S1E8 – D: Extended accountabilities

In this final section of Companies Dilemmas, we handle the controversial topic of Extended Accountabilities, aiming to define how far is a company responsible for the actions of external parties when running a business.

If you sell candies, are you responsible for people getting fat and dying?

If you sell petrol, are you responsible for the environmental pollution of people?

If you sell weapons, are you responsible for the people killed by them?  

If you sell cigarettes, are you responsible for the lounge cancer in some of your buyers?

These are confusing questions that affect many businesses and employees; rightly so, as each of these questions has a unique answer and solving them helps dramatically in the prevention of injuries in society.

To close up this episode I wanted to provide a perspective on the question of how far is a company responsible for its operations. We will not be analysing dilemmas but more discussing how Social Expectations apply and extend to companies. The objective of this section is to visualize how the formalization of social expectation in a marketplace can provide us with the answer to the questions above, as it all depends on how many players are in the game and how well are the rules known to everyone.

Accountabilities dilution

Let us begin by providing a perspective on the concept of accountability dilution. I use this term to mean that within a group it is common to reduce accountabilities and expectations assigned to individuals based on the presence of other actors. For example, in a basketball team, we might want our top scorer to avoid playing defence as much as possible, hence everyone else extends their defence responsibility. Accountability dilution is not only done out of performance reasons, but as well as a safety mechanism, for example, it is smart that pharmaceutical companies are not in charge of the health standards for their own products, as this could pose a risk of manipulation due to conflicting interests.

Accountability dilution is a very important process across all markets, and in particular, I want to share two specific formats It happens in the marketplace:

First, accountability is transferred to the consumer, when we explain the possible consequences of the product and they still want to buy the product. I guess this is quite visible with cigarettes and the messages on their packaging “this product might cause cancer”.

On the other side, accountability is transferred to the government or external parties, that take responsibility for establishing safety thresholds. In the same example of cigarettes, the government puts a limit on how much tobacco can the cigarette have and how it may be sold. These regulations are in fact taking away accountability from the company. So long the company fulfils them, the responsibility for any issue falls within the threshold and regulations, not within the company.

The general message is that accountabilities come in degrees, and in the marketplace, accountability is commonly distributed between the business, the client and the government.

It is in this light of distributed accountabilities that extreme capitalist views take hold, views that believe that a company should only be responsible to make a profit while following the law. This view is not entirely wrong, as in some isolated cases this may happen, but in reality, this is wishful thinking as the process of social expectation varies according to stages of the industry, a process that is constantly evolving, hence there are seldomly points where the company can only focus on making money.

The process of formalization of social expectations

Assigning accountability and building social expectations, relies on our ability to know about the consequences of certain business practices, including the respective connection with the company services or products. It took many years before we could associate cancer with cigarettes, hence the social expectation to prevent this damage was not formalized until the research proved it.

This process of formalizing social expectations and accountability depends on the stage of the marketplace. If the market is relatively new, a “wild-west”, then nobody fully understands the consequences of the product and social expectations between the business, the government and the consumer are blurry, with no clear accountability. A perfect example of what happened when the first social platforms arise and nobody knew about the dangers of data. In contrast, if the market is mature, the consequences have been fully explored, accountabilities assigned and social expectations in place. To make it crisper:

  • In a wild west marketplace, where new products or services are being introduced, there is no regulation in place as nobody knows what to expect. In this case, most of the safety concerns and expectations are assigned to the business. Companies have been creative and explored all kinds of dangers and consequences, this not only is a big responsibility but an equal opportunity as they have the chance to influence the market.
  • In a semi-formal marketplace, the government begins to pay attention to the product or service, as the first issues begin to appear and complaints begin to come forth. The government takes the role of an observer in the same way that a parent joins a school party, pretending it is not there but making it clear that everyone has to be responsible. Regulation and accountability dilution begins to be passed to the government and consumers, mostly the consumers as competition in the market appears and the consumer can voice their discomfort through their choices.
  • In a fully formal marketplace, the government makes sure any critical injuries are properly addressed, either by forgiving practices or asking for heavy requirements. All players are familiar with the expectations and accountability dilution reaches its ideal stage.

As we can see, the stage of the industry and familiarity with the product sets the tone of how formal the expectations that apply to a company.

Guidance for the wild west

At this point, a critical question for any company that operates in a “wildwest” marketplace is, what ethical concerns am I accountable for? The answer is quite simple, everything. Given that the industry is so new and everyone is unfamiliar with it, all the expectations to avoid injuries to the clients fall within the companies. In this regard, the company is responsible to anticipate possible injuries, avoiding such situations or passing on responsibilities to third parties.

Injury imagination for injury prevention

All companies launching innovation have to run a process of “injury imagination”, pretty much asking themselves the obvious questions that lead to accountability

  • How can people use this product and get injured themselves?
  • How can people use this product and injure others?
  • How can people be deceived by this product?
  • Is there anyone that suffers an injury when we produce or sell this product?

