Ethics, Sustainability, Risk and Governance

Introduction

Entrepreneurial strategy is often presented as a search for opportunity, competitive advantage and growth. Yet every opportunity also distributes benefits, costs and risks among people and institutions. A new platform may create convenience while exposing users to surveillance; a low-cost product may depend on poorly protected workers; rapid expansion may increase emissions, regulatory exposure and operational fragility. Strategic entrepreneurship therefore requires more than identifying attractive markets. It requires deciding what the venture is responsible for, to whom it is accountable, how it will create value without unacceptable harm, and how it will remain resilient under uncertainty.

Ethics, sustainability, risk and governance are interconnected. Ethical reasoning guides judgments about acceptable conduct. Sustainability asks whether value creation can continue without undermining ecological and social systems. Risk management identifies and treats uncertainty that could prevent objectives from being achieved. Governance allocates authority, oversight and accountability. Together, these disciplines turn responsible entrepreneurship from a statement of intent into a system of strategic decision-making.

This chapter integrates stakeholder theory, corporate responsibility, environmental, social and governance (ESG) principles, circular economy, social entrepreneurship, enterprise risk management and founder accountability. It also considers legal compliance, reputation, technology and artificial intelligence (AI), board design and ethical decision processes.

Learning Objectives

By the end of this chapter, students should be able to:

1. Explain why stakeholder theory and corporate responsibility matter to entrepreneurial strategy.
2. Distinguish compliance, ethics, sustainability, ESG and social entrepreneurship.
3. Apply circular-economy principles to products, operations and business models.
4. Identify legal, reputational, operational, financial and technology risks and propose controls.
5. Design basic founder, board, compliance and accountability arrangements.
6. Use a structured process to analyse difficult ethical decisions.
7. Evaluate the limitations and possible misuse of ESG and sustainability claims.

1. Stakeholders and the Purpose of the Venture

A stakeholder is any individual or group that can affect, or is affected by, the venture. Typical stakeholders include founders, employees, customers, suppliers, investors, lenders, regulators, communities, competitors, the natural environment and future generations. Stakeholder theory, associated particularly with R. Edward Freeman, argues that durable value creation requires attention to these relationships rather than treating shareholders as the only legitimate beneficiaries.

Stakeholder theory does not mean that every demand must be accepted or that all stakeholders have identical claims. It provides a way to identify affected parties, understand conflicting interests and justify decisions. A founder deciding to reduce product prices, for example, may benefit customers but place pressure on employees or suppliers. The relevant strategic question is not simply “Who gains?” but also “Who bears the cost, who has power, whose interests are overlooked, and what obligations are non-negotiable?”

A useful stakeholder map considers two dimensions: the stakeholder’s influence over the venture and the significance of the venture’s impact on that stakeholder. High-influence stakeholders require active engagement, but low-power groups should not be ignored when the venture significantly affects them. A local community may have little bargaining power but may experience traffic, noise or pollution. Ethical strategy gives voice to such groups through consultation, impact assessment and accessible grievance mechanisms.

Stakeholder analysis can be integrated into the business model. For each major activity, managers should ask:

• What value is created, transferred or destroyed?
• Which stakeholders provide resources or bear risks?
• Are consent, safety, privacy and fair treatment protected?
• Are benefits and burdens distributed fairly?
• What conflicts may emerge as the venture scales?

Stakeholder engagement should be proportionate, continuous and evidence-based. Token consultation—asking for opinions without considering them—can increase rather than reduce reputational risk.

2. Corporate Responsibility, Ethics and ESG

Corporate responsibility refers broadly to the obligations and voluntary commitments of an enterprise toward society and the environment. It includes legal compliance, responsible treatment of workers and customers, environmental stewardship, truthful communication and contribution to communities. Corporate social responsibility (CSR) often emphasizes policies and programs, whereas ESG provides a framework for evaluating environmental, social and governance factors relevant to enterprise performance and accountability.

These concepts should not be treated as interchangeable:

Legal compliance is a minimum threshold, not proof of ethical conduct. An action can be legal yet deceptive, exploitative or irresponsible. Conversely, an entrepreneur may choose stronger standards than regulations require in order to protect stakeholders and build trust.

