Ethics and Values Between for Profit and Not for Profit Organizations, Research Paper Example

Introduction

Although not for profit organizations have different goals from for profit organizations, they both may carry similar ethical values. The purpose of this research paper is to compare and contrast the ethical standings between both not for profits and for profit organizations. For the purpose of this research, the not for profit organization that will be analyzed is the Environmental Defense Fund or (EDF). The for profit organization that will be analyzed is the Cornerstone Environmental Group or (CEG) which is a limited liability corporation.

There are four parts to this research analysis regarding the not for profit and for profit organizations. Part one of the research analysis involves the company profile of the not for profit organization EDF. An outline of the company profile is first presented, followed by any ethical dilemma or issues that they may have faced in the past or are currently facing. This included an analysis of how the not for profit organization responded to such ethical dilemmas that may have been present. Any outcomes from a legal, political, or social perspective arising from the ethical situations are addressed as a part of this research analysis for the not for profit EDF. Part two of the research analysis consists of the same research content as seen in part one, only the research analysis not applies to the for profit organization CEG. Part three of the research analysis presents the personal reflections based on our findings in the comparison and contrasting of the not for profit and for profit organizations. Although part three is a personal reflection, it is supported with facts, evidence, logical reasoning, as well as the relevant content of the analysis. Part four of the research analysis consists of a critique on both the not for profit and for profit organizations. Ethical theories and hypothetical scenarios based on these theories are used to present the critique.

Research Analysis

The Environmental Defense Fund’s (EDF) area of interest stands with the natural eco environment. The organization is regarded as a not for profit environmental advocacy group. EDF has a strong reputation for working on concerns related to global warming, restoration and preservation of the Earth’s eco system, minimizing the pollution in the oceans, as well as human health and safety hazards. In their efforts to protect the natural environment, the EDF organization utilizes both environmental science and economic law to help develop safe guards and policies that can work towards a solution to any environmental or health hazards they feel need to be addressed. (Crane, 2010)

Founded in 1967, the EDF group is based in New York City with over one million members and over 500 employees protecting the interests of environmentalism. As of fiscal year 2013, EDF’s total revenues are up to $120.5 million US dollars. Over half of the support and revenue that EDF generates comes from contributions and memberships. Another 40% of revenue comes from foundations and other institutions. The remaining revenue comes from government grants, investments, and other planned giving. Their group slogan is labeled Finding the Ways that Work. The current president of EDF group is Fred Krupp. The areas in the world which EDF serves in include the US, Asia, the Caribbean, and Latin America.

EDF’s history started when a small group of scientists noticed that the pesticide DDT was thinning eggshells and threatening the future of many wonderful birds. The scientists grouped up with a lawyer and took their case to court. The group won the ban on the pesticide DDT and in 1967 Environmental Defense Fund was formed in order to expand their work on all biosphere levels.

EDF has made notable contributions to protecting the interests of the natural environment in the past few decades. In 1967, EDF ended the use of the pesticide DDT. In 1970 the EDF brought all whales onto the U.S. endangered species list. EDF assisted in convincing federal regulators to end the use of lead-based gasoline in 1985. EDF helped McDonald’s reduce their waste. In 1991, The Clean Air Act used EDF’s approach to cut down air pollution, which resulted in a 52% drop in acid rain by 2008. Some of milestones for the company including an end to overfishing of Red Snapper in the Gulf of Mexico, protected some Hawaiian islands, and introduced some major reforms in both Texas and California to ensure they would leave a lesser carbon footprint. One recent situation that is relevant to ethical dilemma is EDF’s role in the revolution of hydraulic fracturing in the shale oil industry. (Bouckaert, 1998)

For the US, natural gas has been remarkably beneficial for the economy. The use of gas in the US has stimulated manufacturing practices, with investors financing and strategizing hundreds of billions of dollars on new plants for chemical, aluminum, and steel production. This shale boom has generated hundreds of thousands of new high-paying jobs for the middle class. Currently, more than one million Americans work in the natural gas and oil industry — an increase of roughly 40 percent from 2007 through 2012. Furthermore, since natural gas is currently supplying nearly 25 percent of total energy consumed in the US, the shale boom is actually saving US consumers hundreds of billions of dollars every year. Along with the other benefits, these savings have provided the US economy a long-term and stable economic advantage over any competitors and helped the country retract from 2008’s Great Recession. Although the shale oil revolution has shown to be beneficial from an economic stand point, the ethical dilemma lies in the interests of the stakeholders as well as the natural environment. Shale oil fracturing can cause pollution to the natural environment and this is where the EDF group would play a role in protecting the interest of environmentalism. (Martinez-Carbonell, 2004)

Despite such advantages, fracking still remains greatly controversial, mostly because of the potential damage it may impose on human health as well as the environment. There are reports of fracking operations that are contaminating aquifers. Research has also found evidence of increased rates of silicosis among the well workers and even heightened risks of cancer due to air pollution. These issues have led to a number of towns trying to put a ban on the fracking practice. However, in order for energy to remain secure and stable, fracking is simply a requirement for the energy industry. With this in mind, the EDF faces a challenge between the interests of the economy and environmentalists. (McElwee, 2010)

The EDF sponsored a hydraulic fracturing emissions study which was conducted by the University of Texas which generally suggested based on their findings that the process of engineering shale gas productions was actually cleaner and safer for the natural environment than using coal as a natural fuel.

