AMMARA WAHEED MEMON 20131-16094

Contents
ABSTRACT................................................................................................................ 2
INTRODUCTION....................................................................................................... 3
Corporate Social Responsibility..................................................................................3
Business Ethics........................................................................................................... 3
Importance of Business Ethics & CSR in the business environment...........................4
Role of Business Ethics & CSR in the business environment......................................5
Link between Business Ethics & CSR..........................................................................6
CONCLUSION........................................................................................................... 8

ROLE OF BUSINESS ETHICS IN

CORPORATE SOCIAL RESPONSIBILITY

ABSTRACT
Corporate social responsibility includes a firms overall business strategies in
order to practice business legally, ethically and social friendly. CSR activities
should help the society or the community towards its development. In the
recent years many companies have realized the importance of CSR and have
moved their focus on to the development of the society so as to make the
image of the company better and to give in return to the society in which
they do business. In the business world, business ethics and corporate social
responsibility are correlated, business ethics helps the company to
distinguish between what is right and wrong and help them to make ethical
decisions which will benefit the society.
Our report focuses on the following objectives

Link between business ethics and CSR

Importance in the business world
Role of business ethics & CSR in the business environment

INTRODUCTION
Since the 1970s, companies have addressed the business ethics in many ways,
including the compliance program, code of conducts, the hiring of the corporate
social responsibility officers and training programs. In the past years some
companies are practicing an unethical behavior that leads the organizations to
larger corporate scandals. To overcome these problems, US and European
companies are pressurized to provide more controlled supremacy and ethics
platform in order to be more responsible towards the societies in which they
survive.
The main reason behind business to act ethically is that businesses have great
prospective to transmute people's lives and to assuage deficiency through
engendering economic growth. They produce goods and facilities that customers
want and they create careers. Through paying taxes, they subsidize to regime
revenue that can finance schools, hospitals and other public services. Though, a
corporate must keep in jingle with the desires of the societies it assists or it runs the
risk of estranging its shareholders, stakeholders and customers. This would be bad
for business, plummeting growth and hypothetically affecting profit.

Corporate Social Responsibility

Corporate Social Responsibility is a multidimensional concept that includes ethics,
law and wellbeing of the society. Recently the trend of adopting CSR by the
company is increasing over the year. Corporate social responsibility is the key
element that helps the company portrays a positive image in the mind of the
customers. According to a research made by private research firm in New York,
customers tend to buy a product 60% based on the image of the company and its
reputation and 40% on the products benefits. Therefore a company needs to make
use of CSR in order to a reputation for the company.
CSR activity helps the company not to only focus on profits but also to realize its
responsibilities towards the society. The company needs to focus on the wellbeing of
its workers, consumers, faith groups, merchants and the people living in the society.
Nowadays the need of CSR has increased because the companies these days while
operating create social issues which need to be addressed by the company so as to
avoid creating a negative impact on the society.

Business Ethics
Business ethics in simple words is the study of principles that includes the moral
principles as well as the ethical issues that a company faces in the business world.
Business ethics helps the company in making moral decisions; it also enables the

company to attract consumers and to retain them. A company whose believes in

ethics will always consider the wellbeing of the society, its employees and it
suppliers while making every decision. The company which follows ethical
guidelines not only makes profits but also make a reputation in front of its
customers. People will also prefer working in the company due to its reputation.
There are many ethical issues that the company faces and the company needs to
focus on the issue of its consumers, employees etc. Most of the companies hire
engineers at the time of installation of plant and machineries and when the process
is complete, they fire them which is unethical. These types of issues are related to
business ethics. The company needs to provide its employees their rights and need
to respect their rights. The company also needs to do hiring on merit basis; the
company needs to make payments on time to its workers. All these type of issue are
related to ethics and need to be addressed ethically

Importance of Business Ethics & CSR in the

business environment
Reputation of any company is the key asset and it the most difficult to maintain.
Companies that do not act on moral principles and neglect their social responsibility
lead to wider consequences.
Over the past recent year many studies have showed that both business ethics and
CSR are the main factor that can help the company in long term sustainability. In
todays challenging business world, CSR and business ethics are mandatory
exercise for all the companies rather than thinking of them as options.
The natural world is highly affected by the business ethics. For instance, a company
who does not dispose off its waste properly not only avoids social responsibility but
also break ethical principles.
Third world countries that are the developing
countries are highly affected by poor business ethics. The big giant companies, for
the sake of short-term high profits neglects the ethical principles for example they
hire cheap labor, hiring people on preference basis rather than hiring on merit bases
and giving the labor low salaries. This act also violates the CSR principle because
its the social responsibility of the company to make the society a better place and
to give something in return for environment in which they operate.
Following are some examples of companies who do unethical practice that creates a
negative impact on the society nullifying corporate social responsibility.
In reference to Pakistani business environment there are many examples of
unethical business practices in contrast with social responsibility. But we will study
the example of insurance companies. Hashwani hotels limited (owners of Marriot
Hotel Islamabad), have filed a claim of Rs2.2 billion against PICIC Insurance