A useful ethical framework combines three perspectives. First, consequential reasoning asks which option is likely to produce the greatest overall benefit and least serious harm. Second, duty-based reasoning asks whether the action respects rights, promises, consent and non-negotiable obligations. Third, virtue ethics asks what a responsible and trustworthy entrepreneur would do and what kind of organizational character the decision develops. In practice, these perspectives can conflict. A profitable decision may produce aggregate benefits while violating privacy rights. Ethical analysis should therefore make trade-offs explicit rather than hiding them behind a single score.

ESG is strategically relevant because environmental and social conditions can affect costs, access to capital, employee attraction, customer trust, licence to operate and business continuity. However, ESG indicators are not automatically meaningful. A venture can report many metrics while avoiding its most material impacts. Materiality means focusing on issues that are significant to stakeholders, enterprise performance, or both. Measurements should have clear boundaries, reliable data, consistent definitions and transparent limitations.

Common ESG dimensions include:

• Environmental: energy use, greenhouse-gas emissions, waste, water, biodiversity and pollution.
• Social: labour conditions, diversity and inclusion, health and safety, customer welfare, human rights and community impacts.
• Governance: board oversight, anti-corruption, executive incentives, data governance, internal controls, disclosure and accountability.

Entrepreneurs should avoid greenwashing, social-washing and impact-washing. These occur when communications create an impression of responsibility that is unsupported, exaggerated or based on irrelevant information. Claims should be specific, comparable, evidence-based and qualified where uncertainty exists.

3. Sustainability and the Circular Economy

Sustainability involves maintaining the conditions under which economic, social and ecological systems can function over time. It is commonly analysed through the triple bottom line: economic viability, social well-being and environmental integrity. The three dimensions are not always harmonious. A sustainable strategy identifies tensions and designs ways to reduce or justify them.

The circular economy challenges the linear pattern of “take, make, use and dispose.” It aims to retain the value of products and materials through reduction, reuse, repair, refurbishment, remanufacturing, sharing and recycling. The preferred hierarchy is generally to avoid unnecessary resource use first, extend product life second, and recycle only when higher-value options are unavailable.

Circular strategy can be applied at several levels:

1. Product design: modular components, durability, repairability, safe materials and disassembly.
2. Business model: leasing, product-as-a-service, deposit-return systems and sharing platforms.
3. Operations: reverse logistics, renewable energy, waste prevention and resource efficiency.
4. Supply chain: recycled inputs, supplier standards, traceability and industrial symbiosis.
5. Customer relationship: repair services, take-back schemes, education and incentives for return.

Circularity is not automatically sustainable. A reusable product may have greater environmental impact if it is rarely reused or transported long distances. Recycling may create toxic residues or encourage continued consumption. Entrepreneurs should assess the complete life cycle, including extraction, production, distribution, use and end of life.

A simple impact identity can help structure analysis:

Here, activity level is the quantity of products, services or kilometres delivered, and impact intensity is the environmental or social impact per unit. The relationship is a planning approximation, not a complete life-cycle assessment. It assumes that the selected activity and intensity measures are defined consistently. Efficiency improvements reduce impact intensity, but total impact may still rise if activity expands faster than intensity falls. This is known as a rebound or scale problem.

For example, if a delivery venture makes 100,000 deliveries at 0.8 kg of CO₂-equivalent per delivery, estimated delivery emissions are 80,000 kg CO₂-equivalent. If efficiency reduces intensity to 0.6 kg but deliveries increase to 160,000, emissions become 96,000 kg CO₂-equivalent. The venture improved efficiency but increased total emissions. Strategic targets must therefore track both intensity and absolute impact.

4. Social Entrepreneurship and Inclusive Strategy

Social entrepreneurship uses entrepreneurial methods to address social or environmental problems. The venture may be nonprofit, for-profit, cooperative or hybrid. Its defining feature is not a particular legal form but the centrality of a social mission and the intention to create measurable public value.

Social enterprises face a dual or multiple-bottom-line challenge. They must achieve mission impact while maintaining financial viability. Revenue can come from customers, contracts, grants, donations, impact investment or a combination. Tensions arise when the most profitable customers are not those with the greatest need, or when investor expectations pressure the venture to reduce expensive impact activities.

A credible social-enterprise strategy specifies:

• the problem and affected population;
• the mechanism through which the venture creates change;
• the resources and activities required;
• the intended outputs and outcomes;
• how unintended effects will be detected;
• the revenue and funding model; and
• who has authority to protect the mission.

