Information Guide on Code of Conduct for Ethical Business

This section provides background information and ideas to the consumer educator on the following:

The importance of good business ethics;

Characteristics of an ethical business;

Role and responsibilities of ethical business;

Contributions of good governance towards consumer protection;

Business code of conduct; and

Role of Government in promoting ethical business

1. What is the importance of good business ethics?

The consumer movement is not anti-business. The consumer movement is for good business. It is however, anti bad business. Therefore the importance of good business ethics is to help businesses get the support of the consumer movement. The support of the consumer movement will help to improve sales and profit.

Second, the aim of good and ethical business is to serve the consumers. Likewise, the aim of the consumer movement is also to serve and protect the interest of consumers. There is clearly a common purpose between business and the consumer movement. The practice of good business ethics can synergise co-operation and collaboration between ethical business and the consumer movement. Therefore, businesspersons need consumer education as much as consumers to become successful in their business.

This co-operation and collaboration has the potential to benefit both parties, in particular the business. A business that is ethical and truly wants to serve the interest of the consumers shall get free feedback from consumers. This feedback will help business to improve constantly and help the consumers better. Practising ethical business is in the best interest for business as well.

2. What are the characteristics of ethical business?

In this context, and drawing from the opinions of consumer advocates and businesspersons, 5 important characteristics of an ethical business are being identified, namely;

An ethical business is one that is engaged in a lawful business. It is actively meeting the needs and wants of consumers for a reasonable profit, and not one that exploits or profiteers from the consumers.

An ethical business is one that provides goods and services to consumers in a responsible and honest way. When the roles are reversed and they become consumers, they too would like to receive goods and services in a responsible and honest way.

An ethical business is one that engages in the safest, least polluting, efficient and cost effective way of production, using resources optimally and caring for the environment.

An ethical business is one that takes care of the interests of their workers, their shareholders and others involved with them. Such a business ensures honesty and transparency in their dealings,

An ethical business is one that contributes to development that is sustainable, socially just, and which contributes to the satisfaction and well being of society.

3. What are the roles and responsibilities of ethical business?

From the review of the characteristics of ethical business, we can single out 8 important roles and responsibilities that an ethical business can pursue. These are as follows;

Role and Responsibility 1: Business should always be honest, accountable and truthful in its dealings with consumers, employees, suppliers, financiers and shareholders.

Role and Responsibility 2: Strive to provide products and services to the consumers that are the safest and highest quality possible. The product or service must serve the purposes satisfactorily, efficiently and be cost effective.

Role and Responsibility 3: Produce such goods and services with the minimal, social, political, environmental, cultural and religious de-stability and destruction.

Role and Responsibility 4: Always provide accurate information and representation in advertisements of the sales of goods and services. Ensure consumers are informed and educated in the proper and safe use of the products and services for optimum utility and satisfaction.

Role and Responsibility 5: Deliver the product or services in the quality, quantity and time at fair and reasonable prices, as agreed upon with the consumer. Honour all the sales commitment made.

Role and Responsibility 6: Consider not only the interests of the owners of business but the interests of employees as well. Ensure safe and conducive working environment with adequate wages, benefits and amenities.

Role and Responsibility 7: In addition to the interest of the employees, consider also the interest of society. Ensure the interest of the general public is always considered in all decisions on the production of goods and services, in particular the needs, aspiration and welfare of the community.

Role and Responsibility 8: In addition to the interest of society, the business should also consider the consequences and impact of the business on the environment. It is important to contain all negative impacts and minimise pollution and not to sacrifice safety and efficiency in the interest of short-term profitability.

4. What contributions can good corporate governance make towards consumer protection and national development?

Good corporate governance means doing business in a responsible, efficient and cost-effective way. Good corporate governance and management of business can contribute effectively to consumer protection and national development in the following way;

Responsible corporate governance leads to a fair and just economic system. A fair and just economic system leads to greater confidence and the better use of resources without wastage and social disruptions. It creates a win-win situation for the business, the workers, the investors, the government and the consumers. Everybody tends to gain.

Efficient corporate governance leads to better time and resource utilisation. This reduces waste and optimises the use of resources. We are able to manage the production and output process better. This enhances and strengthens further the win-win situation.

Cost effective corporate governance means we are able to do more with less. Again, this reduces wastage and optimises the resources. It enhances the ability of business to lower prices to benefit the consumers.

Collectively good corporate governance – working and managing with responsibility, efficiency and cost effectiveness makes our society and nation competitive in the growing global market.

5. What are the elements for a code of conduct for ethical business?

The Ministry of Domestic Trade and Consumer Affairs of the Government of Malaysia has articulated five elements that constitute the code of conduct for ethical business. We can call this the "Pancacara of Ethical Business". Business should;

Recognise and accept the right of consumers
Practice truthful, ethical and non deceptive business
Refrain from misleading and fraudulent statements
Practice fair competition
Be responsible towards society

6. What role can government play to promote ethical business?

The government, in particular the Ministry of Domestic Trade and Consumer Affairs can play an important role in ensuring and promoting ethical business. From the United Nations Guidelines for Consumer Protection, we can single out 8 ways how the government can ensure and promote ethical business¹.

1. Ensure Product Safety
Government should adopt or encourage the adoption of appropriate measures, including legal systems, safety regulations, national or international standards, voluntary standards and the maintenance of safety records to ensure that products are safe for either intended or normally foreseeable use.

2. Ensure Hazard Warning and Recall
Government should where appropriate, adopt policies under which, if a product is found to be seriously defective or constitute a substantial and severe hazard, manufacturers and distributors should recall it and replace or substitute another product for it. If it is not possible to do this within a reasonable period of time, then the consumer should be adequately compensated.

3. Ensure Consumers Satisfaction
Government should adopt or maintain policies that make clear the responsibility of the producer to ensure that goods meet reasonable demands of durability, utility and reliability and are suited to the purpose for which they are intended, and that the seller should see that these requirements are met. Similar policies should apply to the provision of services.

4. Encourage Effective and Fair Competition
Government should encourage fair and effective competition in order to provide consumers with the greatest range of choice among products and services at the lowest cost.

5. Reliable After Sales Service
Government should where appropriate see to it that manufacturers and/or retailers ensure adequate availability of reliable after-sales service and spare parts.

6. Ensure Fair Contract Deals
Consumer should be protected from such contractual abuses that are one-sided standard contracts. This includes exclusion of essential rights in contracts and unconscionable conditions of credit by sellers.

7. Provide Testing Facilities
Government should regularly review legislation pertaining to weights and measures and assess the adequacy of the machinery for its enforcement. Government should encourage and ensure the availability of facilities to test and certify the safety, quality and performance of essential consumer goods and services.

8. Ensure Availability of Redress Mechanism
Government should establish or maintain legal and/or administrative measures to enable consumers or, as appropriate, relevant organisations, to obtain redress through formal or informal procedures that are expeditious, fair, inexpensive and accessible. Such procedures should take particular account of the needs of low income consumers.

1 The UN Guidelines for Consumer Protection is the most important and comprehensive document on the role of government agreed upon by member states of the United Nations, including Malaysia. See Annex 4 for details. Back