The natural inclination of businesses and individuals is to maximize their profits. In fact, this is their primary goal – to generate profit for their stakeholders. In order to do so, sometimes these businesses must find a way to “cut corners”, even at the expense of society. Now, the main focus of a manager is to do whatever they can to maximize revenue, but they should not break the law or have a negative effect on society. In other words, companies must try to be as successful as they can without violating a certain code of business ethics. American economist, Milton Friedman, once said that although business managers should maximize profits for their shareholders, they should still follow certain social customs.
Following ethical practices while also attempting to create profit can be a difficult task – especially for multinational corporations. In India, trade associations in the drought-stricken state of Tamil Nadu have boycotted “big brands” and moved to locally produced soft drinks after companies like Coca-Cola and PepsiCo used an excessive amount of water after the last monsoon when there was already very little rainfall. The companies were thus depleting the already scarce resources that were needed for use by people such as farmers, in order to satisfy their production.
In the case of Coca-Cola and PepsiCo management; Although their duty is to ensure they have a steady supply of resources for production, there are some social factors that they must take into account. In Milton Friedman’s text, “The Social Responsibility of Business Is to Increase Its Profits”, he writes, “it may well be in the long run interest of a corporation […] to devote resources to providing amenities to [the] community”. In Coca-Cola and PepsiCo’s case, they actually took much-needed resources from the people to fuel the production of their beverages in the short-term. By exploiting resources from vulnerable groups (i.e. independent farmers), the companies are gaining distrust and hostility from their potential customers. In fairness, Coca-Cola and PepsiCo had no obligation to ensure the well-being of the communities it took resources from, but by ignoring the needs of the community, they gained negative media attention and a dip in their sales for the region. This calls into question the economics of ethical business practices. By simply substituting the locale from which Coca-Cola and PepsiCo received their water for a short period of time, they would not have lost out on an entire region of potential buyers and suffered a dent in their public image. Conclusively, it is clear that a business which conducts its affairs ethically can reap its rewards in the long term.
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