Leveraging industry 4.0: The need for Vietnamese business to embrace global business ethics
LEVERAGING INDUSTRY 4.0: THE NEED FOR VIETNAMESE BUSINESS
TO EMBRACE GLOBAL BUSINESS ETHICS
Nguyen Thi Ngoc Anh, PhD.
National Economics University
Abstract: The Fourth Industrial Revolution, also known as ‘Industry 4.0’, is changing
how business functions. Technology and digitization now enhance labor productivity,
increase economic output, create more skilled jobs, and provide huge socioeconomic
gains for all economies. There are several articles dealing with the issue of the
sustainability of business in the context of Industry 4.0. These articles point to the
benefits of these developments as well as the challenges that mankind has to face as a
result.
The following article approaches this issue of sustainability from an ethical
perspective. It addresses the global ethical issues inherent in Industry 4.0,
emphasizing the importance of business ethics. The article analyses current business
ethics in Vietnam in comparison with global business ethics. The author finds that
there are likely to be significant benefits in enhancing Vietnamese business ethics as
Vietnam integrates into the global economy.
Keywords: Sustainable development, the Fourth Industrial Revolution, Industry 4.0,
business ethics
Sustainable Development in Industry 4.0 and Ethical Issues
Industry 4.0 is characterized by a fusion of technologies that is blurring the lines
between the physical, digital and biological spheres. There are specifically nine
technological advances that have created the Fourth Industrial Revolution:
autonomous robots, simulation, horizontal and vertical systems integration, the
industrial Internet of Things (IoT), cybersecurity, cloud, additive manufacturing, and
augmented reality, as well as big data and analytics (The Boston Consulting Group,
2015).
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The First Industrial Revolution used water and steam power to mechanize production,
the Second Industrial Revolution used eletricity to create mass production, and the
Third used electronics and information technology to automate production. When
compared with these previous industrial revolutions, Industry 4.0 is evolving at an
exponential rather than a linear pace. It is disrupting almost every industry in every
country. The breadth and depth of these changes herald the transfomation of entire
systems of production, management, and governance, and also all kinds of
organizations.
In 2015, while setting the global goals for 2030, the UN specially outlined 17 major
goals and 169 targets for humanity. The overarching aim is to “end poverty, protect
the planet, and ensure prosperity for all” (UN General Assembly, 2015). Accepted by
world leaders and fomulated as a continuation of the Millennium Development Goals,
these goals are separated into five major categories: People, Planet, Prosperity, Peace,
Partnership.
Figure 1. 5 Ps of Sustainable Development,
Source: UN Sustainable Development Goals, 2015
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There has been a great deal of commentary concerning our ability to reach the
Sustainable Development Goals (SDG). According to Tsvetkova, the challenges in
achieving the five types of SDG vary. Some goals and targets are regarded as too
ambitious, too vague, or just unachievable in the time remaining. Compared to their
predeccessors, it should be noted, the SDG are extremly wide in scope and cover a far
greater range of needed actions (Tsvetkova, 2017). However, no one can deny the
human significance of the SDG, which are indispensable outcomes that humanity in
general, and each country in particular, must attain. To achieve the SDG, each
country, each organization or enterprise, and each individual must address ethical
issues.
Industrial Revolution 4.0 and Global Ethical Issues
According to Plutschinski, Industry 4.0 could yield greater inequality, particularly in
its potential to disrupt labor markets. As automation substitutes for labor across the
entire economy, the global job market could be increasingly segregated into “low-
skill/low pay” and “high skill/high pay” segments, which in turn will lead to an
increase in social tensions (Plutschinski, 2017).
Plutchinski cites the estimate made by Bilger from the Wharton School of Business,
that “all the developed nations on earth will see job loss rates of up to 47% within the
next 25 years” because of artificial intelligence, robotics, and other technology that is
to be ushered in. Many workers will be disillusioned as their own real incomes and
those of their children will continue to stagnate. An economy that offers only limited
access to the middle class is a recipe for democratic malaise and dereliction
(Plutschinski, 2017).
