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Differences between Business Ethics and Corporate Social ResponsibilityBusiness Ethics CSR
Differences between ethics and CSR
Business Ethics CSR
The whole encompassing behaviour of businesses
CSR as an element business ethics
Business Ethics is the VERY broad field of study concerning good ethical decision-making in commercial contexts.
CSR is more narrowly about a company’s SOCIAL obligations…that is, a company’s obligations to society in general.
Business Ethics is concerned with not just social obligations, but also obligations to employees, customers, suppliers and competitors.
CSR is about the extent to which companies owe something to “society at large” (i.e., those who do not have a direct involvement with the business).
Business ethics is more about “good” or “bad” conduct according to moral standards
CSR : integrating economic, social and environmental targets in one strategy…
Terms are difficult to define and these inconsistences mean debate on the differences
Differences between business ethics and CSR
• Difference between Business Ethics and Social Responsibility• Though business ethics and social responsibility seem to be overlapping, there
has always been a contradiction between the two. Companies, though they are committed to be socially responsible for their behaviour have been found to be engaging in acts that cannot be called ethical.
• What is good for the society is sometimes not good for the business, and what is good for the business is almost always not good for the society.
• If the society is conscious, it responds in such a way that businesses are forced to behave responsibly. The same applies to the administration and the judiciary of any country.
• Selling of liquor and tobacco in any society is not against business ethics though it may be against the principles of social responsibility. The same applies to lotteries and gambling. But it is certainly against business ethics as well as against social responsibility to entice minors to engage in smoking and drinking.
Some people claim that the two overlap interchange and even mean the same. Others claim they are in direct and stark contrast
Sustainability
We did not inherit this world from our parents, we borrowed it from our children.
One day we will return it to them. When we do, it should be every bit as bountiful as it was when we found it.
This is what sustainability means. (Ireland Pavilion, Milano Expo 2015)
Business Ethics is Nothing New
• Some philosophers have argued that moral concepts are timeless, limited and unchanging, others emphasise that moral concepts change as social life changes (MacIntyre: 2009:1). This is supported by Loucks (1986) who has argued that business ethics dilemmas have been prevelant since 560 B.C. Loucks refers to the Greek thinker Chilon, who registered the opinion that “a merchant does better to take a loss than to make a dishonest profit.” (Loucks, 1986:2) His reasoning was that a loss may be painful for a while, but dishonesty hurts forever. This case identifies that although societal issues change the business ethics has always been prevalent in some form.
Three Synergies of Business Ethics
Three Synergies of Business Ethics
Morals in history Business ethics in academia
Ethics as a movement
the application of everyday moral or ethical norms to business (De George, 2005).” Early examples of ethics in business can be seen in the Bible’s Ten Commandments, Plato’s Republic, and Aristotle’s Politic. As ethical philosophies took a more modern approach other views began to arise like that of Adam Smith and Karl Marx.
The 1960’s brought forth a new generation of social consciousness toward business. Vietnam, Civil Rights, and Environmental Issues all became important. Corporations looking to minimize public outcries formed social responsibility programs. Business schools began developing courses designed to address these social responsibilities. In the 1970’s the birth of “Business Ethics” as an academic field came into its own and by 1990 business ethics was deeply rooted in academia.
Ethics as a movement, the final path, shows how a business interweaves ethics into the structures of the organization through the creation of ethics codes, officers, committees and training. The business ethics movement began when new legislation was passed that targeted businesses. These laws included the Civil Rights Act of 1964, Occupational Safety and Health Act of 1970, and the Environmental Protection Act. Non-compliance with these laws could bring lawsuits upon organizations.
Business Ethics Through the Ages• The history of business ethics is probably as old as business itself. Even in prehistoric societies there were most likely rules governing acceptable trade practices.
• Certainly the oldest known written legal code, the Code of Hammurabi (1700s B.C.), dealt considerably with issues concerning commerce, tariffs, and pricing.
• By the 4th century B.C., ethical issues related to business and trade had begun to receive academic treatment in the philosophies of Plato and Aristotle. Plato's preoccupation with justice and morality in such works as the "Republic" often had significant implications for trade and commerce.
