Business Ethics; Corporate Social Responsibility (CSR)

Business Ethics: Corporate Social Responsibility (CSR)

Introduction

Business ethics are important in the modern world where firms are competing for brand image and good reputation. Business ethics are obligations that organizations have to conduct business activities through good ethics that portray social responsibility towards other businesses, employees, clients and immediate community in the business environment. Businesses that have well developed ethical business cultures make ethically responsible decisions. Business organizations should have well developed ethical cultures that guide business decisions while dealing with other stakeholders. Corporate social responsibility is a business ethical practice that serves as a corporate conscience for self-regulation and responsible business. In the modern world, corporate social responsibility has great impact on business success and reputation. Traditionally, firms embraced CSR as a self-regulatory mechanism where businesses monitored and ensured active compliance with law and ethical standards at national and international level. Today, organizations embrace CSR as a way of promoting social good and responsibility for corporate functions, encouraging positive contribution towards business environment and stakeholders. Although, CSR is an important business ethical practice, the impact of government policies on organizations’ CSR remains a challenge in minimizing irresponsible business practices, as well as ensuring business sustainability. This paper will look at CSR and its various contributions in the society.

Role of CSR

In a study done by Armstrong Scott and Green Kesten (2013) on “Effects of Corporate Social responsibility and Irresponsibility Policies,” the authors examine the effects of policies that promote responsible CSR and irresponsible CSR within organizations. Armstrong and Green (2013) points out that when firms embrace corporate social responsibility, they benefit in increased profits. In the modern world of business uncertainties and competition, embracing effective CSR helps organizations enlarge their market influence and corporate reputation. CSR is a marketing strategy that achieves multiple functions such as mass marketing and this helps firms minimize resources used in actual marketing. In addition, the goal of CSR is to maximize the present value of a given firm for long-term profits. However, as Armstrong and Green (2013) opines, the main goal of CSR is to reduce corporate social irresponsibility (CSI). Corporate social responsibility is an approach of promoting good business ethics by making socially responsible decisions.

Firms are motivated to embrace CSRs for improved profits and business reputation. However, most business managers lack incentives to engage in socially responsible decisions.

As such, there is need to guide business managers in making responsible decisions in order to achieve desired business, social and environmental goals. Ideally, effective CSR that promotes and enhances business reputation are based on individual firm’s plans and preference. The choice of CSR activity should be guided by decision made by an organization based on available resources and the intended objectives. When firms are left to make decisions on what CSR activities to engage in, they benefit more since CSR decisions resonates with cultures, values and objectives held by individual firms.

Armstrong Scott and Green Kesten (2013) notes that sometimes some business managers lack incentives to make socially responsible decisions and mandatory policies are required to ensure that firms make sound decisions. The argument given by Armstrong and Green (2013) that governments should enforce mandatory CSR in order to compel firms make socially responsible decisions are justified. In the modern world, most firms are in race to amass great profits at the expense of social and environment good. Most firms use CSR as a means of pursuing more business profits with less regard to social and environmental good. Therefore, government intervention is important in shaping organizations’ CSR as part of protecting social and environmental interests.

CSR and Stakeholders

In liberal global markets, firms should engage in CSR practices that maximizes owners profit objectives. However, the choice of CSR embraced should be socially and environmentally conscious. Firms need to develop agreeable arrangements with all stakeholders for sustainable business. Businesses succeeds, amass profits and reputation when all stakeholders are integrated in all business practices. Business ethics requires that business entities have unwavering consciousness on all stakeholders; at no time should self-interests surpass social and environmental interests. Effective CSRs are based on inclusivity where all stakeholders play significant role in the overall success of a business success. Ethical business practice demands that firms consider other stakeholders when making decisions. In this case, Armstrong and Green (2013) are right in their argument that governments should impose policies that regulates business practices. Effective CSR is achieved when firms respect and embrace decisions and feedbacks made by other stakeholders such as governments, customers, suppliers and competitors.

