BUSINESS ETHICS

MODULE 1

Ethics is a subject of social science that is related with moral principles and social values.
'Business Ethics' can be termed as a study of proper business policies and practices regarding
potentially controversial issues, such as corporate governance, insider trading, bribery,
discrimination, corporate social responsibility, and fiduciary responsibilities.

Business ethics means the application of ethics in business. Business ethics are moral principles
that guide the way a business behaves. The same principles that determine an individual”s
actions also apply to business. Acting in an ethical way involves distinguishing between “right”
and “wrong” and then making the “right” choice. It is relatively easy to identify unethical
business practices.

However, it is not always easy to create similar hard-and-fast definitions of good ethical practice.
A company must make a competitive return for its shareholders and treat its employees fairly.  
A company also has wider responsibilities. It should minimize any harm to the environment and
work in ways that do not damage the communities in which it operates.

Business Ethics–Definition

There are many definitions of business ethics, but the ones given by Andrew Crane and
Raymond C. Baumhart are considered the most appropriate ones. According to Crane, "Business
ethics is the study of business situations, activities, and decisions where issues of right and
wrong are addressed." Baumhart defines, "The ethics of business is the ethics of responsibility.
The business man must promise that he will not harm knowingly."

EXAMPLE- Data Protection

Businesses often collect information about their customers. This may only be an email address,
but it could also be their physical address, or health or financial information, depending on the
nature of the business. Companies that collect customer data normally promise to secure that
information and not share it without the customer's permission. The same applies to employee
information. Business ethics usually protect employees' personnel records and allow access only
to those with a valid need to know.

Customer Prioritization

One way a business shows respect for its customers is by prioritizing the customer's needs, even
at the expense of the company. For example, if a customer purchases goods or services that turn
out to be unsatisfactory, the business will do what it must to recompense the customer. If it is a
faulty product, the business will offer a replacement or a refund. If the customer experienced bad
service, the company will usually apologize and offer a discount or some other form of
compensation.
MORAL BEHAVIOUR

Moral behavior refers to a physical action or attitude that aligns with the principles of a
specific ethical system. Action or actions that produce good outcomes for the individuals as
members of a community, or society. It can be applied to the whole global society.

Schulman defines moral behavior as “acts intended to produce kind and/or fair outcomes.”

1.  Family – the basic unit in a society. It includes one’s biological or adoptive family of
orientation. The same provides us with our basic needs to survive and develop as a
significant member of the society.
2. School – it may include formal or non- formal educational system that provides a child
with his learning needs.
3. Church – the institution that determines what is specifically considered as right or wrong.
It is composed of believers in the same faith.
4.   Mass media – those agencies that are purposive of entertaining, informing and educating
through various channels like the radio, television, printed materials etc.

Psychoanalytic Approach Expresses the idea that when the superego dominates the individual, he
or she is good because he or she has a conscience that tells him or her to be good.
Social-group Approach Claims that we behave the way we do because people expect us to
behave that way
Learning-theory Approach Says that we have been trained and disciplined by our upbringing
and by the examples of our parents into behaving the way we should. Cognitive-developmental
Approach Asserts that to behave morally implies intelligent adaptations to our environment. It
emphasizes the importance of intelligence in moral control. The more intelligent a person is, the
stronger he or she is morally.

Moral Standards

Moral standards are those concerned with or relating to human behaviour , especially the
distinction between good and bad behaviour. Moral standards involves the rules people have
about the kinds of actions they believe are morally right and wrong. As well as the values they
place on the kinds of objects they believe morally good and morally bad.

Characteristics of Moral Standards

1. Moral standards involve serious wrongs or significant benefits. Moral standards deal with
matters which can be seriously impact, that is injure or benefit human beings.

2. Moral Standards ought to be preferred to other values Moral standards have overriding
character or hegemonic authority. If a moral standards states that a person has the moral
obligation to do something, then he/she is supposed to do that even if it conflicts with other non-
moral standards.
 3. Moral standards are not established by authority figures Moral standards are not invented,
formed, or generated by authoritative bodies or persons such as nations’ legislative bodies.
Ideally instead , these values ought to be considered in the process of making laws.

4. Moral standards have the trait of universalizability Simply it means that everyone should live
up to moral standards. To be more accurate, however, it entails that moral principles must apply
to all who are in the relatively similar situation.