• The history of business ethics also has its formative years in the reformation. Reformation figures like Martin Luther and John Calvin, in the 15th and 16th centuries A. D., applied religious and moral considerations to trade and economics leading to the development of the Protestant work ethic. But in the following two centuries, Enlightenment thinkers such as John Locke and Adam Smith began to separate religious doctrine from moral and ethical considerations commerce and business.
Business Ethics Timeline
1960s 1970s 1980s 1990s 2000s+
Ethical climate/
culture
Environmental
issues
Employee
militancy (us vs.
them
Bribery and
illegal
contracting
practices
Unsafe work
practices in third
world countries
Emerging
technology
issues: cyber
crime, privacy
Major ethical
dilemmas
Employer/
employee
tensions
Human rights
issues (forced
labour, low wages,
work environment)
Deceptive
advertising
Increased
corporate
liability for
personal damage
Intellectual
property theft
Civil rights &
race relation
issues
Firms start practice
of covering up not
confronting issues
Financial fraud
(savings & loan
scandals)
Financial
mismanagement
& fraud
International
corruption
Changing work
ethics
Federal Corrupt
Practices Act
passes (1977)
Transparency
issues arise
Federal
Sentencing
Guidelines for
Org. (1991)
Sarbannes
Oxley Act
(2002)
Drug use
escalated
Compliance &
legal to values
orientation
Defence Industry
Initiatives
(1986)
Global Sullivan
Principles (1999)
UN Convention
Against
Corruption
(2003)
History of Business Ethics
Lever Bros
http://www.unilever.co.uk/aboutus/ourhistory/?WT.GNAV=Our_history http://www.quakerinfo.com/quak_cad.shtml
Cadbury
Port Sunlight
Port Sunlight Factory
Key Information About Cadbury and Lever Bros
RECRUITMENT
Cadbury
SELECTION
Unilever
Key Information About Cadbury and Lever Bros
RECRUITMENT
Cadbury Quaker family – members of temperance society
John Cadbury – 1824 invented drinking choc as alternative of alcohol. Believed that alcohol led to poverty.
In 1879 created Bournville or Garden city. Town had gardens and factory has sports fields, kitchens and pools. Considered a model village
Bournville provided homes for workers.Also offered health schemes, pensions and health and safety (not common at the time)
Education – set up schools in communityTraining – staff asked to attend night school
Cadbury led campaign to ban chimney sweepsSet up anti-animal cruelty society leading to RSPCA
1st company in UK to introduce half day Saturdays and bank holidaysSet up work councils for men and women
SELECTION
Unilever
Quaker family – members of congressionalist church
William Hesketh Lever, created Sunlight soap (1st mass market soap) Products focused on social impact
Wanted to sort out factory conditions, health and hygiene in Victoria Britain. Products based on personal care, nutrition and vitamins.
Port Sunlight (near Chester) built for employees (1888-1914) offered high quality houses for workers (330 acres)
Tied cottages – lots of power with company, if you list your job you would loose houseIn total over 400 houses provided around factory.
Intrusive rules, especially in social life, mandatory participation in activities, social life was policed.
Both companies believed in equality for all, and a social responsibility and social reform.
History of Business Ethics (in academia)
•Business ethics only became a subject taught from the 1960s and this was predominantly in the USA.
•Became important as issues were arising over organisations conduct and behaviour.
