MOI UNIVERSITY

SCHOOL OF ENGINEERING

DEPARTMENT OF MECHANICAL AND PRODUCTION

MPE 506: ENGINEERING BUSINESS MANAGEMENT

TASK: ASSIGNMENT

BRIAN TONUI

MELISSA KEMUNTO

MPE/06/15

MPE/09/17
BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
Business ethics are the moral principles that act as guidelines for the way a business conducts itself
and its transactions. In many ways, the same guidelines that individuals use to conduct themselves
in an acceptable way – in personal and professional settings – apply to businesses as well.

INDUSTRIAL ETHICS AND MANAGERIAL ETHICS IN

ORGANIZATIONS

With regard to industrial-organizational psychology, professional ethics refers to the moral

appropriateness of all work activities and the proper treatment of all employees, clients and various
stakeholders including interns, students and professional colleagues.

Many of the moral standards that guide such ethical practice are based on the following principles:

• Respect for people – deontological ethics (ethical theories that place special emphasis on
the relationship between duty and the morality of human actions) emphasize people’s right
to be treated with dignity and their rights to privacy, autonomy, freedom and self-
expression. Such rights are applicable to all persons
• Beneficence- As per this principle, which is derived from the empathy-based ethics of care,
one is expected to do good and promote human welfare when it is reasonably possible to
do so. This is especially the case when considering those who help further one’s own
interests e.g., employees and clients.
• Nonmaleficence- This principle means that one should refrain from unjustifiably doing
harm and is one about which most moral philosophers agree. It is especially important with
regard to those in vulnerable positions and also guarding against the possible misuse of
one’s work by others e.g., research findings.
• Fairness and justice- Justice may be defined as a balance of rights and obligations. Social
justice can hence be defined in terms of the fairness by which the benefits and burdens of
a social system (e.g., an organization) are distributed among its members.
• Moral virtue/ character- This concerns an individual’s personal qualities and their role
in the expression of ethical behavior. It includes an individual’s ability to be trustworthy,
 to honor their commitments, and also promoting the accuracy, validity and integrity of
professional work.

Managerial ethics

Managerial ethics are a key part of business ethics. They can be defined as a set of moral principles
and rules dictated by upper management that define what is right and what is wrong in an
organization. It is the guideline that helps direct a lower manager's decisions in the scope of his or
her job when a conflict of values is presented These policies set the minimum standard expected
by industry leaders from the company/organization down to its employees and the community at
large.

Types of managerial ethics

• Ethics dealing with legal issues e.g., fair hiring process, safe working environment, fair
pay
• Ethics dealing with moral issues e.g., dealing with customer complaints, offering paternity
leave

Importance of managerial ethics

Because people often follow what their leaders do, it is important that top leaders uphold
managerial ethics. Failure to do so may see the same behavior trickling down to the employees.

• Helps to Maintain Good Relations with Stakeholders - Stakeholders are all the parties who
are directly or indirectly related to the organization such as employees, customers,
suppliers, lenders, government, etc. Ethical behavior helps to maintain relations with them.
An ethical manager always tries to meet their requirements.
• Promotes Fair Competition - Business ethics helps to promote fair competition among
business firms. It discourages industries to involve in unfair trade practices.
• Promotes Social Responsibility - The manager performs business in society to fulfill his
economic objectives. Business ethics guide managers to involve in social welfare programs
like participating in education, healthy sports, environmental protection, etc.
 • Improves Working Environment - It guides a manager to develop a better working
environment in the organization. He tries to motivate employees by introducing a feeling
of justice, equality, freedom, belongingness, a sense of responsibility, and ownership.

SOCIAL RESPONSIBILITY

Social responsibility is an ethical theory/idea in which a company/industry/business acts in a

manner to benefit the society around it amid its role in maximizing shareholder value. More
business leaders have recognized that they have a responsibility to do more than just what’s best
for their companies but to do more for the people, the society and the planet at large. Companies
today are mostly guided by a concept known as the triple bottom line, which states that a company
should measure their social and environmental impact alongside their profits. This can be
summarized as the 3Ps- profit, people, planet

It has also been noted that consumers and investors are more actively looking to engage with
socially responsible industries.

Social responsibility is traditionally broken into 4 categories: environmental, philanthropic,

ethical, economic responsibility.

Areas of social responsibility

Environmental responsibility

Refers to the belief that organizations should behave in an environmentally friendly way as
possible. Industries that seek to do so can do it in several ways:

• Waste control- Reducing pollution, greenhouse gas emission and general waste.
• Increasing reliance on renewable energy, sustainable resources and recycled materials.
• Conservational management systems- Offsetting negative environmental impact for
example planting trees, care for local sources of water, funding research and donating to
related causes.
 Ethical responsibility

Concerned with ensuring an organization is operating in a fair and ethical manner. Organizations
that embrace this responsibility aims to achieve fair treatment of all stakeholders including
leadership, investors, employees, suppliers and customers.

