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ETHICAL CONSIDERATIONS IN FINANCIAL DECISION-MAKING AND
CORPORATE GOVERNANCE
I. Fiduciary duty and stakeholder interests
1.1. Balancing profits and ethical responsibilities.
Mitigating profitability with an eye on ethical obligation stands out as a delicate but crucial
exercise that defines today’s business-world scenarios, as understood by Arjoon, in 2020. This
creates a balance between seeking the highest value for shareholders and at the same time
striving to be ethically sound in all business dealings and the company’s obligation to society. In
this process, responsibility is taken with respect to the organization’s key financial value and as
well as the societal/external consequences of all organizational activities for the stakeholders,
societies, and environment as aptly described by Bebbington et al. (2018). This can only be
achieved through the incorporation of ethical issues when practicing business management right
from the employees’ treatment, tendering, supply chain and environmental conservation as
presented by Byrne (2020). Chatterji & Toffel (2018) noted that despite people’s growing
concern of self-gain, corporate decisions for shareholder gains can appeal to ethical norms to
build its brand image and develop trust among stakeholders for sustainable long-term
relationships. In addition, the establishment of profit-ethics balance extends past the simple
recognition and adherence to compliance requirements, to becoming a foundational concept of
sustainable business environment and success. Ethical RS has rebalancing effects as it
encourages to develop new solutions and search for new opportunities to minimize the threats for
an organization and achieve its goals through ethical means implementing new sustainable
business models. Thus, the complex process of achieving the right balance between profit-
focused management and ethically-appropriate corporate behavior requires one to adopt a
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systems approach, where ethical concerns become an integral part of the organisational
framework and system. There exists the belief that profits and principles are mutually exclusive
and that the pursuit of one has to come at the expense of the other. However, by asserting that
ethical values are at the center of sound corporate strategy, it is possible to find a way out of this
contradiction and fashion a new mode of operation for enterprises that would result in lasting
wealth, influence, and social value.
1.2. Accountability to shareholders and society
Of particular importance is the accountability, which involves being answerable to shareholders
and the entire public by filing separatism regarding organizational activities in an appropriate
and clear manner as noted by Bouten & Everett (2019). In its simpler form, this accountability
encompasses the correct discharge of fiduciary duties and the due diligent effort to achieve the
business’ strategies that provides the best returns to shareholders, as postulated by Cahan et al.
(2015) but it does not eliminate the impact of business decisions in the society. Thus, while
business mgmt in the contemporary period entails monitoring and evaluating the finance and
performance of an organization, it also means acting by external standards socially,
environmentally, and ethically as described by Amel-Zadeh & Serafeim (2018). Hence,
organisations are being required to demonstrate why it is important that they ought to behave in a
sustainable manner, in the best and proper ways, and in a way that is acceptable as corporate
citizens; thereby aligning the objectives of the organisational and societal responsibilities and
values. In this way, pointing to the responsibility before both the shareholders and society
minimally, an organization can develop the image of ethical solidity, which, as Arjoon (2020)
points out, would help it function at the ethical pulse. Even though it helps enhance
stakeholders’ confidence in P&G it is also beneficial in regards to business sustainability under
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highlighted social and environmental requirements. Accountability plays the role of
consideration to promote learning in organizations, and it provides a continuous process of
advancement, indicating that companies must make suitable action to respond to the issues and
concerns from the stakeholders and acceptable opportunities that benefit society. With these
stakeholders and through the adherence to the high ground of ethical standards that has been
identified above, companies may be able to establish good accountability frameworks with
solutions that are not only significant and realistic, but also beneficial for the shareholders, for
society, and for securing the public interest for the general good and in the long term.
1.3. Long-term sustainability over short-term gains
Decisions that provide and seek long-term benefits at the expense of short-term gains
characterizes a strategic perspective towards the continuous build-up of the organisational
institution as postulated by Bebbington et al. (2018). This approach requires moving beyond
specific, short-term material self-interest, to a more encompassing and holistic view of business
and its operations, balance between business actions, financial results, environmental protection,
societal benefit, and good corporate governance practices as stated by Byrne (2020). Essentially,
sustainable business management focuses on long-term value creation because the sustainability
practices involve directing resources more towards innovation, employee training, stakeholder
engagement, and justice, among others, as noted by Chatterji & Toffel (2018). Thus, it is
possible to plant sustainable value for all links of the value-added chain, and cultivate a better
understanding of responsibility and risk management in organizations to adapt to new challenges
that surface on the market. This is especially important for an emphasis on sustainable long-term
performance in which ESG factors can become integrated, and companies’ strategies set their
general objectives congruent with the sustainable values that are demonstrated by Cahan et al.
