The Impact of Ethics and Corporate Social Responsibility in Business Environments

Introduction

The business ethics and corporate social responsibility (CSR) are some of the common terms used in businesses and they are sometimes assumed to mean the same. However, as explained in this literature review, the two are related but have different meanings. They both affect businesses in many ways and they can have major impacts on the success and failure of the business. Business ethics act as the guide in the moral decision-making processes in a business. It also applies in the code of conduct of business, and governance issues. The definition of business ethics cannot be complete without defining the morality of the business. There are certain actions and decisions that make up the ethical standards of the business and they are used to identify the business that qualifies to be termed as ethical and otherwise (Vazquez, 2018). The norms followed in business are a major indication of the ethical standards of that business.

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Overview

Overview of Corporate Social Responsibility

Corporate social responsibility takes a practical form of business ethics. CSR is a wider coverage if the ethical business operations, whereby the company applies initiatives aimed at helping the community. The view is that since a company uses the resources in its environment, then it is ethical to give back to the surrounding community as a way of showing gratitude. Companies are expected to have financial, environmental, social and economic responsibilities in the communities they operate. Companies should treat employees fairly, reduce emissions, and help in environmental preservation, among other activities. The activities increase the business acceptability in society and increase its chances of existence (Esa & Zahari, 2016). For the businesses that aim at attracting more stakeholders, CSR is one of the ways they can show their will to have a good relationship with the stakeholders. Ethics and Corporate Social Responsibility affects the business environment in significantly positive ways and have the potential to bring down a business.

Overview of Business Ethics

Generally, ethics means behaving in a morally upright way that is acceptable in society. Similarly, business ethics generally means that a business ought to behave in a morally acceptable way. Business ethics includes the principles and values applied in the running of the business and they determine what is right and what is wrong. Therefore, business ethics help to determine which decisions and actions of business are good and which ones are wrong. In this case, the concern is on the impacts of the business actions and decisions to the external environment. For example, the company is expected to apply fairness and honesty when dealing with the employees, the customers, and other stakeholders. Business ethics should not be confused with business values. Ethics define the set of ways in which a moral person or company should behave. Business values refer to the inner principles that dictate the way a person behaves. A person, in this case, could mean an individual or the entire company or organizations. The relationship is that values guide people into determining what is right or wrong. The success of a business is highly dependent on the ethical standards that guide the daily activities of the employees and other stakeholders (Vazquez, 2018). A business that does not comply with the expected ethical standards is likely to lose customers and attract a negative reputation.

Impacts of Ethics in Business Environments

Customer Loyalty

Customer loyalty is a critical aspect of the business environment. A business that has many loyal consumers makes higher profits from return purchases. People who are loyal to a brand support the business and ensure the sales are consistent over time. When customers perceive the business is unfair to them, then they will not be repeat customers. For example, if a business overcharges the consumers, they are likely to keep away from it and this translates into poor performance and low sales for the business. The loyalty of the consumers is also likely to lead to positive word of mouth among the consumers. Positive word of mouth is known to be one of the most effective marketing tools (Kundu and Rajan, 2016). On the contrary, a business that does not have a good code of ethics is likely to attract a negative reputation that also spreads fast via the word of mouth. Such negative publicity can hurt the business and lead to its closure.

Employee Retention

A high employee turnover rate affects business in many negative ways. For example, the company spends resources to hire, recruit and train employees. When employees quit their jobs, these resources are used repetitively and this leads to losses to the business. Loss of skilled employees can affect the services delivery and production processes. Business ethics helps to retain employees by ensuring they are satisfied with their work and they are treated fairly. For example, good pay and good working terms is an ethical issue that requires planning and making the right decisions (Vetrakova, Durian, Sekova & Kascakova, 2016). The talented employees in all levels of the company expect fair treatment and compensation for their efforts. Some of the business ethics to achieve such fair treatment include making employees part of the decision-making process, efficient communication and creating an environment that supports innovation and diversity. Gender equality, fair and transparent rewards and promotions, fair disciplinary actions and taking care of the personal needs of the employees are guided by the business ethics and help to retain the employees.

