Is it important for businesses to be ethically and socially responsible?

Is it important for businesses to be ethically and socially responsible?

By Mariette Kwakye

Over recent decades, corporate scandals have plagued modern history. Some of the world’s biggest scandals to date include the Eron scandal in 1991 and the WorldCom and Tyco scandal in 2002. Despite the negative ramifications that occurred, a number of businesses continue to be dishonest in their dealings and fail to engage in activities that will enhance the welfare and interests of society. The article therefore aims to discuss why it is crucial for businesses to be ethically and socially responsible, and will go on to highlight the benefits they can experience as a result.

In today’s society, consumers pay close attention to businesses’ ethics and CSR (Corporate Social Responsibility), as they no longer judge companies solely on profits, but also on their professionalism and demeanor (Berenbeim, 2012, online). This can be demonstrated by the company Ben & Jerry’s. Ben & Jerry’s are actively involved with the Children’s Defence Fund and use Fair Trade certified ingredients, subsequently the company possess 18% of the market share and experience high customer commitment (Ben & Jerry’s, 2013), exemplifying the strong connections that exist between CSR, brand image and performance.

Conducting business in an ethical manner provides protection, justice and fair treatment to all stakeholders, which is imperative, as when businesses are unethical; the implications can be severe, exemplified by the Barclays scandal. Barclays pioneered the idea of guaranteed bonuses to bankers irrespective of performances, however this was at the expense of shareholders, who over a period were paid £1.4bn, whilst bankers received £6.8bn in bonuses. This was a clear violation of the executives’ ethical responsibility to shareholders and consequently Barclays’ reputation was trashed (BBC, 2013). The case study demonstrates that conducting business ethically is vital, in order to create ‘decency and discipline in the behavior of individuals and also in the society’ (Shinde 2013, p1).

Organisations must recognise that CSR is an essential part of a business, as businesses exist to benefit society, and are only able to operate as long as society allows, therefore they must accept certain obligations towards various social groups (Shinde, 2013, p3). Freeman’s (1984) stakeholder theory also supports this view, stating that businesses have an obligation outside making a profit, and this is to satisfy the interests of various stakeholders.

Costa Coffee is a company who is committed to ethics and CSR, and as a result are UK’s largest and fastest growing coffee shop brand (Costa-Business, 2014), which displays that the ability to continuously expand in today’s competitive environment is highly dependent on the ethical values a business possesses. Businesses who are committed to ethics and CSR can also experience superior efficiency, reduction of costs and an enhanced reputation.

Businesses are able to promote ethical behaviour within the organistion through ensuring ethical leadership, structures and training programmes are in place, as well as measures to encourage and protect whistle blowers.
Businesses should therefore continuously work to becoming more ethically and socially responsible, as not only does it benefit society but it also produces copious benefits for the business.