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(2015). When sustainability principles are embedded into decision making at strategic, tactical
and operational levels, companies can leverage opportunities that arise from ecological
legislation, minimize impacts of potentially damaging regulations within business and create
value for stakeholders in the effective long run. Finally, to achieve sustainable development,
there is a need to ensure that future-oriented goals and objectives are given precedence, and this
involves decision-making processes that are not only rational, rationalistic, and reasonable but
also sustainable as highlighted by Bebbington et al. (2018). When the goals of sustainable
business are integrated with the goals of business, it makes it possible for the companies to
enhance their ability to respond to challenges, earn the trust of stakeholders, and establish
positive and sustainable value for individuals, society, environment and the company in the long
term.
II. Transparency and disclosure in reporting
1.1. Accurate financial statements and auditing.
Accustomed financial statements and auditing are arguably two fundamental pillars of corporate
governance assumed by Chiu (2017). According to Flammer (2015), these financial documents
are valuable for different users, including investors, creditors and the organizations themselves as
they encompass necessary data about the companies’ financial condition and business
outcomes. Nonetheless, auditing practices and assurance on financial statement are central in
validating and affording credibility to financial information as revealed by Fasterling &
Demuijnck, 2015. As a financial statement preparation and reporting mechanism, auditing is
mainly conducted by the professionals from third party and the basic process of auditing involves
the confirmation of financial statements with a reference to generally accepted accounting
principles and other regulations as stated by Devinney & Auger (2014). Auditors spend a lot of
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time scrutinizing and some of the key roles they perform include assessing the accuracy and
strength of internal controls over financial information and statements, assessing activities that
may be fraudulent or fraudulent, and ensuring that other parties place confidence on the
information disclosed to the public. Hence, ahead of the fact that businesses demand
corporative transparency, accountability, high level of auditing standards and comply with the
best practicing, at the same time, it ensures confidence and investors’ trust, as pointed by
Devinney & Auger (2014), which is an imperative for the credibility of stock market and it’s
stability. Furthermore, the systems of auditing also perform guard mechanisms against
embezzlements, frauds and other unethical practices in the organisations; and which also
safeguard the stake of shareholders and other stakeholders of the organisations as noted by
Flammer (2015). Auditing and finance accounting are key components of corporate governance
because they ensure the accuracy, credibility and compliance of the financial information that is
published by business organizations. These authors argues that tight auditing rules and high
level of disclosure contribute to an enhanced reliability and credibility of organisations and as an
effect generates confidence of investors and sustains the company’s value and its relationship
with its stakeholders in refereeing and other financial systems.
1.2. Preventing fraud and misleading practices.
The following essay looks at fundamental principles and fraud negligence and deceitfulness have
been acknowledged as some of the most significant measures to guarantee the solidity and
credibility of financial corporations, financial markets, and corporate governance structures
Friedman & Heinle (2016). Corrupt practices like embezzlement of shares by management or
other fraudulent activities like insider trading are some of the major risks that are capable of
eroding investor confidence and shareholder value, as well as market stability as noted by
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Christensen et al. (2014). To overcome such evils effectively the internal controls, governance
frameworks and compliances as envisaged by Edmans (2016) should be implemented. All these
practices can be seen as activities to minimize fraud risks; they assist in identifying such
behaviours and dismissing them, agreed, thus avoiding major monetary losses and loss of
credibility. Moreover, Cheng et al. (2014) formulated 24 crucial strategies to regenerate the
ethical standards and ethical leadership and administrative personality among the society, those
are developing the ethical management culture, ethical business practices, and corporate
responsibility from the apex to the base. To cultivate ethical working culture in organizations,
companies prevent fraud incidents from happening; generate trust internally and externally with
various stakeholders as well as the general society; enhance their image and be ready for the
pressures, and future immediate regulating force. This is not only useful but necessary that we
do not involve in such fraudulent practices as independence of investor interest and public
confidence is one of the basic principles of ethical norm. By so doing, the total management of
fraud risks in a positive and constructive manner, creates a synergy that not only safeguards the
investment of the owners, but also the wellbeing of the organizational players besides boosting
the health of the financial community.
