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International Journal of Allied Practice, Research and Review

Website: www.ijaprr.com (ISSN 2350-1294)

Ethics and Corporate Social Responsibility

C.A. ShaileshDattatrayaBorkar

Assistant Professor in Accountancy

shellsnbd@rediffmail.com, shellsnbd@hotmail.com

Abstract - The business ethics that we talk of in relation to companies contain the same issues as the ethics in the socio-

economic context to which they relate. The aspirations and ethical levels of companies operating in certain countries

differ principally from those of companies operating in others, where the concerns for environment, social welfare,

human rights, co-operation,etc. are quite different. The new globalized, networked economy - based on the coordinated

management of knowledge, sets evolutionary trends in motion that raise the levels of ethical compulsions.

Keywords: Business ethics; Social welfare; Co-operation.

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I. Introduction

An organization that has economic responsibility is obviously obliged to earn sufficient returns for its

investors while the adhering to legal requirements. This however cannot be at the expense of corporate

social responsibility which implies that organizations also have certain ethical and societal responsibilities

that go beyond their economic performance. Corporate Social Responsibility takes into consideration the

aspirations of all stakeholders such as employees, customers, suppliers, local communities, state

governments, international organizations, etc. and not only financial investors. The business entity in

question derives its resources from society and is therefore under obligation to address its concerns.

Ethics is an inevitable component of individual and group behavior that go towards executing economic

responsibilities. Ethics regard individual and organizational business actions and decisions in the light of

moral principles and values. Corporate social responsibility and the pursuant requirement to adhere to

ethics entail the following deliberations by the organization–

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Identifying and addressing important ethical issues that arise in business such as fraudulent

behavior, consumerprotection, discrimination, etc.

Making a fair assessment of the global challenges at hand viz. demographic, ecologic and social

issues that requireorganizationalresponsibility.

Critically assess the assumptions and values that every factor brings to complex business

decisions that involveethical issues.

Design and execute action plans that address ethical issues.

II. Matter

Business ethics are moral principles that work as a guiding factor for the way a business executes

its economic responsibilities. It involves differentiating between the right and the wrong and then

choosing the right path. It is indeed much easier to identify unethical business practices but it is important

to chalk out steps to address various social issues. To take a few examples, companies should not adopt

child labour or use copyrighted materials or processes or engage in bribery. However, it is difficult to

generalize the principles of good ethical practice. A company is under continuous pressure to face stiff

market competition and yet earn a handsome return for its shareholders. In doing so, the company must

ensure that it causes minimum harm to environment and work in a way that does not cause harm to

communities in which it functions. This is known as corporate social responsibility.

The law is the key starting point for any business. Most leading organizations have their own

statements of business principles which set out their core values and standards that they intend to follow

in due course of business. A business should also follow relevant codes of practice that are relevant to its

area of operation. These are often drawn up in consultation with governments, employees, local

communities and other stakeholders. An organization that values business ethics and upholds corporate

social responsibility as indispensable must address the concerns of all the elements of the supply chain of

which it is itself a part and in fact right upto the final consumer. This would encompass the interests of

suppliers, distributors, contractors, sales agents, etc. Businesses and industries are increasingly finding

external pressure to improve their ethical track record an inevitable reality. The rise of online consumer

activism has made business activities the cynosure of social concern. Today,with increasing consumer

awareness, the enforcement of the consumer protection rules, the easily enforceable right to information

act procedures, direct consumer action is a challenge that business have to face, thereby making

continuous social and environmental policies not an option but rather a compulsion.

