Success Through Business Ethics | Level 7 Solution

Business Ethics and the Palm-Oil Supply Chain

A critical report on Colgate-Palmolive

Module: Success Through Business Ethics | Level 7

Table of Contents

1. Introduction. 3

1.2 The palm-oil controversy. 3

2. universalist, biodiversity, and utilitarianism. 4

2.1 Utilitarianism.. 4

2.2 Deontology. 4

2.3 Virtue ethics. 5

3. Analysis 2: Ethical decision-making. 6

4. Analysis 3: Leadership and response. 7

5. Recommendations. 7

6. Conclusion. 8

Reference list 9

1. Introduction

Significant role of business ethics and context of the company in decision-making.

In business ethics, we study business situations where issues of right and wrong arise (Crane et al., 2019). It's broader than the legal requirement as a decision could be legal and still be considered unfair, deceptive or injurious to stakeholders. This is important for multinational fast moving consumer goods (FMCG) companies that make decisions that impact consumers, workers, communities and ecosystems in various countries. Colgate-Palmolive, a worldwide consumer-products firm, has brands such as Colgate, Palmolive, Protex and Hill's. Its size and scale allow it a purchasing power and influence in the name of responsibility for its outside of the factory impacts.

1.2 The palm-oil controversy

Palm oil is a good example because on one hand it is a commercially efficient product, but on the other its serious environmental and social hazards. In 2014, Colgate-Palmolive declared no-deforestation policy and promised plantation level traceability. But Greenpeace later said that large-scale brands such as Colgate-Palmolive had not broken ties with traders linked to traders whose business models are linked to rainforest destruction and issues of labour or communities (Greenpeace, 2018). The issue is thus not just that the supplier might have done some wrong; the issue is that the buyer of raw materials was sending out the message of responsible sourcing, but did not yet have the systems in place to have visibility of the issues or the means to fix them. Since then, the company has enhanced its efforts through strengthened traceability and strengthened landscape initiatives and grievance management, such as a public palm-oil grievance process (Colgate-Palmolive, 2023). This report investigates the previous deficit with utilitarianism, deontology and virtue ethics, before employing ethical decision making and leadership analysis.

Table 1. Illustrative risk pathway for a forest-risk commodity supply chain (author synthesis).

2. universalist, biodiversity, and utilitarianism.

2.1 Utilitarianism

Utilitarian reasoning assumes that one action has to be determined by the question whether or not overall welfare is maximised. Palm oil can have a positive impact: it has the potential to be high yielding and has the capacity to generate livelihoods and assist FMCG companies in providing affordable products. The slim commercial calculation might then justify continued buying if price and availability advantages seem to be outweighing the costs of anticipated damage. But proper utilitarian approach should consider also dispersed and delayed costs: the loss of biodiversity, disruption of the carbon cycle and carbon emission from land conversions, health and livelihood consequences in local communities, and loss of consumer confidence. Adwiyah et al (2023) demonstrates that sustainability is contingent on outcomes in environmental, social, and economic aspects, in the case of palm oil, and not just on the price.

The problem with Colgate-Palmolive was a failure to fully recognize its consequences. Although a policy commitment was established, the challenges in tracking material to plantations had deteriorated and negative impacts were disproportionately spread to others in affected communities and ecosystems. The company was not directly responsible for each and every harm that was caused, but choosing certain products over others kept the demand going in a system where governance and certification were lacking. Certification can help, but its impacts depend on enforcement, inclusion and credible verification (Abdul Majid et al., 2021). There are utilitarian reasons why borrowing, for example, may only be done responsibly if the overall reduction in harm by monitoring and remediation attempts is demonstrated.

But private sustainability governance can enhance the performance of companies, provided that sustainability targets are linked to concrete implementation and accountability, and not merely symbolic declarations to be made (Grabs et al., 2023).

2.2 Deontology

Deontology is a theory of right action that appeals to duties and application of principles which include telling the truth and treating people as ends instead of means. Communities and workers must not be slight-of-hand methods for cutting inputs. A "no deforestation" company takes on a responsibility with it to ensure meaningfulness, revealing restrictions and working on credible allegations. The failure in question was not only an unwanted eventuality, it was an incongruence between an in-principle obligation and the ability to prove it. Thus external criticism of the fact that Colgate-Palmolive had not lived up to its promise of traceability led to a duty concern: stakeholders expected Colgate-Palmolive to provide them with correct and non-misleading assurances.

