The Role Of Business Ethics And Corporate Social Responsibility On Business Organizations

Defining Social Responsibility

Discuss about the Evaluating The Relationship In The Business Organization.

Chell et al., (2016), have defined social responsibility as the concept which states that the business entities should not only focus on the profit making activities but also they should maintain an appropriate balance between these activities with those which benefits the society either directly or indirectly. This may incorporate enhancing the businesses while maintaining a positive relationship with the society within which it is operating. The International Organization for Standardization (ISO) focuses on evaluating the relationship between the business organization and the environment surrounding the organization. Presently this social responsibility is being used as a measure of overall organizational performance. The social responsibility in turn makes an organization or individual to act in the best possible manner so as not to affect the environment and society.

Furthermore, Corporate Social responsibility can be defined as a concept through which the companies the social and environmental concerns of the organizations are integrated with their business operations and also within their interaction with the stakeholders (Crane & Matten, 2016). On the other hand, business ethics has been defined as a self-conscious way through looking at the business. In the context of business entities it is quintessential to maintain a minimum level of ethics while conducting the business otherwise its alignment with the social responsibility or corporate social responsibility will be unbalanced. This assignment will focus on determining the role of business ethics and corporate social responsibility on business organizations. This academic essay will further emphasize on evaluating how the scholarly literature base is opining about maintaining ethics and social responsibility in the context of the present global environment of business.

Business ethics can be explained as the standard or principle that outlines whether the business conducts are acceptable or not. This behavioral acceptability of the business is determined by the competitors, customers, interest groups, government regulators and the personal and moral values of the individuals as well. In order to provide an example the case of Azko Nobel Chemical BV in Canada can be stated (Hartman et al., 2014). The Competition Bureau of Canada pledged the company guilty in the federal Court for participating in conspiracies for manipulating market prices and for using chemicals in numerous consumer products as well.

There are numerous researchers who believe that the businesses should not only focus on accruing profit but also take into account the social implications imposed by their business operations. Kolk (2016), have defined social responsibility as the obligation of the business entities towards reducing the negative impact and enhancing the positive impact of the business activities over the society. However, there are several instances where the people use the terms social responsibility and ethics alternatively. Although the meaning of these two words are not the same. The ethics of a business emphasizes on the decision of an individual or a group of individuals that the society evaluates whether is correct or incorrect. On the other hand, social responsibility or corporate social responsibility is a wider concept that determines the impact of the business activities over the entire society (Ferrell & Fraedrich, 2015). For instance, from an ethical perspective one may become concerned and restrictive while health care organization or an individual practitioner is overcharging the provincial government for their service. However, from the social responsibility perspective it would be considered whether this overcharging may enable the system to provide ample medical facilities to the broader population.

Corporate Social Responsibility

Recognizing and resolving the ethical issues in business is the most critical factor towards making ethical decisions in business. In order to determine the key factors that motivates the business entities to operate in an ethical manner it is necessary to develop an in depth knowledge of the concept (Schwartz, 2017). It has been observed that altruism is not the only factor that motivates the organizations to conduct business activities ethically, it the “bottom line” are taken into consideration there are other important reasons as well which acts as the building block towards committing to ethical values.

• It is quite evident from the available data that the ethical businesses are more profitable.
• While the ethical choice is made it reduces the stress over the corporate managers and the other employees as well.
• The reputation of an organization plays a crucial role in determining the profitability of the business.
• Leadership is enhanced through ethical practices.
• It is also a matter of fact that the substitute of voluntary ethical behavior is the regulations which are costly and demanding.

The people who are well aware about the market activities will be able to recognize the unethical as well as aggressive sales techniques used by the organizations to prey the consumers. In certain cases the businesses resort to some sales techniques which are confusing and quite hard to refuse. It is an important notion that is importantly to be taken into consideration is that the ethics in businesses is far more important than the legal issues. The ethical conduct of the business helps in developing a sense of trust among the individual customers as well as enhances the business relationships as well. These in turn promotes and substantiates the confidence of business relationships (Trevino & Nelson, 2016). The organizations which have been accused for acting unethically or carrying out business malpractices faces certain difficulties in establishing trust and confidence.

Identifying the ethical issues can be considered as the most crucial step towards understanding the ethics of business. The ethical issue is characterized as the recognizable problem or opportunity which requires an individual to make a choice from numerous different actions which can later be evaluated as ethical or unethical. In the context of business activities these choices may involve selecting between monetary benefits and what the person carrying out the decision thinks to be an appropriate ethical conduct (Pearson, 2017). The most efficient method to evaluate the ethics behind a specific decision is to look at the situation from the viewpoint of a customer or competitor. However, through the entire discussion regarding the business ethics it can be observed that in the modern day business environment where the customers are well aware about the fact that it is crucial for the businesses to carry out its operations ethically. Otherwise, the businesses will lose its reputation and thereby no longer be able to carry out its operations effectively and efficiently.

