribution is based on the following ideas (Buchholz,
1991: 19):

• Corporations have responsibilities that go beyond the

production of goods and services at a profit.
• These responsibilities involve helping to solve important social
problems, especially those that they have helped to create.
• Corporations have a broader constituency than shareholders
alone.
• Corporations have impacts that go beyond simple marketplace
transactions.
• Corporations serve a wider range of human values than can
be captured by a sole focus on economic values.

Baines & Fill: Marketing, 3rd edition

 Definition and Types of Ethics
‘The analysis and application of moral principles to marketing decision
making and the outcomes of these decisions.’

• Normative ethics – concerned with rational enquiry into standards of right and wrong
(i.e. norms) in respect of character and conduct and which ought to be accepted by a
class of individuals.

• Social or religious ethics – concerned with right and wrong in respect of character
and conduct. Makes an implicit claim to general allegiance to something (e.g. God).

• Positive morality –Knowledge generally adhered to by social group of individuals,

concerning right and wrong in respect of character and conduct.

• Descriptive ethics – study of system of beliefs and practices of a social group from
outside that group.

• Metaethics –form of philosophical enquiry treating ethical concepts and beliefs

systems as objects of philosophical enquiry in themselves.

Baines & Fill: Marketing, 3rd edition

 Ethical Norms in Marketing Decision-Making

The Chartered Institute of Marketing, the world’s largest member-based

marketing organization, requires its members to (CIM, 2005):

• demonstrate integrity, bringing credit to the profession of marketing;

• be fair and equitable towards other marketing professionals;
• be honest in dealing with customers, clients, employers, and employees;
• avoid the dissemination of false or misleading information;
• demonstrate current knowledge of the latest developments and show co
mpetence in their application;
• avoid conflicts of interest and commitment to maintaining impartiality;
• treat sensitive information with complete confidence;
• negotiate business in a professional and ethical manner;
• demonstrate knowledge and observation of the requirements of other (pr
ofessions’) codes of practice;
• demonstrate due diligence in using third-party endorsement, which must
have prior approval; and
• comply with the governing laws of the relevant country concerned.

Baines & Fill: Marketing, 3rd edition

 Normative Approaches in Ethical
Decision-Making

Baines & Fill: Marketing, 3rd edition

 Moral Virtues Applied to Companies I

Baines & Fill: Marketing, 3rd edition

 Moral Virtues Applied to Companies II

Baines & Fill: Marketing, 3rd edition

 The Ethical Decision-Making Process

Early attempts to devise frameworks of how to act ethically involved asking

ourselves reflective questions as follows (Laczniak and Murphy, 1993):

• Does the contemplated action violate the law (legal test)?

• Is this action contrary to widely accepted moral obligations (duties test)?
• Does the proposed action violate any other special obligations that stem from
the type of marketing organization in focus (special obligations test)?
• Is the intent of the contemplated action harmful (motives test)?
• Is it likely that any major damage to people or organizations will result from the
contemplated action (consequences test)?
• Is there a satisfactory alternative action that produces equal or greater benefits
to the parties affected than the proposed action (utilitarian test)?
• Does the contemplated action infringe on property rights, privacy rights, or the
inalienable rights of the consumer (rights test)?
• Does the proposed action leave another person or group less well off? Is this
person or group already a member of a relatively underprivileged class (justice
test)?

Baines & Fill: Marketing, 3rd edition

 Contingency Model of Ethical Decision-Making

Baines & Fill: Marketing, 3rd edition

 Distribution Management and Ethics
• Collusion—in the late 1990s, Italian Antitrust authorities (IAA) found two largest d
airy producers Consorzo del Grana Padano (CGP) and Consorzo del Parmigiano
Reggiano (CPR) guilty of operating strict production quotas designed to effectively
co-manage each other’s market share (Braga and Nardella, 2003).

• Abuse of monopoly status—in March 2004, the European Union levied a half-bil
lion-euro fine against Microsoft, the American software giant, for abusing its ‘near
monopoly’ status. The EU anti-competition authority called for Microsoft to offer Wi
ndows version that did not contain its digital media player within three months, an
d to release a ‘complete and accurate’ interface code to other software companies
to ensure interoperability between competitor companies (Deutsche-Welle, 2004).

