© Jakob Utgård. Last updated 14.8.2026

This chapter asks whether sustainability is the right thing to do? This is important, because the business case and regulatory arguments for sustainability both have limits. If profit and compliance are the only reasons firms pursue sustainability, then unprofitable and unregulated harms will go unaddressed. Ethical arguments establish what firms should do regardless of whether it is profitable or required by law.

Ethical frameworks and sustainability

Normative ethical theory asks not how people actually behave, but how they ought to behave. Several major traditions have developed distinct answers to this question, each with important implications for business sustainability (Moriarty 2021).

Consequentialism

Consequentialism holds that an act is morally right if it produces the best overall consequences for all affected. The most important version is utilitarianism, developed by Jeremy Bentham and John Stuart Mill, which holds that we should act to maximise overall welfare. On this view, the morality of a business decision depends on its actual effects on people, other living beings, and the world (Sinnott-Armstrong 2023).

Applied to sustainability, consequentialism produces a powerful critique of much standard business behaviour. When a firm externalises environmental or social costs, such as pollution or maintaining unsafe working conditions, it transfers harm onto others who did not consent to bear it. From a consequentialist perspective, this is morally wrong when the total welfare consequences are negative (which is normally the case), as a larger number of people or future generations lose more than the firm gains. Singer (1972; 1993) argues that our moral obligations do not diminish with physical or temporal distance. Harm caused to distant people or future generations counts as much as harm caused to those nearby. This is a demanding standard for business, since most significant environmental harms, such as climate change, biodiversity loss, ocean acidification are diffuse and remote in time. Stern’s (2007) analysis of climate economics reaches a similar conclusion, when future welfare is appropriately weighted, the costs of inaction on climate change far exceed the costs of mitigation.

Deontological ethics

Deontological ethics holds that some acts are intrinsically right or wrong, regardless of their consequences. Immanuel Kant argued that we have a duty to act only on principles we could make universal (principles we would be willing to have everyone follow), and that we must always treat persons as ends in themselves, never merely as means (Alexander & Moore 2021).

Applied to sustainability, deontological ethics establishes firm prohibitions that consequentialist calculation cannot override. Deceiving consumers or others is wrong because it violates their right to make informed decisions. Using child labour or maintaining unsafe working conditions is wrong because it denies workers their dignity and autonomy. The universalisability test is a useful analytical tool: if every firm polluted freely because it was cheaper to do so, or sourced from the cheapest supplier regardless of labour conditions, what would the world look like? When the universalised version of a practice produces a world most rational people would reject, the practice is wrong, even if it is profitable and legal for the individual firm.

Virtue ethics

Virtue ethics takes a different starting point. Rather than asking “what should I do?” it asks “what kind of person or organisation should I be?” Rooted in Aristotle’s moral philosophy, virtue ethics holds that the goal of ethics is to develop the character traits, virtues such as honesty, courage, justice, and practical wisdom, that enable human flourishing (Hursthouse & Pettigrove 2023).

Applied to business, the virtue ethics tradition argues that the idea of business as self-interested profit pursuit is wrong and ethically inadequate (Moriarty 2021). Most business activity depends on trust, honesty, and cooperation; a good businessperson is not simply an effective profit-maximiser but someone who acts with integrity in the conduct of their affairs. Applied to organisations, virtue ethics shifts the frame from following regulations to character. Rather than asking “what is the minimum we must do to comply?”, it asks “what kind of company do we want to be?” The concept of organisational integrity, the consistency between stated values and actual behaviour, is in many ways a virtue ethics concept (Paine 1994).

Rawlsian justice

John Rawls’s A Theory of Justice bases ethics on the concept of fairness. Rawls argued that just institutions are those rational people would choose from behind a “veil of ignorance”, without knowing their position in society: their wealth, nationality, or generation. From behind this veil, people would choose institutions that protect basic rights for all, and allow inequalities only when they benefit the least advantaged — what Rawls called the difference principle (Weijers & Robinson 2023).

