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Business Ethics and Social Responsibility

Posted In: Business News

Mosaic of photos showing business professionals and screen spaces representing social responsibility.

The study of business ethics refers to the ethical dimensions of productive organizations and commercial activities, according to the Stanford Encyclopedia of Philosophy. It applies to the production, distribution, marketing, sale and consumption of goods and services. It can include potentially controversial issues like insider trading, bribery and discrimination.

From its roots in ancient Greece to modern topics like unequal gender pay, business ethics is a large field of study. There are several journals devoted to business ethics, and it appears in mainstream philosophy and social science journals as well. However, there is a difference between business ethics and social responsibility (and corporate social responsibility).

The Daily Impact of Business Decisions

Business decisions related to ethics impact the daily lives of professionals and consumers. Many people are employed at organizations that sell or provide goods and services. Professionals like lawyers and accountants are bound by codes of conduct from professional societies, and other professionals must practice sound business ethics in their role and with co-workers, clients and the public.

Consumers interact with the brands and people in a business, and these exchanges affect the success of the business. For example, small businesses depend on reputation and trust among people in the community. By treating employees and customers well, businesses can gain the community’s support.

Unethical business practices can have the opposite effect on customers. False or discriminatory advertising, negative treatment of employees and ignoring safety concerns in products can undermine consumer confidence. Legal action can also result.

Relating Business Ethics and Social Responsibility

Business leaders and organizations can examine how their decisions relate to social responsibility, which is a general concept that can include social as well as cultural, economic and environmental issues. By integrating business ethics and principles of social responsibility, organizations can make a difference in the world and enhance their reputation.

Some companies have adopted the social entrepreneurship model of business that focuses on applying practical, innovative and sustainable approaches to benefit society. The shoe retailer TOMS is one of the most popular examples of the social entrepreneurship model. For every pair of shoes sold, the company provides a new pair of shoes to children in developing countries.

Another example of combining business ethics and social responsibility is by focusing on benefiting the environment. Forbes notes some of the reasons why Seventh Generation, a Burlington, Vermont-based company that produces and distributes green products, was recognized as the best company for the environment.

  • Selling products such as biodegradable, vegetable-based cleaning products, chlorine-free tampons and paper towels and natural lotion baby wipes.
  • Developing an employee bonus program that awards workers who figure out how to make the company’s goods even more sustainable.
  • Having an LEED-certified building where more than a quarter of the company’s fleet is comprised of low-emissions cars and more than a quarter of the energy burned in manufacturing its products comes from renewable energy.

Business Ethics and Corporate Social Responsibility

Definition and Characteristics

Corporate social responsibility is similar to ideas of social responsibility for individuals and businesses. Some sources provide similar definitions for the two terms, but corporate social responsibility is a specific business approach that began in the 1950s and 1960s, with definitions expanding in the ensuing decades.

There is no universally accepted definition of corporate social responsibility, according to the Journal of Business Ethics, but two features can be used to differentiate corporate social responsibility from other activities: 1) They partly or entirely benefit society and/or general interests; and 2) they are not obligated by law. Other aspects of corporate social responsibility can vary.

  • Domains include environmental friendliness, community support, local products promotion, fair employee treatment and more.
  • Stakeholders include employees, suppliers, customers, communities, the environment, investors and regulators.
  • Policies and activities include cause-related marketing (marketing programs that combine sales objectives and helping worthy causes), sponsorship (connecting worthy causes to a brand or organization for money) and corporate philanthropy (charitable donations).

Some organizations engage in corporate social responsibility activities for intrinsic reasons: to help out and make societal contributions. Another motive is extrinsic, which relates to a company expecting financial or other benefits for socially responsible behavior. Many studies reflect positive organizational outcomes for corporate social responsibility activities, the Journal of Business Ethics reports. Finally, a third motive for corporate social responsibility activities is meeting societal expectations and stakeholder pressure.

Interaction

According to a paper in Procedia Economics and Finance, corporate social responsibility is a subset of business ethics. This conclusion was made when viewing corporate social responsibility under the normative stakeholder theory, or a philosophy that “affirms that business corporations are ‘morally’ responsible to look after the concerns of a larger group of stake holders which could include owners, customers, vendors, employees and community rather than its stockholders.” Some sources define stakeholders as groups that the organization depends on for its existence.

In this context, corporate social responsibility becomes synonymous with the duties and relationship between the business and the environment that facilitates its existence. And thus, it is not enough to cover certain ethical practices in businesses. For instance, corporate social responsibility does not include the ethicality of how the organization pursues profits or subscribes to political associations.

Corporate social responsibility is related to business ethics, but the former is a narrow topic within the latter area. Businesses should use corporate social responsibility along with processes like corporate governance, corporate outreach and politics, business process redesign and corporate strategy to reconcile with the ethicality of doing business, according to Procedia Economics and Finance.

Applying Ethics to a Career in Business

Business professionals should have a solid grasp of ethical practices for their careers. Grace College’s business programs are rooted in sound moral and ethical approaches to business, with a focus on Christian servant leadership.

Grace’s fully online Bachelor of Science in Business Administration focuses on the skills and tools graduates need to adapt and excel in the business world. This GOAL (Grace Opportunities for Adult Learners) program is designed for students balancing personal commitments while pursuing an education. It is priced substantially below most degree completion programs and can be completed in as little as 16 months.

Grace’s fully online Master of Business Administration provides students with a strong foundation in marketing, accounting, finance and human resources as well as coursework in entrepreneurship. This program can help graduates pursue leadership opportunities in business.

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