Navigating Business Ethics and Corporate Social Responsibility- A CEOs Perspective

Navigating Business Ethics and Corporate Social Responsibility- A CEOs Perspective

Company Overview

Canada’s hospitality and tourism industry is dynamic and known as one of the most notable employers. It offers employment to at least 1.2 million in the country. One among twelve Canadians holds a position in this industry. In terms of employment, the hospitality industry can be compared to the manufacturing sector. The average wage for hospitality employees was $14.98 per hour in 2019 (Cansim; Unifor Research Department, n.d). This hourly wage has grown by 7 per cent since 2007. While most of the players (98 per cent) in this industry are classified as small business owners, the impact they have on the country’s economy is significant. By 2019, the players reached 84,000 (Lock, 2021). In 2016, the sector recorded total revenue of $80 billion. The sector contributed to 2.1 per cent of the country’s Gross Domestic Product, which amounted to $35 billion (Cansim; Unifor Research Department, n.d). The hospitality and tourism sector entails different business units, such as accommodation and food service. These two business units make varying contributions to the economy. In 2019, sales obtained within the accommodation sector amounted to $17 billion (Lock, 2021). The food service sector has been more stable, with their sales showing significant consistency over the years.

However, both business units were affected severely during the Covid-19 pandemic, which hit in 2020. The occupancy rates in Canadian hotels reduced from above 75 per cent in 2019 to less than 25 per cent in 2020 (Lock, 2021). The sector is expected to recover gradually to 2023 and 2024. Besides the pandemic’s negative effects, the country’s hospitality and tourism industry still encounters work quality issues as well as a lack of regulatory reforms, which could address the unfair competition in the market (Cansim; Unifor Research Department, n.d). Concerning CSR, the hospitality sector still lags in comparison to other sector’s response to sustainability. The main areas that the players must address relate to the environment and labour. Environmental issues include waste management, water consumption, and energy consumption. Labour issues include equal opportunities for employment, training of employees, and quality of employment (Nord, 2006).

The Tea Pot

The Tea Pot is a new entrant in the Canadian hospitality sector. The Tea Pot will offer food services within its initial location in Toronto. However, it will collaborate with accommodation service providers on different platforms to ensure guests can access the utility easily. The decision to outsource accommodation services was based on the need to allow the business to establish its presence as a quality food and beverage provider as well as the employer. This approach will allow easy penetration into the accommodation sector because a client base will be present. Thus, The Tea Pot will offer clients a variety of accommodation services ranging from high-end to newer styles, such as Airbnb. The objective is to ensure that our clients’ needs are sufficiently met.

The Tea Pot will offer food items that match the tastes and preferences of the Canadian market. These range from Canadian native dishes to international cuisines as well as snacks. To achieve this task, The Tea Pot will use rotational menus that have different cuisines each day. Most of these meals will be served on a’ la carte basis initially. However, snacks will be provided daily, especially for clients seeking breakfast and comfortable outlets to have coffee, tea, or any other beverage. In addition, The Tea Pot will also provide home and office deliveries for clients who are unable to visit the outlet physically.

The main beverages that the facility will offer include teas, coffee varieties, freshly squeezed juices, and wines. The teas will create a special part of the beverage menus due to their significance in the country. Canadians are adventurous clients and consume at least 85 litres per person. Specialty teas are consumed by at least 64.4 per cent of the Canadian market. Canadians experiment with new teas forcing manufacturers to produce spicier teas that are expected to satisfy the ravishing appetite for stronger teas (Ipsos, 2004). The Canadian millennials influence the market due to their spending power. In addition, they are also large consumers of tea. At least 64 per cent of this segment drink tea, especially specialty teas. It is important to note that most of the tea drinkers in Canada are least concerned about the price (Roberge, n.d). The most important attributes are flavour and brand. They are less price-sensitive and are more concerned about the quality of the tea. Based on these findings from Ipsos and the Tea Association of Canada, The Tea Pot expects to join the market and contribute towards fulfilling the tea-related desires of Canadians uniquely.

The time of entry into the market is also well thought out. Players in this sector have been affected by the Covid-19 outbreak. Less travel has translated into low numbers of guests and complete closure of business in most cases. At this time, most businesses are trying to recover gradually. Thus, entering into the market at this time will allow The Tea Pot to grow and obtain new clients since competition is less fierce. The decision to outsource accommodation services is also based on the effects of COVID-19 and the gradual recovery. Thus, it would be unwise to invest extensively to offer all services when The Tea Pot is only new in the sector. Strategic collaboration with other players is important in ensuring premium quality services and products. The Tea Pot will employ five full-time employees. The other staff members will be contracted on a part-time basis, depending on the volume of guests. The Tea Pot will be able to plan for its labour costs using this approach.

