Traditional corporate social responsibility (CSR) mainly covers what is generally accepted as decent business behaviour required by society – legally and economically. Business ethics can be said to begin where the law ends. It’s primarily concerned with those issues not covered by law and therefore up for interpretation.
Discussion about the ethics of particular business practices (and pressure from stakeholders and society) can eventually lead to changes in the law, but in many cases it falls to the company’s moral compass.
A B Carroll’s four-part model differentiates between a company’s responsibilities in terms of what is required by society, as opposed to expected or desired.
Ethical responsibility may be expected by society, but it falls to the ethical company to do the right thing, because they are not obliged to do so legally.
At the top, philanthropy is by no means a responsibility, but it is highly desirable and, in many societies, much needed.
The way companies prioritise different levels of ethical behaviour depends on their overall strategy.
This is a long-standing approach to social responsibility, still widely adopted around the world. It considers CSR as part of a strategy where a company generates its profits without too much consideration for wider societal expectations.
However, once the profit is generated, the company then distributes some of the value created to projects, activities and causes that are important to stakeholders. These activities will ultimately enhance the wider image of the company and bolster its brand identity. Ethical behaviour is therefore ‘bolted on’. In Carroll’s four-part model, activity for these companies is mostly about philanthropy (Philanthropic Responsibilities).
INTRODUCING THE NEW BUSINESS ETHICS
Modern ethical businesses promote responsible behaviour as an opportunity to generate profits while at the same time living up to expectations of society. Rather than unilaterally dishing out money, they work with stakeholders to understand their interests and expectations. Ethical and sustainable behaviour for these companies is integral, or ‘built in’ to their core business.
Traditional CSR is now regarded as the old way – making a profit and then doing something responsible with it. The new way builds ethical purpose into the company at the beginning of the financial year, not the end.