Business ethics and social responsibility have been topics of heated debates since the middle of the 20th century. In the 21st century, the discussion is still relevant as organizations are trying to adjust to the changing environment and remain competitive in the market. Researchers, business people, customers have agreed that companies cannot focus on their profits only and have to contribute to the social development (or rather its aspects) of communities (Tumay 64).
This is why organizations have to pay attention to such notions as social responsibility and business ethics. Sometimes these concepts are utilized interchangeably. However, it is important to note that although they are related, business ethics and social responsibility are quite different concepts. It is necessary to define the two notions to reveal the relationship between them.
First, it can be effective to consider certain historical perspectives to better understand the concepts. It is noteworthy that the discussion of issues associated with ethics and social responsibility occurred in the first part of the 20th century but it was quite sporadic in nature (Carroll and Shabana 86). Comprehensive and systematic debate on the matter started after the World War II.
Some researchers note that the notions of business ethics and social responsibility were “expanded” as tools to defend “free-market capitalism against… Soviet Communism” (Carroll and Shabana 86). It is also noteworthy that in the 1950s, business ethics and social responsibility were not linked to benefits of businesses. In the 1960s, which was the period of Americans’ struggle for civil rights, people also tried to make business people behave in a more responsible way.
However, businesses still had quite a specific understanding of the concepts. In the 1960-1970s, the discussion was held mainly in the academic world. Numerous definitions were developed. One of these definitions developed by Keith Davis reveals certain restricted nature of the view on the matter.
Thus, Davis noted that social responsibility could be defined as business people’s decisions and actions that went “at least partially beyond the firm’s direct economic or technical interest” (qtd. in Carroll and Shabana 87). The 1980s became the period when the concepts started acquiring their modern meaning for the business world. At that, such concepts as corporate philanthropy and management of stakeholders were central to the understanding of social responsibility and business ethics (Madrakhimova 114).
Those were close notions but they could not fully explain and help practitioners to apply the concepts in question. Prior to defining the concepts, it is also important to identify major peculiarities of the modern business world as the transition from industrial to information world resulted in people’s focus on ethics and social responsibility (Dimitriades).
In the industrial society, companies focused on production and sales, but the digital world has brought significant changes. It is not enough to produce some goods of certain quality and at certain prices. It is much more important to understand customers’ needs and respond to them in the most efficient way (to be more competitive than others).
At present, public opinion plays an important role in organizations’ development as favorable views hale companies develop while negative attitude may lead to significant constraints or even bankruptcy. Modern consumers do not expect high-quality products only. They expect that companies that make profit will share and will contribute to the development of the community.
At present, business ethics and social responsibility are associated with such concepts as corporate citizenship, sustainable development, corporate reputation and others (Madrakhimova 114). It is necessary to note that many approaches to defining the two notions exist (Godiwalla 1383). For instance, there is a profit-oriented approach that is based on the idea that companies have to focus on their economic gains but in terms of sustainable development.
There is also a stakeholder-oriented approach. It focuses on stakeholders’ needs and economic gains are not primary. This approach is not very popular among for-profit organizations that still strive for profits. There are theories that focus on particular levels (certain types of organizations, certain regions and so on) and some approaches concentrate on global trends.
As far as modern definitions of business ethics and social responsibility are concerned, they are comprehensive and they respond to the needs of the modern market as well as stakeholders involved. Thus, business ethics can be defined as a set of moral principles that is employed in the business world (Dimitriades). It is necessary to add that business ethics is mainly concerned with morality and ethics.
In other words, it is concerned with doing right or wrong. Clearly, there are various universal paradigms, but sometimes business ethics can be biased. When it comes to social responsibility, it is also concerned with doing right and doing wrong. Social responsibility is organizations’ responsibility to make choices and undertake actions that will contribute to the social development of communities at different levels (Tumay 64).
Importantly, the concept of social responsibility includes such components as economic, legal, ethical as well as philanthropic (Dimitriades). In other words, it is not only about doing wrong or doing right, it is about doing right and contributing to the social development through attention to the four aspects mentioned above.
It is noteworthy that there is a significant difference between business ethics and social responsibility as the latter involve particular legal components while the former is more present in the terrain of conventions, culture, morality. With these definitions in view, it is possible to consider the relationship between business ethics and social responsibility.
Researchers stress that business ethics is a broader concept (Belás 120). Hence, it is possible to state that business ethics can be regarded as the basis of social responsibility as it provides a certain kind of paradigm used by businesses. As has been mentioned above, business ethics is developed in terms of culture, beliefs and values of people living in certain areas.
Business ethics sets major rules or even directions that are employed when organizations develop their strategic plans and shape their behaviors. Of course, social responsibility is a narrower notion and one of its major components is economic profits. However, the company has to contribute to the social development of a particular (or global) community and this is the terrain where business ethics and social responsibility are closely connected.
The relationship between social responsibility and business ethics is especially explicit when it comes to operations of multinational companies (MNCs) (Godiwalla 1381). These organizations have a well-established culture. They are committed to contribute to the development of the community and the entire humanity.
At the same time, their values, beliefs and methods are based on business ethics that has been developed in a particular area. There, these companies have a favorable reputation and they are regarded as socially responsible, which translates into economic gains. However, when a MNC expands and starts operating in a new market, it can lose its favorable image as some major morals, beliefs and values may be unsuitable for a particular region.
These companies have to change their operations and the way they provide the policy of social responsibility to adjust those policies to the existing business ethics. Of course, companies have to make sure that their operations are consistent with expectations of customers living in this or that area. Otherwise, they will become less competitive and will have to abandon the market, which will lead to reduction of their economic gains.
In conclusion, it is possible to note that the concepts of business ethics and social responsibility are closely connected. Business ethics can be regarded as a certain background for development of policies used by socially responsible organizations. Thus, business ethics is a set of moral regulations and values.
Social responsibility is a narrower concept and it consists of four major elements (economic, economic, legal, ethical, philanthropic). Companies still concentrate on their economic gains. However, their actions and decisions made are shaped by the public opinion and profitability of an organization depends on the degree of its responsibility. People now strive for development of the society and organizations that have significant resources are seen as potent agents in this process.
The public makes these agents contribute to the social development and, in return, customers remain loyal to this or that company. Of course, companies that do not operate in terms of the business ethics developed in the region where they operate and do not contribute to development of communities often have difficulties with attracting customers.
Works Cited
Belás, Jaroslav. “Social Responsibility and Ethics in the Banking Business: Myth or Reality? A Case Study from the Slovak Republic.” Economic Annals LVII.195 (2012): 115-137. Print.
Carroll, Archie B. and Kareem M. Shabana. “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice.” International Journal of Management Reviews 12.1 (2010): 85-1058. Print.
Dimitriades, Zoe S. “Business Ethics and Corporate Social Responsibility in the e-Economy: A Commentary.” Electronic Journal of Business and Organization Ethics Network 12.2 (2007): n. pag. Web.
Godiwalla, Yezdi H. “Business Ethics and Social Responsibility for the Multinational Corporate (MNC).” Journal of Modern Accounting and Auditing 8.9 (2012): 1381-1391. Print.
Madrakhimova, Firuza S. “Evolution of the Concept and Definition of Corporate Social Responsibility.” Global Conference on Business and Finance Proceedings 8.2 (2013): 113-118. Print.
Tumay, Meltem. “Why Corporate Social Responsibility: A New Concept in the 21st Century.” Yönetim ve Ekonomi 16.2 (2009): 63-72. Print.