The network economy fostered by Industry 4.0 will lead to monopolies, which have a
dangerous side effect, because in every network the benefit for all participants
increases as new participants join. While the old industrial economy is driven by scale
effects, the new information economy is driven by network effects. The key concept
of the new economy is “positive feedback”. Its success is self-replicating. Co-working
spaces in the network economy are booming. The share of virtual work is increasing
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while the share of manual work decreases. There is a reasonable concern that “click-
workers” could become the day-laborers of digital modernism.
Industry 4.0 will change not only what we do, but also who we are. It will affect our
identity and all the phenomena associated with our identity, such as our sense of
privacy, our notions of ownership, our consumption patterns, and the time we devote
to work and leisure, as well as how we develop our careers, cultivate our skills, meet
people and nurture relationships (Plutschinski, 2017). Issues now arising include
whether it is acceptable for a business to review an individual’s Facebook or other
social networking account; whether, when shopping, the fact that QR codes and
microchips give a consumer’s information to business – including their location, what
they are looking at, and what they have done in the last day (via cell phone tower
triangulation) is problematic for that individual; and whether the individual’s non-
professional life should be subject to the ethics of the corporation when they are not at
work. This final issue is in essence the question of whether an individual is a citizen
first and then an employee, or an employee first and then a citizen. (O.C. Ferrell,
Fraedrich, L. Ferrell, 2016).
According to Pride and O.C. Ferrell, global ethical issues also surround the acquisition
and sale of data. Cloud computing has instigated a new paradigm. Business must
understand that it is no longer appropriatedevelop strategies based on past practices.
Instead progressive businesses begin with petabytes of information and look for
relationships and correlations in order to discover new business trends. Big data deals
with massive date files obtained from structured and unstructured databases (Pride and
O.C. Ferrell, 147). What once was thought of as intrusive is now accepted and
promoted. Only recently have people begun to ask whether this level of information
collection by business is acceptable. Companies are becoming more sophisticated in
understanding their customers through the use of predictive analytic technologies.
Such technologies, as well as advances in consumer behavior research, have reduced
the consumer’s ability to choose independently. Business now knows how to better
manipulate data at an elemental level.
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Scientist are already struggling with such dilemmas. As we enter the new industrial
era, we need a new set of codified morals to become global principles.
Global principles are integrity statements about foundational beliefs that should
remain constant as businesses operate globally. These principles address issues such
as accountability, transparency, trust, the natural environment, the safety of
employees, human rights, the importance of property rights, and compliance with
legal requirements. The principles are designed to focus on areas that pose many
challenges to the ethical conduct of global business. Ten global ethical principles that
O.C. Ferrell and L. Ferrell offer are a valuable suggestion in the present context.
Global Principles for Ethical Business Conduct
1.
Require accountability and transparency in all relationships. Accountability requires accurate
reporting to stakeholders, and transparency requires openness and truthfulness in all transactions and
operations.
2.
3.
Comply with the spirit and intend of all law. Laws, standard, and regulations must be respected in all
countries as well as global conventions and agreements developed among nations
Build trust in all stakeholder relationship through a commitment to ethical conduct. Trust is required
to build the foundation for high integrity relationship. This requires organizational members to avoid
major international risk such as bribery and conflicts of interest. Law supporting this principles include the
U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, OECD Convention, and UN Convention against
Corrution.
4.
5.
6.
7.
Be mindful and responsible in relating to communities where there are operations. The communities
where businesses operate should be supported and improved as much as possible to benefit employees,
suppliers, customers, and the community overall.
Engage in sustainable practices to protect the natural environment. This requires the protection of the
long – term well-being of the natural environment including all biological entities as well as the interaction
among nature, inviduals, organizations and business stratergies.
