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Business Ethics and Business

Submitted By: Sumit Advani Abhishek Agrawal Jaineel Doshi Archana ahashur "hetan Sa#ra Divya Shetty 47 49 54 !5 $4 $!

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Table of Contents
Table of Contents........................................................................................................................ 2 Introduction................................................................................................................................. 3 What is Business Ethics..........................................................................................................3 Approaches to Business Ethics:..............................................................................................4 Why Business Ethics?............................................................................................................. !odels used in Business Ethics.................................................................................................." #$ The %hareholder !odel......................................................................................................." 2$ The %ta&eholder !odel.......................................................................................................' 3$ The !ar&et (ailure !odel of Business Ethics.....................................................................) Culture of Ethics........................................................................................................................ ## %o*e (acts about Ethics.......................................................................................................## What co*panies can do to create a *ore ethical +or&place.................................................#2 Whistleblo+in,.......................................................................................................................... #4 What Is Whistle blo+in,?......................................................................................................#4 Brief -istory........................................................................................................................... # %teps for Creatin, a Whistleblo+in, Culture.........................................................................#' .e/elopin, a Whistleblo+er 0olicy........................................................................................#) Why I*ple*ent a Whistleblo+er 0olicy?...............................................................................21 0rotectin, +histleblo+ers in India..........................................................................................2# CA%E2%T3.4........................................................................................................................... 22 What is Biodiesel?................................................................................................................. 22 5easons for biodiesel bein, pro*oted .................................................................................22 En/iron*ental I*pact............................................................................................................ 24

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Introduction
%hat is Business &thics A business is expected to achieve its objectives, usually to make a decent profit for the owners/shareholders. In doing so, it may need to overlook the wishes of others. For example, it could lie about the benefits of its products in order to get more revenue. It could skip important safety checks to save costs. hat should the business do! hen society largely agrees, a

"o some extent, this is an area already covered by #usiness $aw. law can be passed to stop behaviour the society disapproves of.

#usiness %thics looks at areas that are relatively new, but increasingly important and too controversial, for society to agree on. For example, the medical business is increasingly controversial. "he pharmaceutical businesses concentrate their &very expensive' research on illnesses that afflict rich people, because rich people &or the government of a rich country' can afford to buy these new treatments when they are launched on the market. "his means too little research is done into illnesses &like malaria' that primarily affect poor people and poor governments. Is this right! (o there is a trade)off between a profit)maximising business and the ethical businesses (o is there a middle)way For e.g. #ody(hop was one of the first businesses to build on this trend, and made their market niche largely out of the fact that their products are kinder to the world than are competing products. hy buy from #ody(hop! #ecause their products aren*t tested on animals. (o, the ethical nature of the product becomes part of the uni+ue selling point &,-(.,' of the product and central to the /arketing of that product. In other words, there is no conflict between ethics and profit, because an ethical stance is part of the profit)making process.

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0ne difficult +uestion is 1what sort of things count as ethical +uestion!* "here is no agreement on this, hence the difficulty. "ake the example of 2ike 2ike &and others' have been widely criticised for using cheap labour in developing countries, which is what you would expect from a profit)maximising business. (ome people might say well)done to 2ike for creating jobs in a very poor part of the world where jobs are desperately needed. #ut other people have said that it is unethical to exploit very poor people, and to make them work in poor conditions for low wages, especially when the business could afford to pay them more. A##roaches to Business &thics: In most issues of business ethics, ideal moral principles will be checked by economic viability. "o understand what is at stake, we will look at three different ways of deriving standards of business ethics. 1. Deriving Business Ethics from the Profit Motive (ome businesspeople argue that there is a symbiotic relation between ethics and business in which ethics naturally emerges from a profit)oriented business. "here are both weak and strong versions of this approach. "he weak version is often expressed in the dictum that good ethics results in good business, which simply means that moral businesses practices are profitable. For example, it is profitable to make safe products since this will reduce product liability lawsuits. 2. Business Ethics Restricted to Following the Law A second approach to business ethics is that moral obligations in business are restricted to what the law re+uires. "he most universal aspects of estern morality have already been put into our legal system, such as with laws against killing, stealing, fraud, harassment, or reckless endangerment. /oral principles beyond what the law re+uires 3 appear to be optional since society wavers about its acceptance.

