Ethical Dilemmas in Business: A Case Study of Tesco

According to Mamoria (2010), business ethics refers to the ethical behavior and integrity exhibited by businessmen in various aspects of their operations, including interactions with society and other businesses. As a result, conflicts and contradictions may arise regarding how businessmen treat society and others. The purpose of this report is to reveal the underlying reasons behind incidents such as the employment of unauthorized workers, collusion on prices, and the manufacturing of inferior products.

Tesco has taken steps to minimize the negative effects of various incidents on its corporate image, communities, and stakeholders.

These measures include compensating victims, improving performance through management system restructuring, and implementing employee training programs. Additionally, this report will examine Tesco's ethical theories: Ethics of Justice, Ethics of Duty, and Feminist Ethics.

Additionally, this report will examine the commendable strategies and values of the company that encompass corporate social responsibility and environmental preservation. The founding of Tesco in 1919 will also be investigated. Jack Cohen, the founder, began his business by establishing a grocery stall in London's East End.

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On its initial day, he made a profit of £1 from sales totaling £4. In 1924, Mr. Cohen bought a tea shipment from Mr. T.E. Stockwell, which marked the beginning of the "Tesco" brand.

Tesco entered the petrol station industry in 1974 and quickly became the largest independent petrol retailer in the UK. By 1982, its sales had surpassed ?1bn and later doubled to ?2bn. In order to surpass the leading grocer in the UK, Tesco launched an ambitious marketing campaign in 1990 and expanded its business with more store openings.

In 2000, Tesco further expanded its product range through Tesco.com to include clothing, electricals, and personal finance products. For more information on its corporate history, please see Appendix I.

Ethical Dilemmas

Ethics in business and personal ethics are closely interconnected. A person's personal ethics greatly influence their ethical behavior in business or an organization (Gavai, 2010). Despite having strong corporate policies and systems in place, ethical dilemmas still arise as individuals prioritize their own interests. Tesco, a major global retailer, has also encountered similar issues including the employment of illegal workers, price fixing, and subpar product quality. 1. Illegal Workers: Tesco was found to have employed 30 illegal workers who were foreign students at one of its warehouses. These students hailed from various nationalities, with a majority being of Bangladeshi and Indian descent. They allegedly worked for more than three times the permitted working hours stated in their visa permits (www.visabureau.com). These employees exceeded the weekly limit of 20 hours by working up to an additional 50 hours. The incident occurred when the UK Border Agency enforcement team inspected their factory in Croydon in July 2012 (www.immigrationmatters.co.uk).

The retailer accepted responsibility by conducting an investigation, as they claimed to not support illegal work practices (www.telegraph.co.uk). However, the employees were considered victims in this situation, as they were not given proper protection under the company's employment policies and were forced to work additional hours. This led to significant losses, such as the inability to pursue further education and maintain a healthy work-life balance. The employer neglected the welfare of their employees, exploiting their right to work overtime in order to increase productivity and maximize profits while saving on labor costs.

Supplier played a crucial role in this scenario, being the sole entity responsible for exchanging information between employers and employees during the recruitment process. Unfortunately, there were instances where incorrect information was conveyed to either the employer or the employee.

Tesco was involved in a scandal regarding price fixing of its dairy products, including cheese and milk. According to reports from the Office of Fair Trading in the UK, Tesco unfairly charged consumers an extra ?270M between 2002-2003.

The substantial sum was gathered from an additional 3 pence for a pint of milk, 15 penny surcharge for each quarter-pound of butter, and the same fee for every half-pound of cheese when purchased together with another 8 companies who were involved in the collusion (www.dailymail.co.uk). These companies were discovered to be in violation of the competition act, as they had coordinated price increases with other dairy product competitors. Nonetheless, Tesco's competitors had confessed and the OFT received a reduced fine amount as a result of their cooperation during the investigation.

When corporations fail to practice fair competition in compliance with the competition law, consumers suffer as they are not protected in fair trading. This clear violation of consumers' rights (www.savistamagazine.com) allows shareholders to earn extra profits. However, this practice is not encouraged as corporations are required to follow the corporate law outlined in the Corporate Governance. The government department has a crucial role in addressing this embarrassing situation, as their intention is to protect consumers.

The corporations were penalized, sending them a clear message not to violate consumers’ rights. Unknowingly, families in the UK suffered losses by spending extra on daily goods. The fair trading policy aims to protect these families and ensure that they can engage in worthiness trade. Tesco faced penalties from the Bracknell Magistrate Court for selling 127 expired foods, such as beef burgers, ham, and chocolate cheesecake, in their Martins Heron branch in May 2011. This incident occurred when a girl fell ill after consuming chargrilled chicken pasta salad.