One doesn’t have to break their head to come up with a comprehensive view of risks, the exercise is quite intuitive and the questions above are seen in most marketplaces.

During the process of injury imagination, not only is it important to know that a person can be injured, but to understand what kind of injuries they are at risk for. Is this a physical injury? something that affects mental well-being? or something about the reputation of the person? When the potential injuries have been identified, either a company removes the risk of injuries, or when this is not possible a company search for accountability dilution:

  • If the product has any health risks, can the government certify it?
  • Should the consumer do a training to use your product?
  • If the product can cause side effects, can we put a label highlighting the problem and pass the responsibility to the user?
  • Should one stop selling to a certain audience, and ask for certifications?

You may be concerned about this “dilution” step, but this is a very valuable suggestion in the context of innovation and the freedom of the consumer. It is well known that car accidents are mortal, but the benefit of transportation justifies the risk for the consumer, hence we don’t stop the sale of cars but implement measures that minimize the risk of car accidents, such as a driver’s license for the consumer and safe roads for the government. A propo cars, the process of accountabilities assignments is happening right now with self-automated cars, where companies and the government are discussing who should be accountable for things, for example, the government didn’t want to place sensors on traffic lights that would make it easier for automated cars to navigate, the reason was that they didn’t want to be accountable for any malfunctioning in the car.

An important question that requires further exploration is: where does the responsibility end? A blurry line that I don’t have the right answer and it has to be evaluated on an ongoing basis, as expectations keep evolving by benchmarks in other industries. To visualize how complicated can this process be, let’s look at the horrendous example of “it’s hot” label on coffee mugs. Coffee and hot drinks have been sold for decades, with everyone understanding that the mug was hot without having explicit guidance on it. Nowadays one has to make things even more explicit, and I believe we will reach extreme practices that will pass everything to the consumer, which in turn will take all accountabilities as it just wants to “get a coffee” and move on with it.

Closing the episode

We come now to the end of our reviews on business dilemmas. I have introduced you to the central ideas of how DREMSI can be applied when looking into business dilemmas and I thought it would be appropriate to close down with a few general observations that were seen throughout the dilemmas.

Perhaps the most important point is related to the influence of the marketplace’s modus-operandi in the interpretation of injuries and the expectations that apply to companies.

  • On one end, we have seen how the freedom of the consumer to choose their provider minimizes their sensitivity to “unethical” actions from the companies. The consumer’s sensitivity increases as the options in the market diminish, highlighting the risk of operating under a monopoly market.
  • On another end, businesses have to estimate the potential damages to society their products might bring. Depending on the level of formality of the marketplace, some of the responsibilities and expectations are transferred from the company to the government and the consumer. A process that is constantly in discussion as companies keep bringing innovation into the market

Consumer freedom, competition, government regulation, need for innovation and awareness of consequences, all of these elements interact with each other to assign expectations, which in turn define if there is an injury or not.

When I began working on the DREMSI project, one of my goals has been to un-entangle the difficulty of solving companies’ ethical dilemmas. I spent 10 years working for a multinational, and at some point, I got tired of how we made decisions on important matters, I got frustrated with the lack of explanations and I got fearful that I was making the wrong actions. I am glad to say that once I wrote the DREMSI theory, everything started coming into place and writing this episode became less difficult than I thought.

My biggest takeaway is that by understanding how the market works, and clearly differentiating between family-like expectations from marketplace expectations, it becomes easier to understand where the problem lies and make decisions accordingly. Some of the issues can be fixed by a company, some of the issues rely on a mindset change from the consumer, some of the issues have to be recognized by society and some of the issues require an intervention from the government. If only we all had the same understanding I can only imagine what we would be able to achieve.

I plan to write further on business dilemmas, but for the moment I believe we have covered enough ground to move on to the next topic of the agenda, government dilemmas.

NEXT S1E9 – Government Dilemmas.

Pride by Pieter Brueghel the Elder

S1E9 – A: State Dilemmas – Announcement

Hola my dear readers, In episode nine of this series we are meant to analyse the ethical dilemmas that governments face, it has been a long journey and this is one of the last stops in this theory. While individual and business dilemmas were relatively easy to analyse using the DREMSI method, it has taken

Pieter Brueghel the Elder, The Battle of the Moneybags

S1E8 – C: Companies and the Greater good

In this episode, we handle how companies should consider solving «Greater Good» Dilemmas such as inequality and sustainability. A very common and valid question that doesn’t have an easy answer and even at times relies more on the government and the consumer than the company in itself.

Pieter Brueghel the Elder, The Battle of the Moneybags

S1E8 – B: Client based dilemma

The most critical relationship for any business is the one with its clients! we all know that the customer is King, but to which level? In this section, we explore typical ethical dilemmas that companies face while interacting with their consumers.

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