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The past couple of years have been extraordinarily fast-paced, complex and exceptionally uncertain. Though, the world was somewhat halted due to the ongoing COVID-19 pandemic, the consequent changes in the workplace and society were evolutionary. Decisions were to be taken at an extremely fast pace in order to cope with these extraordinarily unforeseen changes that were taking place around the world- perhaps impacting every single of its inhabitants. For instance, from the usage of drones in retail, rescue and security operations, the application of AI in sectors ranging from agriculture to astronomy, working from home and the changing infrastructure and facility management to the emerging online-learning/distance education and more. Even though currently we are gradually coming out of the pandemic phase, this extremely volatile and uncertain environment persist. In this midst, there is another very significant phenomenon that the global business environment is facing- that of geopolitical influence.
The corporate world has increasingly become a battlefield with geopolitics playing a major role, which, in turn has the potential to impact business ethics at an organization level. Even though ethics in business is a pre-condition for its healthy functioning, the evolving situations demand a more focused approach to maintain balance while keeping the business in operation. Let's look at what we mean by geopolitical influence and the ever-evolving ethical dilemmas in the business settings.
Geopolitics and its Influence
Geopolitics, the word that was originally coined in 1899 by the Swedish political scientist Rudolf Kjellén, broadly refers to the influence of power and its relationships in international relations and control over resources (Tuathail, 1999).
Traditionally, geopolitical contests involved focusing on possessing or controlling key geographical elements, such as resources, markets, transportation lines, territories, and access to seas. Geopolitics thus addresses the big picture and offers a way relating local and regional dynamics to the global system (Kong, 2010). Geopolitics has also been described as problem-solving theory for the conceptualization and practice of statecraft (Parker, 1985).
In the contemporary context, geopolitics have even entered within the enterprise landscapes and has the possibility of interference within the very business operations as well. This has also been confirmed by a recent report which notes that companies are walking a geopolitical tightrope. The ever-increasing political frictions both within and between the economies and regions have increased the likelihood that they will affect a global enterprise’s operations, performance, or people. The report further emphasizes on the fact that the challenges geopolitical risks create will get even worse in the future while exerting the pressures on decision making processes of the corporate leaders (Grant et al, 2021).
For instance, within an organization dominant economy’s interference could be directly or indirectly felt in a range of functions starting from the selection of people, to project prioritization and resource allocation and more. In other words, who works for an organization, what works are done by the organization, who gets the reward for the desired work done or obstructing the undesired outcomes are somewhat influenced by these power plays. Likewise, business -to-business competition is now not necessarily just a market dynamism but a conscious effort by the geopolitical powers to reinforce its effects. Like in the Fast-Moving Consumer Goods (FMCG) field, which products would be available in the supermarket chains irrespective of the quality of the products, at what price points, how the display would be, how the consumers queries related to specific products be dealt with and so on. Globalization and digitization have enabled to further enhance such a phenomenon.
The COVID-19 pandemic has made the geopolitical powerplays even intense wherein multiple supply chain disruptions had been introduced and experienced. For instance, during the ongoing pandemic phase, in the US, the disruption in the manufacturing plant of the largest producer of baby formula brand and the subsequent nationwide recall of some of their products sent shock waves across the country. The Biden administration came to the limelight, who had to promptly act to relax import regulations to facilitate stocks of baby formula from the Australian manufacturers to address the shortage that had left many parents in the US struggling to feed their babies, including the newborns (The Guardian, 2022).
On the other hand, in a statement on its website, the Australian brand reassured the local Australian customers that its infant formula supply would not be affected due to their strong control over the supply chain security and wholly owned production facility. They also mentioned that they have been able to take steps to immediately increase the level of future production (ABC News, 2022).
Multiple researches conducted in the recent times have further confirmed that after the outbreak of COVID-19, geopolitics has become a major driver of the supply chain networks impacting the very economic fundamentals. The report argues that efforts to reorganize supply chains by multi-country coalitions such as the Quadrilateral Security Dialogue (Quad) will encounter challenges as they try to reconcile geopolitical imperatives with economic efficiency (Grant et al,2021). In yet another report, it was revealed that in the contemporary world, individual businesses and geopolitical factors are tightly intertwined and that rising geopolitical risk is likely to have a substantial stifling effect even on innovation across the board and future prospect of an organization as well (Astvansh, 2022). There are ethical perspectives too.
