The goal of business is to get the maximum profit for owners and shareholders. That’s a simple statement that doesn’t describe how companies can and can’t go about their business. The pursuit of profitability doesn’t give companies the liberty to override the law or harm groups or individuals in the process. The two terms are often used interchangeably, but they have different meanings. The difference between business ethics and social responsibility is an important issue for every business consider. While the forms that ethics and social responsibility take will vary significantly from one company to another, each of them has a place within every organization.
Defining Business Ethics
Ethics comes from the Greek word, ethos, which means moral character. Ethics means knowing the difference between right and wrong and continuing to do the right thing. Ethical decisions can be based on your conscience or based on principle. In either case, individuals make their own decisions according to the laws of the land or according to their core beliefs.
In a business sense, corporate leaders must follow the right behavior to benefit the good of everyone including the shareholders, stakeholders, employees, customers, and the community. Business activities shouldn’t harm people, products, or services and they should help to protect the reputation of the company.
Consultants Doug Wallace and John Pekel from the Twin Cities in Minnesota say that business ethics are critical in times of fundamental change such as we are in now. During good and stable times, it’s common for good values to be taken for granted. By contrast, during times of crisis or confusion, people’s ethics tend to guide their behavior. The general response to that is to question and scrutinize behavior to ensure that good ethics are being played out in the workplace
Defining Social Responsibility
Social responsibility refers to businesses doing what they can to benefit their communities. Societies set their own acceptable norms. To be successful, businesses have to adhere to social norms and expectations. Some values have eroded over time and that has left no moral compass to guide leaders through complex dilemmas over right and wrong. That means that businesses are on their own to decide the ways that they can best demonstrate social responsibility and give back to their communities.
Bringing Business Ethics and Social Responsibility into the Workplace
To ensure good business ethics and social responsibility, many companies establish an ethics management program that’s in keeping with their mission, vision, and values. Each ethics program is unique to the organization. A corporate ethics program is designed to teach employees the values and policies which set the behavioral standard for those who work and in and around the company.
A company’s mission, vision, and values form a credo that describes the highest set of values that a company operates under. They describe the types of thoughts and behaviors that employees and other stakeholders should aspire to. A formal code of ethics is a little different. It’s a policy that states what employees and others should not do. A code of ethics is specific to those who work under it. For large companies, they may establish specific codes of ethics for individual departments and have one general code of ethics that everyone must abide by.
Human resource departments and legal departments typically collaborate on devising an appropriate code of ethics. At the same time, codes of ethics are more than a legal mechanism. Ethical behavior is part of the corporate culture and the appropriate language and behavior start at the top.
Business ethics can be challenging because our decisions are often a reflection of our own beliefs and cultures in addition to the corporate culture. Relationships are complicated and there’s not always one clear-cut appropriate answer. Cultural assessments can be a valuable part of understanding whether certain behaviors are in keeping with a company’s code of ethics.
Social Responsibility in Business
We live in a more socially responsible period than ever before. Corporate social responsibility is connected to what today’s companies call ESG—environmental, social, and governance. ESG is a practice that incorporates sustainability into a company business model.
Companies that embrace ESG find that it improves their brand and ultimately increases profitability. Customers of today are more inclined to buy from socially responsible companies and employees are more interested in working for socially responsible companies. In research by Cone Communications, the study found that over 60% of Americans looked favorably on companies that pursued social and environmental change whether it was regulated or not. Almost 90% of consumers in the survey indicated they’d be inclined to purchase a particular product if it supported an issue that was close to their heart. The study also showed that 75% of consumers refused to buy anything from a company if it supported an issue they were against.
As the economy improves, society is beginning to expect corporations to give back to their environments and communities. Besides going a long way to boost a company’s branding and image, sustainable practices can aid the financial bottom line. Using less packaging and less energy in production helps to reduce production costs and increase revenue.
There are four general and specific ways that companies can join their efforts between business ethics and social responsibility. They include:
- Environmental efforts
- Ethical labor practices
Concluding Thoughts on the Difference Between Business Ethics and Social Responsibility
The expectations for good business ethics and corporate social responsibility are at an all-time high. Most likely, those expectations will continue to grow in the future. Since they are here to stay, it’s wise to give employees a voice in what those expectations look like in practice. To ensure that your company’s efforts are seen as genuine, it’s important to review your expectations to ensure they dovetail with the company’s mission and vision. Your involvement in such issues is something to be proud of so be certain to promote your efforts and make sure your customers are aware of it. Attention to business ethics and corporate social responsibility creates a win-win situation for all stakeholders.