The key components of CSR would therefore include the following:
Governance: Within the ambit of corporate governance, major issues are the accountability, transparency and conduct in conformity with the laws. Good corporate governance policy would enable the company to realize its corporate objectives, protect shareholder rights, meet legal requirements and create transparency for all stakeholders.
Business Ethics: Relates to value-based and ethical business practices. ‘Business ethics defines how a company integrates core values – such as honesty, trust, respect, and fairness – into its policies, practices, and decision making. Business ethics also involves a company’s compliance with legal standards and adherence to internal rules and regulations.’
Workplace and labour relations: Human resources are most important and critical to a company. Good CSR practices relating to workplace and labour relations can help in improving the workplace in terms of health and safety, employee relations as well as result in a healthy balance between work and non-work aspects of employees’ life. It can also make it easier to recruit employees and make them stay longer, thereby reducing the costs and disruption of recruitment and retraining.
Affirmative action/good practices: Equal opportunity employer, diversity of workforce that includes people with disability, people from the local community etc., gender policy, code of conduct/guidelines on prevention of sexual harassment at workplace, prevention of HIV/AIDS at workplace, employee volunteering etc. are some of the good practices which reflect CSR practices of the company.
Supply Chain: The business process of the company is not just limited to the operations internal to the company but to the entire supply chain involved in goods and services. If anyone from the supply chain neglects social, environmental, human rights or other aspects, it may reflect badly on the company and may ultimately affect business heavily. Thus, company should use its strategic position to influence the entire supply chain to positively impact the stakeholders.
Customers: The products and services of a company are ultimately aimed at the customers. The cost and quality of products may be of greatest concern to the customers but these are not the only aspects that the customers are concerned with. With increased awareness and means of communication, customer satisfaction and loyalty would depend on how the company has produced the goods and services, considering the social, environmental, supply-chain and other such aspects.
Environment: Merely meeting legal requirements in itself does not comprise CSR but it requires company to engage in such a way that goes beyond mandatory requirements and delivers environmental benefits. It would include, but not limited to, finding sustainable solutions for natural resources, reducing adverse impacts on environment, reducing environment-risky pollutants/emissions as well as producing environment-friendly goods.
Community: A major stakeholder to the business is the community in which the company operates. The involvement of a company with the community would depend upon its direct interaction with the community and assessment of issues/risks faced by those living in the company surrounding areas. This helps in delivering a community-focused CSR strategy – making positive changes to the lives of the people and improving the brand-image of the company. Involvement with the community could be both direct & indirect – through funding and other support for community projects implemented by local agencies.
Formation of Value
In a broad sense, morality is a set of rules that shapes our behavior in various social situations. It is more sensitive doing the good instead of the bad, and therefore, it establishes a level of standard for virtuous conduct.
The Corporate Governance Code of Coca Cola
Coca Cola makes it clear that the company is inclined towards a good business morality. Its corporate governance code starts with these starting announcements.
“At the Coca-Cola Company, we aim to lead by example and to learn from experience. We set high standards for our people at all levels and strive to consistently meet them. We are guided by our established standards of corporate governance and ethics. We review our systems to ensure that, we achieve international best practices in terms of transparency and accountability. The foundation of our approach to corporate governance is laid out in our Corporate Governance Guidelines and in the charters of our Board of Directors’ committees.”
The principles of moral ethics can be injected into any business. Ethical businesses recognize the power of conducting businesses in socially responsible ways and they realize that doing so leads to increase in profits, customer satisfaction and decrease in employee turnover.
Business ethics is concerned with applying a moral framework to the way organizations do business. From dealing with human resources issues to sales and marketing policies, ethical viewpoints can shape and change the way businesses operate.
Business ethics has both normative and descriptive elements −
- The normative partof business ethics has to do with understanding, how the behavior you and your employees exhibit in relation to cultural issues or social upbringing. The key to normative ethics for business owners is to understand how personal beliefs affect the choices made as a business owner.
- The descriptive partof business ethics, on the other hand, is related to how you incorporate “best practices” into your organization’s policies and procedures.