Ethics in business settings and the ever-evolving ethical dilemmas
It is a well understood fact that ethics are fundamental to the well-being and prosperity of any economy. By definition, business ethics are the moral compass that guides the way businesses should conduct to function in a healthy manner and for the benefits of the society. One may wonder why a society and its members would then resort to unethical practices-is it just for the profit’s sake, due to ignorance or habit?
In a recently published Harvard Business Review article titled, 'The Psychology behind unethical behaviour', organizational psychologist Dr. Merete Wedell-Wedellsborg(2019) notes the three psychological dynamics that leads to unethical behaviour, which she calls-
a. Omnipotence: when someone feels so aggrandized and entitled that they believe the rules of decent behavior don't apply to them. Both at the macro as well as within the organization, such examples are rampant when the dominant ones feel entitled and act in dissonance with the desired behaviour.
b. Cultural numbness: When others play along and gradually begin to accept and embody deviant norms.
c. Justified neglect: When people don't speak up about ethical breaches because they are thinking of more immediate rewards such as staying on a good footing with the powerful.
Over the past few decades, there were waves of scandals that rocked the corporate world, which was attributed to the ignorance of ethical principles. There have also been many cases when it seems that business ethics were put under pressure due to the ever-increasing demands and performance expectations within an organization. For instance, the blatant use of unethical procedures to meet sales target, maximising bonus opportunities and financial gains, were rampant in the Wall Street (Kelly, 2020). Each wave of scandals that occurred every ten years or so, resulted in more pressure on companies to incorporate ethics into their structure. Gradually, the framework of ethics included not only the commonsense morality but also the ethics in business approach with the application of ethics to economic systems, to the institution of business and especially to corporations (De George, 2015). Hence, in the past few years, ethics has been recognized as not only a necessity but a core component of running a business, as there has been a generational shift in the attitude of people and business from being profit-driven to society-driven and which is also the very basis of the United Nations’ sustainable development goals (Sama et al 2020).
However, regular calibration of aligning ethics with that of business operations is a necessity- more so when, as explained in the previous section, due to the possibility of geo-political influence in the day-to-day operations of business. It also gives rise to ethical dilemmas of whether to succumb to the pressures for economic gains or stick to the ethical principles and traverse through the daily corporate journey while facing the ever-evolving challenges ranging from psychological pressures, technological and operational interferences.
Darjeeling tea and the role of geopolitical influence and ethics in the global value chain
Here, we briefly cite an example to provide a context to the above and explain one of the cross-border trade scenario of which, as an Australian organisation with business of premium Indian tea, we too part of.
According to the recent official sources, each year, around 10 million kg of tea are produced in 87 tea gardens spread over 17,500 hectares of land but over 40 million Kg teas are sold worldwide, as Darjeeling (Aei4eiA, 2017). Further delving into the statics reveal the very active role played by a few neighboring economies (both big and small) of India and a few major global economies as well.
India is one of the major global tea-producing economies (Economic Times, 2021).The rising geopolitical tensions with neighbouring tea producing nation have been impacting the tea industry and its global value chain as well.
For instance, India has a Free Trade Agreement with Nepal. The Revised Treaty of Trade signed in 2009 allows the free and unhampered flow of goods between the two countries, which had in turn made its borders porous. Unfortunately, taking advantage of the situation, cheap, low-quality and spurious Nepalese tea leaves, which falls short of complying with Indian food safety norms, have been regularly entering India and is also being sold abroad in the name of ‘Darjeeling Tea’. “Selling it in India or abroad in the name of ‘Darjeeling Tea’, is an infringement of intellectual property rights,”says Anshuman Kanoria, chairman, Indian Tea Exporters’ Association (TOI, 2021).
