Chapter 3

Emerging Business Ethics Issues

PepsiCo’s Journey Toward an Ethical and Socially Responsible Culture

Company Overview PepsiCo is one of the largest food and

beverage companies worldwide Pepsi Cola Frito-Lay Tropicana Quaker Gatorade

PepsiCo has received many awards and recognitions over the years PepsiCo has earned the Green Award by the

Environmental Protection Agency

Company Overview

As the primary competitor of Coca-Cola, PepsiCo must constantly adapt its strategies to maintain and/or maintain market share.

The company has invested in a number of products and has acquired subsidiaries Quaker Company Frito-Lay

This extension into many diversified product lines can be beneficial for PepsiCo as sales of soda have been decreasing in recent years. Market is growing more health conscious

Criticisms

PepsiCo has faced a number of challenges that question its status as a socially responsible business.

Biggest challenge: selling unhealthy snack foods PepsiCo is trying to overcome this challenge by

offering healthier options.

Deceptive labeling of Aquafina bottled water Negative impact on the environment through

wastefulness and careless operating practices

Social Responsibility

PepsiCo has made great strides in addressing these concerns and undertaking initiatives in sustainability. Recycling and packaging initiatives have reduced the

amount of plastic that ends up in landfills as a result of its operations.

PepsiCo has created a compliance program modeled after its Guiding Principles

PepsiCo acknowledges the importance of corporate philanthropy through its creation of the PepsiCo Foundation and through campaigns to encourage greater community involvement.

Better Business Bureau: Protecting Consumers and Dealing with Organizational Ethics Challenges

Company Overview Better Business Bureau (BBB) is one of the best known self-

regulatory trade associations in the U.S.

Self-regulation expresses a commitment on a company’s part to adhere to certain rules that demonstrate best practices and social responsibility

Although their standards do not have the force of law, companies that engage in self-regulation agree to go beyond what is legally required

BBB creates self-regulatory programs for its members. It uses multiple tools to inform consumers who violates these standards.

Website Newspapers Media

Company Overview

The BBB consists of hundreds of local chapters across the U.S. and Canada that operate independently but work together under the umbrella organization called the Council of Better Business Bureaus (CBBB)

The National Advertising Division (NAD) was created as the investigatory arm of the CBBB to ensure the credibility and truthfulness of advertising claims

The NAD is an important form of self-regulation in developing a transparent marketplace between businesses and consumers

Protects consumers by: Helping them avoid falling prey to advertising scams Providing important information on the ethical practices

of a business

Company OverviewConsumer reports

Grades products

versus

The work of the BBB

Rates businesses

Representation Who does the Better Business Bureau (BBB)

represent?

The BBB was created to reduce consumers’ fears of being taking advantage of by unethical or illegal businesses.

BBB created a channel for consumers to voice their complaints and warn other consumers about problematic businesses.

As it has grown, BBB has added different services for consumers

Membership At the BBB’s inception, process companies had to go

through:

Paid a small fee

Underwent a vetting process

Company was informally graded Companies could use this grade as a means of

promoting their business to new consumers.

When the BBB began it did not make much by way of profits. It aimed to break even.

Yet as the decades passed, the BBB has grown in size and influence.

Membership

To currently qualify for membership:

1. Applicant firm completes an application;

2. Pays membership dues;

3. Provides evidence that it conforms to local BBB accreditation standards;

4. Supplies detailed information as to the nature and structure of the business.

If the business requires a license to operate, the company must prove that it has obtained all applicable state and federal licenses.

The local BBB will ask for contact information and employment histories for all principal owners and officers and for references from entities such as banks, other businesses, and customers.

Reliability Reports A reliability report contains the following information:

1. The status and length of the business' BBB accreditation

2. A BBB rating (not all BBBs have the same rating system or criteria)

3. Contact information and business profile

4. Brief information about products

5. Licensing information, if applicable

Reliability Reports

6. Customer complaint history, including:

Total number of complaints

Complaints broken down by type

How many complaints have been resolved

7. Any government action against the company

8. Any advertising reviews initiated by the BBB

BBB Ethical Challenges

Challenges and controversies BBB faces:

The rating system

“Pay for play” scheme

Misconduct, especially in the Los Angeles chapter

High salaries

Some feel a salary of $400,000 dollars a year for a non-profit organization is too high

Criticism for being too friendly with businesses

Profitable partnerships

NAD Challenges

Challenges and controversies the NAD faces:

As a non-government agency, the NAD is restricted in the actions it can take

The NAD does not have the authority to:

Issue subpoenas

Hold hearings

Levy damages

Pull unsubstantiated advertising

NAD Challenges

Businesses who are referred to the FTC do not necessarily comply with the NAD’s recommendations

A company in violation of the NAD’s regulations may not be penalized

Cost of doing business with the NAD

Costs to file complaints

Length of time for complaints to get reviewed