Impact should be distinguished from activity. The number of training sessions delivered is an output; improved employment or income is an outcome. Attribution is difficult because outcomes may result from several causes. Entrepreneurs should avoid claiming that every positive change was caused by the venture. Where rigorous evaluation is not feasible, transparent contribution claims are preferable to exaggerated attribution.

Inclusive entrepreneurship also considers who can access products, employment and ownership. Design choices concerning language, disability, affordability, digital access and cultural context can determine whether an innovation widens or reduces inequality.

5. Enterprise Risk in Entrepreneurial Ventures

Risk is the effect of uncertainty on objectives. It includes both downside threats and, in some frameworks, opportunities created by uncertainty. Start-ups often face concentrated risks: dependence on one founder, one supplier, one platform, one large customer or one funding source. Rapid growth can magnify risks before systems are ready.

Important categories include:

Risk management begins with objectives. A risk is meaningful only in relation to what the venture seeks to achieve. Identification should involve people with operational knowledge and, where relevant, affected stakeholders. Assessment may use likelihood and consequence categories, but numerical rankings should not create false precision. A rare event with catastrophic consequences may deserve more attention than a frequent minor inconvenience.

Controls can be preventive, detective or corrective. Preventive controls stop an event, such as approval limits or secure design. Detective controls identify events, such as reconciliations, alerts or audits. Corrective controls reduce damage and restore operations, such as incident response, backup systems and customer notification.

Risk treatment options are commonly to avoid, reduce, transfer or accept a risk. Insurance transfers some financial consequences but does not transfer responsibility for safe conduct. Acceptance should be explicit, informed and within delegated authority. A risk register should identify the risk, cause, event, consequence, owner, existing controls, planned treatment, target date and residual risk.

A basic expected-loss estimate can support prioritisation:

Probability is expressed from 0 to 1 and consequence in a specified currency. The estimate assumes the consequence is represented adequately by one monetary value and does not capture reputation, human suffering, legal duties or catastrophic uncertainty. It is therefore a decision aid, not a complete ethical test. If a breach has a 0.05 probability and a direct consequence of $200,000, expected direct loss is $10,000. A control costing $4,000 may appear economically attractive, but privacy obligations and human harm may justify it even when the arithmetic does not.

6. Technology, Data and AI Risk

Technology is simultaneously an enabler and a source of vulnerability. Entrepreneurs must govern data collection, consent, access, retention, quality, security and deletion. Data minimisation—collecting only what is necessary—reduces exposure. Access should follow legitimate business need, with authentication, logging and periodic review.

Cybersecurity is not solely an IT issue. The board and founders must determine risk appetite, assign responsibility, fund controls and ensure that incidents are reported and learned from. A practical incident plan includes preparation, detection, containment, eradication, recovery and post-incident review. Customers and regulators may need timely notification depending on applicable law.

AI systems create additional concerns: biased outputs, opaque decisions, inaccurate content, privacy leakage, intellectual-property disputes, automation failures and overreliance by employees. Before deployment, an entrepreneur should define the decision purpose, affected groups, data provenance, performance boundaries, human oversight, appeal process and monitoring arrangements. High-impact decisions such as employment, credit, health or access to essential services require stronger review than low-risk marketing assistance.

A responsible AI process asks:

1. Is the use lawful and necessary?
2. Could the system produce unequal or discriminatory outcomes?
3. Can affected people understand and challenge important decisions?
4. Who is accountable when the system fails?
5. What testing, human review and shutdown procedures are available?

7. Founder Accountability and Board Governance

Founders often control information, culture and strategic direction. This concentration can accelerate decisions but also create conflicts of interest, unchecked optimism and dependence on personal judgment. Founder accountability requires clear roles, documented authority, transparent incentives and mechanisms through which concerns can be raised.

Governance is the system by which an organization is directed, controlled and held accountable. Even before a venture has a formal board, it should establish governance practices. These include regular performance and risk reviews, written decisions, financial controls, conflict-of-interest declarations, compliance ownership and protection for people who report misconduct.

An effective board contributes more than fundraising contacts. It provides oversight, challenge, expertise, legitimacy and a perspective independent of management. Board composition should reflect the venture’s risks: a regulated health venture may need clinical and compliance expertise; a data-intensive platform may need cybersecurity and privacy expertise.