Applied to business sustainability, the veil of ignorance is a powerful thought experiment. Would we design the current global economic system in which companies externalise environmental costs onto communities that did not produce them, and in which the generation that burns fossil fuels does not pay the full cost of the resulting climate damage if we did not know whether we would be born as a low-wage worker, a coastal community facing rising seas, or a wealthy shareholder? The current system concentrates benefits among the advantaged and distributes costs onto those least able to bear them, a distribution that fails the difference principle. Donaldson (1989) draws on Rawlsian arguments to contend that multinational corporations have obligations that go beyond local legal requirements, precisely because developing countries’ regulatory frameworks often fail to protect their least advantaged citizens. Barry (1989) extends Rawlsian thinking to future generations: justice requires that we not impose costs on people who had no say in the decisions that produced them, a principle that current patterns of greenhouse gas emissions clearly violate.

Business as a structural ethical problem

The ethical frameworks above give us tools for evaluating specific business decisions. But they do not explain why so many business practices are clearly wrong on so many ethical frameworks, but still are decided and implemented by managers and the corporations. Some explanations for this focus on the structure of firms and organizations.

The legal design of the firm, including maximising shareholder value, limited liability, perpetual existence, possibly creates systematic pressure toward behaviour that conflicts with ethical requirements. Jensen and Meckling’s (1976) agency theory formalised this. Managers, as agents of shareholders, face incentives to maximise shareholder returns, and structures that reward other objectives are treated as inefficiencies. Galbraith (1967) suggested that large corporations develop an internal logic of their own that tends to override the preferences and values of the individuals within them.

Individual morals in organisations

The structural account risks to be deterministic, if the corporation is designed to be unsustainable and structural pressure overrides ethical intentions, does individual values and actions matter at all? They of course do, but have limitations.

Treviño’s (1986) argues that individual ethical behaviour is the product of both individual characteristics — moral development, values — and situational factors — such as organisational culture, reward systems, authority relationships. The same person may behave very differently in an organisation that rewards ethical action and one that implicitly punishes it. Kohlberg’s (1969) research on moral development finds that people operating at higher levels of moral reasoning are more likely to challenge unethical practices and advocate for change from within organisations. Jones (1991) adds that the moral intensity of an issue shapes how individuals engage with it. Sustainability issues whose harms are geographically and temporally distant tend to receive less ethical attention than problems that are or feel closer, even when the aggregate harm is far greater.

In the sustainability domain, much individual agency is exercised by people without formal authority such as sustainability managers and internal advocates who work to shift organisational priorities from positions of limited power. Whistleblowers who expose serious wrongdoing often pay significant personal costs which creates rational incentives for silence even among those with strong ethical convictions (Near & Miceli 1985).

References

Alexander, L., & Moore, M. (2021). Deontological ethics. In E. N. Zalta (Ed.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/ethics-deontological/

Barry, B. (1989). A treatise on social justice: Vol. 1. Theories of justice. University of California Press.

Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48. https://doi.org/10.1016/0007-6813(91)90005-G

Davis, K. (1973). The case for and against business assumption of social responsibilities. Academy of Management Journal, 16(2), 312–322. https://doi.org/10.2307/255331

Donaldson, T. (1989). The ethics of international business. Oxford University Press.

Galbraith, J. K. (1967). The new industrial state. Houghton Mifflin.

Hursthouse, R., & Pettigrove, G. (2023). Virtue ethics. In E. N. Zalta & U. Nodelman (Eds.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/ethics-virtue/

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 16(2), 366–395. https://doi.org/10.2307/258867

Kohlberg, L. (1969). Stage and sequence: The cognitive developmental approach to socialization. In D. A. Goslin (Ed.), Handbook of socialization theory and research (pp. 347–480). Rand McNally.

Moriarty, J. (2021). Business ethics. In E. N. Zalta (Ed.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/ethics-business/

Near, J. P., & Miceli, M. P. (1985). Organizational dissidence: The case of whistle-blowing. Journal of Business Ethics, 4(1), 1–16. https://doi.org/10.1007/BF00382668

Singer, P. (1972). Famine, affluence, and morality. Philosophy & Public Affairs, 1(3), 229–243.

Singer, P. (1993). Practical ethics (2nd ed.). Cambridge University Press.

Sinnott-Armstrong, W. (2023). Consequentialism. In E. N. Zalta & U. Nodelman (Eds.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/consequentialism/

Stern, N. (2007). The economics of climate change: The Stern review. Cambridge University Press.

Treviño, L. K. (1986). Ethical decision making in organizations: A person-situation interactionist model. Academy of Management Review, 11(3), 601–617. https://doi.org/10.2307/258313

Weijers, D., & Robinson, B. (2023). John Rawls. In E. N. Zalta & U. Nodelman (Eds.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/rawls/