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Consumers may take action against:

Businesses they consider to be unethical in some ways e.g. the marketing of animal furs

Businesses acting irresponsibly e.g. emissions of harmful industrial gases

Businesses that use business practices they find unacceptable e.g. resorting to bribery and

corruption

There are of course some irrefutable advantages of ethical behavior like:

Higher revenues – demand from positive consumer support

Improved brand and business awareness and recognition and the ensuing consumer loyalty

Better employee motivation due to democratic labour policy

New sources of finance – e.g. from ethical investors concerned with moral investment

The disadvantages of adopting ethical policies though not many may be enlisted as under:

Higher costs – to adopt an environmentally safe process that requires investment

Higher expenses –training & communication of ethical policy to various constituents of the

organization

Corporate social responsibility (CSR) promotes a vision of business accountability to a wide

range of stakeholders, besides shareholders and investors. Key areas of concern are environmental

protection and the wellbeing of employees, the community and civil society in general, both now and in

the future. The underlying idea of CSR is organizations can no longer act as isolated economic entities

operating exclusive of the broader society. Traditional views about competitiveness, survival and

profitability have been replaced by social responsibility.

Some of the motivators pushing business towards CSR include an increasingly laissez faire stance

by governments worldwide, a very much aware and demanding investor segment, an enlightened

customer base that expects not just environmentally safe products but also corporate responsibility on all

fronts, employee groups that look beyond remuneration and expect employers to be more socially

cognizant and responsible and a sea change in the assessment of corporate performance that incorporates

the entire supply chain.

Some benefits of adopting a policy of social responsibility are as follows:

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1. Company benefits:

Improved financial performance.

Lower operating costs.

Enhanced brand image and reputation.

Increased sales and customer loyalty.

Greater productivity and quality.

More ability to attract and retain skilled employees.

Easier access to capital.

2. Benefits to the community and the general public:

Charitable contributions for socially relevant projects.

Corporate involvement in community education, employment and housing programmes.

Product safety and quality.

3. Environmental benefits:

Recycling of waste.

Better product durability and functionality.

Greater use of renewable resources.

Integration of environmental management tools into business plans, including life-cycle

assessment and costing, environmental management standards, and eco-labelling.

Many companies however, continue to overlook CSR in the supply chain - for example by

importing and retailing timber that has been illegally harvested. While governments can impose embargos

and penalties on offending companies, the organizations themselves can make a commitment to

sustainability by being more discerning in their choice of suppliers. The concept of corporate social

responsibility is now firmly rooted on the global business agenda. But in order to move from preaching to

practice, many obstacles have to be overcome.

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A major challenge facing businesses is the need for more reliable indicators of progress in the field of

CSR, along with the dissemination of CSR strategies. Transparency and dialogue can help to make a

business appear more trustworthy and push up the standards of other organizations at the same time.There

is increasing recognition of the importance of public-private partnerships in CSR. Private enterprise is

beginning to reach out to other members of civil society such as non-governmental organizations, the

United Nations, and national and regional governments.

An example of such a partnership is the 'Global Compact'. Launched in 1999 by the United

Nations, the Global Compact is a coalition of large businesses, trade unions and environmental and

human rights groups, brought together to share a dialogue on corporate social responsibility.The 'Working

with NGOs' section offers some insights into the way businesses and lobby groups are working together

to mutual benefit.

Contrary to such public awareness and enthusiasm surrounding corporate efforts towards social

largesse, is the penchant of large businesses to devise new ways of circumventing not only law but also

social expectation. Let us revisit such a corporate endeavour - The Lockheed Case. In this case, the

Japanese bidders expected that certain individuals would be paid cash in exchange for favours of giving

access to the right people and to influence the awarding of orders for the TriStar jet. The payments were

for significant amounts of money and were communicated by third parties who were setting up the deals.

None of the individuals who were paid ever asked for money nor did anyone ever promise that if money

was paid then orders would definitely be given. However, the strong implication was that if the money

was not paid, the reverse would definitely occur i.e. no orders would be given. The amount of payments

expected increased after the orders started, since the payments were later claimed to be for each airplane

and not just a one-time payment. This was not communicated upfront. The justifications of the Lockheed

management over this situation were:

The $12 million payout was beneficial to Lockheed and was only about 3% of the purchase price.

The payments did not violate any American law and no corporate regulation was violated.