1.3. Building trust with stakeholders and regulators
Stakeholder management is one of the key skills to ensure that the value addition process with
stakeholders as well as regulators is maintained and that the social license to operate is
perpetuated (Friedman & Heinle, 2016). Honesty, responsibility, and ethical standards remain
strategic factors in ensuring trust in corporate governance and business activities, as explained by
Flammer (2015). Managers must ensure that top of the range statement accompanies accounts as
a sign of agreeing to facilitate accountability (Fasterling & Demuijnck, 2015). This makes them
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have faith in the companies they invest in, the companies they buy products or services from, and
the employees they manage or work with; also, it helps improve corporate relationship with legal
and regulatory bodies as the corporations show conformance with legal and regulatory
frameworks (Chiu, 2017). Apart from transparency, adopting an active approach in engaging
with stakeholders and moderating expectations and anxieties of stakeholders are critical for
building trust (Cheng et al. , 2014). It is thus possible for companies to actively involve
stakeholders in the decision making process for grievances and seek their input, an agenda that
would affirm enforceable corporate governance responsibility (Flammer, 2015). This makes
stakeholders more committed and assures them of the organisations’ clear and genuine intention
and this creates endorsement and sense of ownership for stakeholders (Christensen et al. ,
2014). Also, every organization must embrace ethics in its endeavors as a way of gaining the
confidence of the members who stake their resources in the firm and the overall regulators
(Edmans, 2016). To maintain ethical standard and values is very important not only for
preventing the fraudulent activities but also for a positive and ethical culture in the organization
(Cheng et al. , 2014). By stressing the importance of ethical practices in every operation and at
every management tier, organisations can assure stakeholders and can prove that they are only
doing business in an ethical manner (Edmans, 2016). Lastly, trust may be seen as a key and
necessary component that forms the basis of long-term business cooperation and day-to-day
business (Friedman & Heinle, 2016). The need for transparency, accountability, and stakeholder
management, along with having higher ethical standards, make organisations more fit to deal
with threats, and grasp opportunities in the contemporary volatile global context. Learning,
establishing and continually investing in trust as an asset should be a critical thrust for
enterprises desiring day, medium or long-term enterprise survival and dominance.
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III. Environmental, social, and governance (ESG) factors
1.1. Incorporating environmental sustainability into operations.
Environmental sustainability in operations is a complex concept that has been defined as
implementing and coordinating a set of strategies that go beyond the organizational frontier in a
systematic and integrated manner (Gómez-Bezares et al. , 2016). This encompasses
incorporating the environmental issues in managerial decision-making, ensuring the local,
regional or global sustainability principles are reflected loudly and clearly in a firm’s mission
and vision statements (Gao et al. , 2016). Furthermore, environmental sustainability means
practicing operational measures within the organization’s environmental responsibility or
pursuing actionable goals in managing the organization’s negative environmental footprint; this
includes measures like energy management, waste management, and sustainable procurement
(Gómez-Bezares et al. , 2016). These baffles are the methods that are used in an organization
with an aim of reducing the emission of carbon, protecting the natural resources as well as
ensuring that ecosystems are protected in future generations (Gao et al. , 2016).Environmental
sustainable management practices remain important for many reasons not only based on ethical
and moral consideration but there are business benefits given by Human & Terblanche (2018).
For companies which consider sustainability as a strategic issue, they tend to have a better brand
image and corporate image since consumer tend to prefer environmental friendly products
(Gómez-Bezares et al. , 2016). This has a way of helping organizations tap into the market of
conscience consumers who have embraced environmental conservation and thus be able to tap
into the dedicated pool of environmentally conscious customers (Human & Terblanche, 2018).
VIP As a strategy, incorporating environmental sustainability in operations aids in reducing
regulatory losses due to violation of environmental legislation and guidelines (Gao et al. , 2016).
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Organisations can avoid future fines, penalties and legal costs associated with the consequences
of pollution and excessive wastage of natural resources while on the other hand keeping in a
favourable standing with the authorities. Transforming organization’s operations toward
sustainability can also benefit organizational bottom line by increasing efficiency and decreasing
environmental cost (Hubbard & Purcell, 2001). Measures like energy saving, source
minimization and sustainable purchasing not only serve the purpose of cost control in the
function and operation but also improve the use of resources and effectiveness of supply chain
management.