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. Deriving Business Ethics from !eneral Moral "bligations "he third approach to business ethics is that morality must be introduced as a factor that is external from both the profit motive and the law. "his is the approach taken by most philosophers who write on business ethics "he most convenient way to explore this approach is to consider the supra)legal moral principles that philosophers commonly offer. Five fairly broad moral principles suggested by philosophers are as follows4 #arm $rinci$le4 businesses should avoid causing unwarranted harm. Fairness $rinci$le4 business should be fair in all of their practices. #uman rights $rinci$le4 businesses should respect human rights. %utonom& $rinci$le4 businesses should not infringe on the rationally reflective choices of people. 'eracit& $rinci$le4 businesses should not be deceptive in their practices. "he attraction of these principles is that they appeal to universal moral notions that no one would reasonably reject. #ut, the problem with these principles is that they are too general. "hese principles do not tell us specifically what counts as harm, unfairness, or a violation of human rights. (o at this point the +uestion that arises is4) hat affects an individual with strong moral values to make ethically +uestionable decisions in a business setting! "here appear to be three general sets of factors that influence the standards of behavior in an organi5ation6 Individual factors

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(everal individual factors influence the level of ethical behavior in an organi5ation. An individual7s knowledge level regarding an issue can help to determine ethical behavior. A decision maker with a greater amount of knowledge regarding an object or situation may take steps to avoid ethical problems, whereas a less)informed person may unknowingly take action that leads to an ethical conflict (ocial factors A person7s behavior in the workplace is, to some degree, determined by cultural norms, and these social factors vary from one culture to another 0pportunity 0pportunity refers to the amount of freedom an organi5ation gives an employee to behave ethically if he or she makes that choice. In some organi5ations, certain company policies and procedures reduce the opportunity to be unethical. For example, at some fast)food restaurants, one person takes your order and receives your payment and another person fills the order. "his procedure reduces the opportunity to be unethical because the person handling the money is not dispensing the product, and the person giving out the product is not handling the money %hy Business &thics' idespread media coverage of business scandals in recent years has damaged the reputations of companies and eroded the trust of key stakeholders. In addition, greater transparency and connectivity has given the public better access to sensitive information. In order to succeed in this age of increased public scrutiny is to make ethics in business the cornerstone of how your company does business, demonstrating by its actions that your organi5ation has nothing to hide.

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Models used in Business Ethics


"he different models used in business ethics are as follows4 () *he Shareholder odel

"he managerial role arises as a conse+uence of the so)called separation of ownership and control in the modern corporation. In the early stages of development, most corporations are run by the founders, who are also generally the principal owners. At a later point, the owners may choose to employ managers to assist them in running the firm, or to take over that role entirely. In the same way that individuals employ lawyers in order to advance their interests in a legal context, owners hire managers in order to advance their interests in a business context. 0f course, as the firm becomes more mature, this relationship becomes significantly more complex. 2evertheless, the fact that shareholders are residual claimants in a standard business corporation means that their interests are not protected by an explicit contract. As a result, there is a set of fiduciary principles governing the relationship between managers and shareholders. #ecause the fiduciary relationship imposes upon managers a very broad 8duty of loyalty9 and 8duty of care9 toward shareholders:concepts with explicit moral overtones:this particular relationship might be thought to serve as a natural point of departure for the development of a theory of business ethics. ;et despite the fact that moral obligations toward shareholders are such a striking feature of the managerial role, in the business ethics literature they are the subject of considerable controversy, and are often downplayed or dismissed. It is a mistake to believe that self)interest alone, combined with a few performance incentives, is able to achieve a harmony of interest between managers and shareholders. "he shareholder approach to business ethics suffers, first and foremost, from the taint of moral laxity. It does not seem to impose enough obligations upon managers to satisfy the moral intuitions of many people.