Workers, communities and stockholders would benefit by the deal.

Lockheed never publicly acknowledged the transfer of any funds.

The sale would not have been made without the payments.

Lockheed never talked about money to any Japanese politician, government official, or airline

official.

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This case is a classic example of the circumvention that circumstances afford for large corporates

to make hay from. Without the slightest doubt excuses do not fall short of justification for such corporate

excess. Some very common justifications may be enlisted as follows –

We follow the law. We will change when the laws change or when public opinion rises up.

If we don’t as a society put ethics into our laws, why should we expect businesses to fill that

void?

Any talk about ethics by businesses is primarily marketing talk, designed to make corporations

look good to the public. Any real good done is welcome but incidental.

Business people with strong reputations for honesty and integrity do better in the long run. The

short run requires the businessman, if he is to be a winner, to bluff within the rules of the business

game.

Yet, in spite of these aberrant anomalies, it can be emphatically said that ethical decision-making

creates lasting business relationships. No amount of government strictures can bring about a social

outlook as can be generated by an enlightened management.Here, it would be in keeping with the

deliberations to mention David Ingram, author of multiple publications since 2009, including "The

Houston Chronicle" and online at Business.com., as well as a small-business owner, who, in his write-up

on “How to Make Ethical Business Decisions “, has made some valuable suggestions. He says -Making

ethical business decisions consistently is a key to long-term success for any business, although ethical

decision makers may, at times, achieve weaker short-term financial results than their shadier counterparts.

Knowing how to make ethical business decisions can help you to set the standard throughout your

organization, helping your company to garner a strong, positive reputation in the marketplace while

securing a loyal customer base. For this certain steps are recommended –

Step 1- Create a code of ethics and consult stakeholders before making business decisions. A

formal code of ethics can help you and your employees make decisions more quickly by

conforming to a set of rules to which everyone agrees. Write your code of ethics as generally or

specifically as you would like, and format it as a numbered list. Before making a decision,

scrutinize each alternative by going down the list and determining whether the alternative adheres

to the code.

Step 2 - Consider the effects of your decisions on all stakeholders. Decisions are often made to

address one or a small number of issues, such as revenue growth, cost control or client-specific

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issues, but it is important to realize the wider implications of your decisions on everyone affected.

Business decisions made in the best interest of stockholders, for example, can have effects on

employees, clients, suppliers, and people living and working near your operations, the natural

environment and even future generations of people.

Step 3 - Use industry regulations as a starting point when making decisions. A number of

industries, including construction and financial services, are highly regulated to ensure the ethical

operation of all companies. Regulations generally require a minimum level of ethical

consideration, however, and it is possible for companies to operate within legal boundaries while

still acting unethically. Build your organization to exceed laws and regulations, going further than

your competitors to ensure that all stakeholders are treated equitably, rather than simply

conforming to minimum standards.

Step 4 - Consult others when making decisions with widespread consequences. Gaining a fresh

perspective on your dilemma can help to shed light on possibilities and impacts of which you are

unaware. You can ask for help in generating options and in choosing which option to pursue, or

you can seek advice concerning an option that you have already chosen before implementing it.

Step 5 - Review the results of your past business decisions, and learn from your mistakes.

Managers should always reflect on the outcomes of their decisions. No one can make perfect

decisions all of the time, although making consistently ethical decisions is more easily

accomplished than making consistently successful or profitable ones. If you have made and

implemented a decision with questionable ethical implications, act quickly to resolve the matter

by making restitution to everyone affected and work to counteract the decision's effects.

III. References

1. David Ingram "The Houston Chronicle" 2009

2. Porter M. E., Kramer M.R., Strategy & Society. The Link between Competitive Advantage andCorporate Social

Responsibility, Harvard Business Review, December 2006.

3. Rappaport A., Ten Ways to Create Shareholder Value, Harvard Business Review, 2006.

4. http://www.iisd.org/business/issues/sr.aspx