1.2. Promoting social responsibility and ethical conduct.
Cultivating social responsiveness and the right decision-making comprehensively consists of
several elements that affect organizational behavior (Goulden & Huybrechts, 2022). This
involves ensuring that business conducts match ethical standards and the expectations of anSH
society, involving the overall conduct and good, ethical, and legal practices within an
organization (Haynes & Hillman, 2010). Furthermore, CSR involves assuming a social
accountability by responding to social factors such as human rights, labor practices, community
welfare, together with diversity and discrimination (Haynes & Hillman, 2010). Indeed, Levy and
Kaplan (2010) depict that corporations’ observance of social responsibility not only benefits the
society but, at the same time, brings commercial gains to companies (refer to appendix 2, slide
4). For example, promoting organizational values of CSR leads to improving the quality of work
of employees, outcome of their satisfaction by providing a meaningful implication from their
organizations in the enhancement of social wellbeing (Iwu-Egwuonwu, 2011). Also, companies
that indulge in socially responsible practices can be easily endorsed by consumers in the market
because customers are becoming wiser and are more willing to support companies with ethical
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values (Jo & Harjoto, 2011). For Instance, when an organization complies with ethical standards
or engages in social responsibility activities, the stakeholders such as investors and consumers,
employees and the society at large will develop confidence in it (Goulden & Huybrechts, 2022).
This trust creates an antidote for long-enduring business relations and can aid organizations to
tackle predatory image issues and disasters (Jo & Harjoto, 2011). Also, the understanding of
social responsibility plays help minimize such liabilities as negative exposure, unwanted
attention from regulators, protesters, and activists that threatens the company’s image and fiscal
solvency (Haynes & Hillman, 2010). The authors argue that companies should ensure that they
take social responsibility and ethical practice as values that the business world cannot do without
if the business world is to have a better future in an increasingly complicated business world.
Analyzing the legal standards, regulations, codes of conduct, self-regulation and societal norms,
it is clear that by maximizing the value for all stakeholders, everyone becomes a winner and
businesses become more sustainable and competitive at the same time.
1.3. Effective corporate governance and risk management
Both corporate governance and risk management have been described as the bedrock of
organizational performance based on the fact that they enhance the concepts of accountability,
transparency and integrity in organizational processes (Kang & Ng, 2016). These principles
include setting up proper structures, mechanisms, and policies to monitor the activities and
decisions of the corporations, to make sure that they conform to the right ethical frameworks and
regulatory recommendations (Kang & Ng, 2016). Human & Terblanche, 2018 argued that
institutions that attach importance to corporate governance and risk management activities obtain
diverse advantages in many ways, not simply revenue. Despite the assessment of the EE and
VPP initiatives suggesting that they primarily focus on striving to maximize shareholder value,
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these programs are also useful for preventing and managing risks related to fraud, misconduct,
and non-compliance (Human & Terblanche, 2018). Thus, adherence to a proper culture,
exemplary guidelines, and responsibilities can help organizations protect themselves and their
reputations from scandals and maintain investors’ trust and stakeholders’ confidence in the
firm’s actions (Human & Terblanche, 2018). The current complex business environment that
organizations are operating demands effective governance practices and proper risk management
framework in order to increase the capability and efficiencies of organizational responses and
adapnaibilities (Iwu-Egwuonwu, 2011). At the operational level, proactive risk identification,
evaluation and management gives firm requisite leverage to meet emerging risks to ensure Firm
Specific Value is not eroded (Iwu-Egwuonwu, 2011). Additionally, strong compliance
frameworks help establish and enforce corporate integrity, safeguarding against malpractice and
encouraging sound conduct across the company (Kang & Ng, 2018). Maintaining high levels of
ethical standards enhances the reputation of a firm, and by ensuring high levels of transparency,
accountability, and integrity in business practices, companies will be creating a favorable culture
that will enable them to deliver sustainable stakeholder management (Kang & Ng, 2016). A good
corporate governance and pragmatic risk management contribute to organizational sustainability,
which leads to optimum and consistent performance and the generation of long-term value in a
continuously shifting environment.
