Business Ethics And Corporate Social Responsibility

The paper critically examines the concepts of business ethics and corporate social responsibility in the light of doing good business.

Corporate Social Responsibility; Sustainable Value; Business Ethics

Good Ethics are Good for Business

There has been over the last three decades a growing emphasis on companies to conduct ethically sound behaviour and practice behaviour governed by ethical code of conduct prescribed by the corporate policy. The birth of industrialization did not bring the need for ethics but the drastic consequences did, in the form of child labour, dishonest trade, lack of systematic procedures and inequity in various aspects in the businesses. Social awareness from 1960s onwards forced companies to consider ethical behaviour, which refines their actions morally and in turn produces a positive image of the company in the eyes of the existing or potential customers and the society as a whole in which the company operates. But this is where the debate arises (Crane, 2006). Ethics are good for business, as it has been claimed by many business authors. However, ethical decision making is by the most complex decision making situation that companies face today. What is ethically right to one is wrong to another (Blowfield, 2008). This so happens owing to the definition of ethics, according to which it is the discipline that examines one’s moral standards or moral standards of the society (Santa Clara University, 2010). Every individual and society has its own set of values, beliefs and morals and the resultant is a conflict among different ethical decisions which pose a dilemma for managers of companies which are fast expanding across the global and taking into consideration a diverse customer base as well as a diverse workforce belonging to different cultures and different moral orientations (Valasquez, 2008). Following strong ethically behaviour and catering to the rights of individuals and societies which are major stakeholders in the companies, companies follow a socially responsible behaviour which is quality of running a good business (Blowfield, 2008). The need for companies to be socially responsible and ethically sound is a complex issue for the companies as they put forward cost complications as well. But nonetheless, the argument that good ethics are good for businesses is well supported and companies who are not following ethically sound behaviour are facing tremendous challenges in sustaining profitable performance of their operations. It has been argued that commitment to socially responsible behaviour and ethically sound practices is an effective long term strategy and it may lead to short term losses but its benefits are spread across the longer run, which companies have to realize to adapt. The concept of sustainable value emerges in the context of long term corporate social responsibility which companies are increasingly benefiting from (Valasquez, 2008).

In today’s world filled with immense global crisis and endless social and environmental issues that affect the business environment, the managers, and shareholders are increasingly concerned over the future well-being of their company. With the corporate social responsibility taken as an expense, there is growing concern over preventing overall reduction in the return to the shareholders. Chris Laszlo through his book, Sustainable Value “How the world’s leading companies are doing well by doing good,” provides a rather comprehensive solution to this problem: Sustainable Value, hence bringing forth social responsibility as an opportunity not as an additional cost to be borne. With a large number of companies operating to service more or less the same pool of customers, there has been heightened competition over gaining an edge in the market over the years, which keeps on increasing. Large companies focus on their competences to gauge success and minimize their costs to provide value back to their shareholders. With the new era came a new concept of corporate social responsibility, which brought the notion that a business has a duty to the society, which it has to fulfill. This only in turn brings a positive image for the company. As much as can be argued about the additional cost it brings for the company, according to Laszlo, investing in social responsibility can only allow the companies to gain competitive advantage. There are many global issues addressing the nations that the companies can choose to serve the society (Laszlo, 2007, p.75).

According to Laszlo (2007) surviving in the world of today filled with global crisis let it be in the form of environmental issues that have to be reduced, societal wrongs that need to be corrected and the wellbeing of the community that is to be considered, is an intense business environment on its own. Businesses can no longer survive with a sole responsibility to its owners but being a part of the larger community they have to face the challenges and bring about solutions.