• Exploitation of supply chain partners— multi-national supermarket groups

have been known to exploit their suppliers. Some European countries have broug
ht in legislation to stop then wielding excessive power, e.g France uses the ‘Châte
l Act’ replaing the ‘Loi Galland’, which forbade supermarkets to charge listing fees.
New act strengthens legislation to stop supermarkets selling at below-cost prices
to increase competition in sector. All discounts and services provided by the distrib
utor to the supplier now require stipulation upfront in an annual agreement (see B
outin and Guerrero, 2008).

Baines & Fill: Marketing, 3rd edition

 Promotion and Ethics

The Use of Sexual and Shock

Appeals
•ethical question arises because a
substantial proportion of adverts
use sexual themes explicitly, e.g.
naked or semi-naked models,
sometimes male, but mostly
female, to advertise their products.
•best examples of shock
advertising appeals are those
used by governments to reduce Source : Courtesy of PETA, www.peta.org
tobacco smoking.

Baines & Fill: Marketing, 3rd edition

 Ethics: Marketing to Children

• Children are more exposed to marketing than before and parents inc
reasingly feel that they are losing control of the marketing directed at t
heir children.

• Parents particularly concerned about internet and mobile phones

and the direct targeting of their children.

• Inappropriate marketing to children damages the brand, making it les

s likely that to get past parent as gatekeeper.

• More appropriate marketing methods are those that are informative a

nd help parents to feel more in control.

Baines & Fill: Marketing, 3rd edition

 Products and Ethics

Pertinent examples of defective products causing death, injury, and inconvenience

include :

1. 2008: Sanlu (and other Chinese milk producers) involved in major scandal in
China when melamine (a banned substance worldwide) was added to milk to
falsely improve protein test readings. Around 300,000 infants became sick and
approximately six died (Spencer, 2008). Sanlu declared bankruptcy same year
and Chinese authorities passed sentences ranging from long prison terms to
two death sentences (BBC News, 2010).
2. 2009 and 2011: Toyota forced to recall more than 9m cars worldwide after
faults were found with poorly fitted floor mats and sticking accelerator pedals,
costing the company an estimated $3bn in total (Sager, 2013).
3. 2013: Ikea forced to recall almond cakes, obtained from a single Swedish
supplier, from 23 countries after Chinese customs officials found they
contained traces of sewage bacteria (Collins, 2013).

Baines & Fill: Marketing, 3rd edition

 Ethics: Defective Products and Recall II

Determining when to recall products is a difficult ethical problem.

Where a risk of injury is likely, a product should be recalled. This might
occur when:

• a serious consumer illness or injury is caused by the contamination

of products;
• there are similar complaints of illness or injury that apply to a specifi
c product;
• a design or manufacturing failure could result in potential harm to co
nsumers; or
• There is defective product labelling that could result in potential har
m to consumers; or where a product has been tampered with.

Baines & Fill: Marketing, 3rd edition

 Pricing and Ethics

Example of Price discrimination

Ayutthaya Historical City operates a discriminatory
pricing policy for Thai and non-Thai nationals. Locals pay
10 Baht, foreigners pay 30 Baht

Baines & Fill: Marketing, 3rd edition

 Universalism/Relativism in Marketing Ethics

• Cultural Relativism versus Universalism - some cultures seem

less likely than others to perceive ethical dilemmas. Under one
perspective, ethicists suggest universal codes of practice in ethics
should exist because some things are simply ‘wrong’ no matter
what colour/creed of people concerned (e.g. murder, bribery,
extortion). Opposite argument that different groups legitimately
consider ethical situations from different viewpoints and there is
nothing wrong with this (e.g. gifts, corporate entertainment).

• Micro-cultural differences do seem to have a big impact on perceived

ethical problems, according to a study of the Javenese, Batak, and
Indonesian-Chinese managers in Indonesia (Sarwono and Armstrong,
2001). Each subculture responded differently to situations with ethical
content.

Baines & Fill: Marketing, 3rd edition

 Universalism/Relativism in Marketing Ethics

A study of marketing ethics in Korea, Kim and Chun

(2003) found that Koreans perceived the seriousness of
ethical problems in order of importance as follows:

1. bribery
2. unfair price increases
3. exaggerated advertising
4. sexual discrimination

Baines & Fill: Marketing, 3rd edition

 Summary

• Defined sustainable marketing and its implications for

marketing practice.
• Defined marketing ethics.
• Explained the common ethical norms applied in
marketing.
• Described the role of ethics in marketing decision-
making.
• Understood how ethical breaches occur in marketing
programmes and activities.

Baines & Fill: Marketing, 3rd edition