On the other hand, recent reports highlights a leading economy's active role in pumping inferior tea into India through Nepal. Such acts are considered to be one of the key reasons as to why over the past years, there have been a decline in the demand for Indian tea, both in the national and also the international markets. Meanwhile, once a major importer of Darjeeling tea with a historical connection with the hilly town, leading European buyers are trying to develop a 'Himalayan brand' with Nepalese tea, which is priced much less than Darjeeling tea and which it expects would impact the global Darjeeling Tea industry (Sentinel, 2021).
The above paragraph narrates just a few of the many cases where geo-politics is impacting the Darjeeling Tea industry. Such unethical practices negatively impact the business cycle, affects the product quality thus reducing the demand of the commodity while fake products available in the market overpowers genuine products. The lower demand and prices of the commodity negatively impact the profitability of the tea gardens, which, in turn directly influences the wages, livelihood, and social sustainability of the garden workers. It also denies the consumers to enjoy authentic produces, which is even good for their health.
One thing is quite clear that practicing business ethics is not only a moral but also a social responsibility and cultivating the habit of business ethics in real sense is truly intriguing. We often hear that unethical forces breed fast. Perhaps, because they join hands for that multiplier effect to happen and to stay ahead in the game. It is thus a constant war and not a one-day game- a practice that needs to be perfected each day. Finally, we reiterate the quote of Mr. Ratan Tata, Chairman Emeritus, Tata Sons and Tata Group and one of the finest business person in the world,"Every one chases profits but the question is how ethical the journey has been. Business is not only about making money, adding that one has to do right by their customers and stakeholders ethically. Making mistakes is part and parcel of businesses but the important thing is to do the right thing at every turn and not shy away from difficult decisions".
ABC News (2022), US looks to Australia to ease baby formula shortage, Sun 29 May 2022 Available online at <https://www.abc.net.au/news/2022-05-20/us-baby-formula-shortage-australia-could-supply/101073012>
Aei4eiA(2017), Experience the first flush @ Darjeeling: Appreciating the nature/nurture bond, India Tourism Australia (Ministry of Tourism, Government of India), Sydney, Australia
Astvansh, V, Deng, W and Habib, A (2022), Research: When Geopolitical Risk Rises, Innovation Stalls, Harvard Business Review (HBR), March 03, 2022 Available online at <https://hbr.org/2022/03/research-when-geopolitical-risk-rises-innovation-stalls>
De George, R. T (2015), A history of business ethics, Markkula Centre for Applied Ethics, Santa Clara University, USA
Gearóid Ó Tuathail (1999) Understanding critical geopolitics: Geopolitics and risk society, Journal of Strategic Studies, 22:2-3, 107-124, DOI: 10.1080/01402399908437756
Grant, A, Haider, Z and Levy, A (2021), How global companies can manage geopolitical risk, McKinsey, Available online at < https://www.mckinsey.com/business-functions/risk-and-resilience/our-insights/how-global-companies-can-manage-geopolitical-risk>
Kelly, J (2020), Wells Fargo forced to pay $ 3 billion for the bank’s fake account scandal, Forbes, February 24, 2020 Available online at <https://www.forbes.com/sites/jackkelly/2020/02/24/wells-fargo-forced-to-pay-$3-billion-for-the-banks-fake-account-scandal>
Tea promotion board (2008) 53rd Annual Report 2006-2007.
Kong XH (2010) Analyze on ways of geopolitics affecting a state’s security strategy. World Regional Studies 19: 19-26.
Parker, G (1985), Western geopolitical thought in the twentieth century (1st ed), Routledge
Sama, L. M. ; Stefanidis, A., & Horak, S. (2020), Business ethics for a global society: Howard Bowen's legacy and the foundations of United Nations' Sustainable Development Goals, International Studies Of Management & Organisation, 50 (3), 201-208
The Guardian (2022), Australian company to ship baby formula to shortage-hit US, Sun 29 May 2022 Available online at <https://www.theguardian.com/australia-news/2022/may/29/australian-company-to-ship-baby-formula-to-shortage-hit-us>
Wedell-Wedellsborg, M.(2019), The Psychology Behind Unethical Behavior, Harvard Business Review
Dr. Jayantee Mukherjee Saha
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