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Impact of Corporate Social Responsibility and Business Ethics on Community and Society

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Table of Contents

  • Introduction
  • Ethics and Corporate Social responsibility
  • CSR
  • Ethics
  • Conclusion
  • Works Cited

Introduction

In the era of globalization, multinational corporations have benefitted the world by providing them with products and services that are customized or needed by them. The organisations have not only brought in new technologies, but also elevated the standard of living of people. They also concentrated in spreading employment and wealth in the underdeveloped regions of the world. The corporations have responded to the needs of host countries and met the expectations for social responsibility and business ethics.

Ethics deals with the norms and values of an organisation and judge what is right and wrong for it, whereas Corporate Social Responsibility (CSR) is about expressing those values by applying different programmes and policies. Ethical codes are considered by organisations to help members in understanding the right and wrong decisions that are taken by them (Jennings 47). Maximization of shareholder’s wealth and profit are regarded as the main objective of an organisation. However, the management mainly aims at meeting the expectations of customers and create high value for shareholders. Often, it is noticed that organisations or corporations are engaged in such business activities which affects the community and environment. These have led to the development of CSR activities, which have become the means of sustainability for most organisations.  

The essay highlights the theory of CSR and its impact on the community and society. It also elaborates the importance of ethics in leading an organisation in a proper manner. CSR is a philosophy that assists a company in generating sales in an ethical manner. It also has a positive impact on culture and the climate. The study also depicts the role of CSR practices in contemporary organisational practices.

Impact of Corporate Social Responsibility and Business Ethics on Community and Society

Ethics and Corporate Social Responsibility

CSR

CSR is characterized as the mechanism through which companies discuss their positions in the communities in which they work. Ethics is the analysis of basic principles that are suitable for making choices after evaluating a course of action. For most businesses, the two terms are inextricably intertwined. It has been observed that in today’s dynamic environment, an organization’s effective activity requires sustainable growth. It further improves the consistency of the goods and services they provide to their clients (Aybars and Kutlu, “Managing corporate performance”).

Corporate accountability may be described as an organization’s willingness to follow laws and legal standards that are designed to benefit society (Nicolau, “Corporate social responsibility”). In today’s management activities, notable degrees of understanding between successful and ethical organizational practices are often identified. In today’s environment, customers and shareholders who recognize the value of CSR are focused on integrating corporate processes with social standards, resulting in effective management practices. CSR is a methodology that helps a company evaluate its corporate practices and their effect on the environment and culture by open and responsible decision-making.

According to the World Business Council for Sustainable Growth, CSR is a means of achieving sustainable development by contributing to society. Health and safety, corporate governance and integrity, environmental stewardship, civil rights, and economic growth are also examples of CSR practices. As a result, it focuses on aspects such as societal and community engagement, corporate philanthropy, growth and investment, consumer loyalty, employee volunteering, anti-corruption initiatives, anti-bribery, and commitment to just market standards (Hohnen and Potts, “Corporate social responsibility”). Business activities play an essential role in job and wealth creation but the main concern of the management is efficient utilization of capital. Thus, it can be inferred that CSR activities can assist in well-utilization of capital and human resources and also, helps in employee retention. The company also enhances its brand image by undertaking different CSR activities. The company which recycles their products aims at reducing their capital expenditure and also, takes care of the environment. It is also noticed that customers are attracted towards those companies which practice efficient CSR activities.

The companies which undertake CSR activities are well aware of the fact that the success of the deeds is dependent on the implementation process.  A particular business, thus, has both commercial and non-commercial responsibilities which are of equal importance. The non-commercial responsibilities that are undertaken by the company include the well-being of community, society, environment and government. The stakeholders are also held important, besides the shareholders and investors.

The important concept of The Triple Bottom Line approach, proposed by John Elkington in 1997 in his book, Cannibals with Forks: The Triple Bottom Line of 21st Century Business became very prominent in United Nations. The author has explained the term as the usefulness of social responsibility for development of economy, policy makers and businessman. The CSR activities have become important for justifying activities of business and practices to society in general and also, to the stakeholders. It has been noticed that in the last few decades, many organisations have engaged themselves in undertaking a wide-ranging social activities and have acted as a responsible citizen. (Norman and Carter 364).