Bracknell Forest Trading Standards officers launched an investigation after receiving a complaint regarding expired food products at Tesco. Upon their visit to the store, the officers discovered that the foods had expired for 16 days. This case was dubbed by Trading Standards officers as the most extreme example of out-of-date products they had ever encountered. The irresponsible actions of Tesco's management not only posed a threat to public health but also caused physical and mental suffering to consumers. Additionally, shareholders incurred losses due to the careless management of stocks.

In addition to the information mentioned above, it was discovered that Tesco had been selling 100 expired food products. These products included yoghurts, fruit smoothies, soup, gravy, vegetable pakoras, packaged salad, pasta bowls, samosa and bhaji snack packs, and guacamole dip. The sell-by-dates for these items ranged from 1 to 17 days prior. The incident was brought to light by a manager who, despite having 20 years of experience, was managing the largest store chain, Tesco Extra, for the first time. Shoppers filed complaints about the issue with the Coventry City Council, and trading standards officers confirmed the problems during their raids at the Gielgud Way branch in Walsgrave in November 2009 (www.coventrytelegraph.net).

Actions taken to solve these dilemmas

According to the Merriam Webster Dictionary, dilemmas are challenging situations or problems that necessitate a choice. In the workplace, ethical dilemmas frequently arise when individuals must decide between moral and immoral actions. It is crucial to address these dilemmas promptly and effectively, and the theory of ethics provides guidelines for making moral decisions. The UK Border Agency (UKBA) fined Tesco, Britain's largest supermarket, ?15,000 because 23 students violated their working visa terms. This action by the UKBA demonstrates the government's dedication to combating visa abuse. As a result of this fine, these 23 individuals are now prohibited from reentering the UK. To prevent similar incidents in the future, Tesco has taken measures such as terminating one of their executives due to poor performance. Additionally, Tesco is highly respected as a founding member of the Ethical Trading Initiative (ETI).

They sought out employees who met a high standard by using the ETI base code, which encompassed criteria such as no exploitation of child labor, adhering to a weekly maximum of 20 working hours for foreign workers, and ensuring regular employment is provided (www.tesco.ie). The government effectively enforced the working terms of visas and took strong action against any employers who violated them. Upon issuing fines, this served as a warning to competitors and a reminder to adhere to ethical practices while competing. It is not permissible to break rules in pursuit of success in competition.

Moreover, as a result of UKBA's involvement in response to the employer's actions, the remaining staff members will benefit from working in a consistent and equitable environment, where they feel safeguarded and supported by the government. The employer has implemented improvements to their management system after dismissing an employee who made an error, and has been directed to prioritize the well-being of their workforce. In its endeavor to uphold its rights, Tesco was fined £10 million by the Office of Fair Trading (OFT) in 2011 for participating in price-fixing of its dairy products following a seven-year investigation. Nonetheless, Tesco has threatened legal action against the OFT for self-protection.

The company expressed their surprise and displeasure at the fine and vehemently denied any collusion in altering pricing details with other dairy processors. Tesco strongly defended its position in court, while also calling for the government to remove the power of the Office of Fair Trading (OFT) to investigate and penalize companies under the competition act. The OFT's intention was to inform industries that competition laws were being enforced to ensure fair trade conditions for consumers. Therefore, after the punishments were issued, it ensured that competition was upheld according to these laws (www.mirror.co.uk).

Furthermore, competitors were only able to exchange information through dairy suppliers, who were also dishonest in this situation. The suppliers neglected their responsibility to offer high-quality products at affordable prices, depriving consumers of their entitlements. As a result, the OFT's decision to impose fines on the suppliers was justified. Although the employer may have desired to contest the ruling with the OFT, they ultimately had to accept the penalty and resolve the matter quickly to prevent any negative impact on their sales figure.

Simultaneously, the expensive and time-consuming case could impact both taxpayers and businesses by increasing expenses. As a result, the payment of fines benefits consumers and promotes fairness in trading.

Compensations

After admitting to selling outdated food, Tesco was fined £12,000 by the Bracknell Magistate Court, along with £15,000 in legal fees and a £15 victim surcharge. The charges were related to the sale of 88 types of expired food products displayed on the shelves. Tesco accepted responsibility for this penalty, as they were aware of the harm it could cause to public health (www.tutorcare.co.uk).