•As a response organisations started to donate money to charity to show their attitudes to ethics (Philanthropy)
•These programs were ad hoc in nature and usually localised. It also varied based on interpretation of beliefs, values and ethics and on the industry
Concepts of Ethics
Developed by moral philosophers over generations
Used to distinguish ethical from unethical behavior
Each has problems
http://www.timelineindex.com/content/select/91/912,91?pageNum_rsSite=1&totalRows_rsSite=78
Relativism
Egoism
Utilitarianism
Deontologism
The 4 The 4 Concepts of Concepts of
EthicsEthics
Relativism
• There is no universal standard by which morality can be judged
• What is correct for one society may be wrong for another
• Ethics and morality are relative• Leads to conclusion - each person’s opinion is
correct• Nothing that anyone does is morally wrong
Egoism
• One ought to act in his or her own self interest
• Ethical behavior is that which promotes one’s own self interest
• Does not mean should not obey laws - only do so if in self interest
Utilitarianism•The morality of an action can
be determined by its consequences
•An action is ethical if it promotes the greatest good for the greatest number
• "the greatest good for the greatest number“
•Can lead to unjust consequences
Deontologism• Derived from the Greek word for Duty• Actions are not justified by their consequences.
Factors other than good outcomes determine the rightness of actions
• It is a duty never to lie• The act itself irrespective of results is the issue at
hand• Utilitarianism - The ends justify the means• Deontologism - It is the means which are important• These two types of ethics can be seen as
opposites
Examples – which of the 4 concepts are these?
• Robbing a Bank
• Driving Above the Speed Limit
• Cheating on an Exam
• Promote environmental concern for political reasons
• Eating the last animal on the planet to feed 5 people
BUSINESS ETHICS WEEK 2 Role of Ethical theory
Week 2 Part 2 - Topics
•Agency theory versus Stakeholder theory• John Mahoney - Ethical Business Circles with
Ben and Jerry•Carroll’s model of CSR•The Cultural Web•The Reidenbach and Robin Model •Chris Arnold – The Ethical Sphere
Milton Friedman, 1970
“It is the social responsibility of businesses to make as much money as possible for the owners, within the law and the rules of competition. If this definition of purpose is accepted then for a company to spend shareholder funds in ways that cannot be shown to be consistent with maximising owner wealth is unethical”
Agency Theory or Shareholder Theory-Friedman
• It is the social responsibility of business to make as much money as possible for the shareholders, within the rules of the game(fair competition, no deception or fraud)
• This is where directors of a company are seen as agents who are duty bound to act in whatever means to maximise the interests of the owners.
Stakeholder Theory- Cannon•There exists an implicit contract between
business and the community in which it operates. Business is expected to create wealth; supply markets; generate employment; innovate and produce a sufficient surplus to sustain its activities and improve its competitiveness while contributing to the maintenance of the community in which it operates. Society is expected to provide an environment in which a business can develop and prosper so surely the organisation should repay?
Name some examples of stakeholders
Organisational Stakeholders
• Employees • Providers of finance• Consumers• Community and the environment • Government • Other organisations or groups (suppliers, trade unions, business associates and competitors)
Stakeholders define ethical issues in business
COMPANYCOMPANYGOVERNMENT
GOVERNMENT
COMMUNITYCOMMUNITY
CUSTOMERSCUSTOMERS
SUPPLIERSSUPPLIERS
SHAREHOLDERS
SHAREHOLDERS
EMPLOYEESEMPLOYEES
INTEREST GROUPS
INTEREST GROUPS
COMPETITORS
COMPETITORS
TRADE ASSOCIATIO
NS
TRADE ASSOCIATIO
NS
MASS MEDIAMASS MEDIA
PRIMARY STAKEHOLDERS SECONDARY STAKEHOLDERS
Ethical Business Circles – Mahoney 2003 Inside the company
Discriminations, confidentiality, loyalty
Customer relations and marketing- Pricing and advertising of goodsRelations with other companies- payment of suppliers, insider trading, mergers and work practices
The company and the community- self-regulation, bribery, the environment, community relations
Many flavours have a social, ethical or environmental message.
Fossil fuel raises awareness of energy and alternative sources of power. It is made with green energy and is a carbon-curbin start.
Bohemian Raspberry is designed to honour Freddy Mercury and for every sale a percentage of the profit goes to The Mercury Phoenix Trust-fighting aids worldwide.
