How is business ethics linked with corporate social responsibility

The ISO environmental management standard The United Nations Global Compact requires companies to communicate on their progress [55] or to produce a Communication on Progress, COPand to describe the company's implementation of the Compact's ten universal principles.

How is business ethics linked with corporate social responsibility

Kheng Guan Toh A firm's stakeholders are the individuals, groups, or other organizations that are affected by and also affect the firm's decisions and actions. Depending on the specific firm, stakeholders may include governmental agencies such as the Securities and Exchange Commission, social activist groups such as Greenpeace, self-regulatory organizations such as the National Association of Securities Dealers, employees, shareholders, suppliers, distributors, the media and even the community in which the firm is located among many others.

The following discussion divides the stakeholder perspective into three categorizations, but it is important to realize that firms do not always initially set out to establish one perspective over another.

Instead, firms tend to develop their views of stakeholders and stakeholder management over time in reaction to events that unfold throughout the firm's history.

These broad categorizations include the separation perspective, the ethical perspective, and the integrated perspective.

The separation perspective suggests that, because managers are agents of the firm's owners—the shareholders—managers should always strive to act in the best interest of the firm's owners.

This view does not cause managers to ignore non-owner stakeholders; indeed, when taking actions that benefit stakeholders also benefit owners, the separation perspective would advise managers to do so. One facet that differentiates this perspective from the others, however, is the rationale behind such decisions; the reason managers make decisions and take actions benefiting non-owner stakeholders is ultimately to reward owners.

Clearly, problems arise when a given decision would maximize the benefit to non-owners at the expense of owners, but that would serve the greater good of society in general. For example, suppose a new but relatively expensive technology was created that lowered pollution from steel mini-mills below the level required by the Environmental Protection Agency EPA.

In this case, there is no law requiring the steel mini-mills to purchase and implement the new technology, but doing so would benefit stakeholders such as the community in which the mini-mill had factories. Yet, due to the cost of the new technology, owners' profits would suffer.

The separation perspective would direct managers in this situation to dismiss the benefit of lower pollution levels for the community in favor of maximizing owners' profits by meeting EPA requirements, but not by spending funds in excess of what the EPA requires. The ethical perspective is that businesses have an obligation to conduct themselves in a way that treats each stakeholder group fairly.

This view does not disregard the preferences and claims of shareholders, but takes shareholder interests in consideration only to the extent that their interests coincide with the greater good.

Budweiser, for example, has modified its advertising over the years to discourage under-age drinking and driving while intoxicated. Social activist groups such as Mothers against Drunk Drivers have pressured Budweiser through their own advertising as well as media attention to maximize responsible alcohol consumption even though this may decrease overall sales for Budweiser.

This approach focuses on ethics and suggests that managers have responsibilities apart from profit-oriented activities. While recognizing the claims shareholders have to profit in exchange for putting their capital at risk, the stakeholder perspective that holds ethics as the preeminent decision rule.

Taken to an extreme, this perspective can minimize the right of owners to participate in financial gain in proportion to the risks they bear when doing what is ethically best for non-owner stakeholders runs counter to what is financially best for owners.

A possible outcome in a capitalistic society could be that fewer and fewer owners place their capital at risk through firm ownership, a condition that may ultimately decrease the economic good of society in general and thus harm the very groups the ethical perspective intended to protect.

The third approach, the integrated perspective, suggests that firms cannot function independently of the stakeholder environment in which they operate, making the effects of managerial decisions and actions on non-owner stakeholders part and parcel of decisions and actions made in the interests of owners.

How is business ethics linked with corporate social responsibility

This view holds that managerial decisions and actions are intertwined with multiple stakeholder interests in such a way that breaking shareholders apart from non-owner stakeholders is not possible. Managers who, according to this approach, make decisions in isolation of the multitude of stakeholders and focus singly on shareholders overlook important threats to their own well-being as well as opportunities on which they might capitalize.

For example, the National Association of Securities Dealers NASD is a self-regulatory organization that monitors and disciplines members such as insurance companies and brokerages. By incorporating NASD regulations into their management decisions and actions, insurance companies and brokerages, at least to some extent, preempt outside governmental action that may make compliance more restrictive or cumbersome.

The SEC reports to the U. Department of Justice—are linked in such a way insurance companies and brokerages ignoring these stakeholders would quickly be unable to make a profit and thus fail to serve the interests of owners.

Increasingly, though, managers have come to view non-owner stakeholders as essential to firms' success, not only in financial terms, but also in societal terms Rodgers and Gago, However, this has not eliminated managerial decisions that are overly concerned with financial performance at the expense of other stakeholder interests.

The collapse of Enron and WorldCom early in the twenty-first century, charges of accounting fraud against firms such as Tyco and Time Warner, Medicare fraud by HealthSouth and United Healthcare illustrate that despite the apparent logic of an integrated perspective of stakeholder management, some managers still hold to the separation perspective.

As shareholders of these and other firms have seen, however, is that sole regard to financial results is not always in the best interests of these shareholders. Those holding Enron and WorldCom stock, even those who knew nothing about illegal activities by the firm's top management, quickly came to realize that excluding non-owner stakeholders is not necessarily consistent with maximizing shareholder wealth.

In fact, excluding non-owner stakeholders can inadvertently bring more pressure on managers when non-stakeholder interests are not respected. Consider, for instance, additional regulations to which firms must now comply in the wake of many of these situations.

The Sarbanes-Oxley Act creates additional reporting requirements in attempts to prevent accounting abuses in the future. Obviously, then, neglecting non-owner stakeholders is not always in the best interest of shareholders even if managers take the separation perspective to stakeholder management.

The separation perspective can be traced at least as far back as when Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations.

Among Smith's most quoted lines is in the work's preface and states: Yet, even though he did not specifically use the term, Smith also realized that stakeholders outside the firm have an important part to play in industrialization.Sustainability. Amadeus helps the travel industry meet the needs of the present without jeopardizing the long term prosperity of the industry, natural, cultural and economic resources, using our technical expertise and business network.

Why is social responsibility important to a business? | Investopedia

The triple bottom line allows businesses to foster corporate social responsibility and benefit their community and the planet. Our mission is to be an energy company committed to a sustainable world with a forward-looking vision based on innovation, efficiency, and respect, and on creating value to promote progress in society.

Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.


These ethics originate from individuals, organizational statements or. The Role of Social Responsibility in Business Ethics Making social responsibility a part of the corporate environment is not always a matter of black-and-white, but is filled with fields of gray.

While many people believe the decisions regarding business ethics and social responsibility should not be that difficult, the implications and. Corporate social responsibility (CSR, also called corporate sustainability, sustainable business, corporate conscience, corporate citizenship or responsible business) is a type of international private business self-regulation.

While once it was possible to describe CSR as an internal organisational policy or a corporate ethic strategy, that time has passed as various international laws have.

Business Ethics and Social Responsibility