Provide equal opportunity, safety, and fair compensation for employees. Employees should be treated
fairly, not exploited or taken advantage of, especially in developing countries. Laws supporting this
principle include equal opportunity legislation throughout the world.
Provide safe products and create value for customers. Product safety is a global issue as various
governments and legal systems sometimes provide opportunities for firms to cut corners on safety. All
products should provide their represented value and performance.
8.
9.
Respect human rights as defined in the UN Global Compact. Human rights are a major concern of the
UN Global Compact and most other respected principles statements of international business.
Support the economic viability of all stakeholders. Economic viability supports all participants in
business operations. Concerns such as fair trade and payment of a living wage are embedded in this
principle.
10. Respect the property of others. Respect for property and those who own it is a broad concept that is an
ethical foundation for the operation of economic system. Property includes physical assets as well as the
Source:O.C.Ferrell,Fraedrich, and L. Ferrell, Business Ethics – Ethical Decision
Making and Cases, 11th edition, Cengage Learning, 2016, p. 302
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Ethical dilemmas are a new focus around the world. No nation, organization, business
or individual can ignore global business ethics when entering the global economy. As
mentioned above, the purpose of this article is to address the ethical business issues
that Vietnam needs to pay attention to when integrating into the global economy in the
context of Industry 4.0.
Identifying Business Ethics in Vietnam Today
Vietnam is still a developing country. Vietnam's development is also a process of
gradual improvement in both the mode of operation of the Vietnamese market
economy and the social institutions based on that economy. Business ethics in
Vietnam has been posing problems both in terms of theory and practice.
For developed countries, business ethics have been considered by entrepreneurs to be
a business development strategy, as the way to grow a business. In these countries,
business ethics are viewed as the decisive factor in the sustainable development and
increased profitability of an enterprise. This has been proven by many scholars
studying the business practices of large companies in the United States and other
developed countries (Hoffman, Frederick, Schwartz, 2001). This is because, in a
country with a developed market economy, every company in a given business is
always an organic part of the whole economy. As a result, business decision-making
behaviors and business practices are subject to social norms and regulations in both
moral and legal terms. In other words, in developed countries ethical standards have
become indispensable to every business person, and for every business. The entire
legal system in these countries has played a major role in preventing business
activities that violate social ethics in general, and business ethics in particular.
Moreover, in developed countries, because of institutional arrangements, including
more sophisticated business ethics, adherence to business ethics creates value in terms
of prestige, brand, product quality and customer service, by attracting more and more
customers, and driving the company's productivity. Meanwhile, in countries with less
developed economies, such as Vietnam, due to their nascent legal systems, the
opportunities for economic and social development are limited by the monopoly of the
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state economy, corruption, and special interest groups. The role of law is to regulate
the identification and prevention of unethical business practices.
At present, Vietnam is building a socialist-oriented market economy under the control
of the state, and considers this model of economic development in line with Vietnam's
realities and trends in global economic development. Vietnam has experienced 32
years of doi moi economic reforms, but the market economy is still in the process of
perfecting both market mechanisms and social institutions. This means that gaps
persist in terms of business models and the legal environment for business activities.
Many businesses have not complied with the law. If a country’s business law is
incomplete, and business structures are unclear, business behavior is opportunistic,
snatching at profit. The serious business ethics violations that the community has
suffered so far, due to the lack of formal governance of business conduct, are
gradually being supplanted by compliance with the law, and refraining from acting in
a manner contrary to the public interest.
It has been clearly shown that when the legal system is incomplete, the gaps that
persist will increasingly encourage businesses to violate business ethics. In Vietnam,
there have been many profitable enterprises that have violated environmental
regulations. The General Statistics Office shows that 80% of Vietnam's industrial
parks are in violation of environmental regulations. Each year, Vietnam is suffering
from environmental pollution equivalent to 5% of GDP. While this stands at 10% in
China, if current environmental pollution increases, Vietnam could actually overtake
China in pollution. The World Bank's assessment also shows that in Vietnam is
causing up to 5% of GDP annually. In addition to this general damage, Vietnam has
been spending up to US $ 780 million annually for the treatment of diseases caused by
pollution.