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"hus we consider the stakeholders model. +) *he Stakeholder odel

/anagers must exercise moral restraint in dealings with stakeholders because managers have direct fiduciary obligations toward those stakeholders. <ompanies have to cater the following groups of stakeholders4 =' (hareholders 3 >enerate profits and pay dividends ?' <ustomers 3 provide good +uality products at reasonable prices. (afety, honesty, decency and truthfulness @' %mployees 3 health and safety at work, security, fair pay A' (uppliers 3 pay on time, pay fair rates for the work done, provide element of security B' $ocal <ommunity 3 provide employment, safe working environment, minimise pollution and negative externalities 3 provide external benefits! C' >overnment 3 abide by the law, pay taxes, abide by regulations D' /anagement 3 their aims versus those of the organisation as a whole E' %nvironment 3 limit pollution, congestion, environmental degradation, development, etc. If managers really are to be regarded as fiduciaries of stakeholder groups, it raises immediate difficulties with respect to +uestions of corporate governance. >iving managers the legal freedom to balance these claims as they see fit would create extraordinary agency risks. 0n the one hand, managers would need to be protected from being fired by shareholders upset over the performance of their investments. #ut even more significantly, it would become almost impossible for members of any stakeholder group to evaluate the performance of management. It is difficult enough for shareholders to determine whether managers are actually maximi5ing profits, given available resources. #ut when profits can be traded off against myriad other objectives, such as maintaining employment, sustaining supplier relationships, and protecting the environment, while managers have the discretion to balance these objectives as they see fit, then there is really no alternative but to trust the word of managers when they say that they are doing the best they can.

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A 8narrow definition9 of the term stakeholders, which refers to groups that are 8vital to the success and survival of the firm,9 and a 8wide definition,9 which refers to any group 8who can affect or is affected by the achievement of the organi5ation*s objectives.9 "he former includes employees, customers, suppliers, but also, in most formulations of the theory, the local community. "he wide definition, on the other hand, is so wide that it becomes e+uivalent to 8all of society.9 &For example, every pricing decision made by the firm contributes to the national inflation rate, which in turn affects every member of society. (o if a stakeholder is anyone affected by the corporation, then everyone is a stakeholder in everything.'It is believed that the managerial role imposes special obligations upon the individual have tended to stick to the narrower definition of the stakeholder. Fowever, there seems to be no reason for the firm to pay special attention to stakeholders in the narrow sense of the term because the groups that are conventionally classified as stakeholders in the narrow sense are not necessarily those with the most at stake in a particular decision, in terms of their potential welfare losses. It tends rather to be those who are the best organi5ed, or who have the most immediate relationship to the firm, or who are best positioned to make their voices heard.

,) *he

arket -ailure

odel o. Business &thics

/arket failure results in two responses4 First and foremost among these obligations will be the fiduciary duty that managers have as the agents of shareholders. "hus when dealing with relationships or transactions 8inside9 the organi5ational hierarchy of the firm, the market failures approach to business ethics follows the shareholder)focused view +uite closely. "he second primary institutional response to market failure is less drastic than the first6 it involves preservation of the market transaction, but subject to some more extensive set of legal, typically regulatory, constraints. "he rationale for this strategy, it is helpful to recall that the point of permitting profit)maximi5ing behavior among firms in the first place is to promote price

