Business ethics and corporate social responsibility are closely tied in that CSR essentially reflects the informal expectations society and stakeholders place on a company to act ethically. Whereas ethics centers on consistency in doing the right thing by customers and communities, CSR involves proactive efforts to contribute to communities in which you operate.
Business Ethics Basics
Ethics center on the basic issue of knowing what is right and wrong, and doing the right thing. The "right thing" varies by industry and situation. When marketing to potential customers, for instance, the right thing is to be transparent and to avoid deception, misdirection and outright falsehoods. When evaluating outsourcing opportunities, it generally is considered unethical for American companies to acquire goods made in foreign sweat shops, especially by child laborers. A business also may require prospective vendors to agree to follow specific ethical standards.
Corporate Social Responsibility Expansion
Though both terms are still used, CSR is a broader concept than simple business ethics. Social responsibility encompasses all facets of balancing economic, social and environmental objectives for a business, according to the United Nations Industrial Development Organization. In short, it is the informal obligation of a business to weigh the needs of communities and the environment against a primary objective of making money.
CSR also has a broader stakeholder perspective than business ethics. Customers, community members, government officials, employees, business partners and associates all are considered in a full-scale social responsibility program. Fair working conditions for employees, charitable contributions and community volunteer programs are primary examples of behaviors that go beyond typical customer interactions.
Ethical and responsible programs aren't without costs. Donating to charities is a direct cash outflow, but implementing programs to reward employees and customers, and to protect the environment require resources as well.
The Importance of Ethics and CSR
Regardless of the label you attach to ethics and CSR activities, there are benefits for getting involved and penalties for companies that fail to commit. Employee loyalty, customer commitment and brand differentiation are among the long-term benefits associated with a thorough CSR program, according to Forbes. Though the profits from a CSR program are uncertain and hard to quantify, the potential backlash for acting irresponsibly and not using environmental resources efficiently are severe in the current business climate.