The board’s responsibilities commonly include:

• approving strategy and monitoring assumptions;
• overseeing the founder or chief executive;
• reviewing risk appetite and major exposures;
• ensuring reliable financial and impact reporting;
• supervising legal and regulatory compliance;
• approving related-party transactions;
• overseeing culture, people and succession; and
• protecting the long-term interests of the organization and relevant stakeholders.

Small ventures may use an advisory board before creating a statutory board. An advisory board can provide expertise, but its authority must not be misrepresented. Governance documents should distinguish advice from legal decision-making power.

Conflicts of interest are normal, not necessarily evidence of wrongdoing. The control is disclosure, independent review, abstention where appropriate and documentation. For example, a founder should not unilaterally approve a contract with a company owned by a family member.

8. Compliance and Ethical Decision Processes

A compliance system translates obligations into repeatable organizational behaviour. It should include a legal and regulatory register, assigned owners, policies proportionate to risk, training, monitoring, reporting channels, investigation procedures and corrective action. Policies that employees cannot understand or apply are ineffective.

An ethical decision process can be structured as follows:

1. Define the decision and the facts; separate verified facts from assumptions.
2. Identify stakeholders, rights, duties, vulnerabilities and likely consequences.
3. Identify applicable laws, contracts, professional standards and organizational values.
4. Generate alternatives, including postponement, redesign and refusal.
5. Test each alternative using consequences, duties, fairness and character.
6. Consult relevant experts and affected stakeholders without disclosing unnecessary confidential information.
7. Decide, document reasons, assign responsibility and communicate honestly.
8. Monitor results and revise the decision if new evidence appears.

A “publicity test” is useful: would the decision remain defensible if accurately reported to customers, employees and regulators? It is not a substitute for analysis, but it can reveal concealment and inconsistency. Ethical cultures also depend on incentives. If sales targets reward misleading claims, a values statement will have little effect.

Applied Case: ReLoop Mobility (Illustrative Case)

Background

ReLoop Mobility is a fictional early-stage venture that leases electric delivery bicycles to small urban retailers. It promises lower delivery costs and reduced congestion. The company owns the bicycles, provides maintenance and uses a software platform to monitor location, battery condition and rider performance.

Problem

Growth has been rapid. A major investor wants the company to expand into three cities immediately. However, the battery supplier has weak labour-transparency practices, the software collects precise rider-location data after working hours, and the company’s impact report counts avoided car journeys but excludes battery manufacturing and replacement. A board member also owns a logistics firm that may receive a large maintenance contract.

Analysis

The stakeholder map includes riders, retail customers, communities, investors, suppliers, employees, regulators and the environment. Immediate expansion could create benefits, but weak battery due diligence creates social and supply-chain risk. Excessive monitoring threatens privacy and trust. The impact claim is incomplete and may constitute greenwashing if presented as total environmental benefit. The related-party contract creates a conflict of interest.

The venture should distinguish legal requirements from ethical responsibilities. It should determine applicable privacy, employment, transport, consumer-protection and procurement rules. It should also ask whether monitoring is necessary and proportionate, whether riders have meaningful notice and whether data can be deleted or restricted outside working hours.

Approach and solution

The board delays full expansion and approves a staged pilot. Management conducts supplier due diligence, seeks evidence on labour conditions and develops a remediation plan. The environmental report is restated to include major life-cycle boundaries and clearly describe estimates. The platform adopts data minimisation, working-hour restrictions, access controls and a process for rider complaints.

The conflicted board member discloses the interest, leaves the discussion and does not vote. Independent directors compare bids and document the decision. The board sets risk indicators: serious safety incidents, unresolved privacy complaints, battery failure rates, supplier findings and emissions per completed delivery. Expansion is conditional on thresholds and independent review.

Outcome

The pilot grows more slowly than the investor originally requested, but customer retention improves and rider trust increases. The venture identifies a battery supplier with stronger traceability and redesigns its impact communication. The board also adopts a formal conflicts register and quarterly risk review.

Learning points

The case demonstrates that responsible strategy is not simply a constraint on growth. It improves decision quality by exposing hidden costs and dependencies. It also shows that governance mechanisms—recusal, staged investment, transparent reporting and measurable controls—are practical tools rather than abstract ideals.

Challenges and Limitations

Responsible entrepreneurship faces several limitations. First, stakeholder interests can be genuinely incompatible; there may be no solution that satisfies everyone. Second, impact measurement is difficult, especially for long-term environmental and social outcomes. Third, small firms often lack the money and expertise required for sophisticated assurance systems. Proportionality is essential: a start-up needs effective controls, not unnecessary bureaucracy.