The later grievance log and human-rights due diligence, of which the company complains, are of ethical importance as evidences of a transition from the public commitment to the procedural respect. But deontology is more than just reactive process. A defensible system would provide affected human beings with an accessible complaint system, free from retaliation, and provide for timely investigation and remedy. Continuing challenges mentioned in Palm Oil Governance Research are the fragmented institutions (Hirsch et al., 2023), weak accountability and unequal bargaining power. Hence, even if local law is lax or a trader repudiates due compliance with a contract, Colgate-Palmolive should be aware of its supplier due diligence obligations as a non-delegable corporate duty.

2.3 Virtue ethics

Virtue ethics poses the question: What would a good organisation do? Proper virtues are honesty, justice, courage, practical wisdom and stewardship. This controversy implies that there is a disconnect between Colgate-Palmolive's public rhetoric and the actual organisation, with an implied message of stewardship in the policies and later actions. A good business would not wait to be prodded into action by the campaigns; it would know that something bad was coming, and listen to those who were affected and accept the commercial inconvenience when required. There are reasons to believe that zero-deforestation interventions are more credible and involve local actors and value-chain power beyond corporate pledges (Castro-Nuñez et al., 2021).

Virtue ethics also reveals the potential of symbolic sustainability. Ultimately, scholars may engage in greenwashing, which implies that commitments are detached from actual effects, even though there might be no intentional deception. (Kudłak, 2025) The more nuanced pronouncement is that Colgate-Palmolive is growing more transparent now, based on learning, but that lack of transparency shows lack of practical wisdom and courage in procurement governance at an earlier stage. Real measurable plantation level results, rather than a neat policy would be evidence of ethical character, and there would be public setbacks, supplier consequences and remediation defined by the community itself.

3. Analysis 2: Ethical decision-making

Models for ethical decision-making: separation of moral awareness, moral judgment, moral intention and moral act. Their value is diagnostic – they go into the understanding of what is wrong in the process in which the enterprise fell. From sourcing onwards, Colgate-Palmolive should have identified palm oil as a moral issue, rather than just a procurement and reputational risk. The 2014 policy demonstrates awareness, though criticism reveals that this awareness did not result in an adequate precautionary decision rule. Studies in ethical decision making highlight the role of organizational context, incentives, and leadership in influencing the individual decision making (Casali, 2021).

Table 2. Ethical decision-making diagnosis of the case

Another aspect of the case illustrates the limits of voluntary social accounting, as only some disclosures are included. Only ethically credible impacts can be reported: Reporting debits (negative impacts) as well as credits (achievements) can make impact visible, but only debits (negative impacts) unresolved grievances and performance gaps can be reported as well. Prior research on greenwashing has identified that stakeholders and consumers can lose confidence in the communications of sustainability (Santos et al., 2024) as a result of greenwashing. The consultation with stakeholders, independent assurance, and a documented escalation threshold and board level accountability should therefore form part of Colgate-Palmolive's future process of deciding. This should be an inquiry of "Can we document that we are dealing with a supplier that is using a responsible approach and the persons affected have remedies available" rather than "Can we defend this supplier contract?

4. Analysis 3: Leadership and response

The leadership response seems to shift from being mostly transactional and risk managed to being more stakeholder-oriented. The use of supplier requirements, audits, contractual controls and minimum performance standards are characteristics of transactional leadership. These mechanisms happen as a way of making the expectations more defined, to develop accountability and give a framework for corrective action. But when compliance is regarded as a 'tick box' exercise, this is ethically inadequate. Policies and audit records are futile if they cannot be used to recognize harmful practices, make the suppliers be more responsible or help safeguard communities affected by the supplier. So, transactional controls should be considered the cornerstone of good ethics management as opposed to showing that the organization has met its more comprehensive duties.