The drilling process for shale oil through the use of hydraulic fracturing, or otherwise known as “fracking”, seems to be the cause of fewer leaks of the methane gas attributing from a greenhouse effect, than the federal government had initially predicted, and noticeably smaller than what some of the critics of shale oil fracturing were expecting.

The University of Texas study suggested in their conclusions that any losses in the oil wells that were examined were relatively low would help in removing the issue of shale oil from the environmental debate. The EDF is heading other efforts in research that should show concern for losses elsewhere. This may include a deeper look into the methane leaks in any municipal gas lines of distribution.

On their website, the EDF has a page dedicated to their policies pertaining to natural gas and other environmental risks. They disclose on this page that natural gas is of course a beneficial use of natural resources of energy. However, that it should be produced in such a manner that does not negatively impair factors relating to public health and the natural environment. The EDF’s views on natural gas strongly consider it as a replacement for coal. Because shale oil is necessary to promote economic sustainability, the EDF has been able to find ways to protect the natural environment by placing restrictions for environmental control on the process of hydraulic fracturing without having to ban it. Such a compromise for this ongoing issue demonstrates how well the EDF is able to integrate economic interests within their contour for ethical goals. (Strickland, 2008)

It is important for the EDF to demonstrate strong concern for their stakeholders because nearly 40% of their revenues are attributed to other foundations and institutions that share common interests in the natural environment. The primary obstacle that the EDF may face is the possibility of losing out on revenue to fund their operations should they lose out on donations from supporters. This is why the EDF must help meet the needs and interests of their stakeholders. (Martinez-Carbonell, 2004)

The EDF was the subject of funding studies regarding environmental concerns, where the party conducting the study might share a conflict of interest. The studies, such as the one conducted on shale oil, were accused of being fabricated through inaccurate science practices and questionable economics. The EDF has denied such accusations and has disclosed all of their policies regarding natural gas on their official web page. (Crane, 2010)

Viewing their official website, the EDF’s public records show that they have been a tax exempt organization since 2006; however, further investigation is needed to know for exactly how long they have held that status. Looking at their 2012 form 990, the EDF falls under the Internal Revenue Code 501 (C) (3) tax exemption status, which is a common tax exemption for not for profit organizations. The EDF may be exempt from federal taxes so as long as their activities and operations carry purposes of—in the case of the EDF—of testing for public and environmental safety.

The Cornerstone Environmental Group (CEG) is a for profit, limited liability corporation. This means that CEG is the formation of a private limited company with the business design which consists of the same taxations such as that of a sole proprietorship or a partnership, while still maintaining the limited liability of a corporate entity. Cornerstone’s headquarters is in Middletown, New York. Also, they have ten regional offices and twelve satellite offices throughout the nation.

The CEG is a firm of engineers and field service technicians that provide solid waste services for commercial, industrial, and agricultural clients. CEG has been offering consulting and engineering services for environmental related projects for the better part of the past thirty years. Since the beginning, CEG has worked on over 2,800 projects in 44 states. They also observe and review on 24 air emission source test each year. Cornerstone provides annual maintenance on air compliance to over 120 facilities while employing over 160 workers throughout the country. The company also provided construction quality assurance in thirteen states and eighteen landfills. All of the revenue generated for this company has been driven by their nationwide clients because of course they are a for profit entity that relies on the sales revenues of consumers. CEG has annual revenues of up to $30 million USD.

A possible ethical dilemma that CEG may face is the decisions they make when considering the interests of their stakeholders. Because CEG is for profit, they do not have a tendency to demonstrate as much concern for their stakeholders as not for profit organizations, or at least they are not expected to. CEG does not rely on contributions and donations from other organizations, so their primary source of revenue comes from sales to consumers. This may suggest that CEG is not concerned with the interests of stakeholders; therefore they may not be as concerned for the safety of the natural environment. However, in order for any business to sustain in the long run, including for profit organizations, they should demonstrate concern for their stakeholders. Showing concern for stakeholders is not only ethical, but also beneficial to business. Stakeholders can easily become consumers, which then lead to gains in profits. If a for profit organization such as CEG takes into consideration the interests of their stakeholders, then this brings a positive image to the business. Any business that incurs a negative image will more than likely lose out on customers due to ethical considerations. (Vranceanu, 2014)