Companies now are increasingly opting for addressing specific and special social and environment issues, creating awareness among the people of the society regarding the hazards and at the same time bringing to them solutions let it be in the form of their innovative products and services or through special voluntary services as part of their corporate social responsibility other than following strong ethical conduct internally. Of course, in the end the business benefits from the positive image in the minds of the potential and existing customers, and enjoys the sustainable value that ensures a profitable future (Laszlo, 2007, 178). Such an investment in social responsibility and business ethics which brings about productivity and profitability is termed as sustainable value. Sustainable value is the value given to the shareholders and stakeholders, which can be expressed in monetary terms and which is increasingly rejecting the idea that investing in corporate social responsibility only means additional costs for the business (Laszlo, 2007, p.117). Sustainable value only sustains the returns for the company and the added cost notion is just a myth that is by far the only hindrance in its successful implementation in companies. It calls for social innovation, a change in leadership style and the overall direction of the company that puts the social environment alongside its main objectives, which are all related to maximizing its returns (Vogel, 2008).

Creating services and products to cater to the sustainable-value commitment of the business while at the same time applying social responsibility mechanism calls for bringing about social innovation. This, by definition, means creating new strategies, plans, concepts and ideas to address to the specific and existing social needs that are targeted by an organization (May, 2008). Social innovation is by far a different concept from the innovation encouraged in the organizations for the benefit of the organization itself alone. Social innovation has a much larger scope with takes into account the entire external as well as internal environment in which the company operates in addressing each member’s interests (Vogel, 2008).

Sustainable value is a concept, which emerged from the groundwork put forward by the not so distant phenomenon of holistic value. This idea cleverly integrates the monetary objectives of the organization with the social environment, the community in which the business operates in and the internal structure of the organization not missing out any value generating element or competency residing inside and any future value generating opportunity lying in the outside world. Holistic value calls for realizing the bigger picture of the business world, which works successfully with the well-combined effort of its many elements (McElhaney, 2007)

When one talks of sustainable value, social responsibility and holistic value, a much concerning object put in focus is the social environment within which the business operates. This social environment consists of the following elements and members: the employees that work for the company to enable it to meet its objectives; the people who are and could be the customers of the company; the social activists and environmental pressure groups which potentially hold the key to disrupting the entire organization’s public image let there be any environmental mishap done through its hands; a primary and secondary set of attitudes, values and objectives of each of these groups; a profound culture; and a set of societal norms that the business has to follow up to survive in a well-established social environment (Vogel, 2008).

Of course, social environment is not the only influencer of the overall business world, sustainable value strategy making calls for the vivid concern for the serious economic issues facing the nation or the world. Such as the recent global recession that affected the organizations around the world, profit sustainability became quite a challenge to overcome as a circumstance of it (Kotler, and Lee, 2008). This brings forth the ethical dilemmas against the corporate social responsibility, as the major responsibility of the company is towards its shareholders and investors to provide them the most benefits, but in times of economic crisis when the revenues shrink doing so alongside the socially responsible behaviour becomes far difficult. The Commitment to sustainable value ensures the involvement of economic issues to be addressed through a well-formed strategy in combination with the issues of the society, whilst maintain ethical standards of the corporation (Holmes, 2007).

This is indeed a long strategy which cannot be implemented or formulated abruptly. According to business ethics authors, commitment towards socially responsible behaviour should be a long term strategy as its benefits are more in future than in the present (May, 2008). The starting point is making the individuals and the teams in the organisation ethically sound in their behaviour and actions so that together as a group, the entire organisations puts forwards a responsible and morally strong behaviour (May, 2008). Once the entire workforce is committed to morality and socially responsible behaviour then can only he company implement a long term strategy for sustainable value, which calls for commitment at individual as well as holistic level in order to bring forth benefits in future. In order to prevail a culture of moral soundness and responsibility, the leaders have to first analyze and understand the different backgrounds the employees belong to and establish commonality in beliefs and values in order to enable the employees to produce an ethical fit in the conduct which is similar for all and minimum conflicts occur. Ethical training is also common nowadays in order to explain to the employees the importance of their moral conduct and how well they can serve the company as well as the society through practicing ethically strong behaviour. With this commitment can only the company successfully practice social responsible behaviour and become ‘good’ in the eyes of the society.