Armstrong and Green (2013) observe individual firms cannot achieve effective CSR without integrating other stakeholders. CSR helps in ensuring business sustainability. As such, every firm should have mutual arrangements and relationships with all stakeholders in order to retain long-term benefits. Effective CSR requires that business firms treat other parties well to avoid confrontations that ruin business reputation and long-term profits. For instance, businesses should share valid and timely information to all stakeholders on all matters concerning business operations. To illustrate this, business should tell customers about product limitations in advance to avoid future lawsuits and disgruntled customers. The core of business ethics is responsibility towards other stakeholders and this is achieved by sharing all relevant information with stakeholders, businesses exhibits good business ethics. No organization can purport to practice effective CSR without adequate integration of all stakeholders. CSR requires that firms embrace responsibility, accountability and sensitiveness towards other parties. In this way, an effective CSR is assessed on how well a business is able to integrate all stakeholders in making socially responsible decisions.

Armstrong and Green (2013) argue that governments are important stakeholders who guide businesses in adopting effective CSRs. Existing evidence indicates that even though business operates in a liberal market, government regulation on business activities are necessary in order to protect customers, employees, environment and the immediate community against irresponsible corporate actions. If organizations are left on their own, selfish interests of profit maximization obfuscates responsible social decisions. In the modern world, most organizations are motivated to make more profits at the expense of social and environmental good. Before CSR became popular organization framework for guiding business practice, many firms engaged in unethical business practices that were harmful to customers, employees, business owners, immediate community and environment. It was common for organization to underpay, mistreat and expose employees or clients to various forms of harm. In addition, business entities engaged in activities that had adverse effects on the environment. However, businesses and governments realized that the pursuit of profits at the expense of environmental and social good was unsustainable.

Government’s Participation in CSR

Government plays a significant role in ensuring that firms adopts CSR that safeguard social and environmental interests. In this case, as Armstrong and Green (2013) argues mandatory CSR policies are useful in guiding organizations in the formulation of decisions that are socially ethical. However, government intervention in economic activities is viewed as retrogressive especially when the enforced business policies do not align with organizations’ culture, values and objectives. Armstrong and Green (2013) are concerned that government intervention in organization through mandated CSR policies does not always lead to responsible decisions. Armstrong Scott and Green Kesten (2013) notes that ‘mandated CRS do not achieve organizations objective as they circumvent organization plans, preferences, and mislead organizations when making resources allocation decisions. While government regulations are useful, mandated policies are harmful in some cases. For instance, in the US mandated disclosures that demands organizations to disclose more information to buyers and sellers are harmful. Government intervention in business activities should only be limited to certain aspects such as consumer protection against harmful products, prices and unwarranted exploitation. Government plays an important role in regulating business practices. However, as Armstrong and Green (2013) observes, mandated government CSR leads to distorted allocation of resources and irresponsible decisions that eventually do not benefit anyone.

Business entities operate in free market and any attempt by government s to control some business activities is a gross violation of liberalized economy. The arguments given by Armstrong and Green (2013) are justified and relevant. In part, government intervention in business activities interferes with individual business goals, values, and resource utilization. However, this does not mean that businesses should be left to operate without regulation. Government regulation on business activities is important not only in safe-guarding the interests of customers but also in protecting other stakeholders such as investors, environment and employees. Corporate social responsibility constitutes other aspects such as fighting racial, gender and ethnicity discrimination in organizations. It is therefore vital that government plays an essential role in guiding organizations along effective CSR. Although, there are challenges encountered by organizations when forced to adopt certain governments policies, such policies helps in promoting common good. Furthermore, organizations that embrace government policies achieve higher reputation among stakeholders thereby improving business fortunes.

Conclusion

Armstrong and Green (2013) present great ideas about building effective CSR for socially responsible decisions within organizations. In part, the arguments are presented in a balanced approach that acknowledges the positive and negative impacts of government policies on organizations’CSR decisions. However, Armstrong and Green (2013) arguments that CSR does not help organizations earn higher profits are wrong. CSR helps organizations gain more reputation in the market and among stakeholders. Governments are important stakeholders that help in shaping organizations’ CSR as part of promoting social and environmental good. Without adequate CSR framework that is aligned with organization’s objectives, culture and values, organizations may make socially irresponsible decisions. Organizations should embrace CSR policies that integrate contribution from all stakeholders in order to make socially responsible decisions and project good business ethics.

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