Business Ethics and Its Importance

In addition to the business ethics, social responsibility is also quite important for the business entities (Quarshie et al., 2016). However, the corporate social responsibility has been observed to be emerging as a result of the business ethics. It possesses three clear dimensions which are as follows,

1. a) A better corporate governance
2. b) Corporate Social Responsibility
3. c) Environmental Accountability

These are the way through which business ethics is spreading its influence over the business governance. The top most management of an organization is not only held responsible for identifying such a change but also for translating this vision into appropriate practices and thereby adopting the appropriate measure which will be balanced incorporating the three aforesaid approach.

An effective corporation is designed and formed on the basis of the division between control and ownership. In such a system the owner or the investor relies completely over the manager or CEO. The manager carries out the business activities effectively on behalf of the investor. This clearly implies that there exists a principle agent relationship between the manager and investor that gives rise to the emergence of asymmetric information. This means there may exist a gap between the information possessed by the manager as well as the investor (Bowie, 2017). This specific situation in turn enhances the need for a good corporate governance, which will be transparent. On the other hand, the shareholders should also possess complete and appropriate information. The entire process should also be transparency in the process as well so that the manager does not become able to exploit the asymmetric information. The key objective of good governance is to establish an efficient system for controlling and managing through which the interest of the investors can be protected. The process should also be so designed to restrict the managers from patronizing their own interest i.e. the manager who is working as an agent may possess their own interest which may not be in line with the organizational objectives. These processes must be institutionalized so as to protect the interest of the investors which is maximization of profit as well as wealth (Vitell, 2015). Henceforth, the ethical structure has the implication of good governance which in turn implies increased profits.

The second ethical dimension of the corporate social responsibility emphasizes over the social practices where the organizations carry out their operations for rendering their services towards the community. Stakeholders are those who can easily be influenced through the policies, decisions, actions or practices of the organization. Stakeholders not only incorporates shareholders but also amalgamates consumers, suppliers, employees and government within it (Köseoglu et la., 2018). Through corporate social responsibility the organizations are acknowledging their responsibilities towards the society which is more than making profit through selling goods and services. It is a widely accepted fact that these modern day organizations are more than just economic institutions and these organizations also possess certain responsibilities towards the society which helps in solving the rising social issues (Pai et al., 2015). CSR or corporate social responsibility emphasizes over the process through which the companies control its business processes and thereby leaves a positive impact over the society.

Identifying Ethical Issues in Business

The third dimension of CSR is considered in the form of accountability of the business towards the environment. The business entities interact with the natural environment on a regular basis, these entities accrue their resources from the environment as well. Furthermore, the businesses are found to be influencing the environment through its actions (Andriof & McIntosh, 2017). Hence, these organizations will also be held responsible for leaving any impact over the environment. Previously the corporate organizations used to dump the waste products in the environment. However, with the rise in the level of environmental awareness and degradation of the environment quality, depletion of the exhaustible resources like fossil fuel, coal, water and other natural resources the organizations are being pressurized to become responsible towards the environment (Spence, 2016).

Corporate Social Responsibility is linked strictly with the components of sustainable development. It proposes that the business enterprise should not take decisions on the basis of the financial and economic factors they should also take into account the environmental and social consequences of their activities being carried out by them. Hence corporate social responsibility is associated with how these businesses are adjoining their business operations with the expectations and need of the different stakeholders of the company (Carroll, 2015). Moreover, the corporate responsibility also depicts the commitment of an organization towards the environment.

Conclusion

Therefore in the context of the given case scenario it can be observed that the organizations should be responsible for the society and environment as well as they should carry out their business activities as ethically as possible. The ethics of business is mainly the criteria which are needed to be followed so that the activities which are being carried out by the businesses mitigate the social and environmental standards specified by the governing authority. On an added notion, it should also be mentioned that the organizations in most of the cases find out that conducting the business ethically involved forgoing a substantial amount of financial benefits as well. Therefore, as the discussion suggests it is quite necessary to conduct the business ethically as in the ever increasing awareness among the people may find an unethical business non-suitable for the society and disregard the business. This as a result may cause a significant decline in the revenue and profit of the organization. Finally it has also been observed that corporate social responsibility is a component of the business ethics as well. Business ethics is a wide concept that encompasses the concept of business ethics and therefore as stated earlier it can again be pointed out that practicing both of these has become inevitable for the organization to follow.

Reference List

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Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.

Carroll, A. B. (2015). Corporate social responsibility: The centerpiece of competing and complementary frameworks. Organizational Dynamics, 44(2), 87-96.

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Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.

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Kolk, A. (2016). The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), 23-34.

Köseoglu, M. A., Yildiz, M., & Ciftci, T. (2018). Authorship trends and collaboration patterns in business ethics literature. Business Ethics: A European Review, 27(2), 164-177.

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Pearson, R. (2017). Business ethics as communication ethics: Public relations practice and the idea of dialogue. In Public relations theory (pp. 111-131). Routledge.

Quarshie, A. M., Salmi, A., & Leuschner, R. (2016). Sustainability and corporate social responsibility in supply chains: The state of research in supply chain management and business ethics journals. Journal of Purchasing and Supply Management, 22(2), 82-97.

Schwartz, M.S., 2017. Corporate social responsibility. Routledge.

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Vitell, S. J. (2015). A case for consumer social responsibility (CnSR): Including a selected review of consumer ethics/social responsibility research. Journal of Business Ethics, 130(4), 767-774.