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Social ethical strategies

Lecture 11
Mkt702
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• Although the main objective for a company is to make

money, focusing solely on profitability is not enough today.
Consumers want to embrace and support companies and
brands that take stances on social issues going on in the
world. By exercising corporate responsibility, companies can
be mindful of the impact they are having on their
communities beyond sales transactions.
• Company leaders should embrace the four types of
corporate responsibility to not only benefit their business but
also for the sake of doing good for their communities.
Corporate social responsibility typically falls into four
categories: environmental, human rights, philanthropic and
economic.
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• Corporate Environmental Responsibility

• Pollution and excessive consumption were once considered
the costs of doing business for companies. As environmental
issues grew on a global scale, it became more important than
ever for companies to be aware of their contributions to these
problems.
• Environmentally responsible companies need to analyze their
processes and voluntarily do everything in their power to
reduce the environmental impact – especially when it comes
to waste disposal and carbon footprints. Global warming
poses a real threat, and corporations bear a large part of the
blame.
• Consumers today see it as their responsibility to take
actionable steps to address the problem.
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• Corporate Human Rights Responsibility

• Human rights responsibility for companies usually involves
enacting fair labor practices, condemning child labor and
establishing fair trade practices. The National Labor Relations Act
(NLRA) was enacted to prevent unfair labor practices by
employers and unions, yet issues such as unequal pay have gone
unanswered on a large scale.
• Employees are the core of a company, many consumers maintain
that it is on company leadership to make sure they are treating
their employees fairly.
• In addition to their own employees, companies must ensure the
companies they are doing business with are taking human rights
responsibility serious, especially when it comes to child labor.
Many companies are beginning to end business relationsihps with
companies that use child labor. Disney, Mattel and Walmart are a
few companies that came under intense scrutiny after it was
revealed that the factory that produces their toys uses child labor.
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• Corporate Philanthropic Responsibility

• Corporate philanthropic responsibility typically involves making
investments in the local community, whether it is for educational
programs, scholarship programs, health initiatives or supporting
notable causes in general.
• Companies that don't view the people in their communities as
sources of revenue understand the role the community plays in
their success outside of the business. Consumers today want to
know that companies care about them outside of the money they
spend.
• Most corporations choose to donate money to causes that are
meant to bring about social change. Some may choose to attach
their brand to the cause, while others may choose to remain
entirely in the background and not take any credit for the money or
resources offered.
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• A good amount of large corporations have in-house

departments devoted to coordinating and managing the
company's philanthropic programs and efforts. These
corporations will usually have a few causes that they attach
their brand to and commit their resources toward.
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• Corporate Economic Responsibility

• The straightforward truth is that companies that do not make
money do not remain in business. However, consumers
today believe that profits should not come at the expense of
ethics. Unethical practices may benefit a company in the
short term, but their long-term effects can be disastrous. The
2008 financial crisis is an example of by a few companies
creating the worst financial crisis since the Great
Depression.
• Economic responsibility for corporations also includes
finding and implementing the most efficient practices for
minimizing wasted capital. This may come in the form of new
manufacturing processes that improve efficiency or investing
in new equipment.
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• Corporate social responsibility, often called simply CSR,

refers to doing business in ways that benefit, rather than
harm, society and the environment. Business sustainability
refers to a company's ability to survive into the future and to
eventually outlive its current owners. Although these
concepts may seem dissimilar at first, there is an
inseparable link between CSR and business sustainability.
Understanding how acting ethically and responsibly in the
marketplace can influence your financial stability and the
future of your business is essential for entrepreneurs and
executives alike.
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• Environmental Responsibility
• The concept of social responsibility can be broken down into
a number of categories, each of which can be more or less
of a concern in different industries. Environmental
responsibility refers to the ethical management of the
impacts that business operations have on water, air, earth,
wild animals and non-renewable natural resources.
Companies such as natural-resource refineries and chemical
producers generally incur greater impacts on the
environment than other types of businesses, such as local
retail shops, making this aspect of CSR especially important
in certain industries.
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• Economic Responsibility
• A corporation can cause a wide range of external impacts on
various stakeholder groups, sometimes with economic
consequences. The business models of large companies
can impact local wage levels while simultaneously impacting
the local economy of a community. A corporation could
unethically take advantage of child labor in an Asian country
while paying minimum wage in the U.S., for example, or it
could pay a living wage in the U.S. while sourcing from
ethically certified international suppliers, either decimating or
strengthening the two local economies.
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• Public Health and Political Responsibility

• Ethical behavior in the area of public health and politics are equally
important. Decisions made by corporations selling food products,
medicine, addictive recreational substances, and even entertainment
can impact consumers on a physical, emotional and psychological
level, potential influencing deep cultural change. This carries a
weighty responsibility to market products that do not inherently
cause harm to people who use them as intended.
• The ability of corporations to fund political campaigns gives them a
great deal of power in the political process, placing another huge
ethical responsibility on their shoulders as they face decisions that
seem to place social responsibility and business sustainability at
odds. When legislation proposing a ban on cigarette advertising was
introduced in the 20th century, for example, cigarette companies
faced a choice to support or oppose a legal act that could benefit
society while threatening their own sustainability.
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• Business Sustainability
• Sustainability is all about the ability to keep the doors open
and continue to serve customers. Positive cash flow is
essential to sustainability, as it pays today's bills and
expenses, but long-term investment and strategic planning
are just as important. More than simply ensuring cash on
hand, business sustainability requires entrepreneurs and
managers to invest in production capacity, research and
development, competitive labor, and branding. Sustainability
also requires thorough short-, medium- and long-term
strategies for product development, brand development and
continued growth.
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• Correlation
• Short-term corporate profits can sometimes grow through
unethical and irresponsible means, but unscrupulous
business practices rarely build the foundation of long-term
customer loyalty, legal compliance, and strong brand
reputation necessary for sustainability. Doing the right thing
may cost a bit more than purely serving the bottom line, but
a commitment to social responsibility can build brand equity
that stands the test of time. Balancing profit considerations
with ethical guidelines for impacting the environment,
economies, public health and politics can lead to win-win
decisions that keep your company in the black while making
positive contributions in the world.
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• Business ethics and social responsibility are closely related