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competition, along with all the beneficial 8upstream9 and 8downstream9 effects of such competition, such as technical innovation, +uality improvement, etc. -nder conditions of 8perfect competition,9 lower price, improved +uality and product innovation would be the onl& way that firms could compete with one another. e can refer to these as the set of $referred competitive strategies. -nfortunately, in the real world, the terms of perfect competition are never met. #ecause of the practical impossibility of satisfying these constraints, firms are often able to make a profit using non($referred competitive strategies, such as producing pollution, or selling products with hidden +uality defects. "he basic rules for marketplace competition are laid down by the state. In many cases, the state simply lacks the information needed to implement the measures needed to improve upon a marketplace outcome. %ven when the information can be obtained, there are significant administrative costs associated with record) keeping and compliance monitoring, not to mention the costs incurred by firms in an effort to evade compliance. Ideally, the only way that a firm could make a profit would be by employing one of the preferred strategies. Fowever, for strictly practical reasons, it is often impossible to create a system of laws that prohibits the non)preferred ones. "hus according to the market failures perspective, specifically ethical conduct in an e)tra(firm business context &i.e., when dealing with external parties' consists in refraining from using non)preferred strategies to maximi5e profit, even when doing so would be legally permissible. Firms should run to maximi5e the Interest of the stakeholders, subject not only to legal constraints but also to moral or social obligations.

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Culture of Ethics
Some -acts about &thics Ethics are tied directl& to who we are. "he strongest motivation to act ethically comes from our relationships with our families and friends. It is hard for most people to establish a reliable commitment to ethics in the abstract but it is not hard for most of us to make an enduring commitment to a life that benefits the emotional health of our families.

From success to significance "here also comes a time in the life of most high achievers when it becomes important to move beyond success, i.e., accomplishing our career, financial, and lifestyle goals, to significance, i.e., having a durable positive impact on individuals, on our company, on society. 2o matter what our job, no matter the si5e of our paycheck or the si5e of our responsibility, each of us can choose to use every single relationship, every encounter with a customer, a vendor, a colleague, even people on the street, to create a significant impact, to make things better in a meaningful way. Ethics is not about fi)ing something that is bro*en. Although it might be easy to assume this in today*s corporate world where any discussion of ethics can provoke a self)defensive response, ethics is instead a dimension of business and organi5ational life that can)and should)be better. It*s about living the values we say we espouse. It isn*t a +uestion of right rhetoric)%nron had an excellent written code of ethics)it*s a +uestion of walking the talk.

Intention makes a huge difference in how our actions are perceived. A company that invests substantially in safety e+uipment for its employees in order to lower its liability risk sends a

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clear message to those employees that money matters more than human lives.

e don*t tend to

give anybody moral credit for what we perceive as a bad intention. ;et companies seem afraid to credit for what we perceive as a bad intention. ;et companies seem afraid to take advantage of this kind of solid relationship with and among employees, hence, the all)too)common disparaging of such 8soft9 intentions. +an organi,ations nurture a sense of $ersonal worth and worthiness without undermining $roductivit& and $rofitabilit&;es, if ethical values are truly lived within the company and in all aspects of business, from hiring to finances, from production to customer relations.

%hat com#anies can do to create a more ethical work#lace 1. Review recruiting/ hiring/ and $romotion criteria to see what messages &ou are sending about &our values. Fire for character, train for skills. "his touches on two important dimensions of goodness4 competence &our effectiveness' and character &our ethical framework'. #oth are critical to business, for character without competence will lead to bankruptcy, and competence without character will lead to disgrace. 2. Review $ersonnel $ractices for integrit&. %valuate for character on performance reviews. %mployees will meet the expectations and disciplines you set up. hat employees know is being evaluated is what they strive to hen there*s no mention of values, these ethical principles are seen accomplish and incorporate.

as irrelevant or cosmetic, not as meaningful guides for behavior. In addition, reali5e that unrealistic performance expectations encourage unethical behavior, pressuring people to find short cuts to do what is not really possible otherwise.