According to the author, Smith (1999, cited by Lee and Newell, “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia”), the budget for social activities are increased so as to improve the business activities. Most of the organisations employ CSR activities, which help in developing plans that will satisfy the demand of stakeholders and shareholders. The CSR activities that are employed by organisations are directly connected with their respective social, financial and environmental performance. The important investment in the innovative activities has assisted the companies for drawing profit from it. Under any social structure or situation, accountability has been referred to as the behaviour that is obtained from an individual. Thus, the concept is very different from accountability. Some tools are used to understand the difference between CSR and accountability (Chen, “The major components of corporate social responsibility”). The effective implementation of the CSR tools will meet the demands of shareholders and stakeholders with respect to certain ethical issues.

The main objective of CSR towards enhancement of organisational effectiveness is to treat all the employees fairly and equally. They are dealt with integrity and according the basic human rights, for sustaining a suitable environment in the future (Moir, “What do we mean by corporate social responsibility?”). It is seen that there exists very limited information on the process undertaken by corporate decision makers for settling the difference between the private goal and public interest. The limitations of the CSR concepts for aligning the personal goals and business goals are not understood accurately. Various difficulties are encountered while utilizing documents of the company and also, for the construction of the detailed approach and activities of the business. The CSR approach is relative in nature and has an objective base (Galbreath, “How does corporate social responsibility benefit firms? Evidence from Australia”).  It is also referred to as radical approach. There are other CSR approaches that help in developing the continuums which actually focus on incorporating business activities within the societal activities. Organizations have also developed various measures that deal with the societal and strategic needs, community and environmental needs and thus, have led to increase in expenditure of the organizations. It is also observed that the small and medium organisations do not have adequate resources for developing or implementing CSR approaches and tools.

When a company feels the need for improving the societal performance, it undertakes social activities like, providing donations to the charities, organisations of the charitable associations and sponsoring various activities (Crane and Matten 256). The company, apart from laying importance on some specific results, also needs to conceptualize managerial responsibility and thus, takes decisions accordingly. The decisions taken should have the ability to enhance the performance of the company. The scope of CSR approach is very wide and it lays emphasis on the support of the community, innovation, diversity, job security, employee security and job involvement. The CSR approaches undertaken by the organisations have specific affect on the evaluation of the products and consumption patterns.  The reason can be depicted as the relationship that exists between the business companies and consumers. The consumers are highly affected by the tangible and acquirable aspects of a company. When a company execute evaluation process for a product and also, manufactures products which are customized, then it is said to have fulfilled the needs and demand of the consumers for delivering exemplary societal performance. This has a very moderate affect on consumers, since evaluative judgment of products has articulated standards for judgment, implied to the contexts of the decisions. The decisions regarding product development requires sufficient suggestion that are made according to the CSR approach. The companies are developing products which are environment-friendly along with the ability to meet the needs and wants of the consumers (Lee and Newell, “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia”).

Ethics

The corporate responsibility has been realised that it has risen from business ethics. So, it has few dimensions which are elaborated below:

1)Good Governance: The corporations have their own division of control and ownership. The investor relies on the manager or CEO for managing the business on their behalf, as they are also a part of the business. It indicates the fact that the agent principle relationship exists very strongly between the manager and investor. It, thus, helps in forming room for asymmetric information which means that a gap is always present between the information transferred between investors and managers. Hence, the situation demands good or corporate governance which mainly implies transparency. The shareholders are to be provided with true and complete information. There should be lucidity in the processes so that the managers do not have the chance to mismanage the asymmetric information. Thus, the main objective of good governance is to possess a system of control so that the owner’s interests are protected through vital information. 

The case of Nike can be set as an example for elaborating the topic. Nike is a household name in the sportswear and apparel industry with their high quality products that cater to the sports enthusiastic fraternity around the globe. For many years down the line Nike has been accused of child labour exploitation and of producing sports clothing under sweat shop conditions by using cheap labour in the countries of Taiwan, Indonesia, China and South Korea around 1970’s. Nike was heavily criticized internationally. Nike stated that it didn’t have control over its sub- contracted factories. As a result of worldwide protests Nike began to monitor all its factories worldwide, installed a code of conduct for all its factories and spent 10 million dollars to ensure that the code of conduct was followed worldwide. This example denotes that when the companies are faced with uncertainties good governance is the only mean to take care of the situation. 