To prevent any future occurrences, Tesco implemented staff training at their Bracknell store to ensure all processes followed strict quality control measures and compliance with procedures. Providing satisfactory service to customers is essential for any business, as they are the reason and purpose behind its existence (Gavai, 2010).

According to Tesco Corporate Responsibility, they had established a local supplier program to source fresh and high-quality products. To ensure smooth operations and compliance by suppliers, the company had to enforce the program rigorously.

Employers were responsible for a management problem that caused a significant issue. The actions they were accused of had a severe negative impact on the company's image and reputation, resulting in decreased sales. Nevertheless, the employers addressed the situation properly by acknowledging their error and providing compensation. This incident demonstrated Tesco's dedication to Plato's (2010) idea of Justice Ethics, which emphasizes the organization and aesthetics of all components working together harmoniously. Justice involves effective coordination and seamless integration of the entire entity.

Ethics of justice involves determining what is right and wrong with clarity and precision, particularly in relation to fairness. When someone experiences unfair treatment or is denied what they deserve, it constitutes injustice. Tesco recognized that treating someone unfairly is an immoral action. To uphold fairness for consumers and align with the concept of rightness within the Ethics of Justice framework, Tesco acknowledged their wrongdoing and paid a fine. They were penalized ?33,400 for selling 100 expired foods, with additional charges taken into account during sentencing. Shareholders of Tesco attended court to demonstrate their seriousness and concern regarding the issue. The company admitted guilt, resulting in the dismissal of managers and disciplinary measures against two employees (www.lacors.gov.uk). Employees have a responsibility to comply with the corporate system while performing their duties. Certain errors are not tolerated as they pose a risk to public health.

The Coventry council expressed satisfaction with the outcome of the sentence, as it served as a clear message to other competitors in the same industry. The government's support for the communities was acknowledged and valued.

Best Practices and Values

According to Donald, White and Bedner (2010), value is defined as a concept of the desirable. It is an internalized criterion or standard that individuals use to evaluate things. These concepts and standards, which are limited in number, shape how people assess the various objects they come across in their everyday lives. Values also have a moral dimension as they involve an individual's assessment of what is good, right or desirable.

Tesco has undertaken a range of community initiatives in order to give back to society and provide value. Engaging in corporate social responsibility is advantageous for businesses as it contributes to societal change, creating a more favorable business environment while also being socially responsible (Rendtorff and Dahl, 2009).

Communities Works

Tesco actively supports local communities without any conditions and aims to maintain good relationships with the communities they operate in.

The core offering Tesco brings to communities is providing high-quality, affordable food and goods, as well as creating job opportunities for the unemployed. Moreover, Tesco actively engages with local communities, addresses their needs, and values their input. They make positive contributions by addressing important issues and enhancing the local area. Additionally, Tesco aims to revive neglected areas by frequently establishing new stores. In the UK, Tesco takes pride in its Regeneration Partnership Programs, which offer long-term unemployed individuals a chance to secure employment.

In May 2012, Tesco opened its first store in Hungary as part of a regeneration program in Debrecen. This initiative aimed to provide employment opportunities for 100 unemployed individuals, while also offering courses organized by the Regional Labour Centre to help 42 individuals adjust to daily work routines. Additionally, Tesco brought together local communities by creating a central hub for interaction. In Turkey, Tesco Kipa Family Club provided various classes, including cooking, dancing, chess, and English language learning, to its 60,000 members. Furthermore, Tesco had over 100 Extended Class schools in South Korea, where customers and families could participate in arts and English classes.

Currently, Tesco has over 750 communities championing their efforts to effectively communicate with communities. They organize various activities, such as promoting healthy eating to primary and local school children, hosting charity events through collection or bag packing, and encouraging both staff and customers to participate in events like Race for Life (www.tescoplc.com). Tesco's commitment to values such as responsibility, accountability, concern, and unity has unquestionably had a significant impact on the communities they serve. The concept of "value" in this context is a broad category.

The text highlights the various things that Tesco includes, ranging from personal desires such as health and humor to social ideals like wealth and liberty (Weston, 2010). Tesco fulfills its responsibility towards the communities by offering them high-quality products at affordable prices. Additionally, they promote accountability by organizing learning classes for the communities to enhance their knowledge and interests. Tesco also prioritizes the unemployed in terms of job opportunities, ultimately contributing to their better future and improved quality of life.

Unity within local communities is of great significance. Tesco has established a platform for these communities to effectively communicate, interact, and collaborate. It is their hope that every business and store is highly regarded by the communities, as Tesco actively strives to take an interest in these communities. Tesco consistently contributes both time and funds towards community initiatives, showcasing the ethical principle of Duty. As Kant (2010) highlights, fulfilling one's duty is an obligation, regardless of the circumstances.

