Business Environment

& Sustainability
MBA (Trimester III)
DR. PALLAVI MEHROTRA
MS. PRANSHI SINGHAL
Session 4-5
 Corporate Ethics and Corporate social responsibility
 Session 4-5
Session Topic Readings Learning Activities in Session
4-5 Corporate Ethics and Corporate Mandatory References Group Discussion
social responsibility
IIMA Case Study: GAIL 'Saksham' Program: Remoulding the Future
(PSG0123)

The social responsibility of business / Alex Edmans / TEDx London

Business School
https://www.youtube.com/watch?v=Z5KZhm19EO0
The Era of CSR is ending / Rachel Hutchisson / TEDx Wilmington
https://www.youtube.com/watch?v=N8dXNzCIVxg

Recommended References
Nestle entangled! Braving the Maggi Noodle Crisis in India (IIMA:
COMM0013)

ePG Pathshala
http://epgp.inflibnet.ac.in/

Management/P12/M05 - Business and Society

https://youtu.be/NNQM5UCLuWA

Management/P12/M36 - Social Responsibility of Business

https://youtu.be/-kzfb8JXhgc
Business Ethics
Ethics are the principles of conduct, governing any
individual or organization. Business Ethics imply
conducting business responsibly and ethically.
Business Ethics are about inculcating in the
company’s management and employees a sense of
honesty, integrity and responsible business
conduct. Business Ethics provides the overarching
principles and rules which govern organizational
behavior.
These rules are normally documented in a value
statement and reflected in policies, procedures and
expected behaviors.
Business ethics is a practice that determines what is
right, wrong and appropriate at the workplace.
Theoretical foundation for business ethics
According to Stenier and Steiner (2016) there are two opposing theories regarding the
application of ethics in Business.
1. Theory of Amorality states that businesses need not follow any ethical standards as expected
by society. Friedman contended that the “business of business is business”. Adam Smith pointed
out that when a business pursues its own benefits it automatically promotes societies interest
such as providing goods and services, employment opportunities and economic development of
the country.
2. The Theory of Moral Unity states that businesses are judged by the ethical standards of
society. Business ethics are bound by social behaviour. The ethics and values of managers are
drawn from the society‘s laws, religions and cultures. Thus, ethical values may differ in different
countries. In multinational companies, where people come from different social and cultural
backgrounds creating a common set of ethical values may prove difficult.
Steiner J.F. and Steiner G.A. (2012), Business, Government and Society: A Managerial perspective: text and cases
Steps for institutionalizing business
ethics
1) Establish an ethics committee
2) Frame an appropriate code of ethics
3) Teaching ethics in management development programs.
4) Training and compliance monitoring should be made integral parts of the Code
5) Violators should be subject to specific and appropriate penalty and
punishment
6) Have a whistle blower policy at workplace.
Ethic Policy
Ethics Policy should address the following areas:
1. Safeguarding Confidential Information
2. Ensuring the Integrity of Records
3. Providing Strong Internal Controls over Assets
4. Truthfulness in Dealing with Auditors, Examiners and Legal Counsel Board, senior
management.
5. Avoiding Self-dealings and Acceptance of Gifts or Favors
6. Observing Applicable Laws
7. Implementing Appropriate Background Checks
8. Involving Internal Auditor in Monitoring Corporate Code of Conduct
9. Providing a Mechanism to Report Questionable Activity
Benefits of business ethics
 Enhanced reputation and goodwill
 Reduced risks
 Reduced costs
 Protection from unethical employees and agents
 Enhanced performance, productivity, and competitive position
 Expanded access to capital, credit, and foreign investment
 Increased profits and sustained long-term growth
 Increased international respect.
Business and Society
Social responsibility refers to the obligations and duties of a business to the
society.
Factors contributing towards social responsibility/accountability in business:
 Pressure of the labour movement.
 Development of moral values and social standards.
 Business education and contacts with the governments.
 Recognition of human factors contributing to the long-term interests of business.
 Development of a professional managerial class (separation of ownership from management
in the corporate enterprise).
 Increased complexity of the decision-making processes.
 The change in public opinion about the role of business in modern society.