Ethical, Corporate Social Responsibility Issues and Unique Challenges

Various CSR indicators are used to determine a sector’s response to the global issue. These include water consumption, employee training, equal opportunities for employment, energy use, waste production, and employee organization (Nord, 2006). The hospitality industry has various challenges related to labor and the environment. Labour issues include a lack of training and recruitment to save on costs. Most hotels employ insufficient individuals to handle the volume of work within their establishments. Such employment does not only result in overworking employees but also low wages and a lack of growth opportunities. Most low-level employees work for minimum wages set by the local administration, while those in managerial positions take home significantly high incomes. Canada’s average income, which is $14.98, is 35 per cent less than the wages in the industrial average (Cansim; Unifor Research Department, n.d). Employees in the industry encounter low-quality jobs due to a lack of organization and poor standards. These aspects are prevalent in scheduling and remuneration practices.

The environmental issues that challenge the sector’s players include waste management, consumption of water, and energy. Hotels have an opportunity to manage different environmental issues to demonstrate their concern for the environment. This change also allows them to save on costs. Full-service hotels allocate at least 4-6 percent of their sales to energy. Luxury hotels may allocate 10 percent and above. The hotel industry’s energy consumption is more than US$1 billion every year (Nord, 2006). Switching to alternative sources of energy may compromise the quality of services and affect the overall guest experience. Waste management is a critical issue as well because of the amount of waste that hotels generate. Most waste includes aluminium, steel, glass, cardboard, food, wastewater, and plastics. However, these forms of waste are recyclable and reusable. The hospitality players are faced with the challenge of monitoring energy and water consumption as well as reduction of waste generation without affecting the quality of services.

Therefore, as a new entrant in the market, The Tea Pot will have to deal with the aforementioned challenges and issues related to ethics and CSR. Every new entrant’s battle is to create strategies that show a better response to ethical and CSR issues in comparison to the existing players. Such an approach is ideal because various players in the sector use CSR and ethical sensitivity to attract and retain clients who are sensitive about the same. It enables an entity to create an attractive brand that is pleasing to not only clients, but also the employees, potential investors, and other players who may be interested in collaboration. Therefore, all players should handle CSR and ethics-related activities with urgency to maximize the benefits.

The Tea Pot’s Stakeholders

Stakeholders are defined as parties, groups, or individuals who have an interest in an entity. Their actions affect the company’s ability to achieve its objectives. They are also affected directly or indirectly by the actions that a company takes while in operations. Primary and secondary levels classify stakeholders. They can also be passive or active. A primary stakeholder is one whose participation in the business is critical for continuous operations. Secondary stakeholders affect and are affected by the company’s operations. However, their contribution is not critical to the company’s survival (Bombaywala & Riandita, 2015). The primary stakeholders are active, while secondary stakeholders are passive.

 Primary Stakeholders

Employees entail those in the mid and top levels. Employees are internal stakeholders and take part in the daily running of an entity. At The Tea Pot, managers, chefs, wait staff, riders, receptionists, and accountants fall under this category. They are classified as primary because their involvement in daily activities affects the activities of the business directly. Their absence can cause the failure of the business. Employees take part in the production and delivery of services and products, as well as the maintenance of the physical facility. Employees act as ambassadors of a business and interact directly with the clients. Thus, they are critical to a business, especially a new one, and are often referred to as the first customers.

Clients also fall under the category of primary stakeholders. The Tea Pot intends to create products and services for sale to clients. The clients are expected to provide revenue through payment for the offered products and services. Every product and service that will be developed at The Tea Pot will revolve around the needs, wants, and preferences of the targeted clients. Failure to fulfill a client’s needs and wants is likely to result in dissatisfaction. A dissatisfied client is a liability to any company because their review of the services and products affects future business. If The Tea Pot fails to offer the needed services or products, it is likely to exit the market. Essentially, clients support all businesses.

Suppliers provide an entity with the necessary services and ingredients, which are used to create the final products and services. Suppliers are critical to The Tea Pot because their absence would paralyze the production of goods and services. At the same time, the delivery of substandard ingredients tends to affect the quality of products and services as well. The Tea Pot intends to engage local farmers and companies to supply the required goods and ingredients for production. The relationship between suppliers and establishments is governed by contracts and quality/quantity specification documents. These state the required items; specify quantity and quality, as well as delivery periods. An amicable relationship between suppliers and hotels creates a positive effect that demonstrates the goodwill of both parties (Bombaywala & Riandita, 2015).

Secondary Stakeholders

The government is one of the secondary stakeholders. Government agencies and regulatory authorities govern the activities within the hospitality sector as well as others. The legislation process leads to laws that affect a company’s revenue, interactions with clients, treatment of employees, and business activities indirectly. For instance, The Tea Pot will be required to remit taxes that are stipulated by the Canada Revenue Agency (CRA). The entity will also be obligated to operate within the confines of Canadian laws. In addition, The Tea Pot will employ and relate with employees in a manner that complies with the government’s regulations. The government is part of the external environment; its actions and decisions affect the business, yet, the entity lacks control over the same.

