Business Ethics and CSR

Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their
business operations and in their interactions with their stakeholders on a voluntary basis” (European Commission,
Directorate General for Employment and Social Affairs)

Arguments for CSR:

Large companies have power which extends beyond simple finance. In 2016, Coca-Cola company reported gross profits
of $M 5615. In 2017, Guyana reported Gross Domestic Product of $M 3675. This power imbalance affects payscales,
access, taxation, revenues, environment, community in a positive and negative way. Thus, Companies are important
elements of a local community who have power beyond the simple supply of goods and services. So, they have a
responsibility to the community which goes beyond the simple generation of profit.

1. Protect the interests of stakeholders: Labour force is united into unions which demand protection of their rights
from business enterprises. To get the support of workers, it has become necessary for organisations to discharge
responsibility towards their employees.
Consumer today is the kingpin around whom all marketing activities revolve. He buys what he wants. Firms that
fail to satisfy consumer needs will close down sooner or later. Consumer sovereignty has, thus, forced firms to
assume social responsiveness towards them.
2. Long-run survival: Business organisations are powerful institutions of the society. Their acceptance by the
society will be denied if they ignore social problems. To avoid self-destruction in the long-run, business
enterprises assume social responsibility.
3. Avoids government regulation: Non-conformance to social norms may attract legislative restrictions.
Government directly influences the organisations through regulations that dictate what they should do and
what not. Various agencies monitor business activities.
4. Resources: Business organisations have enormous resources which can be partly used for solving social
problems. Businesses are the creation of society and must work in the best interest of society, both
economically and socially.

Arguments against CSR:

1. Business is an economic activity: The best know theorist here is Friedman, who says The business of business is
business! It is argued by the opponents of social responsibility that basic function of a business enterprise is to
look into economic viability of its operations. Managers have a responsibility to owners/shareholders, not the
external community. Companies should work within the law and ethical standards, but should not voluntarily do
anything which impacts adversely on the bottom line. This doesn’t mean a company should act unethically –
simply that it should not get involved in activity not directly related to the business.
The prime responsibility of assuming social responsibility should, therefore, be of the State and individuals.
1. Cost-benefit analysis: Any social-benefit programme where initial costs exceed the benefits may not be taken
up by enterprises even in the short-run.
2. Lack of skill and competence: Professionally qualified managers may not have the aptitude to solve the social
problems.
3. Transfer of social costs: Costs related to social programmes are adjusted by passing it to consumers by
increasing prices of goods and services, reduction in wages.
Carroll’s pyramid
Carroll's CSR Pyramid is a simple framework that helps argue how and why organizations should meet their social
responsibilities.

Economic Responsibility: Carroll says that making profit is at the base of good
CSR activity. A business has to be profitable maximising profits, minimizing costs,
plan for the future and provide shareholders with sufficient and attractive returns.
The stakeholders affected most in this group are its employees and shareholders.
Therefore, we can regard legitimate economic activity as CSR.
Legal responsibility: Assuming that laws are just and a legitimate expression of the
ethical will of society, then a company should keep the law. Society expects
businesses to adhere to all regulations and laws, honour its contracts, warranties
and guarantees. Keeping the law is part of our CSR responsibility.
Ethical responsibility: CSR proponents say companies should actively seek to do what is right and just. CSR opponents
say companies should keep the law and observe accepted ethical standards, but are under no obligation to go further.
Philanthropy: It involves giving back to the community and being a good corporate citizen through donations and active
participation in charities or other community welfare programs.CSR opponents say we should not engage in
philanthropy unless it increases our profits – in which case it was not done with truly charitable intent!

Conclusion: Corporate Social Responsibility suggests that companies have a duty to the wider community beyond the
simple generation of profit. This argument is based on the power which companies may wield in a
community/area/country. Arguments against CSR suggest that companies should keep the law but are under no
obligation to participate in broader activity.

Example - Ford Motor Company, in an effort to reduce its GHG emissions, an EcoBoost engine was developed to increase
fuel efficiency and hopes to offer 13 new electric vehicle models by 2020.
The pharmaceutical company Pfizer raise awareness for non-infectious diseases and work to provide healthcare to
women and children who struggle with adequate care.