Some examples of ethical responsibilities include setting a higher minimum wage, guaranteeing
all material are sourced ethically and ensuring that all employees receive competitive pay and
comprehensive benefits as well as treated with respect.

Philanthropic responsibility

Refers to a business aim to actively make the world and society a better place. In today’s world its
almost expected for businesses to give back to the communities they exist in and donate to causes
that align with their company mission. They can be small scale as sponsoring a local non-profit
annual fundraiser or large scale as donating a percentage of the annual earning to a prominent
course e.g., covid. Others go so far to create their own charitable organization to give back.

Other types of philanthropic responsibilities can include things like funding educational programs,
supporting health initiatives, supporting beautification projects, donating to causes.

Economic responsibility

When a business is acting with economic responsibility in mind, it’s making financial decisions
that prioritize doing good and not just making money. It’s the practice of a firm backing all its
financial decision in its commitment to do good in the areas listed above.

This type of responsibility is intertwined with the other areas listed above in that for example you
are ready to spend more on a supplier that uses sustainable materials even if it costs more. Another
example is if a business commits to a transparent salary system that fairly compensates all
employees and makes up for past gender and race gap.

Volunteering

Volunteering as a form of social responsibility can have benefits both for individuals and society.
Recently, volunteering has become a key part of any corporate social responsibility (CSR) strategy
and can bring numerous benefits both to the employees and the organizations themselves.
It also demonstrates that a company is engaged in the society beyond traditional charitable or
philanthropic investments. Employee volunteering programs not only benefit the community but
they also add value to the recruitment, retention, training, development, loyalty and overall
fulfillment of an employee.

Benefits of social responsibility

• Powerful marketing tool – positions a company favorably in the eyes of consumers

• Stronger brand image, recognition and reputation
• Retaining key employees - Employees often stay longer and are more committed to their
firm knowing that they are working in a socially responsible industry
• Attracting potential employees
• Operational cost saving – investing in operational efficiencies results in operational cost
savings as well as reduced environmental impact
• Easier access to funding – Investors are willing to be associated in business that practice
social responsibilities.
• Reduced regulatory burden – strong relationship with regulatory bodies can help reduce
firm’s regulatory burden.

Organizational approach to social responsibility

Obstructive

A company that takes an obstructive stance toward social responsibility attempts to defend its
economic priorities by blocking any attempts to point out the company's lack of social
responsibility. An obstructive company does not make social responsibility an effort, instead
making profits the most important aspect of its business.

Some people view obstructive businesses as immoral since they may exploit their employees,
pollute natural lands or deceive customers. When faced with specific social demands,
obstructive companies often deny any wrongdoing and may even use obstacles to deliberately
delay or divert investigation of their practices.
 Defensive

Business that take a defensive stance are not particularly responsible. These companies may
consider themselves neutral, and they make profits a more important motive than performing
actions in a socially responsible way. These companies make a point of following the law to
ensure that others cannot take legal action against them. For example, a company may create
more waste than necessary, but it will remove the waste in a legal method rather than dumping
it illegally.

Accommodating

An accommodating stance signifies that a company believes social responsibility is important

and perhaps as important as making a profit. These companies satisfy all legal requirements
and attempt to meet ethical standards.

An accommodating company does not attempt to hide its actions and remains open about why
it takes specific actions. For example, it may decrease its creation of waste, source products
from social responsible suppliers and pay its employees a fair wage.The company would keep
its records open to the public and may change their policies in response to criticism.

Proactive

Like an accommodating company, a proactive company makes social responsibility a priority,

even if doing so cuts into their profits. Instead of reacting to criticism, a proactive company
attempts to remain ahead of the curve when it comes to social responsibility. It may make
ethics part of its mission statement and attempt to avoid any harm to the environment or its
employees. A proactive company may go out of its way to institute new recycling programs,
give all of its employees a living wage and benefits, and donate a portion of its profits to
charity.

Managing social responsibilities

Adopt a business code of ethics

A business code of ethics will outline employees conduct on issues such as ethics, values,
environment, diversity, employee respect and customer service. More and more entrepreneurs
are choosing to go one step further by changing their governance document to include their
commitment to social and environmental goals.

Follow a workplace health and safety program

Creating a clear workplace health and safety program will help you establish reliable systems
to protect your employees and prevent accidents and injuries. It will also ensure you are
compliant with government legislation on health and safety.

Commit to protecting the environment

Develop policies and practices that allow your company to fulfill your commitment to the
environment. For example, you can consider producing a report that documents your activities
and results as they relate to your environmental impact. Some companies produce broader
“sustainability” reports, which encompass social, economic and environmental activities.

Get your suppliers on board

Ensure your suppliers know and meet your expectations of responsible behaviour regarding
issues such as fair pricing, for example. Screen them to determine their past conduct, and tell
them what you expect.

