Understanding Business Ethics and Social Responsibility
Today, many businesses are expected to drive profits while contributing positively to society and the environment.
This article will explore business ethics and social responsibility, including real-world examples and how businesses can better incorporate ethical values into their operations.
What are business ethics and social responsibility?
Business ethics refers to the values, principles, and policies that dictate how businesses and individuals conduct themselves. Business ethics extends beyond legal requirements to create a code of ethical conduct that guides employee behavior and builds trust between companies and their stakeholders.
Social responsibility is defined as the ethical commitment of individuals and businesses to act in a way that positively affects society and the world. This social contract has become more important to investors and consumers looking for businesses that balance profit with social impact, according to McKinsey & Company.
Business ethics sets internal standards for right and wrong, while social responsibility holds organizations accountable for their influence in society.
Business ethics and social responsibility: How do they go hand in hand?
Andrew B. Gustafson, PhD, professor in the Heider College of Business at Creighton University, emphasizes that “Businesses rely on society’s support and acceptance in order to operate and thrive.”
Society, in turn, benefits from the goods, services, and economic growth that businesses provide. This mutual reliance emphasizes the importance of ethical and socially responsible practices.
Business ethics guides how an organization and its people make decisions, promoting fairness and integrity. Social responsibility, meanwhile, focuses on the impact these decisions have on society and the environment. Gustafson says, “Business social responsibility then refers to how we're contributing to the common good or how we're helping society thrive.”
Together, business ethics and social responsibility form a strong foundation for ethical leadership—one rooted in trust, honesty and responsibility. By prioritizing ethical practices, organizations can better align with their corporate social responsibility (CSR) goals.
The importance of business ethics and social responsibility
Today, consumers and business partners are more inclined to choose brands that align with their values. Research shows a strong connection between CSR efforts and customer trust. These efforts can strengthen relationships and drive continuous improvement in products and services.
Prioritizing ethics also offers practical benefits, including cost savings from sustainable practices and improved employee productivity through value-based leadership. “It’s important to learn how to practice business in a way that can help society as you're also making a profit,” says Gustafson.
A balance of ethics and social responsibility supports:
- An improved company image and brand recognition
- Boosted employee motivation and productivity
- Attraction and retention of top talent
- Greater customer loyalty and retention
- Positive outcomes for the community
- A competitive edge and profitability
Examples of business ethics and social responsibility
Gustafson points out that supporting CSR efforts may involve asking questions such as:
- How can I help my employees become better people and learn new skills?
- How can I make sure the products we make don't harm the world with pollution?
Social responsibility in practice
As an example, companies can host tree-planting events or install energy-saving lighting to meet their social responsibility goals. Bosch, for instance, has committed to reducing its ecological footprint through climate action, water conservation and a circular economy. Today, 400 of its locations are climate neutral. As Gustafson notes, "Doing the right thing might cost you a little, but generally speaking, it's going to be better for you to do that."
Organizations may also give back by offering volunteer time off or donating profits to charities. TOMS shoes exemplifies this with its one-for-one model, donating a pair of shoes for every pair sold.
Gustafson says, "It can be a win for everybody. You're doing something that's more environmentally friendly or socially beneficial, and you're also going to make a little bit more money doing it. Good intentions matter."
Business ethics in practice
Salesforce has worked to increase diversity in hiring and invest in minority-owned businesses. After exceeding its original goals, the company continues to provide annual updates to ensure accountability and track further progress. Gustafson says, “If you can get people to feel invested and enjoy being at the company, it makes a big difference.”
Transparency is an ethical practice that fosters success and builds confidence among employees, customers and investors alike. For instance, Ben & Jerry’s emphasizes its commitment to sustainability and social justice issues. These business practices aim to strengthen ethical standards while leaving a lasting positive impact.
"The companies that are busy being ethical are ones that you don't really hear that much about because they're not making a big deal about it—they're just doing it," says Gustafson.
How to implement ethical and socially responsible practices
As Gustafson puts it, "If you do the wrong thing, you're probably going to lose. And if you do the right thing, you're probably going to win." That said, ECI research shows that 87% of employees say their workplace lacks a strong ethical culture and is missing elements such as:
- Ethical conduct that's consistent at all levels
- Trust in leaders to follow through on commitments
- Clear and open communication to keep employees informed
- Accountability when wrongdoing occurs
However, businesses can take the following steps to establish a more ethical and socially responsible culture:
1. Establish a code of conduct
A clear set of guidelines promotes consistent and ethical decision-making and behavior at all levels of the organization. In general, Gustafson explains that "businesses have an ethical obligation to help their employees know what is expected of them."
2. Educate employees and stakeholders
Offer training programs that focus on company values, ethical policies and the importance of integrity. This helps stakeholders understand and apply ethical standards in their work.
3. Encourage risk-free reporting
Create an environment where employees feel safe to report concerning behavior without repercussions for those who come forward. As Gustafson says, "Communicating that game plan to your employees clearly and following through—that speaks volumes."
4. Recognize and reward employees
Clear systems to recognize and celebrate ethical behavior can encourage others to follow suit. Gustafson says, "The more you let employees have autonomy and a say in what's going on and treat them with real respect, the more loyal they're going to be to you—and the better your whole company culture is going to be."
5. Support the community
Businesses can invest in initiatives that support local communities through socially and environmentally responsible actions. This may help build a positive reputation while contributing to the greater good.
Learn business ethics and social responsibility at Creighton University
The Master of Business Administration (MBA) program at Creighton University develops leaders who value ethics and social responsibility. The program teaches students to solve business challenges while maintaining strong ethical standards. Graduates are prepared to lead with integrity in today’s complex business world.
Learn more about the MBA program at Creighton University, or request more information today.