concepts that address how companies should conduct
themselves. Business ethics is a general term that
comprises an overall approach to moral and ethical
decisions and activities. Social responsibility has evolved
over time and essentially represents an expanded view of
business ethics in the early 21st century. Operating ethically
and responsibly can affect company relationships with key
stakeholders for the long term.
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• Business Ethics Impact

• The ethical nature of a business can enhance or degrade its
brand in the same way an individual's ethics affect his
reputation. In the past, companies would often concern
themselves only with the possibilities of whether poor ethics
would be discovered. Due to the evolution of the Internet
and digital technology, companies have had to adjust to the
reality that poor ethical choices routinely get discovered and
lead to negative company and brand effects. Attracting and
retaining core customers is usually more possible for
companies that operate honestly and ethically in their
business activities
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• Ethical Arenas
• Ethical considerations cover the full gamut of business
decisions. Accounting, human resources and customer
communication are common areas where businesses of all
types have struggled. In other cases, business ethics help or
hinder companies in areas more specific to their industry
and commerce. Manufacturers, for instance, must ponder
ethics when deciding how to produce goods and the
potential impact of production on the environment. Not all
ethical dilemmas are clear right or wrong choices. Some are
gray areas where companies take a stance that hopefully
align with values appreciated by customers, communities
and partners.
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• Social Responsibility Impact

• Because of increased pressure from consumer and
environmental watch groups and society as a whole,
companies are also forced to deal with the consequences of
failing to act socially responsibly. Social responsibility
describes an unwritten, informal requirement to appease the
public and key stakeholders while operating a profitable
business. In essence, a company must normally balance
earning money with treating customers, communities,
employees and business partners fairly and responsibly.
Failure to do so can lead to negative publicity and consumer
backlash, which ultimately affects the bottom line.
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• Bottom Line Responsibility

• Social responsibility has increasingly become part of a
company's business strategy. Generally, social responsibility
extends beyond basic ethics and emphasizes that
companies act as good community citizens while also
meeting shareholder requirements. Giving back to
communities through philanthropy and active involvement in
activities help companies meet the informal expectations
stakeholders have. While profits generated by socially
responsible behavior are often intangible and hard to
measure, keeping up with competitive standards and public
demands aids long-term stability.
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• Stakeholders are individuals and entities that are affected by

the actions taken by a business organization. A small
business can affect its stakeholders in both positive and
negative ways, forcing the management team to make tough
choices. Actions taken to keep the company’s owners or
investors happy by maximizing profits, for example, may not
be viewed in a positive light by employees who want to
share in the company’s financial success. A business has an
ethical responsibility to uphold with each of its stakeholders.
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• Good business ethics dictate that a business should tell

customers the truth from the moment it makes contact with a
customer and in all subsequent dealings, including after a
purchase. The pressure to make a sale may cause a
salesperson to exaggerate the benefits of or need for a
product. A heating and cooling system maintenance
company, for example, might tell a homeowner she needs a
new system when only routine repairs are necessary. An
even more serious breach of ethical responsibility would be
knowingly selling a product that is unsafe or of inferior
quality.
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• Providing Fair Returns for Investors

• Investors in private companies want the company to
maximize profits, because that increases the value of the
business and of their ownership share in the company. A
company that spends lavishly on executive compensation
and perks could be viewed by the investors as not living up
to its ethical responsibility to provide the highest possible
returns on their investment.
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• Treating Employees Fairly

• A business owner’s efforts to increase profitability can result
in an excessive workload for employees and deadlines that
are impossible for employees to meet. Employees expect to
be compensated with wages and benefits that are at least up
to industry standards. A company owner may choose
instead to maximize his own compensation and not live up to
his obligations to employees. Employees also seek
opportunities for career advancement, which may require the
company to provide additional education or training. An
unethical organization may decide that employee
satisfaction and training aren't the company's concern. The
business owner will choose instead to let unhappy
employees leave and replace them with new hires.
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• Giving Back to the Community

• Companies increasingly recognize that they have an ethical
responsibility to the towns or cities where they do business
and to society as a whole. Maintaining the highest ethical
standards can cost money and reduce profits -- for example,
investing in equipment to reduce greenhouse emissions to a
degree that goes beyond the minimum compliance required
by government regulation. The most ethical companies
recognize that their financial and human resources can be
used to help those less fortunate in their local communities.
They use their name recognition to encourage people in the
community to get involved in good causes and may also
sponsor charitable events.
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• Dealing Fairly With Suppliers

• The most ethical companies treat their vendors, suppliers
and independent contractors as part of their team. They do
their best to pay invoices on time, express appreciation for
the quality products and services the vendors provide and
keep vendors and contractors informed of changes to
business operations that may affect them. For example, if a
company knows it will be reducing purchases by 25 percent
in the upcoming year because of a business slowdown,
letting the vendor know in advance will allow that company
to adjust its operations accordingly.