Anupama Nair
The goal of a business establishment is to get the maximum profit for the owners and shareholders. This is merely a simple statement that doesn’t describe how companies can and can’t go about their business. The pursuit of profitability doesn’t give companies the liberty to override the law or harm groups or individuals in the process. The two terms are often used together, but they have different meanings. The difference between business ethics and social responsibility is an important issue that every business must consider.
The word ethics comes from the Greek word, ‘ethos’, which means moral character. Ethical business decisions can be based on your conscience or based on principle. In either case, individuals make their own decisions according to the laws of the land or according to their core beliefs.
In simple terms, ethics involves learning what is right or wrong, and then doing the right thing, but "the right thing" is not nearly as straightforward as conveyed in books of business ethics. Most ethical dilemmas in the workplace are not simply a matter of "should Bob steal from Jack?" or "should Jack lie to his boss?"
What is business ethics? The idea has come to mean various things to various people, but generally it is realizing what it right or wrong in the workplace and doing what's right, in regard to products or services and in relationships with stakeholders. Wallace and Pekel who are management consultants, explain that the attention to business ethics is critical during times of fundamental change i.e., times much like those faced now by businesses, both non-profit or for-profit. In times of fundamental change, values that were previously taken for granted are now strongly questioned. Many of these values are no longer followed. Consequently, there is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong.
When attention to ethics is paid in the workplace, it sensitizes leaders and staff to how they should act. Perhaps most important, attention to ethics in the workplaces helps ensure that when leaders and managers are struggling in times of crises and confusion, they retain a strong moral compass. However, attention to business ethics provides numerous other benefits, as well.
Many people believe that business ethics, with its continuing attention to "doing the right thing," only states the obvious ("be good," "don't lie," etc.), and so these people don't take business ethics seriously. For many of us, these principles of the obvious can go right out of the door during times of stress. Consequently, business ethics can be strong preventative medicine. Anyway, there are many other benefits of managing ethics in the workplace. These benefits are explained later in this document.
In a business sense, corporate leaders must follow the right behavior to benefit the good of everyone including the shareholders, stakeholders, employees, customers, and the community. Business activities shouldn’t harm people, products, or services and they should help to protect the reputation of the company.
Social responsibility refers to businesses doing what they can to benefit their communities. Societies set their own acceptable norms. To be successful, businesses have to adhere to social norms and expectations. Some values have eroded over time and that has left no moral compass to guide leaders through complex social dilemmas over right and wrong. That means that businesses are on their own to decide the ways that they can best demonstrate social responsibility and give back to their communities.
How can we bring social responsibility and ethics together? Easier said than done isn’t it.
To ensure good business ethics and social responsibility, many companies establish an ethics management program that’s in keeping with their mission, vision, and values. Each ethics program is unique to the organization. A corporate ethics program is designed to teach employees the values and policies which set the behavioral standard for those who work and in and around the company.
A company’s mission, vision, and values form a credo that describes the highest set of values that a company operates under. They describe the types of thoughts and behaviors that employees and other stakeholders should aspire to. A formal code of ethics is a little different. It’s a policy that states what employees and others should not do. A code of ethics is specific to those who work under it. For large companies, they may establish specific codes of ethics for individual departments and have one general code of ethics that everyone must abide by.
Human resource departments and legal departments typically collaborate on devising an appropriate code of ethics. At the same time, codes of ethics are more than a legal mechanism. Ethical behavior is part of the corporate culture and the appropriate language and behavior start at the top.
Business ethics can be challenging because our decisions are often a reflection of our own beliefs and cultures in addition to the corporate culture. Relationships are complicated and there’s not always one clear-cut appropriate answer. Cultural assessments can be a valuable part of understanding whether certain behaviors are in keeping with a company’s code of ethics.
We live in a more socially responsible period than ever before. Corporate social responsibility is connected to what today’s companies call ESG—environmental, social, and governance. ESG is a practice that incorporates sustainability into a company business model.
Companies that embrace ESG find that it improves their brand and ultimately increases profitability. Customers of today are more inclined to buy from socially responsible companies and employees are more interested in working for socially responsible companies. In research done by Cone Communications, the study found that over 60% of Americans looked favorably on companies that pursued social and environmental change whether it was regulated or not. Almost 90% of consumers in the survey indicated they’d be inclined to purchase a particular product if it supported an issue that was close to their heart. The study also showed that 75% of consumers refused to buy anything from a company if it supported an issue they were against.
As the economy improves, society is beginning to expect corporations to give back to their environments and communities. Besides going a long way to boost a company’s branding and image, sustainable practices can aid the financial bottom line. Using less packaging and less energy in production helps to reduce production costs and increase revenue.
There are four general and specific ways that companies can join their efforts between business ethics and social responsibility. They include:
- Environmental efforts
- Philanthropy
- Ethical labor practices
- Volunteering
The expectations for good business ethics and corporate social responsibility are at an all-time high. Most likely, those expectations will continue to grow in the future. Since they are here to stay, it’s wise to give employees a voice in what those expectations look like in practice. To ensure that your company’s efforts are seen as genuine, it’s important to review your expectations to ensure they merge with the company’s mission and vision. Your involvement in such issues is something to be proud of so be certain to promote your efforts and make sure your customers are aware of it. Attention to business ethics and corporate social responsibility creates a win-win situation for all stakeholders.