IV. Executive compensation and income inequality
1.1. Aligning incentives with long-term value creation.
Being consistent with the objectives of productivity improvement and constructing the means for
value yielding it is pertinent for companies willing to build sustainable returns for their
shareholders. One of the strategic human resource management practices entails establishment of
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compensation and incentives that ensure long-term goals of the organization are met, rather than
having employees focus on the short-term yields (McWilliams & Siegel, 2001). They include the
pay-for-performance schemes, stocks, and shares and the profit motive that can specifically be
designed to encourage and promote behaviours and results that are ultimately productive of long-
term stakeholder value (Koh et al. , 2014). Rewarding performance in terms of profitability,
innovation, and customer satisfaction, over the long-term means that various companies can steer
the employees towards aLong-term perspective because compensation helps to drive
accountability and focus in organizational structures (Lins et al. , 2017). Business executives and
employees are then encouraged to make decisions that promote the sustainability of their
organizations and to guard against future disturbances to sustainably generate business value
(Malik & Kanwal, 2018). Linking rewards with organizational goals can be central to talent
acquisition and management since it assures talented employees of their rewards once they attain
corporate goals (Koh et al. , 2014). Lins et al. (2017) suggested that when employee understand
the pump and pride themselves in putting their energy in realizing long term strategic goals and
objectives, then there is high likelihood that they will continue committing to the organization.
This in turn helps in getting more committed employee participation, satisfaction and employees’
performance which in turn helps in increasing the organizational effectiveness and competitive
advantage (Malik & Kanwal, 2018). Such incentive structures can also help strengthen corporate
reputation through a more firm-wide, long term, and ethically sound approach (McWilliams &
Siegel, 2001). To this end, it is important to note that investors and other stakeholders consider
opinions on corporations more favorably whenever they identify corporate practices of
reasonable executive compensation with long-term sustainable value (Koh et al. , 2014).
Companies may use CSR to achieve short-term benefits since it pays off to create value for the
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firm and, in turn, trust and credibility among its stakeholders for long-term gains in growth and
profitability (Lins et al. , 2017). In conclusion, the idea of linked incentives corresponds to the
focus on building long-term value corresponds with the goals and objectives of the organization,
helping to engage employees and ensure that organizational decision-making is strategic and
oriented towards creating long-term value.
1.2. Fairness in compensation and income disparities
Hence, the study should ensure fairness in remunerations to eliminate salary inequity, is crucial
to enhancing employee engagement and social justice in organizations (Matten & Moon, 2008).
Reasonable policies refer to offering employee compensation packages in terms of both
remuneration and organizational structure that are competitive, equal, and transparent (Muhonen
& Pitkänen, 2010; Lourenço et al. , 2014). Along with being paid fairly in terms of dollars,
nonpecuniary incentives such as medical, pensions, and training are other antecedents that
inform overall fairness perceptions according to the findings of Missimer et al. (2017). Further,
while pay equity refers to equality of pay in relation the demographic status of employees, fair
compensation also looks at disparities in pay according to working positions and levels within
certain compounds (Chuang & Liao, 2010). A study shows that perceived fairness regarding the
issuance of pay is positively associated with motivation, job satisfaction, and organizational
commitment (Zhao et al. , 2017). By focusing on elements of equity in the payment system, the
organisation’s performance not only strengthens the motivation and commitment of workers but
also reduces the loss owing to the unsatisfaction or turnover rates among the employees
(Eisenberger & Stinglhamber, 2011). Safe and reasonable remuneration structures can foster
well-being at the workplace, and people’s health as well as boost their efficiency (McWilliams &
Siegel, 2001). Moreover, organizations require consistent appreciation and revision of the
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payment component procedures to reflect the new workforce characteristics, new market
tendencies, and new legal conditions (Matten & Moon, 2008). Thus, organizations that support
fair remuneration practices help to create conditions of trust among their employees, which is an
indicator of profitability for organizations in the future (Matten & Moon, 2008, p. 116). This
may include periodic surveys to determine overall and relative levels of compensation, polling
employees to get their perceptions on offered remunerations, and offering paths for promotion
and growth to confirm that workers are recognized and remunerated adequately (Cummings et al.
, 2018).
