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May 2012/ Volume 2/Issue 5/Article No-13/761-765 ISSN: 2249-7196

*Corresponding Author www.ijmrr.com 761

INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH

AND REVIEW

BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Dr. Manoj M. Pimple* 1

1 Assistant professor, Mahtma Jyotiba Phule Arts, Commerce & Science College, Bhatkuli,

Amravati.

ABSTRACT

Is there a difference between business ethics and corporate social responsibility? Are the two

compatible or mutually exclusive? This paper raises questions about the overlap and

reciprocally supportive interface between business ethics and corporate social responsibility,

as well as about their mutual exclusivity. It isolates several specific ethical and corporate

social responsibility topics for further exploration.

Business ethics imply a system of moral principles and rules of conduct applied to business

so that the business should be conducted according to certain self-recognised moral

standards. This is with a view that the interests of society and of the business sector itself

should not suffer. The ethics are the same as those, which every individual in society and

society as a whole should abide by.

Corporate social responsibility is a form of corporate self-regulation integrated into

a business model. It is also called as corporate conscience, corporate citizenship, social

performance, or sustainable responsible business. CSR policy functions as a built-in, self-

regulating mechanism whereby business monitors and ensures its active compliance with the

spirit of the law, ethical standards, and international norms.

Keywords: Business Ethics, Self regulation, Social performance

INTRODUCTION

Business ethics can be defined as written and unwritten codes of principles and values that

govern decisions and actions within a company. In the business world, the organization's

culture sets standards for determining the difference between good and bad decision making

and behavior. In the most basic terms, a definition for business ethics boils down to knowing

the difference between right and wrong and choosing to do what is right. The phrase 'business

ethics' can be used to describe the actions of individuals within an organization, as well as the

organization as a whole.

CSR-focused businesses would proactively promote the public interest (PI) by encouraging

community growth and development, and voluntarily eliminating practices that harm the

public sphere, regardless of legality. CSR is the deliberate inclusion of PI into

corporate decision-making, that is the core business of the company or firm, and the

honouring of a triple bottom line: People, Planet, Profit. The goal of CSR is to embrace

responsibility for the company's actions and encourage a positive impact through its activities

May 2012/ Volume 2/Issue 5/Article No-13/761-765 ISSN: 2249-7196

on the environment, consumers, employees, communities, stakeholders and all other

members of the public sphere.

Understanding the landscape of business ethics can be problematic. The field is vast, often

encompassing such concerns as corporate governance, reputation management, accurate

accounting, fair labor practices and environmental stewardship to name but a few. In fact, the

field addresses the entire scope of responsibilities that a company has to each of its

stakeholders: those who have a vested interest in the decisions and actions of a company, like

clients, employees, shareholders, suppliers and the community. Depending upon the company

in question, one may even be able to identify additional stakeholders.

The field of business ethics is further complicated by the fact that many terms exist to refer to

corporate offices and programs intended to communicate, monitor, and enforce a company’s

values and standards. In theory, one can make some rough distinctions among the various

domains related to business ethics, e.g., corporate responsibility, social responsibility,

corporate compliance, etc. In practice, however, such distinctions blur because corporate

offices of compliance established in the 1970s may now function similarly to offices of

corporate and social responsibility.

For the purpose of clarity, definitions will be provided for each of the terms that can be

understood as related to the goal of improving the conduct of business, namely, business

ethics, corporate compliance, corporate governance, corporate responsibility, CSR, and

corporate sustainability. Please note that these definitions are not being offered as official

definitions, but only to impart how they are commonly used in the business ethics industry.

Business Ethics

Business ethics is a form of applied ethics. It aims at inculcating a sense within a company’s

employee population of how to conduct business responsibly. Because the term “ethics” can

pose problems in an international context, i.e., the term does not translate well and it can be

difficult to find a common understanding of the term, some organizations choose to recast the

concept of business ethics through such other terms as integrity, business practices or

responsible business conduct.

Corporate Compliance

U.S. business scandals that occurred in the 1980s – particularly related to government

contracts – gave rise to corporate compliance, which is most often narrowly focused on

complying with national and local laws and regulations. Corporate compliance officers and

programs have been criticized for falling short of respecting the spirit of the law in favor of

the letter of the law. It should, however, be noted that corporate offices of compliance may

now function in much broader contexts.

Corporate Governance

Corporate governance refers to the broad range of policies and practices that stockholders,

executive managers, and boards of directors use to (1) manage themselves and (2) fulfill their

responsibilities to investors and other stakeholders. Over the past decade, corporate

governance has been the subject of increasing stakeholder attention and scrutiny. These

May 2012/ Volume 2/Issue 5/Article No-13/761-765 ISSN: 2249-7196

concerns have given rise to a powerful shareholder movement. Shareholder activists,

composed primarily of large multi-billion-dollar pension funds, religious and socially

responsible investment groups, and other institutional investors, are now using a variety of

vehicles to influence board behavior, including creating corporate governance standards of

excellence and filing shareholder resolutions. These investors are concerned with such topics

as board diversity, independence, compensation, and accountability, as well as a broad range

of social issues, e.g. employment ethics practices, environmental policies, and community

involvement.