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. Review the business $lan and budgeting $rocess for vulnerabilities. -nethical behavior can show up in the smallest things4 asking for more money than your department needs in fear that you won*t get enough, spending your end)of)the)year remainder on things you may not need to justify the next year*s budget, padding expense accounts, misusing sick days, etc. "hus it becomes important to review the business plan and the budgeting process. 0. "ther areas of ethical review Geview marketing and sales practices for over)promising, intentional underpricing, and other dishonest practices. Geview your fulfillment practices under pressure)what short cuts are taken and under what circumstances! Geview competitive practices for fairness and respect)how fairly do you talk about the competition! Geview community service, support and philanthropy practices to see if you are doing enough.

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Whistleblowing
%hat /s %histle blowing' histleblowing can be defined in a number of ways. In its simplest form, whistleblowing involves the act of reporting wrongdoing within an organi5ation to internal or external parties. Internal whistleblowing entails reporting the information to a source within the organi5ation. %xternal whistleblowing occurs when the whistleblower takes the information outside the organi5ation, such as to the media or regulators. %stablishment of a clear and specific definition of whistleblowing itself should be a fundamental component of every whistleblower policy. hen 1ime maga5ine editors named orld<om7s <ynthia <ooper and %nron7s (herron atkins two of their .eople of the ;ear for ?HH?, they were acknowledging the importance of internal whistleblowers:employees who bring wrongdoing at their own organi5ations to the attention of superiors. At orld<om, <ooper pushed forward with an internal audit, alerting the #oard of Iirectors

Auditing <ommittee to problems, despite being asked by the company7s <F0 to postpone her investigation. According to Fortune maga5ine, ,If <ooper had been a good soldier, the whole incredible mess might have been concealed forever., At %nron, accountant (herron outlined the company7s problems in a memo to then)<%0 Jenneth $ay. #ut by the time atkins and <ooper blew the whistle, much damage had already been done, and the shareholders and employees were the ultimate losers. (o the +uestion is, how does an organi5ation create a culture that encourages employees to ask +uestions early:to point out issues and show courage in confronting unethical or illegal practices! And then how can a company ensure that timely action is taken! In other words, how does an organi5ation encourage internal whistleblowing! Attitudes "oward histleblowing "hese +uestions must be answered in the context of conflicting cultural norms, which make it likely that whistleblowers will encounter hostility and alienation. As "erance atkins

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/iethe explains in his book, 2histleblowing at 2or*, many people see the whistleblower as a ,snitch,, or a ,a lowlife who betrays a sacred trust largely for personal gain., "his attitude was illustrated by an arbitrator in a =KD? case, who told the employee that you cannot ,bite the hand that feeds you and insist on staying on for the ban+uet., Among others, .eter Irucker, the famed management guru and anti)whistleblower, viewed whistleblowing as ,informing,, illustrating yet another instance of the animus whistleblowers have to expect from advocates of loyalty to the organi5ation first. 0n the flip side, whistleblowers such as Frank (erpico and Jaren (ilkwood are seen as ,saviors, who ultimately helped create important changes in organi5ations. "his approach to whistleblowers as guardians of public accountability is often taken by consumer advocates such as Galph 2ader. >iven this dichotomy, whistleblowers may well encounter difficulties when they appeal internally or go public with information that may damage their companies.

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Brie. 0istory Attitudes toward whistleblowing have evolved considerably during the past BH years in corporate America, from the early days of the ,organi5ation man, ethos where loyalty to the company was the ruling norm, to the present time when public outrage about corporate misconduct has created a more auspicious climate for whistleblowing. In part because of this lack of protection for whistleblowers, problems were often concealed rather than solved. %ven in cases where whistleblowing occurred, it was not always heeded. "here have, of course, been successful cases of whistleblowing although even in these cases, the personal and professional toll on the individuals has been heavy. In =KKC, Leffery igand, a tobacco researcher, revealed that #rown M illiamson "obacco

