While staying within the boundaries of an ever-changing list of business laws is necessary for running about
a successful business, it is not always adequate.
Businesses and managers must also recognise the additional expectations and limitations placed upon them 
by business ethics. Business ethics stem from the principles and values which define what is right and wrong in 
a wider sense. 
 
While law requires everyone to follow the same path to avoid punishments, ethics can differ from 
organisations, or society to society. 
Legal systems provide a framework to identify what is doable and what is not, but a legal right may not always 
mean that the results of an action would be ethically correct. 
Ethics impose a higher standard that identifies a multitude of stakeholders beyond suppliers, customers and 
employees. 

Ethical dilemmas in an organisation mainly occurs in situation involving the following: 

● Conflict of interest 
● Honesty and fairness in business practices 
● Communication 
Values ​are a set of principles or certain standards of behaviour that are regarded as desirable, important and 
held in high esteem by the society. 
Values hold a major influence on an organisation’s behaviour and attitude and serve as broad guidelines in all 
situations. 
 
There are five major sources of ethical standards. 
● Utilitarian Approach 
○ A set of principles or standards that are regarded as desirable, important and held in high 
esteem by the society  
○ Values hold a major influence on an organisation’s behaviour and attitude 
● Rights Approach 
○ Focuses on the respect for human dignity. Human dignity is based on the freedom to choose 
the way a person lives his life 
○ Talks about people having a moral duty to respect others in the same way 
● Fairness or Justice Approach 
○ Keeps a check on whether an action treats everyone in the same way 
○ Ensures that there is no discrimination or favouritism in the company 
● Common Good Approach 
○ Ethical options that benefit all members of the community are a part of the common good 
approach to ethics 
○ Focuses on ensuring that the social policies, systems and institutions are beneficial to everyone 
● Virtue Approach 
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 ○ This approach says that our actions need to be consistent with certain ideal virtues 
■ Honesty 
■ Compassion 
■ Love 
■ Generosity 
■ Tolerance 
■ Integrity 
■ Fairness 
■ Courage 

 
By ensuring that a business practices ethics in its interaction inside and outside the firm, we ensure the 
following: 
● Promote a strong public image 
● Enhance employee growth and retention 
● Create an improved society 
● Helps avoid litigation and fines 
 

A company’s behaviour in different situations need not be the same. A central ethical standard is required
to guide the actions of the company at multiple similar situations.

A sound ethics programme is what top leaders need to develop to ensure that their employees and
managers practice business ethics.

A ​formal code of conduct ​is a written document which clearly outlines what is acceptable and or
unacceptable behaviour at the workplace.

An effective ​ethical communication system ​will help the responsible teams to communicate the
organisation’s values, standard of ethical conduct, and the company’s policies to all employees.

Ethics officers ​and an ​ethics committee ​are set up using employees within the company.
These people are responsible for defining, implementing and communicating policies across the
organisation.

Corporate Social Responsibility (CSR) is becoming increasingly important these days.

CSR charges organisations to be responsible for their actions that affect not just themselves and their
partners, but also the larger social ecosystem.

Companies have responsibilities similar to other members of the social ecosystem, and these
responsibilities fall into the following major groups:

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 ● Economic responsibility
● Legal responsibility
● Ethical responsibility
● Philanthropic responsibility
● Sustainability responsibility
Objective of CSR is to enable an organisation to embrace these different responsibilities. It encourages
companies to create a positive impact through its activities related to the environment, consumers,
employees, vendors, communities and all stakeholders in the ecosystem.

The CSR clause within the Companies Act of 2013 mentioned stakeholders, and the need for integrating an
organisation’s social, environmental and economic objectives. The provisions of the CSR clause is
mandatorily applicable to companies with the following:
● An annual turnover of ₹1,000 crore
● A net worth of ₹500 crore or more
● A net profit of ₹5 crore or more
The companies falling under this category are required to do the following activities:
● Appoint a CSR committee to formulate and put a CSR policy into action
● The committee monitors the CSR policy from time to time
● The committee should consist of three or more directors, of which at least one is an independent
director
● The company’s board should approve the committee’s policy
● The committee’s report be available to the employees on the company website

Following are some of the benefits a business can avail by practicing business ethics:
● CSR helps create a better public image for the company
● Generates better media coverage opportunities
● Good CSR strategy boosts employee engagement
● Good CSR strategy helps the HR team hire better employees and retain them longer
● Helps to attain and retain investors

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