Business and Society
Factors that affect the orientation of a business towards social responsibility.
1. Promoters and Top Management
2. Board of Directors
3. Stakeholders and Internal Power Relations
4. Societal Factors
5. Government and Law
6. Competitors
7. Resources
Benefits of CSR (Corporate Social
Responsibility)
Benefits of CSR include
 Satisfied stakeholders, viz., employees, distributors, shareholders and the society at large
 Positive public relations
 Improved public image of the business
 Positive word of mouth
 Cost reductions through efficient staff hire and retention, implementation of energy savings
programs, effective management of potential risks and liabilities more effectively, less
investment in traditional advertising etc.
 More business opportunities (through an open, outward approach)
Business and its Environment
The environment in which an organization operates has a direct bearing on its objectives and
functions. The environment of a business enterprise, as discussed earlier, comprises several
segments which may be classified as under:
 Social: Comprising of consumers and employees as well as social institutions which benefit
from business or provide benefits to it.
 Economic: Encompassing the whole economy, the various economic institutions including
other firms with which the organization deals with.
 Political: Covering the political institutions of the country, including the government and the
legislature, which regulate business activity and draw upon the resources of business firms in
the form of different kinds of taxes.
 Technological: Comprising of the know-how and production and management technology
available to business firms at any point or period of time.
Social Responsibility of Business
Some of the responsibilities of business may be outlined as follows:
 The shareholders: Provide a fair return on capital and to provide them with regular,
accurate and full information about the working of the enterprise.
 The workers: The management should provide opportunities to the workers and create
right conditions in the enterprise including social security, profit sharing, fair promotions,
proper grievance settlement and employee welfare.
 The consumers: Providing the goods and other services needed by the community at the
most reasonable possible prices. It must guard against adulteration, poor quality, lack of
service and courtesy to customers, misleading and dishonest advertising, etc. The
consumers also need protection against monopoly and restrictive trade practices.
 The community: An enterprise must respect the law and pay taxes regularly and honestly. It
should take care to avoid bad effluents, smoky chimneys, and pay attention to housing and
workers living conditions and the community.
Social Factors Effecting Business
Social factors which impact customer needs and size of markets are:
1. Lifestyles, buying habits, purchasing power
2. Education level, emphasis on safety of products, health consciousness
3. Religion and beliefs
4. Demographic profile, population growth rate, age distribution and life expectancy rates
5. Average disposable income level, attitudes toward saving and investing
6. Social classes, minorities.
7. Family size and structure
8. Attitudes toward green or ecological products, attitudes toward for renewable energy
9. Immigration and emigration rates.
10. Attitudes toward imported products and services
11. Attitudes toward work, career, leisure and retirement
12. Attitudes toward customer service and product quality
Measuring and evaluating an organisation’s
social performance
Archie Carroll defines corporate
social responsibility as the entire
range of obligations to the society
has proposed a multi-dimensional
conceptual model of corporate
performance. According to him, a
firm has the following four
categories of obligations of
corporate performance.
Economic responsibilities
Legal responsibilities
Ethical responsibilities
Discretionary responsibilities
Discretionary responsibility
Contribute to community and
quality of life
Ethical responsibility
Be ethical. Do what is right. Avoid
harm.
Legal responsibility
Obey the law
Economical responsibility
Be profitable
What limits the organisations from being socially
responsible?
1. Cost
2. Efficiency
3. Relevance
4. Scope

Barriers to social responsibility

5. The Manager
6. The Organization
7. The Industry
8. The Division
Case Studies
1. IIMA Case Study: GAIL 'Saksham' Program: Remoulding the
Future (PSG0123)
2. Nestle entangled! Braving the Maggi Noodle Crisis in India (IIMA:
COMM0013)