<orp. knew tobacco was addictive. Fis revelations had a dramatic impact on public policy and public perceptions of the tobacco industry. *o &ncourage %histleblowing histleblowing to an external entity, such as the media or government agencies, has been a ha5ardous activity, both for the individual and the organi5ation. "he ambivalent attitude toward whistleblowers ensures that, even with legal protection, they may face retaliation in subtle ways4 being shunned by co)workers, being closely supervised, or just feeling alienated. (o, the +uestion is, Fow do organi5ations encourage internal whistleblowing:that is, to an authority within the organi5ation:to preclude external whistleblowing and the resulting damage to an organi5ation! "he objectives of an internal whistleblowing program are "o encourage employees to bring ethical and legal violations they are aware of to an internal authority so that action can be taken immediately to resolve the problem

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"o minimi5e the organi5ation7s exposure to the damage that can occur when employees circumvent internal mechanisms "o let employees know the organi5ation is serious about adherence to codes of conduct "he barriers to a successful internal whistleblowing program are A lack of trust in the internal system -nwillingness of employees to be ,snitches, /isguided union solidarity #elief that management is not held to the same standard Fear of retaliation Fear of alienation from peers Although companies should seek to remove these barriers, it is also important to acknowledge that some whistleblowers have less)than)honorable motives.

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Ste#s .or "reating a %histleblowing "ulture A policy about reporting illegal or unethical practices should include Formal mechanisms for reporting violations, such as hotlines and mailboxes

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<lear communications about the process of voicing concerns, such as a specific chain of command, or the identification of a specific person in the organi5ation, such as an ombudsman or a human resources professional <lear communications about bans on retaliation In addition, a clear connection should exist between an organi5ation7s code of ethics and performance measures. For example, in the performance review process, employees can be held accountable not only for meeting their goals and objectives but also for doing so in accordance with the stated values or business standards of the company. >et %ndorsement From "op /anagement .ublici5e the 0rgani5ation7s <ommitment Investigate and Follow -p Assess the 0rgani5ation7s Internal histleblowing (ystem

Develo#ing a %histleblower 1olicy A whistleblower policy may be drafted and implemented by management, but it should then be submitted to the audit committee or board of directors. "he foundation of any whistleblower policy is a clear and specific definition of whistleblowing. 0ther key aspects of a whistleblower policy include the following4 +lear definition of individuals covered b& the $olic&. 3on(retaliation $rovisions. +onfidentialit&. Process +ommunication

-pon completion of the whistleblower policy, the organi5ation should develop implementation and enforcement mechanisms that are consistent with the policy. Although the first step: creating an environment where a whistleblower will report problems that exist:is the crucial one, to be fully effective a whistleblower policy must be consistently implemented, claims investigated and evaluated, and proper enforcement taken when necessary.

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%hy /m#lement a %histleblower 1olicy' All organi5ations, including universities, governmental entities, and nonprofits, should consider implementing whistleblowing provisions. <onsider these important facts from the Association of <ertified Fraud %xaminers* ?HHC 8Geport to the 2ation on 0ccupational Fraud and Abus94 /ore than NCHH billion in annual losses is attributed to fraud. Anonymous reporting mechanisms are the antifraud measure with the greatest impact on reducing losses4 <ompanies with anonymous reporting mechanisms reported median losses of N=HH,HHH, while those without reported median losses of N?HH,HHH. "ips from employees, customers, and vendors and anonymous tips account for4 @AO of the detection of all fraudulent activity6 @AO of the detection of fraudulent activity for not)for)profit organi5ations6 @K.DO of the detection of fraudulent activity for government agencies6 and AEO of the detection of owner/executive fraud schemes. Geporting on internal controls was recommended to the corporate community in the late =KDHs, but it took the large scandals &such as %nron' for the (0P legislation to impose such reporting. IG( data indicate that many nonprofit organi5ations would be categori5ed as small businesses. /ost small businesses struggle with an appropriate level of segregation of duties, making a whistleblower policy a good mitigating control. histleblowing can significantly affect a whistleblower*s life and livelihood. "he authors believe that the potentially huge personal impact whistleblowing can have on individual whistleblowers means there is an even greater need for organi5ations to develop clear whistleblower policies.

