Ethical Objectives and Corporate Social Responsibility (CSR)

1)   Define:

a)    Ethics: moral principles that guide decision- making and strategy.

b)   Morals: what is considered to be right or wrong, from society’s point of view.

c)    Corporate Social Responsibility: businesses that act morally towards their stakeholders, such as their employees and the local community.

d)   Social Auditing: a way to ensure that socially responsible objectives are being implemented.

 

2)   Give three examples of unethical business behavior.

-       Financial dishonesty: a business mismanages its finances, such as deliberate misrepresentation of its financial accounts. There may also be moral issues, such as extravagant business expenses reimbursed to the directors of a company.

-       Exploitation Of The Workforce: Employers may mistreat staff, such as through deliberate neglect of employee welfare issues.

-       Exploitation of Suppliers: Large businesses are able to take advantage of suppliers, forcing them to cut prices.

-       Exploitation of Consumers: Firms may knowingly sell products that harm the welfare of people or society. Large firms with few competitors may charge excessive prices.

 

3)   What are the advantages for businesses who behave ethically? Disadvantages?

 

Advantages Of Ethical Behavior:

-       Improved Corporate Image. Acting in an ethical way can help enhance the image and reputation of a business.

-       Increased Customer Loyalty.

-       Cost Cutting. May benefit from lower litigation costs – costs associated with legal action taken against a business.

-       Improved staff motivation.

-       Improved Staff Morale.

 

Disadvantages Of Ethical Behavior: -

-       Compliance Costs. This refers to the potentially high costs of acting ethically. Using recycled materials can actually be more costly than simply replacing them.

-       Lower Profits. If the compliance costs cannot be passed onto the consumer in the form of higher prices, then it is likely that profitability will fall. An ethical dilemma for a business exists when ethical decision-making involves adopting less profitable course of action.

-       Stakeholder Conflict. 

 

4)   How does CSR help a business compete?

Reputation can give a business a competitive edge. Some businesses donate some of their post-tax profits to charity due to their desire to act in a socially responsible way, or to the fear of a negative corporate image due to non-compliance. Being socially responsible can help to improve the reputation of a business, but compliance costs are likely to result in higher costs for the firm. Employees must also be convinced that CSR is in their best interest in order for them to help the organization meet its ethical objectives.

 

5)   Why is a social audit undertaken by business?

A social audit is undertaken by a business to show their stakeholders that the business is being socially responsible. A social audit proves if the business is using renewable and sustainable resources; using reputable and socially responsible suppliers; creating systems that cater for the well-being of employees; establishing an ethical code of conduct, and creating methods to monitor management and employee commitment to CSR policies.