Ben and Jerry’s Homemade Inc. Its founders created a ‘Value’ led business and integrated a social mission into its operations
Ben and Jerry’s programme of social integration
COMPANYVALUES
COMPANYVALUES
WORKPLACE•TRUST•WALK THE TALK•SHARING THE WEALTH•CARING COMMUNITY•OPEN/INCLUSIVE
WORKPLACE•TRUST•WALK THE TALK•SHARING THE WEALTH•CARING COMMUNITY•OPEN/INCLUSIVE
BUSINESS PRACTICES
•CARING CAPITALISM•COMMUNITY & DECISION-MAKING•CREATING ECONOMIC OPPORTUNITY
BUSINESS PRACTICES
•CARING CAPITALISM•COMMUNITY & DECISION-MAKING•CREATING ECONOMIC OPPORTUNITY
ENVIRONMENT•STEWARDSHIP OF NATURAL RESOURCES•MINIMISE ENVIRONMENTAL IMPACT•SUPPORT AGRICULTURE
ENVIRONMENT•STEWARDSHIP OF NATURAL RESOURCES•MINIMISE ENVIRONMENTAL IMPACT•SUPPORT AGRICULTURE
SOCIAL MISSION
•IMPROVE QUALITY OF LIFE OF BROAD COMMUNITY•SOCIAL AUDIT/ANNUAL REPORT•SUPPORT EMPLOYEES/EDUCATION
SOCIAL MISSION
•IMPROVE QUALITY OF LIFE OF BROAD COMMUNITY•SOCIAL AUDIT/ANNUAL REPORT•SUPPORT EMPLOYEES/EDUCATION
Philanthropic Responsibilities
Be a good corporate citizen
Contribute resources to the community; improve quality of life
Ethical Responsibilities
Be ethical
Obligation to do what is right, just and fair. Avoid harm
Legal Responsibilities
Obey the law
law is society’s codification of right and wrong, Play by the rules of the game
Economic Responsibilities
Be profitable
The foundation upon which all others rest.
Fig 1; The Pyramid of CSR (Source: Archie B. Carroll (1996) Business and Society, Cincinnati, OH, South-Western College publishing: p39)
Compare and contrast the ethical Business circles model and Carroll's Pyramid of CSR
•SIMILARITIES •DIFFERENCES
Legal Responsibilities
Obey the law
law is society’s codification of right and wrong, Play by the rules of the game
Economic Responsibilities
Be profitable
The foundation upon which all
others rest.
Fig 1; The Pyramid of CSR (Source: Archie B. Carroll (1996) Business and Society, Cincinnati, OH, South-Western College publishing: p39)
THE CULTURAL WEB- JOHNSTON AND SCHOLES 2005
THE CULTURAL WEB EXPLAINED
StoriesWhat stories do people currently tell about your organization?
What reputation is communicated amongst your customers and other stakeholders?
What do these stories say about what your organization believes in?
What do employees talk about when they think of the history of the company?
What stories do they tell new people who join the company?
What heroes, villains and mavericks appear in these stories?
THE CULTURAL WEB• Rituals and Routines• What do customers expect when they walk in?
What do employees expect?What would be immediately obvious if changed?What behaviour do these routines encourage?When a new problem is encountered, what rules do people apply when they solve it?What core beliefs do these rituals reflect?
• Symbols• Is company-specific jargon or language used? How well known and usable
by all is this?Are there any status symbols used?What image is associated with your organization, looking at this from the separate viewpoints of clients and staff?
CULTURAL WEB• Organizational Structure• Is the structure flat or hierarchical? Formal or informal? Organic or
mechanistic?Where are the formal lines of authority?Are there informal lines?
• Control Systems• What process or procedure has the strongest controls? Weakest controls?
Is the company generally loosely or tightly controlled?Do employees get rewarded for good work or penalized for poor work?What reports are issued to keep control of operations, finance, etc...?
• Power Structures• Who has the real power in the organization?
What do these people believe and champion within the organization?Who makes or influences decisions?How is this power used or abused?
The Reidenbach and Robin Model • Commercial life is increasingly hedged around with choices about
profits and ethics. • How can organisations sensibly develop an ethical position?
• It is important to note that a multi-divisional organisation may occupy several stages at the same time, and companies may also regress from higher to lower levels.