5. Moral Standards are based on Impartial consideration Moral standards does not evaluate
standards on the basis of the interest of a certain person or group, but one that goes beyond
personal interest to a universal standpoint in which each person’s interest are impartially counted
as equal.

6. Moral standards are associated with special emotions and vocabulary Prescriptivity indicates
the practical or action-guiding nature of moral standards. These moral standards are generally put
forth as injunction or imperatives. These principles are proposed for use, to advise, and to
influence to action retroactively, this feature is used to evaluate behaviour, to assign praise and
blame, and to produce feelings of satisfaction or of guilt.

Role of ethics in business :-

1. Leadership and management of the company : The leadership and management of a company
set the atmosphere of operations in the company. Their philosophy is adopted by the employees
of the company right to the very bottom rung. Creating an ethical and trustworthy environment
helps in attracting and retaining valuable talent. It also keeps the working atmosphere healthy so
that everyone can thrive in it. Employees get a sense of accomplishment from the work that they
do.
2. Employees and teams : Ethical practices build more trust and cohesion amongst employees of
the company. This greatly affects their productivity. And in turn, greatly improves the
company’s profits.
3. Community and Investors : Research shows that a company known for its good practices is
always favored by consumers above other cheaper competitors. Consumers find business known
for their good practices to be trustworthy. Investors, one of the key components in the running of
a business, are greatly influenced by a company’s image and their ethics. It is a common
phenomenon that whenever a company comes in the limelight for mal-practices, market shares
are the first to plummet.
4. Corporate Social Responsibility : A part of good business ethics, CSR has been found to
greatly benefit a company’s profits and shares. CSR is an exhaustive and effective business
practice, a key feature of all sustainable and successful business models around the globe.

 Relative Autonomy of Business Morality

 A very basis of business ethics refers to an idea of how business fits into modern society as a
whole, a social philosophy of business. Characteristics of Modernity: Private Life Economic Life
Political Life
 Fundamental division of modern civilization: 1. Moral Community: The values (warmth,
recognition, support) of each moral community drawn from the pre-modern local traditions. 2.
Specialized functional spheres: Modern social experience consist of specialized functional
spheres (healthcare, tourism, etc.) where each sphere performs their specific task through formal
procedure and rules.

 Social Philosophies of Business 1. Unitarian view of ethics Moral Structure Business Moral
Ethics

 2. Separatist view of ethics (Adam Smith & Milton Friedman) Business Ethics

 3. Integration view of ethics (Talcott Parsons) Business ethics Law Market System Society
Morality & Ethics BusinessGovernment

 Theory of Voluntary Mediation In situation of conflicts when two or more parties come together
voluntarily to resolve the dispute and achieve their goals by taking help of a third eligible party
(known as mediator) then this process is known as voluntary mediation. It includes following
three types of ethics: 1. Participatory ethics. 2. Transactional ethics. 3. Recognition ehtics.

 Principles of mediation: Self-determination Impartiality Conflicts of interest Competence

Confidentiality Quality of the process

Participatory Ethics: It provides idea about how to mediate between business goals and moral
demands and how to serve the society in more ethical way and gain corporate excellence.
Example; Ford Foundation

 Transactional Ethics Here all parties involved in the action pattern have interests that happens to
coincide in time but that do not affect each other. In order to let each party’s transaction run
smoothly, all parties have to accept the principle of equality. In order to let things run smoothly
following principle requires: 1. Honesty 2. Reciprocity

 Recognition Ethics It regards moral interaction as a matter of protecting individual liberty and
granting public welfare. According to this view the rights of individuals and our duties to them
override personal egocentric interests. Moral agents are bound to the whole of society by a tacit
social contract.

MODULE 2

Utilitarian Approach Utilitarianism is an ethics of welfare. Business guided by utilitarian

approach focuses on behaviours and their results, not on the means of such actions. It can be
described by the phrase, “the greatest good for the greatest number.” The utilitarian approach
prescribes ethical standards for managers in the areas of organisational goals, i. e., maximisation
of profits; and having efficiency which denotes optimum utilization of scarce resource.
Utilitarianism prescribes that the moral worth of an action is solely determined by its
contribution to overall utility, that is, its contribution to the happiness and satisfaction of the
greatest member.
 For example, one may be tempted to steal from a rich wastrel to give to a starving family.
Hence, this approach is also referred as consequential approach. Utilitarianism is a general term
for any view that holds that actions and policies should be evaluated on the basis of the benefits
and costs they impose on the society. The policy which produces the greatest net benefit on
lowest net costs in considered right. The best way to analyse any decision including a business
decision is by doing a cost benefit analysis. Several government agencies, legal theorists and
moralists advocate utilitarianism. Jeremy Bentham is considered as the founder of traditional
utilitarianism. He propagates on objective basis for making value judgements that would provide
common acceptable norm for determining social policy and social legislation. The utilitarian
principle states, “an action is right from ethical print of view if and only if it seem total of
utilities produced by that act are greater than the sum total of utilities produced by any other act
that can be performed at that point of time by any person”.