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1rotecting whistleblowers in /ndia Iuring the past decade, scams, swindles, and rip)offs have become a regular feature of the Indian political and corporate landscape, costing taxpayers, investors and banks thousands of crores of rupees ith the consent of the re+uired number of (tate governments, .arliament should try to enact a single Act for all employees working in any tier of government and also for employees working in any form of organisation in the private and voluntary sectors. "he 0fficial (ecrets Act should be overridden to provide for a public interest defence and the Qgagging clauses7 in employment or severance contracts should be declared void in respect of public interest disclosures. Act7s protection should be extended to members of the armed forces, the secret services and the police: subject to the condition that the disclosures shall not jeopardise operations or endanger the lives of personnel hat constitute Qpublic interest disclosures7 need to be clearly defined. "he protection should apply to specific disclosures only involving an illegality, criminality, breach of regulatory law, miscarriage of justice, danger to public health or safety and damage to environment, including attempts to cover up such malpractices. "he whistleblower must reasonably believe that his information about a malpractice is substantially true, and must act in good faith. "he Act must encourage employees to raise the matter internally in the first instance and mandate organisations to establish suitable mechanisms for this purpose. "here should be a Qfast track mechanism7 for adjudication of cases on the lines of the (arbanes)0xley Act. As things stand today in India, the chances of enacting such legislation may seem remote. #ut whistleblower protection measures are gathering a momentum of their own around the world, aided partly by spectacular government and corporate scandals.

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CASE-STUDY
%nergy security has become an area of significance, engaging the attention of all countries. #io) fuels have come into prominence as they are considered to be environmentally friendly with reduced gas emissions. $ess dependence on fossil fuels is a goal which many nations have set for themselves. #io)fuels are thus considered to be a viable option for achieving the targeted reduction by many countries. %hat is Biodiesel' #iodiesel is an alternative to petroleum)based diesel made from renewable resources such as vegetable oils, animal oils and fats. #iodiesel either completely substitutes petro)diesel or is simply blended with petro)diesel for use as a transportation fuel due to its very similar combustion properties. #iodiesel is composed of fatty acid methyl esters and produced from edible oils such as palm oil, (oybean oil, (unflower oil and mustard oil. 2on)edible vegetable oils used are Latropha oil, .ongamia seed oil, and aste vegetable oil & R0'. 0il extracted from algae for producing biodiesel is still in an experimental stage. It does not re+uire any special storage facilities and it can be transported and sold using today*s infrastructure. 2easons .or biodiesel being #romoted AS #iodiesel has a closed <0? loop.

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"he reason for this is, biodiesel is produced from renewable resources such as vegetable oils. Iuring the process of growing oilseeds, the plants consume the <0? from the atmosphere. 0nce these oilseeds are processed and used in vehicles, the combustion of this biodiesel leads to the release of <0? in into the atmosphere again. And this <0? is then reused by the plants in their photosynthesis process. (o it is a complete cycle. #S (tudies have found that the lifecycle production and use of biodiesel produces approximately between EH)=HHO less carbon dioxide and almost =HHO less sulphur dioxide emissions because it contains no sulphur. <S #iodiesel further provides significant reductions in particulates and carbon monoxide than petroleum diesel fuel. IS #ased on Ames /utagenicity tests, biodiesel provides a KHO reduction in cancer risks. %S "he use of biodiesel can extend the life of diesel engines because it is more lubricating than petroleum diesel fuel while fuel consumption, ignition, power output and engine tor+ue are unaffected.