Creating a Positive Working Environment

A positive working environment is made up of many factors. Employees are expected to work as a team to achieve the goals set by their employers. The employers are expected to remain open on the targets of the organization and to ensure there is a good communication system that enables all employees to remain engaged. According to Raziq & Maulabakhsh (2015), a positive working environment affects the job satisfaction of the employees and determines the motivation level of the employees. Right at the time of recruitment, employees' ethical responsibility is to be open about their experience and capabilities. Business ethics also advocates for confidentiality in matters business. Employees are expected to handle the data of the company with confidentiality and to create a cordial relationship with the other employees. In a business where business ethics are not followed, employees are likely to lie about their actions, leak the confidential information and to work individually instead of teams. In extreme cases, employees are likely to steal from the company and this attracts high losses. Services delivery, mostly in industries like tourism and hospitality, is likely to get highly affected by poor business ethics. From the above analysis, it is evident is that business ethics determines the business environment.

Compliance and Avoiding Legal Problems

Business ethics guide the actions of the business owners and this helps them to avoid legal problems that come as a result of unethical operations and non-compliance with the legal requirements of the country. In the pursuit, if higher profits, the business may be tempted to cut some corners to avoid paying taxes or other legal requirements. The business may also be tempted to ignore the labor laws, to oppress employees, to ignore the employee hazard regulations and to use sub-standard raw materials. The insurance policies used in the business .have to comply with the government regulations and business ethics guidelines helps to avert these possibilities. Good policies and strategies used in business ethics help the business to avoid such occurrences and the cost of compliance is lower than the legal fees that could arise from non-compliance.

Business Reputation

The reputation of the business is based on what the public sees and believes about business operations. A company that has good business ethics follows the right decisions and this earns them a good reputation among its peers. Ethical businesses allow the employees to grow and this gives them more confidence and high motivation. In that way, the employees help in creating a positive reputation about the business and this is shared with the other stakeholders. When the business experiences turbulent moments, then the business ethics guide their decision-making and prevents making the wrong ones. For example, when accused of negligence, the code of ethics guides the management on the best way to restore faith among the stakeholders (Sontaite-Petkeviciene, 2015). The connection between the two is evident in many aspects. The above analysis shows that business ethics affects the business environment in many different ways and it can have positive and negative outcomes.

Impacts of CSR in Business Environments

Corporate Social responsibility involves integrating the social and environmental concerns into the business operations and making business decisions that are in line with the needs of the community. There are no standards of the CSR activities and they are solely voluntary and based on what the company can achieve. However, there are several activities that are generally accepted and applied in many parts of the world and are used as the standard measure of CSR activities. There have been several efforts to make it a compulsory requirement for the businesses to participate in CSR. The general view is that companies play a major role in managing the issues in society. CSR increases the acceptance and existence of the business in its environment (Esa & Zahari, 2016). Companies that participate in CSR have a high chance of making high profits because they are supported by the communities around them.

Impacts on the Supply Chain

CSR affects the business environment in many diverse ways and one of them is the supply chain management. Feng, Zhu, and Lai (2017) explain that CSR affects supply chain management in terms of ethical sourcing, sustainable production, performance evaluation, and stakeholder interest. The supply chain includes other companies that have similar interest as the main company. The impacts of CSR is that it guides on how one company can influence its partners into implementing CSR activities in their operations. For example, a company can guide and assist other companies to grow and to incorporate social and environmental issues in their business. The outcomes of this partnership are that CSR acts as a common interest among the companies in the supply chain and this helps to create a responsible society. A company that has the right CSR intentions ensures that all supply chain activities occur in an ethical way. They also train others on how to maintain a good environment with the community and other partners.

The supply chain management activities should not be against the norms of the society and the environmental conservation efforts. Ahi and Searcy (2015) state that companies should consider green supply chain management (GSCM) even though some perceive it as an expensive way of doing business. The aim of the authors is to express the ways in which the supply chain process from the procurement of raw materials to the delivery of the final products can be done without affecting the community and the environment negatively. CSR guides companies that use GSCM on ways to achieve their goals and these include recycling of resources, proper management of resources and helping the community in social goals like cleaning the environment, accessing water and reducing pollution. The supply chain achieved high...