Many companies that have violated rules against fraud, counterfeit and imitation
products, have been eventually discovered and penalized, but delays in prosecution
have inadvertently created businesses that disdain business law, and repudiate the
concept of business ethics. In recent years, when a number of businesses have been
dealt with by the law, these businesses and even the general public have taken the
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permissive or lenient view that when it comes to business ethics, business is not
breaking the law. So the issue of adherence to business ethics for Vietnamese
enterprises has not yet dominated business behavior, in either strategy or business
models. Yet for sound business development, business ethics must be addressed in
planning, strategy, production, finance, employee training, and in relationships with
customers in general.
In recent years, when a number of Vietnamese businesses have been dissolved, shut
down, or declared bankrupt, bad debts have impacted the banking system and the real
estate market has suffered, leading to economic and financial crisis. According to the
General Statistics Office, in the first 6 months of 2017, on average, 370 enterprises in
Vietnam ceased operations or went bankrupt. The violation of business ethics has
made no small contribution to this situation. Business ethics are an investment in the
future. It follows that in order to ensure the sustainable development of enterprises, in
addition to the principles of business compliance with market mechanisms and law,
enterprises must also adhere to the standards of social ethics and business ethics.
However, in Vietnam, not only is the legal system incomplete, but so are market
mechanisms, and even standards for business ethics have not fully formed. Ethical
values have been paid little attention. This situation has been caused by too many
business ethics violations escaping both condemnation by society, and punishment by
law. In fact, it is because of these violations that businesses have raked in higher
profits. In this nascent situation, especially in the early years of reforms, legitimate
business people often suffer more than those who commit business ethics violations.
In terms of business ethics violations, social morality is declining, and many people
mistakenly blame the market economy. The real underlying cause is the leniency of
the law and its enforcement. This means that legal support for the establishment and
implementation of business ethics is extremely important. Good law, also known as
law that contains strict penalties (Ayres and Braithwaite, 1992) can encourage
entrepreneurs to act voluntarily, complying with business ethics as a vital condition
for the sustainable development of their enterprises. Reforms require legal support so
that they are strictly adhered to, ensuring that business avoids breaking the law.
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There is ample evidence for the alarming state of business ethics in Vietnam today.
For example, there is a very high level of software piracy in Vietnam (74% of
installations) when compared to other developed countries in the Asia-Pacific region
such as Japan, Australia, New Zealand, where this offence sits at only 18 - 21% of all
installations. This is one example of the significant distance in business ethics
between Vietnam and developed countries in the region.
Figure 2: Rates of Unlicensed Software Installation of Vietnam and Four Developed
Countries in the Asia Pacific Region
100
80
Vietnam
60
40
20
0
Singapore
Japan
Australia
New Zealand
2011
2013
2015
2017
Source: Data from BSA Global Software Survey – In Brief.
According to the Corruption Perception Index (CPI) published by Transparency
International, Vietnam’s score in 2017 was 35, which ranks poorly compared to other
developed countries in the Asia-Pacific region such as Singapore with a score of 84,
Japan with a score of 73, Australia with a score of 77, and New Zealand with a score
of 89. The index, which ranks 180 countries and territories by their perceived levels of
public sector corruption according to experts and businesspeople, uses a scale of 0 to
100, where 0 is highly corrupt and 100 is very clean. With score of 35, Vietnam ranks
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at 107th place out of 180 countries. This disappointing ranking shows the current
status of business ethics in Vietnam.
Figure 3. Corruption Perception Index 2017 of Vietnam and Four Developed
Countries in the Asia Pacific Region
100
80
Vietnam
60
40
20
0
Singapore
Japan
Australia
New Zeland
Corruption Perception Index 2017
Source: Data from Transparency International, Corruption Perception Index 2017.