Most of the time, duty implies an action that one is expected to do as a part of society, which may not be solely for personal satisfaction or immediate happiness. Tesco was aware of their primary duty to the communities. Merely thinking positively is not sufficient; it must be followed by action. Their actions demonstrated their responsibility to the communities.

Protecting Environment

Tesco's main focus is on protecting the environment, specifically by reducing the impact on water and energy usage.

All suppliers must comply with Tesco's program to reduce the carbon footprint of their products and manage water usage in all stores. The goal is to become a zero-carbon business by 2050. Achieving this mission requires both planning and implementation. Tesco has successfully converted over 100 stores to natural refrigeration methods. In Kenya, the Lake Naivasha water stewardship project has reduced water pollution, increased water levels, and replaced lorry transportation with rail transport, resulting in saving 15,000 tonnes of CO2e annually.

Tesco partnered with Unilever to promote sustainable product choices and raise awareness among customers. In Turkey, over 10,000 customers were educated about reducing their water usage. Tesco implemented measures like reducing packaging and minimizing waste in their dairy operations to minimize their environmental impact. Waste reduction was a key focus for Tesco, and they employed an advanced store ordering system to accurately predict each store's sales, thereby minimizing food waste before it reached consumers.

The store chain has implemented waste reduction programs since 2009 across its global locations. In the UK, no waste is sent to landfills. Instead, if recycling is not possible, it is converted into alternative energy sources. China ensures full recycling of cardboard and wasted oil in its stores. Poland conducted a waste segregation audit in stores to improve recycling rates. In Malaysia, employees are encouraged to recycle through a weekly competition to determine the top recycler.

In the US, waste food is sent to a food bank to reduce wastage. In Slovakia, waste food is donated to the Hunter's association for animal feeding. The materials used for product packing are lightweight, sustainable, and recyclable. Since 2007, Tesco has reduced the packaging of own-brand products in the UK by over 15%. This includes a reduction of 420 tonnes annually in glass usage for their own label Champagne. They have also implemented a new packaging reduction technique for toys, resulting in a 15% reduction.

Tesco in the UK has made commitments with WRAP’s Courtauld 2 program to reduce packaging waste by 2012. These commitments include reducing the weight of packaging, increasing the amount of recycled content in grocery packaging, increasing recycling rates, and lowering carbon impact by 10%. Tesco has also pledged to reduce household food and drink waste by 4% and products and packaging waste in the supply chains by 5%. By fulfilling these commitments, Tesco demonstrates their dedication to caring for the environment and brings value in terms of duty, love, hope, and comfort to society.

All resources from the earth and environment were utilized and recycled, a responsibility everyone shares. Tesco prioritizes this duty and also promotes the values of love for the earth, environment, and each other by conserving water resources. Water is essential for human survival, and Tesco recognizes its importance by implementing several programs to reduce water consumption. In addition, Tesco offers hope to society by saving resources to prevent shortages and combat climate change.

The practices mentioned above generate hope in people and contribute to a harmonious and secure living environment, which is important for future generations. Tesco aims to achieve a peaceful world by providing a clean environment and promoting comfort. This includes promoting a lifestyle that encourages positivity, tolerance, and forgiveness. Tesco's program also reflects the ethical theory of right, which emphasizes entitlement to act or have certain actions. (Sbaw, 2010).

Everyone has the right to take certain actions and expect others not to deprive them of that right. However, others have the right to disagree with those actions, but they cannot ignore them. Tesco has promoted a program to protect the environment and has made it known to communities that they have the right to live in harmony. The concepts of rights and duties are related, as our main duty is to protect the rights of people (Gavai, 2010). Tesco has the responsibility to treat society fairly, and communities have the right to enjoy fair treatment.

Conclusion

Having business ethics is crucial for corporations as it leads to numerous benefits and advantages. Companies with strong business ethics build a positive image and reputation in the market, resulting in increased market awareness and improved sales. Additionally, practicing corporate social responsibility is vital as it safeguards the well-being of employees and communities. This not only benefits the corporation itself but also fosters employee loyalty.

A dedicated and loyal employee will remain with the company continually, leading to increased productivity and reduced staff turnover. Tesco, being one of the largest global retailers (see Appendix II for International Business Chart), acknowledges the significance of these factors and is committed to demonstrating ethical behavior, creating value for communities, and making moral decisions to resolve ethical dilemmas. This ensures that stakeholders and communities can reap the benefits.