This approach gives precedence to good over right. There are some limitations utilitarian
approach. It is impossible to measure utility of different actions on a common scale. How can
utility of one action be compared to that of the other? At times benefits and cost of an action
cannot be even predicted accurately. For example, it is not possible to predict advantages of
building housing for the underprivileged. Moreover, non-economic goods, such as life, equality,
health, beauty and justice cannot be traded for economic goods. But utilitarianism assumes that
all goods are tradable for some quantity of another good. Both Utilitarianism and Kantian ethics
have important implications in business world. Therefore, both of them can be applied in
business ethics. However, both have some negative points. Some are of the view that utilitarian
ethics is more applicable to business ethics than Kantian ethics, because the aim of any business
is to gain profit/benefit. The fundamental feature of utilitarianism is to maximize utility.

MODULE 4

INTRODUCTION TO CSR

Corporate social responsibility (CSR) is a self-regulating business model that helps a company
be socially accountable to itself, its stakeholders, and the public. By practicing corporate social
responsibility, also called corporate citizenship, companies can be conscious of the kind of
impact they are having on all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is operating in
ways that enhance society and the environment instead of contributing negatively to them. As
important as CSR is for the community, it is equally valuable for a company. CSR activities can
help forge a stronger bond between employees and corporations, boost morale, and aid both
employees and employers in feeling more connected to the world around them.

DEFINITIONS OF CSR
According to CSR Asia, a social enterprise, “CSR is a company’s commitment to operate in an
economically, socially and environmentally sustainable manner whilst balancing the interests of
diverse stakeholders”

According to the World Business Council for Sustainable Development, 1999 “Corporate Social
Responsibility is the continuing commitment by business to behave ethically and contribute to
the economic development while improving the quality of life of the workforce and their families
as well as of the local community and the society at large.”

Example of Corporate Social Responsibility

Starbucks has long been known for its keen sense of corporate social responsibility and
commitment to sustainability and community welfare. According to the company, Starbucks has
achieved many of its CSR milestones since it opened its doors. According to its 2020 Global
Social Impact Report, these milestones include reaching 100% of ethically sourced coffee,
creating a global network of farmers and providing them with 100 million trees by 2025,
pioneering green building throughout its stores, contributing millions of hours of community
service, and creating a groundbreaking college program for its employees. 3

Starbucks' goals for 2021 and beyond include hiring 5,000 veterans and 10,000 refugees,
reducing the environmental impact of its cups, and engaging its employees in environmental
leadership.4

The 2020 report also mentioned how Starbucks planned to help the world navigate the
coronavirus pandemic. The company's response to the pandemic focuses on three essential
elements:

1. Prioritizing the health of its customers and employees

2. Supporting health and government officials in their attempts to mitigate the effects of
the pandemic
3. Showing up for communities through responsible and positive actions.

What Is the Triple Bottom Line (TBL)?

The triple bottom line (TBL) maintains that companies should commit to focusing as much on
social and environmental concerns as they do on profits. TBL theory posits that instead of one
bottom line, there should be three: profit, people, and the planet. A TBL seeks to gauge a
corporation's level of commitment to corporate social responsibility  and its impact on the
environment over time.

In 1994, John Elkington—the famed British management consultant and sustainability guru—

coined the phrase "triple bottom line" as his way of measuring performance in corporate
America. The idea was that a company can be managed in a way that not only makes money but
which also improves people's lives and the well-being of the planet.

Triple-bottom-line theory says that companies should focus as much attention on social and
environmental issues as they do on financial issues.
According to TBL theory, companies should be working simultaneously on these three bottom
lines:

 Profit: This is the traditional measure of corporate profit—the profit and loss (P&L)

account.
 People: This measures how socially responsible an organization has been throughout its
history.
 Planet: This measures how environmentally responsible a firm has been.