Company limited and New Jubliee Insurance Company. On 20 th September 2008

there was a terrorist attack on the Marriot hotel Islamabad which resulted in more
than 50 deaths; a fire broke out right after the incident which caused heavy damage
to the building as well as to the furniture. Reports of investigation from the police
department, clearly shows that the fire had nothing to do with the terrorist attack.
But when the company claimed for insurance; both the insurance companies used
unethical business practices just to avoid giving them their insurance money. Both
the insurance company started using delaying tactics and bribing the judges so as
to delay the suit.
In context to example of foreign companies, Apple faced a legal suit in 2006
regarding child labor and poor ethical practices. Apples manufacturing company
FOXCONN uses child labor and provides poor working environment for the workers.
The workers were forced to work under dangerous conditions inhaling cancerous
vapors for daily 10 hours. 17 suicidal deaths have been reported regarding the
issue, when workers were frustrated working in those conditions they jumped off the
window in order to commit suicide, later on the company had to install anti-suicide
nets. Small residential quarters, heavy workload, immense pressure and low salaries
are some conditions that were faced by the Foxconn employees.
Another example is of Nestle, the company was found guilty by World Health
Organization WHO for the death of infants in the developing countries. Nestls
infant formulas death rate was as compare to breast-fed infants were much greater.
The death rate was around 15% to 20% greater than that of breast-fed infants. The
issue was that the company hired females and dressed them as nurses to distribute
that formula for free as publicity campaign protracted enough that the milk of
lactating moms dried up. The moms and their kids were now totally dependent upon
their formula. In the developing countries such as Egypt, Nigeria etc. most of the
people are not wealthy enough to buy that formula therefore the mothers were
forced to give their children that formula in lower quantity, which resulted in low
nutrition and the death of infants. The other issue was that the formula required
clean water and the company did not educate their customers about clean water
and in such developing countries clean water was difficult to find and due to high
illiteracy rate the mothers did not know this condition which resulted in death of
their children. This act by the company was not only unethical but also was against
social responsibility. This act resulted in boycott of the companys product. In UK
only many student unions, businesses, cultural groups, trade unions and celebrities
supported the boycott by removing the companys product from their shops and
vending machines. The above example helps us clearly understand what impact
business ethics and corporate social responsibility have on the profits of the
company.

Role of Business Ethics & CSR in the business

environment
CSR and ethics both play a key role in the welfare of the society as well for the
business environment. Having a concern for the society is just not for the welfare of
the society its also for the welfare of the company because nowadays consumers
have become educated and in a survey conducted in UK 87% of consumers think
that the companies should take into their account the effect of their activities and
decisions on the society.
Corporate Social Responsibility and business ethics both define the companys
strategies to conduct business in a moral and people friendly manner. They include
activities such as association with locals of the society, making healthy relationship
with their employees. The company also needs to address the social issues that are
faced by the society. If they make profit out of the society they need to give
something or need to contribute for the welfare of the society. Following is the
example of a company who follows ethical guidelines and csr for the sake of welfare
of the business environment.
Anglo American is a UK based private organization. It is the leader in the mining
industry. The company does ethical csr activities. Since mining has a great impact
on the environment therefore the company ensures that it does not cause harm to
the local inhabitants and to the society as well. The company respects the society in
which it works, therefore hire locals for mining giving them an opportunity for work
and also provides them with safety gears, medical insurances and also provide
educational support to the children of that society. Sometimes the company needs
to relocate the small villages for the sake of extraction of minerals; therefore the
company builds the inhabitants of the village with better homes and living
standards. This ethical practice helps the company gain profit and trust of the
people. The company does extraction of minerals with minimum accidents.
Below is the example of a company who does not behave ethically while doing CSR
and its impact on its profits.
Coca Cola is the leader in carbonated drinks yet it faces boycott in 7 different states
of India. Coca Cola in the year 2000 setup their bottling plant in Kala Dera, a large
village just outside Jaipur. The community in 2007 realized a decline in the water
level of the village. Kala Dera is an agricultural village therefore water is an
essential resource for them and has a direct relationship with their income. Low
water mean low cultivation, low water mean women does have to travel 5 to 6km
far to fetch water. The company depletes underground water for production. In
summer the condition get worse because in summers water usage is at peak at the
same season company needs to produce extra load. The community blamed the
company and asked them to close their plant but the company behaved unethically
and denied all the charges. Later on the company announced that they will be using

RAIN HARVESTING as a CSR activity to help protect the natural resources, but it was
an unethical move by the company just to bluff the society. The fact is that in Jaipur
it rains max 30days a year and the water stored can only last for a month or so. This
act is a clear example of how the companies practice unethical means just to make
profits and they used CSR for their advantage. This act resulted in boycott in 7
states of India.
By studying following examples we can easily understand that those companies
who neglect CSR and ethical rules are the ones who face boycotts and low profits.
Whereas on the other hand the companies who follow ethical guidelines and bear
social responsibility not only increase profits but also increase trust among their
customers.