Fourth, ESG ratings and labels may use different definitions, boundaries and data sources, making comparison unreliable. Fifth, reporting can displace action when managers optimise indicators rather than underlying outcomes. Sixth, governance structures can become symbolic if boards lack independence, expertise or access to information. Finally, ethical reasoning cannot eliminate uncertainty. It can, however, improve transparency, participation and accountability.

Contemporary Developments and Best Practices

Entrepreneurs increasingly face mandatory sustainability disclosures, supply-chain due diligence expectations, privacy regulation, cyber obligations and scrutiny of environmental claims. Requirements differ across jurisdictions, so ventures should obtain qualified local advice rather than assume that one framework applies everywhere. Voluntary standards may help structure action but do not replace legal compliance.

Best practices include:

• integrate ethics, sustainability and risk into strategy rather than assigning them only to a communications function;
• identify material impacts and affected stakeholders before selecting metrics;
• use specific, verifiable claims and disclose boundaries and uncertainty;
• design products for safety, repairability, accessibility and privacy;
• maintain a risk register with named owners and review dates;
• separate duties for authorisation, custody, recording and review where feasible;
• establish a speak-up channel protected from retaliation;
• conduct supplier and technology due diligence before scaling;
• ensure board members receive timely, independent information; and
• treat incidents as opportunities for learning, not merely public-relations problems.

Chapter Summary

Strategic entrepreneurship involves creating value while managing the effects of enterprise decisions on stakeholders, society and the environment. Stakeholder theory broadens the strategic lens beyond shareholders and helps reveal conflicts, dependencies and overlooked harms. Corporate responsibility, ethics, sustainability and ESG are related but distinct: compliance sets minimum obligations, ethics guides judgment, sustainability addresses long-term system viability, and ESG provides structured areas for measurement and oversight.

Circular economy principles seek to reduce resource use and retain product and material value through durable design, repair, reuse, refurbishment and responsible recycling. Social entrepreneurship combines a social mission with entrepreneurial methods and must manage the tension between impact and financial viability. Enterprise risk management identifies uncertainty affecting objectives and applies proportionate preventive, detective and corrective controls. Expected-loss calculations can support prioritisation but cannot replace judgment about rights, human harm or legal duties.

Technology and AI require governance of privacy, security, bias, transparency and human accountability. Founder accountability and board governance distribute authority, challenge assumptions, manage conflicts and protect the venture’s long-term integrity. Effective compliance and ethical decision processes connect rules, values, stakeholder participation, documentation and learning. Responsible strategy is therefore not an optional public-relations activity; it is a foundation for resilience, legitimacy and durable value creation.

Key Terms

Stakeholder: A person or group that affects or is affected by an organization.

Stakeholder theory: The view that organizations should create and govern value for relevant stakeholders, not only shareholders.

Corporate responsibility: The responsibilities an organization accepts toward society, the environment and affected parties.

Ethics: Reasoned principles concerning what conduct is right, fair or responsible.

ESG: Environmental, social and governance factors used to manage and assess organizational performance and accountability.

Materiality: The significance of an issue to decisions, stakeholders, enterprise performance or both.

Greenwashing: Misleading or exaggerated communication about environmental performance.

Sustainability: The capacity to create value without undermining future ecological, social or economic conditions.

Circular economy: An economic system designed to reduce waste and retain products, components and materials at value.

Life-cycle assessment: Evaluation of impacts across stages from resource extraction through use and end of life.

Social entrepreneurship: Entrepreneurial activity primarily directed toward social or environmental value creation.

Impact: A change in social, environmental or economic conditions associated with an intervention.

Risk: The effect of uncertainty on objectives.

Risk appetite: The amount and type of risk an organization is willing to pursue or retain.

Risk register: A structured record of identified risks, owners, controls and treatments.

Compliance: Conforming to applicable laws, regulations, contracts and organizational requirements.

Governance: The system through which an organization is directed, controlled and held accountable.

Conflict of interest: A situation in which personal interests may improperly influence organizational duties.

Data minimisation: Collecting and retaining only data necessary for a legitimate purpose.

Founder accountability: Arrangements that make founders answerable for decisions, conduct, impacts and results.

Review Questions

Short Answer Questions

1. What is a stakeholder, and why should low-power stakeholders sometimes receive special attention?
2. Distinguish legal compliance from ethical responsibility.
3. State three principles of a circular economy.
4. What are preventive, detective and corrective controls?
5. Why is disclosure important when a board member has a conflict of interest?