The need to apply the concept of TBL is caused due to— (a) Increased consumer sensitivity to
corporate social behaviour (b) Growing demands for transparency from
shareholders/stakeholders (c) Increased environmental regulation

(d) Legal costs of compliances and defaults (e) Concerns over global warming (f) Increased
social awareness (g) Awareness about and willingness for respecting human rights (h) Media’s
attention to social issues (i) Growing corporate participation in social upliftment

EXAMPLE OF TBL

LEGO

The LEGO Group (privately held; Billund, Denmark) has formed partnerships with

organizations like the nongovernmental organization  (NGO) World Wildlife Fund. In addition,
LEGO has made a commitment to reducing its carbon footprint and is working towards 100%
renewable energy capacity by 2030.

INTRODUCTION OF SUSTAINABILITY

Sustainability is based on a simple principle: Everything that we need for our survival and well-
being depends, either directly or indirectly, on our natural environment. Sustainability creates
and maintains the conditions under which humans and nature can exist in productive harmony,
that permit fulfilling the social, economic and other requirements of present and future
generations. Sustainability is important to making sure that we have and will continue to have,
the water, materials, and resources to protect human health and our environment. Sustainability
has been comprehensively defined in Paul Hawkin’s book – The Ecology of Commerce as:

“Sustainability is an economic state where the demand placed upon the environment by people
and commerce can be met without reducing the capacity of the environment to provide for future
generations. It can also be expressed in the simple terms of an economic golden rule for the
restorative economy; leave the world better than you found it, take no more than you need, try
not to harm life of environment, make amends if you do.”

Environmental Aspects of CSR

1. Improved Supply Chain Efficiency

Boosting the environmental performance of supply chains is a multi-tiered procedure. It requires

identifying waste at all levels of production. Some of these steps include decreasing energy
consumption and waste production and promoting the use of renewable resources. Supply chain
efficiency can reduce a company’s carbon footprint while also enhancing ROI.

2. Investment in Renewable Energy

The depletion of natural resources by industrialization is no secret. Big business is responsible

for adding 6.3 billion tons of carbon dioxide to the atmosphere every single year. Luckily, there
is good news. Corporate response to the climate crisis has taken a sharp turn in the last few
months, with companies making pledges to go carbon neutral, and some, like Microsoft,
declaring a plan to become carbon negative by 2030.

3. Reducing Packaging Waste

Particularly in the food and personal goods sector, companies are making changes to the
packaging they utilize. Businesses that traditionally use plastic are turning towards alternatives
such as glass, recycled plastic or aggregates. Specialized certifications, such as Cradle to Cradle,
also accredit companies based on a set of sustainable principles, including material use, water
consumption, renewable energy and social integrity.

4. Mindful Water Consumption

Large corporations, such as Johnson & Johnson, have taken steps towards identifying their water
footprint. The Alliance Energy Corporation asserts that companies use more than half of the
water available for human use in industrialized countries. Measuring water consumption is the
first step in reducing waste. It can also result in considerable cost savings.

5. Rethinking Lighting
Regardless of the infrastructure where your building is, lighting likely plays a major role in your
overall footprint. Most new construction in the United States utilizes LEDs and other energy-
efficient lighting systems. Investing in more environmentally options can also contribute to your
overall renewable energy goals. For example, JP Morgan has invested in efficient lighting as a
step towards their goal of 100% renewable energy down the line.

6. Environmentally-Conscious Construction

Corporations are making a conscious effort to reduce their environmental footprint by paying
attention to how they build their infrastructure. A well-known example many companies are
investing in is LEED certification. LEED stands for Leadership in Energy and Environmental
Design and is a third-party verification that improves upon water usage, energy efficiency,
emission reduction and attention to the overall ecological impact.

7. Waste Removal

Every business reduces waste. Simply decreasing the amount of waste produced is only one part
of improving your carbon footprint. Handling and disposing of waste is another essential
consideration. When implementing a new waste removal strategy, it’s crucial to set objectives so
that you can analyze optimizations as you make progress. Waste removal is most effective when
employees are directly involved and feel responsible for their role.

8. Innovative Technology

Regardless of the size or industry of a business, technology has a massive influence on how it
operates. Eco-innovation, the process of using technology for sustainable purposes, plays a
significant role in identifying possible energy alternatives and creating solutions for difficult
situations. The United Nations Environment Programme reports that eco-innovation will be the
deciding factor in finding solutions to complex environmental challenges, creating to ols that do
not yet exist.