Link between Business Ethics & CSR

The companys overall objective is to make profit but they should also consider the
welfare of the society they operate in. Business ethics is about making moral
judgments, how an organization operates without causing any harm to the society
and to their inhabitants as well. Whereas CSR is about giving back something to the
society for its development, its usually about doing ethical activities.

The relation between business ethics and csr is inter-related. They both helps the
company to practice business in a responsible way keeping in mind that they have
to make profit without creating harm for any other person. Nowadays the
companies have realized there need to CSR and they are promoting CSR activities in
a moral aspect.
There are many reasons for linking social responsibilities with business ethics in the
business environment. The relation is held upon the fact that CSR activities should
be for the sake of the society not for the sake of the company. If the company bears
social responsibility in an ethical way than the consumers and its suppliers will have
faith in the company and eventually this will lead to max profit. We can consider the
example of Starbucks coffee; its been there for past 30 years and is the leader in
the coffee business. It relationship with its suppliers is very strong. The suppliers
provide them with the fresh and finest coffee beans from all over the world and in
return the company takes care of the farmers. The company provides them with
health benefits and long term contacts which earn them decent profit.
Following are some example of Pakistani companies who follow CSR activities in
guidance with the ethical principles

ENGRO Chemical Pakistan Limited

Engro Chemical Pakistan Limited is the second biggest manufacturer of Urea

fertilizer in Pakistan. Engro chemical is holding the mission to generate value for its
stakeholders. So Engro Chemicals participates in various activities which can help
meet its mission that is the value creation and improving the standard of its
stakeholders. If we look on the company activities it can be seen that the company
is following the notion and principles of CSR. The company is gives funds for
education to the people of far flung areas by building educational institutes there. In
order to support different health issues the company arranges camps in diverse
areas of the country. The company also gives funds to the hospitals in order to
develop new departments so that a range of diseases can be cured easily. The
establishment of the Oncology Unit at Aga Khan University Hospital, Karachi and
Dialysis Centres at Daharki and Mirpur Mathelo are some examples of Engro as a
part of CSR activity.

Unilever Pakistan Limited:

Unilever Pakistan is the biggest FMCG Company in Pakistan, and also one of the
largest multinationals in the country. Unilever Pakistan believes that in order to
flourish it has to build and holds the highest standards of corporate behavior.
As a leading company in following the concept of CSR in Pakistan, it strongly
believes that as a part of the local community it has a liability to return to the
community in which it. So Unilever Pakistan has participated in three areas that are
most important to the Pakistan and its people: education, health & water.
In the education sector of Pakistan UPL is giving funds to the universities like Lahore
University of Management Sciences (LUMS). In order to enhance the quality of the
primary education in Pakistan it has also given financial support to the NGOs which
are working for the betterment of education like The Citizen Foundation (TCF). UPL is
also running the Unilever International Art Project for Schools.
In order to support health facilities to the people of Pakistan the Unilever Pakistan
has sustained long-term collaboration with certain health organizations and helps a
broad range of projects. These organizations and projects include the Marie
Adelaide Leprosy Centre (MALC), Layton Rehmatullah Benevolent Trust (LRBT) and
the Loralai TB Control Program.
Unilever also gives support to the water sustainability initiatives. The shortage of
water in Pakistan gives the company an opportunity to offer useful solutions for
water sustainability and preservation. In order to have commitment to water
sustainability UPL has made collaboration with, the Thardeep Rural Development
Programme (TRDP)

Following are the examples of some foreign companies who practice ethical CSR
activities. All these companies have been awarded with best ethical csr reputation
award. The survey was conducted by a private company which surveyed around
50,000 consumers from 15 different companies.

Microsoft
Microsoft holds a small Citizenship team at the corporate level, it has Citizenship
Leads across the world and it works daily in cooperation with a large number of
stakeholders on a variety of issues significant to local communities.
Another reason of their success is their employees enthusiasm for helping their
communities and causes through charitable giving and volunteering In September
2012, Microsoft utilized much of their efforts providing opportunities for youth by
introducing Microsoft YouthSpark, a main project to provide hundreds of millions of
youth with opportunities for education, employment and entrepreneurship

Google
Google is considered as the best company to work for in the world. Google treats its
employees equally and fairly and takes their well-being as their one of the
important concerns. And when consumers ask where corporate responsibility
begins, they say its with the people in the workforce.

The Walt Disney

The company is a good corporate citizen that supports good causes and protects
the environment and makes certain the respectful workplaces to encourage the
wellbeing of kids and families.

CONCLUSION
We can conclude that business ethics and corporate social responsibility are both
different terms but are correlated with each other. Business ethics concern with the
belief and norms of what is right and what is wrong in context of the business world,
whereas CSR is all about the welfare of the society, but both terms are share an
important relation. The company need to practice business ethically and should also
consider the benefits of the society. Companies such as BMW, Microsoft, Walt
Disney, Unilever are the leaders in performing CSR activities ethically.