Business Ethics and Social Responsibility

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It is well-known that the goal of any business is to maximize profits for its owners and shareholders. However, in the 21st century, the ways and means by which companies go to accomplish this objective, inherently matters. Two terms that have become popular in the business and management lexicon are business ethics and social responsibility. While they are often used interchangeably, they represent distinct factors of consideration for companies around the world.

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Ethics, if put simply, is the ability to distinguish between right and wrong, and act on it. The theory of social responsibility is a subset of the system of ethics. It calls upon organizational management to ethically validate a decision before proceeding with it, ensuring that the action does not cause direct or indirect harm to society or the environment we live in, making it socially responsible. While it seems simple enough, there are multiple situations when businesses are faced with tough decisions, especially when there is enormous pressure to make a profit or achieve certain performance indicators. However, ethics and social responsibility call for a status quo in the world of business where there is an equilibrium between economic growth and the welfare of society.

Let’s discuss business ethics in more detail. As mentioned, ethics is learning the difference between right and wrong, and acting on the right thing. Many ethics of daily life are now enshrined into law, including for businesses, and these are fundamental rules which people expect others to adhere to. Business ethics refers to the actions done in the workplace. Regardless if it is major company decisions or minor workplace conflicts. Business ethics are driven by values that are established in the workplace environment, defining the approach and culture that drives that specific organization. Notably, one of the primary elements which guide ethics in an organization is its leaders and management, who can use the moral compass set by the established values to provide direction in times of crises and confusion.

Business ethics are difficult to take seriously at times. Most companies give little to no attention to ethics other than an annual seminar perhaps. Meanwhile, more often than not, in your college classes, you are presented with scenarios where business ethics is portrayed as an easy way to resolve conflicts, and there is an obvious choice. Of course, when presented with a scenario where an employee cheats or steals, or a manager lies to a customer to preserve the bottom line, it is evident that these are unethical behaviors that you should not do. The ethical dilemmas that managers face in real life are inherently more complex, with real-world consequences and usually no clear guidelines from company policies or the law. Some characteristics of an ethical dilemma include:

  • Significant value conflicts among different interests
  • Choice alternatives that can be equally justified
  • There are far-reaching consequences for stakeholders.

I would like to present a business ethics scenario at this point. For example, Volkswagen has been experiencing a turbulent few years, being involved in a scandal and facing decreased profits. As a result, the business was tasked with cutting costs, the primary of which is well-known is the workforce. However, given the state of things in the world, and the COVID-19 pandemic which later hit, Volkswagen committed to not make any layoffs in its German factories. It made the ethical decision to continue supporting its workers, making cuts elsewhere, and also utilizing a smart strategy of not filling positions of those retiring or leaving the company. Potentially, nobody would have judged the company for making the difficult choice of layoffs, however, given the difficult situation that even a strong economy like Germany was put into, Volkswagen decided to reduce its profitability in the country to ensure that these workers could still feed their families.

Meanwhile, social responsibility is a subset and an essential aspect of business effects. The movement arose in the 1960s with increased public consciousness regarding the role of business in society. In the modern age of media and information travel, businesses are not expected to act in a socially responsible manner. The concept of corporate social responsibility is a self-regulating model where organizations are socially accountable, as mentioned earlier, not engaging in unethical practices that harm people and the environment, but also are expected to give back to the community. For the most part, social responsibility has been beneficial, incorporating sustainability and public opinion into business models. However, it also has the double-edged sword of being a key aspect of a company’s brand in the modern world. Furthermore, sustainable practices that are now a key part of social responsibility, can benefit a company’s bottom line. Therefore, it poses a question, of whether certain public acts are truly ethical and meant to aid society, or represent nothing more than brand enhancement.

For example, the beverage company The Coca-Cola Company, each year engages in widespread efforts to build wells and replenish fresh water in communities that need it to match the tons of volume of water that the company uses for its various drinks. While the company publishes a sustainability report where these and other positive practices are described, Coca-Cola does not actively advertise it to the public and few know about it. Meanwhile, Apple in its recent iPhone release removed chargers from the box, under the argument of ecological e-waste and significantly fewer emissions on shipping. However, it sold chargers separately resulting in an even bigger shipping impact for a different package and made hundreds of millions of dollars in profit on this. While Apple does do a significant amount in its environmental and sustainability efforts, in this case specifically, the question arises on the ethics of the decision, which most experts agreed would make virtually no positive difference from an ecological perspective.

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In conclusion, currently, the expectations for businesses to practice good ethics and maintain social responsibility are higher than ever before. Companies are expected to demonstrate transparency and genuine efforts or face significant public backlash and stakeholder pressure. While shady practices can make a business a lot of money quickly, the ramifications if uncovered are highly detrimental. Management should engage and promote ethical behavior and culture in the workplace, and yes, also demonstrate this to your clients and customers. Ultimately, ethical decision-making produces a win-win situation for everyone.

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BusinessEssay. "Business Ethics and Social Responsibility." September 2, 2022.