Although they are a for profit entity, CEG is not a publically traded company. This means that they have no stockholders to show concern for. However, CEG was just recently acquired by Tetra Tech, Inc.: TTEK; NASDAQ as of April 2015. TTEK is a publically traded company in the same consulting, engineering, technical, and construction industry as CEG. Because CEG is now acquired under a publically traded company, they may show concern for stockholders. However, TTEK’s Chief Executive Officer (CEO) demonstrated concern for the safety of the environment in his statements regarding the acquisition in stating that the acquisition of CEG would enable them to reach out to the interests of environmentalists at a greater level. This is due to the additional resources, services, and experience CEG carries with them in being acquired by TTEK. (Verschoor, 2012)

As far as future obstacles that CEG may face, only time will tell. The company just got acquired by Tetra Tech so the future of them is unknown at the moment. However, the CEO of Cornerstone is excited by the next chapter in his company’s history and looks forward to what it brings. The current management seems to have a lot of room for improvement. A lot of reviews from former employees over the past three years back up that statement. Former employees felt undervalued and not compensated enough for what they were asked on a daily basis. It is noted on their official website however, that the CEG team comprises of professionals who are nationally recognized for their expertise in environmentalism. (Wright, 2008)

Based on our findings from the research analysis, we can draw the assumption that both EDF and CEG are ethically sound in their business practices. Admittedly, EDF will generally carry higher concerns of ethics for their stakeholders simply because they are a not for profit entity. It can be assumed that TTEK would not have acquired CEG had they not been in good ethical standing. TTEK is a publically traded company on NADAQ, which means they are under the radar of the Securities and Exchange Commission (SEC). The SEC enforces legal, political, and ethical standards on all publically traded companies. This would mean that CEG would have to carry the same ethical interests in order to have been acquired by TTEK. (Wright, 2008)

The EDF’s use of scientific practices along with economic and law related concerns demonstrate their approach to the utilitarianism approach of ethical practice. This ethical approach governs that the entity practicing it makes decisions that will have the greatest benefit that meets the interest of the majority of parties. The benefit of this ethical approach that the EDF demonstrates is that they can compare and contrast variations of solutions and use logical reasoning to decide which choice benefits the most people. The EDF presents their primary concern for the safety of the natural environment and health of the general public. Along with their environmental concerns, the EDF considers what best suits the economy as well as what decisions best conform to rules, regulation, relevant laws, along with other policies. When the EDF sponsored the shale oil study for the University of Texas, this was beneficial for the environment because it would help to provide evidence on how oil fracturing impacts the environment. The study was also beneficial for the economy and stakeholders because the evidence provided would not only help stakeholders feel more at ease about environmental concerns, but showing evidence that supports the safety of oil fracturing betters the economy in supporting the continued used of shale oil. (Deininger, 2015)

Because CEG has been recently acquired by TTEK, it is hard to tell what ethical approaches they are currently practicing. However, in continuing forward with their acquisition under TTEK, CEG should consider following the deontology approach when considering ethical theory. This ethical theory governs that the business should conform to their company obligations whenever they are analyzing any type of ethical dilemma. This means that CEG will make decisions based on their obligations to not only TTEK but to the environmental stakeholders as well. Because their services and tools are crafted towards the benefit of the natural environment and public health, CEG will be able to fulfill the desires of their stakeholders while generating profits for themselves as well as TTEK and their stockholders. (Ipswich, 2014)

In conclusion, the findings of this research analysis demonstrate that although the EDF and CEG have different business goals, they both contribute to environmental concerns. This shows their position from an ethical standpoint and reinforces the concept that both not for profits as well as for profit organizations can share similar ethical values despite their contrasting desire for profits and stakeholder support.

References

Bouckaert, L. &. (1998). Business Ethics and the Management of Non-Profit. Journal of Business Ethics, (9/10). 1073.

Crane, A. &. (2010). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. .Oxford University Press.

Deininger, W. T. (2015). Utilitarianism by John Stuart Mill. Salem Press Biographical Encyclopedia.

Ipswich, M. (2014). Deontological ethics. Encyclopædia Britannica [serial online]. September 2014;Available from: Research Starters,.

Martinez-Carbonell, K. &. (2004). Non-profits Need to Increase Advocacy of Ethical Standards. PA Times, 27(5), 4.

McElwee, B. (2010). The rights and wrongs of consequentialism. Philosophical Studies, 151(3).

Strickland, R. A. (2008). The Hierarchy of Ethical Values in Nonprofit Organizations. Public Integrity, 10(3), 233-251.

Verschoor, C. C. (2012). New Survey of Workplace Ethics Shows Surprising Results. . Strategic Finance, 93(10), 13-15. .

Vranceanu, R. (2014). Corporate profit, entrepreneurship theory and business ethics. Business Ethics: A European Review, 23(1), 50-68. doi:10.1111/beer.12037.

Wright, A. D. (2008). Survey: Nonprofits Fall Short on Ethics. HR Magazine, 53(5), 24.