A common way to define business ethics is as the interplay between two agents: the company’s stakeholders and the law. But a company has many stakeholders, and since it’s impossible to do what’s best for each one — how do companies decide where the tradeoffs occur?
Consider coal mining in West Virginia. In the Appalachian Mountains, coal companies employ techniques called mountaintop removal and valley fill, in which they use huge amounts of explosives to remove tons of topsoil and rock in order to access seams of coal within the mountain. This resulting topsoil and rock is than scraped by dragline cranes into the adjacent valleys.
Photographs of this process are quite striking — the environment around these mines is devastated. The clear-cutting and topsoil removal destroys whatever native forest existed on the site. The valley fill creates havoc in the local watershed, and thus the surrounding water table is often unsuitable for anything, let alone human consumption.
Ask an environmentalist about this process and watch out. The destruction of pristine mountain wilderness eliminates the possibility of sustainable tourism revenue for the local inhabitants and destroys the intrinsic value found in the natural world (although some would argue against this point). Burning coal also produces a great deal of harmful emissions, including carbon — the main culprit in global warming.
Ask a union worker and you’ll get a slightly different — but equally big — response. Mountaintop removal has caused the coal industry to shed thousands of mining jobs over the past few decades, effectively breaking the power of the mining unions and the protection they engendered.
But in looking for solutions, this example unravels into a more complex ethical dilemma.
Underground coal mining is extremely labor intensive and dangerous, and the additional costs are likely to be absorbed by the end consumer — raising a number of issues as to how low- and middle-income families could afford higher energy prices.
And according to the Energy Information Administration coal generates 48.6 percent of our country’s electricity — yet there is no easy alternative. Natural gas is subject to severe price fluctuations and requires importation terminals near which no one wants to live. Not to mention that most of the world’s proven natural gas reserves are located in Russia and the Middle East — not exactly regions that one would categorize as ideal sites for a reliable energy source.
Oil carries the same risks, and solar, hydro, wind and nuclear power are in no position to provide this much electricity. Based on their current levels of output, it will take decades until they are as efficient as coal.
So the fact remains that coal companies are providing an affordable and necessary service to the electricity consumer and high returns to their investors, and yet industry practices are ruinous to the natural environment and the human communities around the mines.
Here lies the new frontier of business ethics. The idea that an ethical business must simply follow the law and provide the highest returns to shareholders while doing so is dying a long-overdue death. There are far too many examples of laws being designed and interpreted to suit powerful industries for this myopic belief in the rightness of the letter of the law to be anything but wishful thinking.
Right and wrong in the business world must be constantly examined by all participants in the decision making process and answer the question: What are our priorities? Tradeoffs must be weighed, sacrifices must occur and eventually, a decision must be made in which there are winners and losers. As a society — and especially as a business community — it is our responsibility to determine the balance between these winners and losers in a manner that reflects the ideals we wish to pass on to future generations.