Business Ethics and Corporate Social Responsibility
Business organizations must make a profit in order to survive. Saying so, they must also balance their desire for profit with the desires and needs of the society in which they operate. Organized societies in the world have established principles and rules for legal and implicit conduct that guide businesses in their quest to make profits while still not harming the society (Crane & Matten, 2010). In business, business ethics and corporate social responsibility concepts are often used interchangeably. However, business ethics has a different meaning from corporate social responsibility in that it is the moral principles and conducts that guide the behavior of businesses while corporate responsibility refers to a business organization’s responsibility to make maximum positive impact and minimize the negative impact in the society. This essay uses the Svennson and Wood business ethics model to assess the ethics of the business practices of Anglo-American and Primark. It also discusses the costs and the benefits to organizations that act ethically.
The term ethical business behavior represents a combination of three words that are “ethical”, “business” and “behavior”. Ethical comes from the word ethics that means conforming to the set and accepted principles or standards. A business in an organization with an objective to produce or sell goods and/or services in order to make profits. Behavior is the manner in which a person or individual conducts him or herself. Based on these concepts, ethical business behavior involves the moral principles and standards that guide the behavior of a business. Corporate social responsibility is made up of ethical responsibilities among other responsibilities (Griseri & Sepal, 2010). Behaviors and conduct that are not there in the law but a society sets and expects from a business make up ethical responsibilities. Primark defines business ethics as the rules of conducts of business behavior that basically involve doing the right thing. Primark has made it a responsibility to look after the community that is involved in their business including their employees spread across the globe. For Anglo-American, the same principles and rules that guide an individual also guide a business. Acting ethically for the company involves distinguishing between right and wrong (Griseri & Sepal, 2010).
In order for Anglo-American and Primark companies to be socially and ethically responsible, they have applied ethics in practice. Primark has clear values that shape its relationship with stakeholders. Some of these values and principles include taking care of their employees, being good neighbors to the community and establishing ethical business relationships with partners. The code of conduct for the company is based on International Labor Organization’s (ILO) Code that promotes freedom, security and dignity for its employees. The code of conduct is translated into 26 languages in the company’s website to ensure that the code is effectively communicated to employees working in different countries that the company operates in. Primark also has an ethical trade director who makes sure that the company sources goods ethically. It is also a member of Ethical Trading Initiative (ETI -www.ethicaltrade.org), an organization that improves working conditions for employees worldwide. In addition, Primark works closely with and provides training for their suppliers, factories, as well as its buyers to make them understand ethical issues. For suppliers and factories, the company has a selection process and auditing that enables appropriate working conditions before approval. The company adopts these values and principles in order to adopt good business practice that will sustain the business for a long time (The Times 100).
Anglo-American company has ‘Good Citizenship’ business principles that set out company values and standards. The company is actively involved in initiatives that ensure acceptable standards and principles are met including Extractive Industries Transparency Initiative (EITI), the United Nations Global Compact (UNGC) and the Global Reporting Initiative (GRI). In addition, it contributes to the voluntary Principles on Security and Human Rights that ensure that the company does not negatively affect the local population while ensuring the security of its operation in volatile countries. These principles guide how security forces that secure a mining facility are trained in human rights, vetted, monitored and controlled. Anglo-American also adopts principles that ensure the protection of human rights among employees and local people in countries they operate. Anglo-American company openly supports and follows the principles in the Universal Declaration of Human Rights (The Times 100).
The company also has a corporate responsibility that ensures that business operations are carried out taking into account the needs of all stakeholders including government, employees, local communities and customers. Anglo-American has also adopted a Socio-Economic Assessment Toolbox or SEAT process that enables managers measure the impact of their activities on the company and the community at large. In situations whereby relocation is needed for mining activities, Anglo-American company adopts a structured consultation, fair compensation, and restores the livelihood of the people involved (The Times 100).
