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Strategy

Business ethics and social responsibility explained

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 — March 10th, 2019

Business ethics and social responsibility explained

Mazlow had the right idea with his hierarchy of needs. He posited the notion that people’s needs start with basic things, like food and shelter, before moving up the chain to eventually reach ‘self-actualization’. That’s the idea that beyond a full belly we want to “become everything one is capable of becoming”.

Arguably we’re now seeing a parallel hierarchy of ethics emerge as organizations, having satisfied more fundamental business needs, now seek to achieve organizational ‘actualization’ by satisfying society’s desire for services and products which do more than make your teeth ‘whiter than white’. People want the organizations they deal with to have authenticity.

Fashion industry gets transparent on ethical issues

Recent evidence comes from one of the most ephemeral of business sectors -- fashion. A recent Guardian news report on the Fashion Transparency Index looked into the ethical and social actions of 200 of the world’s biggest fashion brands (turning over $500m+).

The assessment is based on the public release of policy and commitments, governance, supply-chain traceability, supplier assessment, and remediation, as well as ‘spotlight issues’ including gender equality, work conditions, climate issues, and responsible consumption and production.

The best performing fashion brands in the 2019 index were well-known high street names, including Adidas, Reebok, Patagonia, Esprit, and H&M.

Ethics and Social Responsibility take center stage

Highlighting just how mission-critical corporate social responsibility has become, a 2017 study by Cone Communications discovered that more than 60 percent of US citizens hope businesses will lead social and environmental change in the absence of clear government regulation.

Interestingly 87 percent of the consumers surveyed said they would choose a product where a company supported an issue they cared about. Tellingly, more than three quarters (76 percent) won’t buy from a company if they discover it backs an issue in opposition to their own beliefs.

What do we mean by Corporate Social Responsibility?

Corporate Social Responsibility seeks to guide company conduct in a direction that is considered ethical. This typically means businesses taking some consideration of its social, economic and environmental responsibilities as well as impacts on basic human rights. It’s not simply doing “the right thing” anymore.

CSR can range across a number of areas such as:

  • Working in partnership with local community groups
  • Socially & environmentally responsible investments
  • Developing relationships with employees and customers
  • Environmental protection and sustainability

Ethics and Social Responsibility in action

As an organization, the United Kingdom’s Church of England has a vast investment portfolio. As society has changed so too has the church to better reflect the views and ethical stance of its members. In 2018 the ruling Council, the General Synod, voted, “to withdraw investment from companies that are not pulling their weight in the fight against climate change”.

What the Church of England example suggests is that, just as society’s views and attitudes change over time, organizations must keep up with evolving ethical and social standards of behavior if they want to remain relevant. Without reaching this minimum set of social and ethical standards, companies and institutions will be in danger of being disregarded in favor of those companies which do.

This applies even more so in the digital age where the barriers to competitive entry are set so low that any failure to meet expectations could quickly lead to the hemorrhaging of custom to those that do.

Ethics & Social Responsibility in the digital era

Yet there are some notable exceptions to this rule. Arguably, both Facebook and Google are such significant online platforms that they are considered infrastructure plays, subject to greater Government and Public pressure on questions of ethical operation, but not exposed to consumer wrath due to limited available alternatives.

Arguably the General Data Protection Rules introduced by EU member states in 2018 were a reflection of governments seeking to impose minimal ethical standards upon platforms previously perceived to have, at best, ignored ethical and moral concerns over corporate behavior.

Facebook has also been accused of lax ethical standards in allowing advertisers to cherry-pick according to ethnic background leading to a US court case. In early 2019 The U.S. Department of Housing and Urban Development announced it was going to sue Facebook for violating the Fair Housing Act, accusing the company of, “encouraging, enabling, and causing housing discrimination” permitting advertisers to block real estate ads along the lines of race, religion, country of birth.

Of course, most companies are not facing the issues of Facebook’s or Google’s scale. Yet, the recent ethical scandals serve to highlight how business ethics and a company’s role in taking a socially responsible approach become ever greater as companies are embraced as core parts of a modern digital society.

The Ethics of the future

There can be little doubt that, in an age when many people have generally met their most basic survival needs, ethical concerns about companies they do business with really matter. Societal concerns about environmental issues, animal welfare, recycling, and many other once-incidental issues are becoming defining badges of identity for consumers.

This, in turn, places a new onus upon organizations to consider how their wider business strategies meet with their audience’s expectations. It’s an uncertain time for businesses faced with a deeply dynamic and ever-changing ethical and moral landscape. But it’s one which all organizations must engage with in order to remain relevant now and in the future.

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