Essay: Importance of business ethics & corporate social responsibility (with examples)

In recent years the concept of ethical behaviour and Corporate social responsibility has become very important among both developed and underdeveloped countries. These two can be very beneficial for the companies to get success, earn wealth, reputation, goodwill and increase brand awareness. Companies have a responsibility towards the society along with making profit and wealth generation for their investors or stakeholders. Business ethic and Corporate social responsibility lead to increase in both customer and employees relationship.

Business Ethics

Business Ethics refers to the code of conduct of the workers or people operating in an organization. It consists of various guidelines, rules and regulations and principles which tells or decide the way in which workers of the organisation should behave. The organization should be fair and honest towards its people.

Every organization’s main objective is to make profit and earn money but the way to earn shouldn’t be unfair. No one has the right to indulge in unfair means and practices.

There are various business ethics that an organisation must follow:-

• Organization should not discriminate any employee on the basis of sex, religion, physical appearance, age or family background. All employees should be treated with respect either male or female. Female staff shouldn’t be asked to stay back late at work. It is unethical to discriminate employees just because they belong to a lower caste or religion.
• Companies shouldn’t employ children who are below the age of 14. Child labour is strictly prohibited
• Be true and honest to your customers. Real picture of the product or organization should be showcased. No false commitments should be made.
• Employee safety and health should be the first priority and they should not be allowed to work under bad conditions and also proper healthcare and medical services should be provided if some issue happens at workplace.
• Organization should never cheat their customers because it will spoil their goodwill. All economic transactions should be done fairly.

Business ethics plays a very important role for companies.

1. Helps in avoiding legal problems – It could be very difficult for an organization if it follows unfair means and practices like using low standards or low quality products, not following or complying with labour laws, working under hazardous conditions etc. If companies would work under business ethics then no such penalties or legal fines are required to pay
2. Customer loyalty – It is very important for a company to be successful. It’s very important to create trust and be honest towards your customers. If Customer’s got to know that they are treated unfairly then they will never trust you and will not be loyal and thus customers will never suggest to anyone and no new customers will come. To build your reputation in the marketplace, it’s very important to build loyalty towards customers.
3. Retain productive and good employees – Talented workforce are present at all levels in the organization. If company wants them to retain and be productive then they should be fairly paid and be involved in meetings and discussions. Also, they should be asked for suggestions.
4. Better decision making – If a company respects business ethics then to make decisions, management has to take economic, social and ethical aspects in consideration. If decisions are in the interest of public, employees and company then only decision making will be better.
5. Societal protection – A place where law fails, then ethics succeed. The government cannot control all the harmful activities to the society but HR managers can more effectively reach to employees than government or police. Ethics can protect the society far much better than our legal system.

Some of the examples of business ethics followed by companies are:-

1. VOLKSWAGEN

Volkswagen reduce its workforce or labor without layoffs. Like he does not hire people for vacant job positions of those people who are retired. At Volkswagen German plant workforce will not be face layoff for 10 years. They think no layoffs will increase morale and motivation among employees. Also level of profit decreases after layoffs.

2. BEN & JERRY’S

It is an American company that manufactures ice cream, frozen tougher and sorbet. The company though of use of fair trade ingredients- Ingredients such as fair trade coffee, fair trade chocolate and fair trade clothes which is meant basically for those companies that produce goods and services in foreign countries and import into their home countries. The company decided to do full fair trade by 2013 which ensures good and safe working conditions, fair wages and salary etc.

Corporate social responsibility (CSR)

Corporate social responsibility (CSR) is a very broad concept. It describes a company’s commitment to carry out their business in an ethical way which means a company is operating its business in ways that enhance society and environment.

It is a concept or model that helps a company to be socially accountable to itself, public and to its stakeholders

It refers to system that enables the production and distribution of wealth for the betterment of stakeholders by implementing sustainable management practices and ethical systems.

Due to the Introduction of Section 135 in the Companies Act 2013 government made CSR mandatory for some specific companies. Companies having net worth of ₹500 crore or more, net profit of ₹5 crore or more and turnover of ₹1000 crore were asked to spend 2% of its average net profit on CSR activities. The main objective behind mandating CSR was to lower down the burden of government to provide social services to the needy humans.

Now the company and government will work together with their power and funds to increase social services in the country. Therefore CSR funds will not be provided for Government schemes instead they will coordinate with each other to support and increase sustainability and public welfare.

CSR is very important due to following reasons:-

1. Gives a chance to all the employees of an organization to contribute towards the society and environment – Living for others and doing something good for them gives a very great feeling like if your company has thought of to give education to poor children which will not only give satisfaction but pride too. CSR gives opportunity to work for betterment of the society.
2. Improves innovation within the business – When a company and its employees get engaged in social and sustainable activities, they become more innovative and new ideas start coming to their mind. Creativity and skills gets developed through CSR which further helps the business to get success.
3. Attracts investors – Nowadays investors invest in those companies that works in a way which further helps in making the world better. Organizations that are more adaptive to social change and are ready to follow sustainable practices are very much attractive to investors.
4. Increase brand awareness – If you follow ethical and sustainable practices towards the society then this news will spread and therefore more and more people will get to know about your brand which will create brand image and awareness.

Some of the examples of companies involved in CSR are:-

1. TOMS “We’re in business to improve lives”

• It was founded by Blake Mycoskie in 2006 after his trip to Argentina. During his trip he noticed that people living in areas of poverty of Argentina had to live without shoes. Inspired by his trip he decided to establish a sustainable footwear company.
• Its commitment is to include more products rooted in earth and using eco-friendly materials and processes. He wants to expand the use of sustainable cotton grown without toxic chemicals or modified seeds and use 100% sustainable cotton by 2025.
• It continues to do packaging made from sustainably manages forests made from at least 80% recycled materials.
• The company uses pigments derived from natural botanicals in its plant dye process.
• They also use eco fibres like hemp, linen and jute as they require less chemicals to grow.
• The company has donated more than 60 million pairs of shoes to the needy people since 2006. Also expanded access to birthing kits to expectant mothers as well as provided training to birth attendants. TOMS has helped more than 20,000 women to deliver their babies safely.

2. BMW India

BMW group India has partnered with Magic Bus to provide livelihood opportunities to youth through a skilled development program. It focuses on training disadvantaged youths and moving into sustained employment to achieve both personal and professional goals. They have also contributed during this Pandemic of COVID 19

• They have distributed over 200000 meals and ration kits to migrant labour in Gurugram and in BMW plant Chennai.
• They have provided with 5000 Antigen kits and medical equipment like ventilators to GHD (Gurugram Health Department).
• Created PCR lab in Government medical college Chennai which is nearby their BMW plant.

CONCLUSION

This shows that ethical behaviour and corporate social responsibility is important for a business’s organizational growth and success. It shows that organization should look outside their businesses and focus on the interests of the people and consider them as their priority.. This is because the societies in which these businesses operate expect them to show some responsibilities in relation to publicly welfare and their sustainability.

Business ethics lead to positive relations among employees, consumers as well as the society. It concludes better reputation and greater customer loyalty. Unethical behaviour can destroy a company’s reputation and make it less attractive to stakeholders. Ethics and CSR shouldn’t be followed and often use for own personal benefit.. Organizations should start behaving in a more socially responsible manner.

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