Another example can be cited as the Astonishing Case of Apple.  Everyone had the desire to have an apple phone but many are unaware of the fact that the Apple phone one uses has been made by children slaves who are forced to work day in and out in conditions that increases the chance of having cancer because the children works in unhealthy conditions inhaling cancerous vapours for 10 hours a day, 7 days a week. This is why Apple has such a high profit margin. Apple’s Foxxcon plant possesses dark, terrific and unhealthy working conditions for the workers. The conditions are so grave that Apple had to install anti- suicide nets to prevent employees jump off from the buildings being not able to withstand the conditions inside the factory. The storm began in 2006 and is still continuing today. Recently Apple has decided to look into the matter and has begun efforts to branch out their operations to some other company other than Foxxcon. This led to good governance of the company which changed its operation.

2)Environmental accountability: The corporate social responsibility has other dimensions too, in form of accountability of the business towards environment. The business has interacted with the natural environment for decades and has drawn useful resources from the same. The business has also influenced the surroundings by different actions. So, the business will be accountable for any impact on the environment.

In earlier days, corporations used to dump their wastes in the environment which affected the society and community along with nature. However, with the increasing awareness programs and concerns over depletion of natural resources (fossil, fuel and water), environmental degradation and the concept of global warming, there has been increasing legal and moral pressure on the corporate, for realizing that earth requires preservation in order to prevent the future generation from being negatively affected.

The concept of corporate responsibility is also closely linked with philosophy of sustainable development. It proposes that organisations are obliged for making decisions which are based not only on economic or financial factors, but also on environmental and social consequences of the activities. Therefore, corporate responsibility basically deals with aligning business values with the expectations of the shareholders and stakeholders. It also identifies the commitment of a company which is accountable to the environment and is also responsible for the people, or the society at large. The company should be lucid in its business practices and should not concentrate on profit only. They should also put in efforts to earn profit for the investors too, which will lead to good governance.

The challenges that are encountered for setting the standards of corporate responsibility, which is required for successful running of business, are elaborated below. The issue regarding the setting of international standards is the extent of the approach which is in the form of CSR principles. It can be evaluated that it deals with problems at a general level. 

Setting Benchmark

The main aim of the process is to modify the criteria for assessment. The main problem faced by the top management is to set a benchmark for the standards. The measurement problems should be eradicated firstly. The success is to be measured and the yardstick is also set for eradication of the main challenge.

Merge of the Standards

The standards set for one aspect are not flexible enough to be changed according to the accountability of the environment. The codes that are used for each of the measures are common for the explicit interpretation of the standards. The other problem in measuring the standard is the ISO which is experienced for laying the standards of the physical measures.

Social Phenomena

The physical phenomena are measured and compared in absolute measures. The social phenomenon may have the requirement of qualitative measures. Relative comparisons are more common in that situation.

Transformation

Transformation always indicates radical change in different departments. It is expected that ISO standards will capture the radical changes and complexity. Thus, it complicates the measurement problems.

The Causal Framework

Another dimension is identified to be the casual framework. A casual framework is to be followed in order to make policies. If the framework is not prepared, then the policies are not effective in the real sense.  Thus, there will be a problem regarding the standards being mandatory or plain voluntary. However, it is obvious that the measurable standards are mandatory (Shimp 423).

For the past few decades, the corporate has adopted The Triple Bottom Line Reporting approach. It is an integrated approach for public reporting about the social, environmental and economic results which are done against certain benchmarks. The major steps taken by the company for integrating the different dimensions of business ethics have been elaborated above. The line of thinking primarily originates from the top management of an organisation. A number of external and internal pressures are the main influencers of these corporate leaders in order to address the increasing use of ethics, which will make an impact on the Non-Government Organizations. It has the ability to knock down the impact of corporate accounting scandals like, Enron. The corporate leaders are also influenced for increasing the legislation, increase the growth for socially responsible investments and change the expectations of the employees and customers. The top management is highly responsible for integrating ethical consideration with the decision of the company for managing the base of personal integrity and values of the organisation. The core goal of management is to put the company’s purpose and purpose statement into action, so that they can profit and fulfil the expectations of the customers (Schwartz 165).

The main foundation of ethics is divided into three categories:

Objective: It describes a set of ethical and moral obligations that exists and the needs are respected by the social entities. There is a naturalistic view of ethics that are highly important for human beings.

Subjective: It is known that the social conditions help in constructing ethical and moral standpoints of human beings.