• Stage 1 Amoral • At the base are the amoral or ethically challenged companies. They are around
strictly for the short term, and are characterised by winning at all costs. • Obedience is valued and rewarded and there is little concern for employees other
than their value as an economic unit of production. • The ethical climate of a stage one organisation can be summed up by phases like • "They’ll never know", "Everybody does it", and • "We won't get caught".• At the heart of this organisation is the philosophical conviction that business is not
subject to the same rules as individuals and that there is no set of values other than greed.
• Stage 2 Legalistic • Legalistic firms obey the law, though ethical concerns are judged on the basis of
adherence to the letter if not the spirit of it. No breach of law often means no breach of ethics.
• The argument goes that 'If its legal, its OK', 'and if we are not sure, have the lawyers check it out' typifies the legalistic approach. Economic performance dominates evaluations and rewards.
• A legalistic company's code of ethics - if it exists - would be dominated by don't do anything to harm the organisation statements.
• Some legalistic companies have no ethics code, and do not accept the necessity. Often they see little purpose in expressing explicit ethical standards, and indeed some feel any such statements could lead to difficulties and complication.
• Stage 3 Responsive • Managers understand the value of not acting solely on legal basis.• Although a reactive mentality may remain, it is coupled with a growing sense of balance between profits
and ethics. • Nonetheless, the basic premise still may be a somewhat cynical of ethics paying. • Management begins to test and learn from more responsive actions. A responsive company's ethics code
would reflect a concern for other stakeholders, but additional ethics support vehicles, such as hotlines, are less likely to be found.
• Most stage two companies would leave ethical concerns aside until they become a problem only then would they consider remedial action.
• Stage 4 Emerging Ethical • Managers have an active concern for ethical outcomes: • We want to do the right thing. Values are shared across the organisation. Ethical perception has focus but
may still lack organisation and long term planning. • Ethical values in such companies are part of the culture. Codes of ethics are action documents, and
contain statements reflecting core values. • These organisations accept that their code of ethics is a starting point - any code not monitored and
enforced rapidly becomes a dead letter. • One leading UK bank has put in place a range of instruments for enlisting staff commitment to its code,
including ethics hotlines and regular assessment of code effectiveness. • Stage 5 Ethical Companies • This stage represents what the researchers call the ethics organisation. • Here there is a total ethical profile, with carefully selected core values (and an approach to hiring,
training, firing and rewarding) reflect it. • The answer is not to attempt to turn staff and companies into saints, but rather to strike a suitable ethical
balance in business operations, in order to minimise reputational risk. • Although the concept of social responsibility may change from time to time, the pyramid model gives us a
framework for understanding the evolving nature of the firm's economic, legal, ethical and philanthropic performance.
Chris Arnold – The Ethical Sphere, 2009.
1
9
2
14
1. Fairtrade2. Supports Charity3. Less water4. Sustainability5. Not tested on animals6. Lower carbon footprint7. Chemical free8. Less Energy Used9. Local10.Organic11.Natural12.Healthy13.Recycled14.Less packaging15.Supports communities16.Socially responsible
Balancing KEVs and Traditional Methods
There are over 50 different ethical values that can be used to map around any product or company. Though this process between 1-4 are selected as KEVs. These are finally reduced to 1 or 2 which are blended with the companies traditional values
Key Ethical Values (KEVs)
NewProposition
Traditional Company
Values
Coca-Cola Ethical History
Nicholas the Wonderworker. He had a reputation for secret gift-giving, such as putting coins in the shoes of those who left them out for him, and thus became the model for Santa Claus, whose English name comes from the Dutch Sinterklaas.
Please note there is no evidence that tap water was used in Dasani
Seminar Session – Coke Warshttp://www.youtube.com/watch?v=XqEJRdP4B
qo
http://www.youtube.com/watch?v=sx0i7WgBOvs
http://www.youtube.com/watch?v=LM9rA4LbOMc
http://www.youtube.com/watch?v=IXDSWhobbfc&feature=related