Organizations rely upon investors to obtain capital for expansion or the initial set-up of businesses. Investors provide their funds to an organization and become shareholders who benefit from dividends. The Tea Pot is currently new and may not require investors at this stage. However, the necessity for investors in the future exists especially for expansion into the accommodation sector or setting up of new branches in different locations. The two groups may be involved in decision-making depending on their capital contribution. Otherwise, they are notified about different company aspects, such as performance every financial year. Investors and shareholders may paralyze the activities of an entity based on their contribution towards the capital. In The Tea Pot’s case, the business is a partnership, where members have contributed 49 and 51 per cent in capital. If one of the shareholders withdraws from the business, the operations may be affected negatively. In such a case, shareholders benefit from the company’s revenues according to the capital contribution. The larger shareholder gains more profits and bears 51 per cent of the company’s losses as well.

Finally, the local community is also part of the secondary stakeholders. The community entails other business owners in the same and other sectors, institutions, and residents. The Tea Pot must operate in a manner that places the best interests of all these groups at heart. It should not carry out operations that may pose harm to either of the groups. These individuals do not have to purchase from The Tea Pot but are affected by the decisions of the company.

The Tea Pot’s Management of Ethical Issues, CSR Activities, and Stakeholder Interests in Practice

Offering equal employment opportunities to all candidates who may be interested in the outlet’s positions is one of the management strategies. For instance, when interviewing candidates, the HR department pays attention to their qualifications instead of race, gender, physical abilities, and nationality. All employees will be subjected to similar tests regardless of their differences. The use of standardized tests allows all individuals to display their qualifications for the job and avoids cases of favouritism or discrimination. Employee training follows the selection process. Training all employees regularly will ensure their skills and knowledge are up to date. The Tea Pot will train employees every three months to establish a certain standard of service and ensure they learn consistently. Before training, the company’s outsourced HR officials will conduct a needs analysis using the most appropriate tools. This information will inform the training programs. Monitoring the process will allow the company to establish the effectiveness of the training programs. Most importantly, The Tea Pot will remunerate employees at a higher rate than competitors to avoid the negative effects that are associated with low wages. The employees will also receive extra benefits such as educational sponsorships, where The Tea Pot will pay 50 per cent of the course. Promotion opportunities will be offered to existing employees first to ensure they can access career development prospects.

To manage waste that is generated at The Tea Pot, the management will use Toronto’s Waste Wizard (City of Toronto, 2021). The application allows users to view the drop-off points that are close to their location. To facilitate this process, The Tea Pot will install garbage bins that are colour-coded and clearly labelled. All employees will be taken through the training process to ensure they understand the waste management strategy. Clear posters will be placed near the garbage bins to ensure that clients use the bins efficiently. This strategy will enable the company to reduce pollution in the natural environment.

To reduce the consumption of water at the outlet, The Tea Pot will implement simple measures such as training employees and creating awareness regarding the importance of reducing water consumption. The second strategy that will be applied is ensuring that all water fixtures are fixed to avoid leakages. In high-traffic areas such as lavatories, The Tea Pot will replace the taps with infrared ones and have low-flow fittings where possible. Posters that inform clients about the water reduction initiative will be placed in strategic areas such as sinks (Tirado, Nilsson, Deya-Tortella, & Garcia, 2019).

Finally, The Tea Pot will involve employees in charitable activities around more needy communities. This will allow The Tea Pot to give back to the community and assist those who are in dire need of necessities. The activity will be carried out twice every year where the company will donate 5 percent of its revenue and encourage employees and clients to participate actively or passively. Involving clients will create an attractive brand that instils confidence in the outlet’s products and services (Bhattacharya, Good, & Sardashti, 2020).

The Tea Pot’s CSR Strategy

‘The Tea Pot offers Canadians exotic tea varieties, different cuisines, and accommodation services that suit their varying needs. Every interaction with Tea Pot offers clients an opportunity to settle down within the outlet’s comfortable environment and just relax, friends an opportunity to catch up, lovers a chance to reconnect with each other, business partners an opportunity to grow, and families an opportunity to reunite and celebrate. Our products and services are created for the clients and intended to evoke good and positive memories.’