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FS #iodiesel is safe to handle and transport because it is as biodegradable as sugar, =H times less toxic than table salt and has a high flashpoint of about =?B< compared to petroleum diesel fuel which has a flash point of BB<. >S hen burned in a diesel engine, biodiesel replaces the exhaust odour of petroleum diesel with the pleasant smell &nvironmental /m#act "he use of biodiesel has an impact on the environment at multiple levels. "he production of biodiesel leads to air, water and soil pollution. It also leads to global warming. "he environmental impact of biodiesel production is linked largely with the production of the feedstock for biodiesel production. Rarious stages of bio)fuel production can affect water +uality, beginning with chemical applications to agriculture. hen fertili5ers and pesticides containing phosphorus and nitrogen enter bodies of water, they deplete it of oxygen, thus creating a more difficult environment for a+uatic species to survive in. (oil erosion can also threaten water +uality as soil and chemicals are washed into local streams and lakes. #io)refineries also release wastewater, potentially high in biochemical oxygen demand, into local water sources. In the case of fuel crops for biodiesel, to get a good yield of oil from the seeds it is essential that the crops are genetically modified, and are provided with an ade+uate amount of fertili5er and pesticides #io)fuels are supposed to reduce greenhouse gas emissions. #ut they do exactly the opposite. Almost all of them produce more greenhouse gases than petrol or diesel, for two reasons4 =S %missions of nitrous oxide which is a very powerful greenhouse gas caused by the application of nitrogen fertili5ers. ?S "he destruction of grassland, wetland and forest caused by the expansion of agriculture stimulated by this new market of biofuels increasing greenhouse gases.

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#iofuels ) especially biodiesel made from palm oil ) also cause other kinds of environmental havoc. "hey are now among the major drivers of deforestation in Indonesia and /alaysia, wrecking tens of millions of hectares of primary forest and driving orang)utans and other wildlife towards extinction

And they hel# to starve the world3 $ast year, the global food crunch was caused by a decline in the world7s stockpiles of cereals4 they fell by around B@m tonnes. "he production of bio)fuels consumed almost =HHm tonnes., According to an I/F report, the use of corn for ethanol production and their demand for soya bean oil has increased world food prices by about =H per cent. "he extra millions who died as a result of malnutrition)related diseases when the price of grain rose last year did so largely because we took their food to put in our tanks. Gecent studies have shown that there is a net energy loss in the production of biodiesel, i.e., it costs more energy to produce biodiesel than is gained from the biodiesel.

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Net Energy Losses in production of biodiesel

In terms of its impact on both the local and global environments, biodiesel is more destructive than crude oil from 2igeria. (o, as a conclusion, from an environmental perspective, biodiesel is not suitable as a future fuel. "his is because the production of biodiesel on such a large scale is causing and will cause irreversible damage to the environment. If looked at from the economic perspective, it is still not viable because the cost of production ranges from Gs @B)AH, while the procurement price set by the government for biodiesel is Gs.?C.BH, making the production of biodiesel unviable for the manufacturers, but only because it is subsidi5ed by the >overnment, can it be marketed to the consumers. "his still looked attractive when the crude oil prices were touching N=AH per barrel. #ut now when the crude oil prices have come down to N AH per barrel, it has not remained a very attractive proposition considering the irreversible damage wrought overall as we have seen.

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(o here7s what we gain from the bio)fuels trade4 =. >lobal environmental destruction ?. Figher greenhouse gas emissions. @. /ass starvation A. "he loss of hundreds of millions of dollars. B. "he prospect of a new trade war. (o why is bio)fuels still being promoted as a panacea for all the environmental issues! #ecause, by taking into account only some of the emissions produced by biofuels, the government can claim to be cutting greenhouse gas production, thereby helping it to meet the legally binding targets in its climate change act. #ecause it means that people can carry on driving without constraint, this policy causes the government no political pain. It is exchanging political convenience at home for the lives of people overseas. "he +uestion that needs answering is4 Is it the #usiness which decides on the ethics it wants to follow or is it a higher authority i.e. the >overnment which actually sets the tone of ethics for any business.

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