1.3. Impact on employee morale and productivity
There is now more understanding of stakeholders to align their incentives with long-term value
creation and fairness in remuneration has been identified as some of the essential factors in the
management of the organization. It means thus that workers within the organization are
encouraged to work extra hard with an aim of helping the organization achieve its objectives and
goals and at the same time get appropriate remunerations for the efforts they put in achieving
organizational goals. That is, as the policies for fair compensation, it does not only refer to the
payments of appropriate wages but also to proper fit regarding the distribution of the incentives
and follow up in regard to the principles of reasonable and sensible determination of wages
(Lourenço et al. , 2014). Additionally, there is a shift to performance-based incentive systems
that focus on sustainable returns for shareholders and employees to ensure the delivery of value
to the company in many years into the future (Missimer et al. , 2017). By duly linking rewards
with the conceptualised goals in the long-term planning efforts, the employees of organisations
take up the accountability and strategic direction necessary to deliver sustainable shareholder
value (Lins et al. , 2017). The compensation issue is essential in enhancing workforce morale and
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productivity since it was socialized to employees signifying that fair compensation will be given
in accordance to their efforts (McWilliams & Siegel, 2001). The study also found that when
employees perceive that equal pay policy is fairly applied on them, they are more committed,
engaged and have high productivity levels as compared to when the policy is perceived to be
fairly applied to others in the organization or field (Malik & Kanwal, 2018). Secondly, the
matters of fair remuneration foster a sound corporate culture that embraces trust, openness, and
cooperation within the employees (Matten & Moon, 2008). Consequently, the levels of employee
turnover and turnover rates are reduced with improved levels in employees ‘ satisfaction hence
enhancing organizational performance and competitiveness in the long run as proposed by
Lourenço et al. (2014). All in all, this paper established that compensation policy is an effective
tool to align organizational incentives with its long-term value and maintain fairness thereby
increasing motives, commitment, workforce performance and consequently organizational
success (Missimer et al. , 2017).
V. Ethical investing and responsible finance
1.1. Screening for ethical and sustainable investments.
The analysis for ethical and sustainable investment profiles has emerged as a crucial issue in
investment management context based more generally on the concern for social responsible
investment (SRIs) (Orlitzky et al. , 2003). This is a comprehensive screening process that seeks
to determine the suitability of companies based on environmental, social and governance
measures, also known as the ESG factors that determine the ethical and sustainability standards
of companies (Oh et al. , 2011). Environmental considerations are essentially a company’s
responsibility for the environment, the programs that minimize the carbon footprint, the
efficiency of energy use, and the rational use of resources (Naughton & Rezaee, 2018). Besides,
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the idea of corporate governance comprises such aspects as the presence of a non-executive
board, high-paid executives, and the method of addressing shareholders (Pacini et al. , 2020).
Ethical investment screening prevents investors from investing in undesired securities by
offering the investors the opportunities to invest in the securities that suit their economic and
social values and sustainable goals and objectives (Orlitzky et al. , 2003). ESG factors play an
important role in the investment decision process since they enable avoiding the negative
impacts of the environmental or social crisis on investment crises, such as criticism, additional
regulation, and other unfavorable aspects (Oh et al. , 2011). Further, ethical investment screening
enables investors make their choice to invest in companies who have shown corporate
responsibility in their business practices, environmental sustainability, and governance practices
(Naughton & Rezaee, 2018). Not only did the integration of ESG factors improves the
performance of business but it also has many advantage because evidence has shown that
company with good ESG outperforms their counterparts in the long run (Pacini et al. , 2020).
This approach is in consonance with the conventional realization amongst investors that the
double bottom line concept is about attaining both economic and non economic gains (Orlitzky
et al. , 2003). It is in this respect that ethical investment screening has the possibility of making a
positive contribution in influencing change within the corporate business environment, given that
investors acting as gatekeepers of their stakes can ensure that they vote for better policies that
lead to improved business sustainability besides attractive gains for investors as found by Oh et
al. , (2011).
1.2. Impact investing and social impact bonds
Blended value approach, also known as impact investing, is a significant paradigm shift as
investors aim to generate both the financial returns and social/ environment gains (Galy, 2014).
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However, SIBs remain a notable class of impact investment vehicles alongside other exotic
structures that retain the financial incentive aligned to output in an integrated approach
(Naughton & Rezaee, 2018). In other words, SIBs are contracts between investors and the
government whereby private money is used to fund socially valuable activities, and the investors
are paid back based on the results of the social impact initiatives (Naughton & Rezaee, 2018).
This model also creates responsibility and effectiveness in the delivery of social services and
enhances the ability to go to the next level of implementation of best practices in addressing
emerging social issues (Naughton & Rezaee, 2018). Social investment can be defined as a wide
ranging concept of utilizing and deploying capital for the improvement of social and ecological
causes (Oh, 2011). spanning from poverty alleviation, enhancements of accessibility to health
services, environmental enhancement, Â and other measurably positive social change investment
channels channeled resources where they could have a positive societal impact (Oh et al. , 2011).