The main aspects that are acceptable within The Tea Pot’s CSR strategy include;

Humanity and kindness

Teamwork

Cultural tolerance

Diversity and inclusivity

Ethical practices

The five aspects are interconnected to each other and are expected to enable The Tea Pot to deliver its CSR strategy efficiently. Through the humanity and kindness of employees and clients, The Tea Pot will be able to carry out charitable activities that show their empathy for others within the community. At the same time, the company’s members will participate in environmental conservation activities that include proper utilization of natural resources such as water and energy, as well as proper waste disposal. As team members, all employees will be expected to demonstrate cultural tolerance towards each other and collaboration (Clary, Coogle, & Floyd, 2010). The production of different cuisines is a sign that each member of the team is critical to the success of the business. The human resources officials will be expected to create a diverse workforce that ensures adequate representation of different members of Canada’s society. Such diversity should improve service and product delivery making the workforce a competitive advantage (Beaver & Hutchings, 2005). Finally, ethical practices are expected from employees towards each other and the clients. The employees will be encouraged to remain honest in all their interactions with clients, empathetic, human, and understanding. Such activities will retain a positive brand image and improve the client’s experience. Satisfied clients make referrals, leading to more business. Any unethical practices that go against the company’s ethical policies will attract the appropriate disciplinary action.

Unacceptable activities that may hinder the realization of The Tea Pot’s CSR strategy include discrimination, dishonesty, illegal actions, failure to dispose of waste appropriately, and waste of water and energy. Each of these activities tends to derail The Tea Pot’s CSR strategy. Discrimination of individuals within the workforce or among clients is highly discouraged. Such actions can attract litigations, especially when they involve minority groups or emanate from fellow employees. Secondly, the act can also lead to a negative reputation, which would yield a negative brand image for the outlet. Thus, all stakeholders will be treated equally (Clary, Coogle, & Floyd, 2010). Dishonesty is unacceptable because it has the potential to affect the clients’ experience negatively. Illegal actions are likely to result in incarceration, investigations that affect business activities negatively, and probable revocation of operating licenses. Failure to dispose of waste correctly can lead to inefficient management of the same. Water and energy wastage will increase the cost of operations and affect profitability negatively (Nord, 2006). In addition, water wastage will affect the natural environment negatively, portraying The Tea Pot as an irresponsible steward.

References

Beaver, G., & Hutchings, K. (2005). Training and developing an age-diverse workforce in SMEs. Education and Training, 47(8/9), 592-604.

Bhattacharya, A., Good, V., & Sardashti, H. (2020). Doing good when times are bad: the impact of CSR on brands during recessions. European Journal of Marketing, 54(9).

Bombaywala, M., & Riandita, A. (2015). Stakeholders’ Collaboration on Innovation in the Food Industry. Procedia – Social and Behavioral Sciences, 169, 395-399.

Cansim; Unifor Research Department. (n.d). Hospitality Sector Profile. Retrieved from https://www.unifor.org/sites/default/files/documents/document/unifor-hospitality-en.pdf

City of Toronto. (2021). Recycling, Organics & Garbage. Retrieved from City of Toronto: https://www.toronto.ca/services-payments/recycling-organics-garbage/

Clary, C., Coogle, L., & Floyd, J. (2010). Continuing Professional Development: Building and Sustaining a Quality Workforce. In Redesigning Continuing Education in the Health Professions. Washington DC: National Academies Press. Retrieved from https://www.ncbi.nlm.nih.gov/books/NBK219809/

Ipsos. (2004). Canadians And Tea. Retrieved from https://www.ipsos.com/en-ca/canadians-and-tea

Lock, S. (2021). Hospitality industry in Canada – statistics & facts. Retrieved from Statista: https://www.statista.com/topics/2862/hotels-in-canada/

Nord, T. (2006). Corporate Social Responsibility in the Hotel Industry Cross-Cultural Perspective. Retrieved from https://www.stockholmresilience.org/download/18.aeea46911a31274279800065096/MHF+Uppsats+Nord+CSR+Hotel+070201+fs.pdf

Roberge, L. (n.d). Canadian Market Overview. Retrieved from https://www.o-cha.net/english/association/information/documents/Louise.pdf

Tirado, D., Nilsson, W., Deya-Tortella, B., & Garcia, C. (2019). Implementation of Water-Saving Measures in Hotels in Mallorca. Sustainability, 11(6880), 1-13.

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In this project, you will set up a fictitious business of your own and take the perspective of the Chief Executive Officer to reflect on the dimensions of business ethics/corporate social responsibility (CSR) of your company.

More specifically, you will:
1) Briefly describe your company (your industry, your main product and/or services, the scope and size of your operations).
2) Discuss the range of ethical/CSR issues and unique challenges that your company faces.
3) Identify your company’s stakeholders and their varying interests.
4) Discuss how your company manages ethical issues, CSR activities, and stakeholder interests in practice. Please provide examples for each to illustrate your points.
5) Create a short position statement for the management of your company outlining your overall CSR strategy. What types of activities fall within your CSR strategy, and what types of activities are excluded? Why?
6) Discuss the potential implications (positive or negative) of your approach.
12 pages, APA style