Social Constructionist: It is observed from different theories that ethics are socially constructed, thereby shaping the views of humans and the actions that are build.

The ethical theories are elaborated as ethics of conduct and ethics of character. Under ethics of conduct, there is consequentialism and deontology. Both are about the conduct of a particular person or an organisation. Few major schools in ethics have elaborated the following concepts which relates to the ethics of a particular organisation or a human being.

1) Utilitarian view: It helps in maximising the goods and offers a straight forward method to decide upon the moral rights in the course of action for a particular observed situation. Firstly, the various courses of actions are identified and then the benefits or harmfulness of the actions are judged. At last, the course of action that provides the greatest benefits is selected, after the cost is taken into account. Therefore, the morality of action can be identified by the consequences (Crowther 165).

2)  Religious principles: It explains that certain omissions, actions and prohibitions are morally right.

3) Egoism: It advocates pursuing one’s own end (Jennings 343).

4) Conformism: It explains the need to meet the norms of the group or codes of conduct.

5) Agapism: It explains the ethics which is based on the concern or love for others. 

6) Deontology: It explains that actions are justified by the consequences. The factors, other than appropriate outcomes, are determined by the rightness of those actions (Weiss 234)

Now, explaining the concept of ethics, in terms of organisation, it can be said that the organisation must justify their goals, control methods and practices according to the well-being of the environment and society in order to keep it ethical. The shareholders concept of ethics lies in the fact that a company exists for maximising their shareholder’s value. While the stakeholder’s concept explains that the company is responsible towards its stakeholders. Thus, it is important for both the shareholders and stakeholders (Simpson 356).

Conclusion

It can be concluded that business ethics and corporate social responsibility have immense importance in development of an organisation. Without following the two fundamental concepts, an organisation will not be successful in the long run and can even face challenges (Sims 187). Corporate social responsibility has evolved into the most important component of a long-term sustainability strategy. For long-term viability, the company must consider the interests of its shareholders, the economy, and society as a whole. Ethics elucidates the proper and improper behavior of every individual person, which may impair the functioning of an organization and, in turn, cause societal disruption. Therefore, ethics and CSR both are required for organisational effectiveness and to run a peaceful business.

Works Cited
  • Aybars, Asli, and Ozlem Kutlu. “Managing corporate performance.” International Journal of Productivity and Performance Management, 59(3), pp. 229-254. Web. 31 December 2013.
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  • Crane, Andrew, and Dirk Matten. Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford: Oxford University Press. 2010. Print.
  • Crowther, David. Perspectives on Corporate Social Responsibility. England: Ashgate Publishing Company. 2004. Print.
  • Galbreath, Jeremy. “How does corporate social responsibility benefit firms? Evidence from Australia.” European Business Review, 22(4) (2010): pp. 411-431. Web. 31 December 2013.
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  • Jennings, Mariane. Business Ethics Case Studies and Selected Readings. Connecticut: South Western Cengage Learning. 2012. Print.
  • Lee, Chi, Ling, and Graeme Newell. “Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia.” Journal of Property Investment & Finance, 30(4) (2010): pp. 389-403. Web. 31 December 2013.
  • Moir, Lance. “What do we mean by corporate social responsibility?” Corporate Governance, 1(2) (2001): pp. 16-22. Web. 31 December 2013.
  • Nicolau, Juan. “Corporate social responsibility.” Annals of Tourism Research 35(4) (2008): pp. 990-1006. Web. 31 December 2013.
  • Norman, Jackson, and Pippa Carter. Rethinking Organisational Behaviour: A Poststructuralist Framework.  London: Prentice Hall. 2007. Print.
  • Schwartz, Mark. Corporate Social Responsibility: An Ethical Approach. Moorebank: NewSouth Books. 2011. Print.
  • Shimp, Terrance. Integrated Marketing Communications in Advertising and Promotion. California: Thomson Southwestern. 2007. Print.
  • Simpson, Justin. Corporate Governance, Ethics and CSR. London: Kogan Page Limited. 2013. Print.
  • Sims, Ronald. Ethics and Corporate Social Responsibility: Why Giants Fall. Connecticut: Praeger Publishers. 2003. Print.
  • Weiss, Joseph. Business Ethics. New Delhi: Dorling Kindersley Pvt. Ltd. 2011. Print.

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