Assist with achievement of sustainable development goals: Investors can use their money to
promote and invest on projects/organizations that address social or environmental change
challenges for a chance of getting good returns (Pacini et al. , 2020). The attraction of impact
investment stems from the possibilities of creating value for both parties and creating value for
society at large, expressed in clearly defined and measurable terms (Pacini et al. , 2020). We
have seen that through engagement in SIBs and other integrated impact investment structures,
investors hold a key position of unleashing change and wealth, at the same time achieving
portfolio diversification and risk management (Pacini et al. , 2020). In addition, impact investing
brings together private capital, development, philanthropy, and government to work together and
develop new solutions to solve global social and environmental problems that are difficult to
address. Thus, the emergence of impact investment is able to change the existing paradigms of
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savings and investments and contribute to the development of the new type of sustainable
finance (Orlitzky et al. , 2003).
1.3. Avoiding unethical industries or business practices
SRI or sustainable investing can be defined as the investment that undertakes researches on
social responsible criteria and integrates them into the investment process in a goal of delivering
both satisfying financial returns, and positive societal effects. ESG factors cover a vast array of
topics which include climate change risk, human rights abuses, labor relations, corporate
management, and gender diversity (Naughton & Rezaee, 2018). Some of the categories of
investors who practice RI may strategically apply different procedures like ESG integration
techniques, negative screening, positive screening, thematic RI, and impact RI in a bid to ensure
that their potentials are in sync with the RI and sustainable standards and policies (Oh et al. ,
2011). It refers to the integration of ESG factors into the conventional model of analysis of
financial assets to either generate alpha or moderate risks (Pacini et al. , 2020). This is where
investment managers avoid certain companies or industries with negative social impacts or
industries they consider to be immoral or sinful, like the manufacture of tobacco, guns or alcohol
(Hale et al. , 2021). Positive screening, in contrast, is the identification of firms with high ESG
scores or companies with significant links to sustainable products or projects (Higgins &
Wilburn, 2019). Thematic investing resides in thematic investing strategies where investors
choose to invest in particular sustainability themes or trends like renewable energies or clean
technologies with the aim of managing upcoming changes and exploring value-added
opportunities (Malesich & Lamberton, 2017). Blending with impact investing, which not only
identifies investment opportunities with social or environmental gains but also aims at achieving
positive social or environmental impact alongside the intended financial value (Lam et al. ,
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2020). These approaches afford investors an opportunity to work with the values of sustainability
and aims at achieving financial portfolios as fiscal gains. Investors can be agents of change by
implementing sustainability goals and creating sustainable practices and solutions across
industries, through ESG investing.
VI. Corporate social responsibility and ethical branding
1.1. Philanthropic initiatives and community engagement.
Due to the fact that genuine giving and people involvement are being incorporated as the
fundamental initiatives of CSR policies, these positions referred to as commitment of a firm
towards social cause and further development. It encompasses aspects like giving to charities,
volunteer work, sponsoring philanthropic endeavors, financially during events happening within
the society and supporting education (Orlitzky et al. , 2003). Some of the firm-levity
stakeholders are non-profit, communities, government, and other attendees to deliberate on
issues that affect the society including poverty, lack of education, health problems and
environmental issues among others (Wong & Wong, 2004). Thus, by means of philanthropic
activities, companies could demonstrate that the main reason for their existence is not only in
generating revenues for shareholders but also in taking actions to increase the general well-being
of people and the surroundings that will be inhabited by the enterprises. However, there are four
recognized facts that suggest that philanthropy can be beneficial to a firm and that can be defined
in terms of its affective image, stakeholder eagerness, and competitive advantage to its customers
(Yi & Park, 2021). In addition, CCI also enhances awareness of organisational needs of such
communities and helps provide many avenues in which organisational can come into direct
contact with the communities (Orlitzky and others , 2003). It can refer to tasks that involve
persuading others to provide their services, getting involved in programs that seek to solve
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societal concerns, or working together with other companies or businesses in tackling similar
concerns (Pacini et al. , 2020). This therefore implies that, through involving the community,
the companies can ‘win the hearts of’ the employees and have them to believes in the change,
and thus embrace change that would lead to enhanced and better social return in the society
(Schlenker, 2009). However, backed by over ten samples of empirical studies, the authors
substantiated that the enhancement of philanthropic activity and its better compatibility with
business values in the case of brand image boosts their reputations (Yi & Park, 2021).