Be smart about donating money

Get behind causes that are meaningful for your business. A forestry business, for example,
might choose to support organizations that protect the environment. Many manufacturing
businesses donate to community organizations in towns where they have plants. The idea is to
give back to society, while at the same time sending a message about the values of your brand.

ISO AND SOCIAL RESPONSIBILITY

The International Organization for Standardization (ISO) introduced the ISO 26000 to help
steer organizations in a more socially responsible direction. The ISO 26000 provides
recommendations to help organizations to go beyond legal standards of compliance to
contribute to sustainable development.
 ISO 26000 was designed in a manner that it applies to all types of organizations whether public,
private or NGO. Industries in the energy sector, transport, retail, schools, hospitals and
charities can all adopt this standard.

Unlike other ISO standards, ISO 26000 is not intended to be used for certification or regulation.
Since it does not contain requirements, it cannot serve as a basis for audits, conformity tests or
other compliance statements. Instead it only provides recommendations.

7 key principles of ISO 26000

These are the principles that ISO 26000 identifies as the roots of socially responsible behaviour

1. Accountability
2. Transparency
3. Ethical behaviour
4. Respect for stakeholder interests
5. Respect for the rule of law
6. Respect for international norms of behaviour
7. Respect for human rights

In addition to these principles, ISO 26000 also identifies 7 core subjects of social responsibility;

1. Organizational governance

ISO 26000 encourages organizations to consider accountability, transparency and ethics in their
decision-making process and governing practice. This includes formal and informal processes.
Organizations are guided by the standard to establish mechanisms to hold themselves accountable.

2. Human rights

Human rights are the universal freedoms that apply to all human beings regardless of race, gender,
language, religion, nationality or any other status.

ISO 26000 provides guidance for companies to support human rights particularly by;

• Allowing free organization and collective negotiation

• Providing equal employment opportunities
• Preventing all forms of discrimination
• Seeking ways to prevent or mitigate adverse human rights violations e.g., child labour
• Resolving grievances

3. Labour practices

With respect to this standard, responsible labour practices should address

• Employment and contractual relationships

• Working conditions and social protection
• Social dialogue
• Health and safety at work
• Human development and training in the workplace

4. The Environment

ISO 26000 urges institutions to minimize their environmental impacts and ensure that their
resource consumption is sustainable. They are encouraged to adopt a holistic approach and
consider the direct and indirect socio-economic and environmental effects of their activities.

The organizations are to embrace initiatives to

• prevent pollution
• mitigate and adapt to climate change
• use resources sustainably
• protect the environment, biodiversity and the restoration of natural habitats

5. Fair operating practices

Fair operating practices address the way an organization interacts with others i.e. customers,
contractors, suppliers, competitors and government agencies to bring about a positive outcome.

They include

• preventing corruption
• promoting social responsibility
• fair competition
• responsible political involvement
• respecting property rights

6. Consumer issues

Organizations that provide products and services have certain responsibilities to consumers. ISO
26000 encourages companies to promote fair and sustainable economic and social development
through;

• consumer education
• sustainable consumption
• protection of health and safety
• fair marketing practices
• data and privacy protection
• upholding fair use
• ensuring that essential products and services are available to everyone including disadvantaged
groups.

7. Community involvement and development

All organizations have an impact on the communities they operate in and thus their active
participation in them can help ensure the well-being of the communities.

ISO 26000 offers guidance on

• active community involvement

• promotion of education and culture
• support for civil institutions
• job creation and skills development
• technology development and access
• health promotion
• social investment
• income and wealth creation
EXAMPLES OF CSR ACTIVITIES BY KENYAN FIRMS

The main focal areas for CSR in Kenya include

• education initiatives aimed at improving access to quality basic education, reducing adult
illiteracy, enhancing vocational training
• health initiatives directed towards combating communicable diseases e.g., TB, HIV/AIDS;
maternal health (the Beyond Zero Campaign)
• poverty reduction initiatives through social/ community development
• concern for underprivileged children
• job creation
• food security
• environmental protection.

Examples of companies

1. Safaricom who conduct their CSR activities through the Safaricom Foundation, their focus
areas being health, education and economic empowerment.
2. Del Monte who are world renowned producer of canned fruit and fruit juices. Their brand has
come to guarantee quality to consumers.
3. Coca cola as a brand is putting a huge focus on sustainability, the key areas being climate,
packaging, agriculture, water stewardship and product quality.
4. Equity Bank which sponsors students through their Equity Wings to Fly program.
5. EABL who through their CSR arm, EABL Foundation assist communities in Kenya, Uganda
and Tanzania through five areas of activity; water supply, education and training, health,
environment and special projects
6. KEBS as a govt institution has CSR programs designed to support organizational mandate of
standardization. This includes capacity building programs on conformity assessment and
standardization.