Long Answer Questions

1. Explain how stakeholder theory can change the way an entrepreneur evaluates a new business opportunity.
2. Compare corporate responsibility, ESG and sustainability, using examples of evidence for each.
3. Discuss the strategic benefits and limitations of circular-economy business models.
4. Explain how founder accountability and board governance can reduce entrepreneurial risk.
5. Describe a complete ethical decision process for a venture considering deployment of a high-impact AI system.

Analytical / Application Questions

1. A food-delivery start-up reduces emissions per delivery by 25 percent, but the number of deliveries doubles. Analyse whether its total environmental impact necessarily improved and identify additional information required.
2. A founder proposes selling customer data to finance expansion. Apply stakeholder theory, ethical reasoning and risk analysis to recommend a decision.
3. Design a concise risk register and governance response for a social enterprise that depends on one government contract, one technology platform and volunteer labour.

Multiple Choice Questions with Answers

Question 1

Which statement best reflects stakeholder theory?

A. Only shareholders have legitimate claims on the venture.

B. A venture should consider parties affected by and able to affect its activities.

C. Stakeholders are limited to customers and employees.

D. Stakeholder interests should always be treated as identical.

Correct Answer: B. A venture should consider parties affected by and able to affect its activities.

Question 2

Which practice is most likely to constitute greenwashing?

A. Disclosing the boundary and uncertainty of an emissions estimate.

B. Publishing a specific, independently supported reduction claim.

C. Claiming a product is environmentally harmless while omitting major life-cycle impacts.

D. Reporting both absolute emissions and emissions intensity.

Correct Answer: C. Claiming a product is environmentally harmless while omitting major life-cycle impacts.

Question 3

Which option is highest in the circular-economy hierarchy?

A. Designing a durable product that can be repaired.

B. Sending all used products to landfill.

C. Replacing products frequently with non-recyclable versions.

D. Recycling materials without considering reduction or reuse.

Correct Answer: A. Designing a durable product that can be repaired.

Question 4

A risk has a probability of 0.05 and a direct financial consequence of $200,000. What is its expected direct loss?

A. $1,000

B. $5,000

C. $10,000

D. $40,000

Correct Answer: C. $10,000

Question 5

Which is a detective control?

A. A segregation-of-duties rule before payment approval.

B. A system alert identifying unusual account access.

C. A backup used after data loss.

D. A decision to avoid a risky market entirely.

Correct Answer: B. A system alert identifying unusual account access.

Question 6

What is the primary purpose of a board in an entrepreneurial venture?

A. To replace all management decisions with board decisions.

B. To provide oversight, challenge, expertise and accountability.

C. To guarantee that the venture has no risk.

D. To maximise short-term sales regardless of impacts.

Correct Answer: B. To provide oversight, challenge, expertise and accountability.

Question 7

Which response best addresses a related-party transaction involving a board member?

A. Keep the relationship undisclosed if the price seems competitive.

B. Allow the interested member to make the final decision.

C. Disclose the interest, use independent review and document the decision.

D. Cancel every transaction involving a connected person automatically.

Correct Answer: C. Disclose the interest, use independent review and document the decision.

Question 8

Which statement about social entrepreneurship is most accurate?

A. It must always use a nonprofit legal form.

B. It measures only revenue and ignores social outcomes.

C. It combines entrepreneurial methods with a central social or environmental mission.

D. It cannot accept investment or earn commercial revenue.

Correct Answer: C. It combines entrepreneurial methods with a central social or environmental mission.

Question 9

Which practice best supports responsible AI deployment?

A. Removing human oversight to increase automation.

B. Collecting unlimited data in case it becomes useful later.

C. Defining purpose, testing for bias, providing oversight and enabling challenge.

D. Treating the vendor as solely accountable for all outcomes.

Correct Answer: C. Defining purpose, testing for bias, providing oversight and enabling challenge.

Question 10

Why is legal compliance not sufficient to demonstrate ethical conduct?

A. Law never applies to entrepreneurial ventures.

B. An action can comply with law while still being deceptive, unfair or harmful.

C. Ethical conduct requires ignoring all regulations.

D. Compliance is relevant only to large corporations.

Correct Answer: B. An action can comply with law while still being deceptive, unfair or harmful.