1.2. Ethical marketing and advertising practices
These elements include achieving high levels of ethical marketing and advertising as key
attributes to building consumers’ trust and investment in products that are beneficial to the
society (Yi & Park, 2021). Such practices include selling a product or a service in a manner that
is ethical and informative to the general public through positive advertisement (Orlitzky et al. ,
2003). Ethical marketers focus on transparency and consumer sovereignty by not using
misinformative tricks, fake advertisements, and tactics that would endanger the best interests of
the consumers or take advantage of the troubles varying society has (Pacini et al. , 2020). This
concern of ethical advertisement sustain various aspects numerous aspects of advertisement such
as protection of privacy, diversity, and truthful representation of attributes of the products (Wang
et al. , 2021). When marketers embrace appropriate marketing communication ethical practices,
the relationship that consumers have with brands would be strengthened by trust hence
enhancing the communication experience through positive word-of-mouth promotion (Zaman et
al. , 2021). The enhancement of more ethical marketing messages fosters proper brand
development and a sustainable future business stable by adhering to the standards of right
morality and the expectations of customers and the society as a whole (Zaman et al. , 2021).
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Marketing communication practiced ethically is preferred and thus helps firms to build and
differentiate their brand against the competition to leverage on by consumers (Yi & Park, 2021).
Moreover, ethical advertising appeals to the socially sensitive consumers who take the ethical
aspect of the advertisement into consideration when making a purchase decision, which the
advertisers helps to reach more and more people as well as gaining their loyalty and trust
(Orlitzky, et al. , 2003). Ethical marketing also is a very important component of functional
marketing in that it contributes to the good of society through giving back a cause, change and
social issues (Pacini et al. , 2020). Marketing, sponsors and partnerships for nonprofit
organizations, organizations embrace cause related marketing and partnership with nonprofit
organizations in order to show the organizations that they have a responsibility of prov iding the
necessary support to the society in the event that they are needed. These actions not only inspire
consumers’ positive perception but also positively affect subsequent societal and environmental
problems, starting from poverty and ending with environment (Zaman et al. , 2021).
1.3. Building a positive corporate image and reputation
Marketing is an essential element that has been acknowledged as being important in business for
several years, especially in creating a favorable image and reputation of companies that is
effective in present day environment (Orlitzky et al. : 2003). Positive organizational image in
terms of modality and responsibility, professionalism, and transparency empowers the company
to attract consumer attention and gain investment, as well as ensures loyalty and trust (Pacini et
al. , 2020). Specifically, the overall reputation of the firm was considered a key factor reflecting
its trustworthiness, reliability, and being socially responsible all of which can create greater
competitive advantage (Yi & Park, 2021). It is crucial for establishing and sustaining the
corporate image post a crisis situation to incorporate ethical practices, conducts responsible
22 | P a g e
business, and engage stakeholders effectively (Wang et al. , 2021). Reputation management
involves a number of approaches; amongst them areTransparent communication – being truthful
regarding companies’ practices, deeds, records and outcomes Accountability – companies
admitting to faults and taking responsibility for their actions Stakeholder engagement –
Companies actively listening to stakeholder complaints, queries or comments (Zaman et al. ,
2021). I realized that when leadership brings up controversies and shows that the corporation is
willing to correct the mistakes it made, it becomes easier for leadership to improve the
organisation’s image with the public (Schlenker, 2009). On the same note, charity and other CSR
activities also play a vital role in boosting a firm’s image and portraying it as a responsible
corporate entity in the society as noted by Matten & Moon (2008). In addition, it was noticed
that the use of digital environment and social media networks can benefit for the building and
controlling of corporate reputation (Pacini et al. , 2020). Such means can be employed in
carrying out good news announcements, coping with feedback, and directly interacting with the
public in real-time, which in turn helps to manage public perception and the flow of trust (Yi &
Park, 2021). However, it is imperative that the leaders communicating on behalf of organization
are to be correct and truthful at all times, because anything to the contrary may lead to loss of
face for the organization in the society (Orlitzky et al. , 2003). In conclusion, efforts made in the
management of building a favourable corporate image and reputation have the major strategic
and tactical advantages for the business function in the long-term; this contributes to brand value,
consistent consumers’ loyalty, and stakeholders’ confidence (Wang et al. , 2021).
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