Elements of transformational and servant leadership are seen in the growing focus on both traceability and the management of grievances and collaborative landscape level initiatives. The difference between transformational leadership and servant leadership is that both are focused on changing values and behaviours within the organisation; a transformational leader produces a shared sustainability vision; a servant leader looks for the needs of stakeholders, striving for their dignity and empowerment. From this angle, not only do leaders need to be careful about preserving brands, but they also are needed to act to reduce the structural reasons that cause environmental degradation and other social issues. Traceability has the power to help workers and communities gain greater transparency in complex supply chains, while open grievance mechanisms can provide them with a formal channel to voice concerns. Likewise, collaboration with suppliers, governments, communities and NGOs can give solutions that would not exist if the organisation works on its own.

Ethical leadership is particularly prominent with regards to sustainability choices, as these choices are often driven by commercial pressure. The Ethical Leadership of Proactive CSR Decision-Making was examined by Meng et al., (2023), who conclude that the link between ethical leadership and proactivity CSR decision making is positive, however, it is prone to the influence of performance pressure. This finding is important as managers might have an inclination towards sustainability, but as soon as targets are posed on cost, growth or delivery, sustainability becomes a lower priority. The challenge of leadership then lies in whether senior buying decision-making is willing to risk short term financial sacrifices in order to defer the sourcing decision or to suspend the suppliers if they do not adhere to the standards, for the sake of long term stakeholder interests. When commercial goals always win out over ethical commitments, sustainability remains symbolic, and not strategically woven through.

One of the areas that might need strengthening is the tension between lofty public promises and the relative scarcity of indications that leaders question internal practice that is contributing to poor results. They can make the target of public commitments with insufficient or even absent measurable milestones subject to accusations of greenwashing, as well as undemocratic transparency of underachievement. To establish trust as a leader, you need transparency and you need to show everyone what you have accomplished as well as what you haven't. Data shared on grievances and engaging with NGO may be indicative of learning and accountability where grievances lead to investigation and remedy and protection from retribution. Ensure that stakeholder engagement contributes and does not take place as an afterthought once key decisions have been made.

The hallmarks of good ethical leadership are to be honest, fair, respectful and committed to the common good. To be honest, you need to communicate an honest statement and acknowledge uncertainty when you don't know all the facts. Justice calls for an equitable distribution of costs and benefits in the implementation of sustainability efforts, especially for vulnerable suppliers, employees and inhabitants. Respect necessitates meaningful participation in the enterprise, and concern for the common good involves seeing how the enterprise affects society and the environment as well as its impact on the bottom line.

This means that sustainability must become a control system, not a communications programme. The board must offer independent challenge, clear ERP and tie-in remuneration to verifiable results. Progress should be tracked using indicators such as percentage of supply traceable to plantation level, number and quality of supplier-remediation plans, measurable community benefits, time frame for grievance resolution and percentage of grievances that are resolved within an acceptable remedy. Proper, non-dependent verification and transparency regarding the realization of these indicators would enhance accountability. Leadership response is increasingly ethical and looks more to the needs of stakeholders but this is dependent on commitments leading to demonstrable change in how the school works and whether leaders are held accountable if things do not go well.

5. Recommendations

Table 3. Recommendations derived from the ethical analysis

The recommendations are directly applicable in this context as it is the lack of commitment, visibility and accountability that participatory culture has caused the ethical failure. They also understand that these smallholders cannot be simply left out, but rather capacity development programmes and fair purchasing arrangements are required to ensure sustainability is not just passed on to vulnerable local producers (Lai et al., 2022).

6. Conclusion

The case of Colgate-Palmolive and Palm Oil serves as a reminder that business ethics goes beyond the law and company policy. Utilitarianism uncovers costs that have been externalized or costs that are being uncovered in the environment itself or in society; deontology uncovers the duties or responsibilities to be truthful and respectful and remedies; and virtue ethics uncovers disconnects between values that are professed and character that is reflected in the organization. Leaders were initially overly dependent on transactional assurance and ethical decision-making was compromised by limited transparency and incentives to continue rather than take precautions. Subsequent grievance and traceability will be positive but if based on independently verified outcomes, ethical credibility is ensured. Colgate-Palmolive must implement the rational handling of raw materials as a hard commercial gate, emphasize the remedy of stakeholders, and coordinate incentives for management personnel and full transparency of unclosed issues.

Reference list

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