Henry Ford on Business Morality
“There is one rule for the industrialist and that is: make the best quality goods possible at the lowest cost possible, paying the highest wages possible.”
“Justification” in terms of business ethics can be portrayed in two different ways. In business ethics, do the means justify the ends, or do the ends justify the means?
Is it better to have a set of rules telling you what you ought to do in a particular situation, or should one worry more about how things are going to end up and do anything to reach that goal?
Let’s take an example. John ran a medicine business in California, USA. His herbal product used to stop nausea and vomiting for chemo patients. California regulators had allowed his business entity, but federal agencies had not approved it. Therefore, selling it on national level was breaking the law. On the other hand, not selling could consign his clients to suffering. So, when federal agents came knocking on his door, he had to make a decision.
- If the means justify the ends− If he follows the rules no matter what the consequences are, then the agents ask John directly whether he is selling the medicine and the ethical action would be to admit it.
- If the ends justify the means− If your ethical interest focuses on the consequences of an act instead of what you actually do, then the ethics change. Therefore, when agents ask him whether he is selling, he has a reason to lie.
When we ask questions, such as “Which is more important, telling the truth or preventing harm?” often the context is more important. Context can be determined from factors such as time and place, the nature of the situation, other people’s expectations, and the relevant history.
To understand the context, let’s assume you are a resident of Nazi Germany, in 1940. A family of Jews is hiding in your attic. The German police come searching that particular family of Jews. In such a case, preventing harm is clearly more important than telling the truth.
The Importance of Relationships
Business morality largely depends on business relationships. Our rights and obligations spring largely from relationships. These include our relationships with shareholders, customers, and general stakeholders.
These relationships can offer moral reasons for particular actions. For example, relationship with your shareholder means moral duties to them (such as to offer profits and be transparent) which you do not have for non-stakeholders.
Moral Questions are not Distinct
Moral problems are not a separate, special or particular domain to that is followed only on special occasions. Moral issues are present all the time. Most decisions that people make usually have a degree of moral importance. The challenge is in recognizing that fact. Morality is often finding the best choice overall, taking into consideration the result, economics, and technical (e.g., finances) appropriateness, and balancing them against other sorts of business values, which the organization follows.
Moral Decision Making
There is no crafted-out formula or algorithm for moral decision-making. Good moral decision-making includes knowledge of the facts, and careful consideration of the moral values (principles) relevant to a given situation. Importantly, sensitivity and awareness of the range of interests are also highly sought in moral decision-making process.
Getting the Facts Straight
To make a good decision, we have to get the facts of the situation straight. In some difficult cases, additional facts may make the correct course of action apparent. These facts are available through science, or from the experiences of people who have studied the situation for a long time.
The Importance of Moral Sensitivity
Sensitivity to the moral issues involved in everyday activities is important for moral decision-making. Sometimes, we may take the help of instincts for taking trivial decisions. For example, most of us do not require an impetus to avoid lying in most cases.
For a problem with moral importance, the first and perhaps the most important step in resolving the problem lies in finding out the range of considerations. This includes an awareness of the parties going to be affected, sensitivity to the set of values or principles probably to be applied, and a sensitivity to the factors that influence the decision.
The Role of Discussion in Morality
If morality in business ethics is primarily about shared values, then business discussion, which can take many modes of communication with various parties, takes a central place in moral business-decision making. In many cases, more than one party may often be involved, and we should include others in our decision-making processes.
Discussion as a Means of Consensus-Building
Discussion is important in moral business-decision making, as it is often important that others around us agree with or understand our decisions. For example, the consumer products industry often collects feedback through surveys and marketing gigs to take the business discussion forward.
Discussion as a Way of Learning from Others
We can learn from discussing moral questions with others. Others can provide valuable insight or experience. For example, the software makers can have valuable feedback from users. That is why they beta test their products before launching a product.
Guide to Moral Decision Making
There is no formula for making good medical diagnoses, or for giving good legal advice. All of these involve significant elements of experience and sensitivity.
Experience and sensitivity will not guarantee that a good decision is made, but they help assure that decisions are not hasty, or lacking in sufficient consideration of ranges of problems.