When a business operates in an ethical manner, it may incur additional costs in comparison with other businesses that may not do business in that manner. Ensuring highest legal and moral standards brings in additional costs to a business. For instance, Primark bears all the costs selection process and audit of suppliers and factories. It also takes care of the costs used for training of its suppliers and factories on ethical practices. Additional costs also come in employment of the ethical team that includes ethical directors and managers. For Anglo-American company, the costs that come with ethical business behavior include engaging stakeholders, training, vetting and monitoring of security guards that secure mining sites, assessing and measuring the impact of company activities on the community, and development of alternative and better livelihoods for the community (Griseri & Sepal, 2010).
Ethical business behavior also brings with it numerous benefits to the business and the community at large. Ethical business behavior leads to transparency of a business operation as people are able to see how the business manages its relationships with stakeholders. In Primark, transparency between the company, suppliers and consumers has enabled good business practice. For Anglo-American, the principles have enabled the company work without fatal accidents, increase benefits to the community and avoid legal problems. Full compliance to environmental laws while paying attention to workers’ safety is critical for maintaining ethical standards and avoiding legal problems. Ethical behavior may also earn a company stakeholder loyalty. A business’ reputation in ethical behavior helps to build a positive image for the company. For Anglo-American, high ethical standards have enabled the company to be a more likely partner of choice for communities, governments and other partners. Ethical business behavior also creates a positive working environment for employees. Ethical behavior for a company trickles down to the employees who adopt ethical practices and hence develop positive relationships with one another and the community, and are given more autonomy (Svensson & Wood, 2008).
In Svensson and Woods model of business ethics, three principle components include expectations, perceptions and evaluations. These components are interconnected through other sub-components. In perception, the way a business interacts in relation to society expectations provides it consequences. This means that companies should understand society expectations and their impacts on the society as these impacts would determine their success. Perception involves the business’ relationships with the stakeholders. The relationship between a company and its employees is critical, as employees are the ones that do all the work and enable a business to achieve success. A company should adopt principles that look into the needs of their employees. The adoption of the ILO codes of conduct by Primark is important in promoting employee welfare and ensures protection of their rights (Svensson & Wood, 2008).
The day to day operations of a company normally depends on each individual contribution and when all levels of employees can connect, then it will be easier to understand what employees need in order to achieve success in the individual roles. According to Svensson & Woods, when employees feel connected to their organization they will enable its success. At Primark, relationship with employees is highly valued as the company keeps track of all its 700,000 employees working in three continents. If the company does not keep a good relationship with its staff by acknowledging their needs and providing the appropriate working conditions, then the company activities will be paralyzed. Primark has therefore made it a responsibility to make sure its partners, including factories and suppliers act responsibly towards their employees. Primark is also a member of Ethical Trading Initiative (ETI -www.ethicaltrade.org) an alliance of companies and trade unions that improve the lives of employees. Employees should have a positive attitude and feelings towards their organizations. If the organization look into their needs and does not discriminate against them, then employees will feel proud to work there (Svensson & Wood, 2008).
Anglo-American has also adopted initiatives that look into the needs of employees with the aim of establishing good staff relationship. The stakeholder engagement process provides employees with a platform to air out their needs and for the company to respond in order to establish better relationships. Anglo-American company should not compromise their ethical standards in handling employees. Good staff relationship also involves good communication between the company and employees on company goals, objectives, operations and other critical information. This will ensure that the company and employees are moving towards the same goals and objectives and how these will be achieved. Active participation of employees in an organization should be promoted in an organization to enhance positive relationships with workers. Active participation and acknowledging employee contributions builds trust and satisfaction and employees can fulfill organization requirements including those of Primark and Anglo-American companies (Crane & Matten, 2010).
In conclusion, business behavior has always had and will always have an impact on the environment they operate in. international organizations by stakeholders including employees, environmentalists and governments like the international labor organization (ILO) show that business behavior will always attract public opinion. The role played by public opinion and all stakeholders in shaping ethical and corporate behavior should therefore not be underestimated. Anglo-American and Primark companies have adopted business ethics as a responsibility to the society and stakeholders. This essay on business ethics and social responsibility critically analyzes Anglo-American and Primark companies and their application of business ethics. It uses the Svensson and Wood business ethics model to assess the ethics of the business practices of the companies and discusses the costs and the benefits to organizations that act ethically.