Corporate Responsibility

Corporate responsibility refers to fulfilling the responsibilities or obligations that a company

has toward its stakeholders. When examining a particular corporate practice, like profit

versus environmental protection, corporate responsibility can help distinguish between a

stakeholder expectation and a corporate obligation, i.e., is the company obligated to provide

absolute environmental protection at all costs or is it obligated to maximize profits for its

investors at the cost of damaging the environment?

Corporate Social Responsibility (CSR)

CSR can be understood in terms of corporate responsibility, but with greater stress upon the

obligations a company has to the community, particularly with respect to charitable activities

and environmental stewardship. Corporate and social responsibility is sometimes described as

being a tacit contract between business and a community, whereby the community permits

the business to operate within its jurisdiction to obtain jobs for residents and revenue through

taxation. Additionally, the community expects the business to preserve the environment and

to make the community a better place to live and to work through charitable activities.

Ethics and Social Responsibility

It is clearly impossible to do a one-on-one comparison between ethical standards and social

responsibility principles if, for no other reason, than there are twelve ethical standards and

seven principles for social responsibility. Nevertheless, a side-by-side look at the standards

and principles provides the opportunity to make some initial comparisons and begin to

question their compatibility or mutual exclusivity:

Ethical Standards Social Responsibility Principles

Perceived impropriety Community

Responsibilities to the employer Diversity

Conflict of interest Environment

Issues of influence Ethics

Confidential and proprietary information Financial responsibility

Supplier relationships Human rights

Reciprocity Safety

Applicable laws

Small, disadvantaged and minority-owned businesses

Professional competence

National and international supply management conduct

Responsibilities to the profession

May 2012/ Volume 2/Issue 5/Article No-13/761-765 ISSN: 2249-7196

Buying organizations have the ability to influence and/or demand both ethical behavior and

social responsibility from their suppliers, but should they? When it comes to ethics, an

implicit agreement of long-standing exists that ethical behavior is not only desirable but

required in domestic business transactions. Any debate stems from doing business globally

wherein the ethics standard recommends being “especially sensitive to customs and cultural

differences with respect to social and business behavior and issues of influence.”

Influencing or demanding social responsibility from suppliers has no such caveat and poses

such questions as:

• Is it ethical to influence the social responsibility of suppliers?

• Is it ethical to demand, by way of contract language, socially responsible behavior

from

suppliers?

Ethics

Perhaps, the first thing that becomes apparent in comparing the ethics standards and the

social responsibility principles is that “ethics” are embedded in the social responsibility

principles. Under ethics,

“Abide by your organization’s code of conduct”

Diversity

The ethical standard for small, disadvantaged and minority-owned businesses seems to relate

to the social responsibility principle of diversity. The commentary for the ethical standard,

“encourage support for small, disadvantaged and minority-owned businesses,”

The social responsibility principle includes:

• Proactively promote purchasing from, and the development of, socially diverse

suppliers

• Encourage diversity within your own organization

• Proactively promote diverse employment practices throughout the supply chain

Because the social responsibility principle is much broader than the ethical standard, a direct

relationship is not as well defined as that concerning ethics and questions begin to emerge.

• Is this ethical standard compatible only with the first item under the social

responsibility principle?

• Are the second two items of the social responsibility principle mutually exclusive?

• Can you be ethical and demand, as a condition of a contract, that a supplier ensure

diversity within its organization?

• Can you go beyond encouraging diversity and demand, as a condition of a contract,

that a supplier have a diversity-supplier program in place?

• If mandates such as these are placed in contracts, how does this square with the

ethical standard on supplier relationships that demands impartiality?

May 2012/ Volume 2/Issue 5/Article No-13/761-765 ISSN: 2249-7196

CONCLUSION

Understanding the importance of ethics in business is the key to success. Customers,

management, and employees all appreciate honest and ethical practices. Business ethics are

important because they help maintain a clean reputation and they ultimately benefit everyone

involved. Ethically the business should also have social responsibility towards shareholders,

employees, customers, community & government. Corporate responsibility is a phrase

heavily used in the business world. Often mentioned to enhance the image of an organization,

corporate responsibility does have a true meaning. Businesses that use energy efficient

lighting and offer their employees a fair pay rate are practicing corporate responsibility.

Corporate responsibility is an integral part of business ethics and should be practiced by all

entities, whether large or small. Corporate responsibility simply means that each individual

within a company is practicing personal and professional responsibility in a way that will

benefit him and others. Clearly, it is extremely difficult to create a set of strict guidelines that

will work for every organization, across each standard and principle, in every situation, and

in every country within which it may conduct business.

REFERENCES

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Marquez A, Fombrun CJ. Measuring Corporate Social Responsibility. Corporate Reputation

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www.prweek.com

Consumer protection & Business Ethics, Kayande, Gangadhar & Khanolkar Smita, Chaitnya

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More E, Webley S. Does Business Ethics Pay? London: Institute of Business

Ethics.Northrop Grumman Corporation. (2004). Frequently Asked Questions About

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ISM Principles and Standards of Ethical Supply Management Conduct with Accompanying

Guidelines, published by the Institute for Supply Management, Inc., Tempe, AZ,

www.ism.ws, 2002.

ISM Principles of Social Responsibility, published by the Institute for Supply Management,

Inc., Tempe, AZ, www.ism.ws, 2003

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.