Implications for enhancing business ethics in Vietnam to adapt to the
requirements of Industry 4.0
To enhance business ethics in Vietnam now, the development of a complete legal
system – including enforcement rules – is clearly necessary, but not sufficient. In
essence, norms must be laid down. Business ethics can guide business behavior.
Education must make business aware that good business ethics is an investment in the
future, and in sustainable business development.
In order for Vietnamese enterprises to comply with global business ethics standards,
Vietnamese enterprises must adhere to the following principles when conducting
business activities:
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- Define the business objective as being to reach a consensus between corporate
interests and community interests. The public interest here must be both immediate
and long-term. Therefore, business strategy planning and business expansion must
ensure the common good of the community in terms of material and abstract benefits,
both in terms of product quality and environmental issues. Compliance with this
principle also means that business people do not violate business ethics.
- Always maintain credibility. Faith must be expressed not only in the business brand,
but also in its products. To implement this principle is to ensure the sustainable
development of the enterprise. Entrepreneurs must understand the important role of
complying with business ethics in their long-term business strategy.
- Prioritize honesty in business. Of course, in a market economy, this principle should
be applied in a flexible and appropriate manner because of the need for competition. It
must be reflected in both the brand and the credibility with customers. Success in
branding business without a laudable business ethos - one that prioritizes honesty - is
unlikely. On the basis of this principle, entrepreneurs are made aware of the ethical
business issues that are vital to their business brand and products.
- Comply with the law and regulations. Businesses must fulfill their responsibilities
and obligations to the society. This is a mandatory principle for every business that
wants to survive and develop in the long run. Compliance with this principle will
prevent businesses from violating business ethics, such as smuggling, counterfeiting,
and damaging the ecological and social environment. This is also to avoid business
ethics violations.
- Do regular social or charitable work. This is also a way to promote and strengthen
the brand of the business, by demonstrating good business ethics to the community in
accordance with Vietnamese traditions.
- Be grateful, as an owner, for the business people who work in the business unit, and
be fair to them. In other words, create sound relationships with colleagues and
subordinates and in the distribution of profits and remuneration. This can also be
considered as a tip for managing business profits. At the same time, this will
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encourage employees to feel a sense of personal investment in the business activities
of enterprises, and in promoting the brand of their business.
However, in Vietnam today, businesses that want to comply with these principles face
a difficult road. In addition to the instability inherent in a developing market economy,
which is accompanied by corruption and inflation, capital shortages are quite
common. There is a lack of transparency in investment, and in business monitoring
mechanisms, and especially a lack of information at the macro level in areas related to
business operations. A difficulty associated with administrative procedures is the
‘lubrication regime’ (bribery) that businesses use when they want to carry out
procedures quickly. This is a great obstacle for business people in compliance with
business ethics. These are the major constraints in terms of complying with business
ethics.
A business that wishes to comply with ethical standards, not just pursue profits should
priorities its relationships, specifically its relationships with society as a whole, as well
as with other enterprises, in the spirit of mutual development. Every business must
consider itself an organic part of the whole economy, a member of the entire social
community. This is addressing the relationship between the business and those outside
the business. This means that the business must comply with both business ethics and
business law.
Conclusion:
The impacts of the Fourth Industrial Revolution are becoming increasingly apparent.
In addition to great benefits, this industrial change also invites hardships and negative
consequences that are also immense, requiring humanity to focus on ethical issues. No
country, organization or individual can ignore these issues if it wants to succeed in
Industry 4.0, and Vietnam is no exception. The current situation of business ethics in
Vietnam is in an alarming state, which requires the government, organizations,
enterprises and every Vietnamese person to pay attention to business ethics and follow
global principles for ethical business conduct.
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References
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14.https://gss.bsa.org/wp-content/uploads/2018/06/2018_BSA_GSS_InBrief_US.pdf
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