Business Ethics and Corporate Social Responsibility

As recently as a decade ago, many companies viewed business ethics only in terms of administrative compliance with legal standards and adherence to internal rules and regulations. Today the situation is different. Attention to business ethics is on the rise across the world and many companies realize that in order to succeed, they must earn the respect and confidence of their customers. Like never before, corporations are being asked, encouraged and prodded to improve their business practices to emphasize legal and ethical behavior. Companies, professional firms and individuals alike are being held increasingly accountable for their actions, as demand grows for higher standards of corporate social responsibility.

What is Business Ethics?

Simply put, ethics involves learning what is right or wrong, and then doing the right thing -- but "the right thing" is not nearly as straightforward as conveyed in a great deal of business ethics literature. Most ethical dilemmas in the workplace are not simply a matter of "Should Bob steal from Jack?" or "Should Jack lie to his boss?"

(Many ethicists assert there's always a right thing to do based on moral principle, and others believe the right thing to do depends on the situation -- ultimately it's up to the individual.) Many philosophers consider ethics to be the "science of conduct." Twin Cities consultants Doug Wallace and John Pekel of the Twin Cities-based Fulcrum Group explain that ethics includes the fundamental ground rules by which we live our lives. Philosophers have been discussing ethics for at least 2500 years, since the time of Socrates and Plato. Many ethicists consider emerging ethical beliefs to be "state of the art" legal matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or rule tomorrow. Values which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. Statements around how these values are applied are sometimes called moral or ethical principles.

Business Ethics mean various things to various people, but generally it's coming to know what it right or wrong in the workplace and doing what's right -- this is in regard to effects of products/services and in relationships with stakeholders. Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change -- times much like those faced now by businesses, both nonprofit or for-profit. In times of fundamental change, values that were previously taken for granted are now strongly questioned. Many of these values are no longer followed. Consequently, there is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong. Attention to ethics in the workplace sensitizes leaders and staff to how they should act. Perhaps most important, attention to ethics in the workplaces helps ensure that when leaders and managers are struggling in times of crises and confusion, they retain a strong moral compass. However, attention to business ethics provides numerous other benefits, as well .

Note that many people react that business ethics, with its continuing attention to "doing the right thing," only asserts the obvious ("be good," "don't lie," etc.), and so these people don't take business ethics seriously. For many of us, these principles of the obvious can go right out the door during times of stress. Consequently, business ethics can be strong preventative medicine. Anyway, there are many other benefits of managing ethics in the workplace. These benefits are explained later in this document.

Two Broad Areas of Business Ethics

1.       Managerial mischief.

Madsen and Shafritz, in their book "Essentials of Business Ethics" (Penguin Books, 1990) further explain that "managerial mischief" includes "illegal, unethical, or questionable practices of individual managers or organizations, as well as the causes of such behaviors and remedies to eradicate them." There has been a great deal written about managerial mischief, leading many to believe that business ethics is merely a matter of preaching the basics of what is right and wrong. More often, though, business ethics is a matter of dealing with dilemmas that have no clear indication of what is right or wrong.

2.       Moral mazes.

The other broad area of business ethics is "moral mazes of management" and includes the numerous ethical problems that managers must deal with on a daily basis, such as potential conflicts of interest, wrongful use of resources, mismanagement of contracts and agreements, etc.

Business Ethics is Now a Management Discipline

Business ethics has come to be considered a management discipline, especially since the birth of the social responsibility movement in the 1960s. In that decade, social awareness movements raised expectations of businesses to use their massive financial and social influence to address social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. An increasing number of people asserted that because businesses were making a profit from using our country's resources, these businesses owed it to our country to work to improve society. Many researchers, business schools and managers have recognized this broader constituency, and in their planning and operations have replaced the word "stockholder" with "stakeholder," meaning to include employees, customers, suppliers and the wider community.

The emergence of business ethics is similar to other management disciplines. For example, organizations realized that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. Organizations realized they needed to better manage their human resources and so the recent discipline of human resources was born. As commerce became more complicated and dynamic, organizations realized they needed more guidance to ensure their dealings supported the common good and did not harm others -- and so business ethics was born.

Note that 90% of business schools now provide some form of training in business ethics. Today, ethics in the workplace can be managed through use of codes of ethics, codes of conduct, roles of ethicists and ethics committees, policies and procedures, procedures to resolve ethical dilemmas, ethics training, etc.

10 Myths About Business Ethics

Business ethics in the workplace is about prioritizing moral values for the workplace and ensuring behaviors are aligned with those values -- it's values management. Yet, myths abound about business ethics. Some of these myths arise from general confusion about the notion of ethics. Other myths arise from narrow or simplistic views of ethical dilemmas.

1. Myth: Business ethics is more a matter of religion than management.

Diane Kirrane, in "Managing Values: A Systematic Approach to Business Ethics,"(Training and Development Journal, November 1990), asserts that "altering people's values or souls isn't the aim of an organizational ethics program -- managing values and conflict among them is ..."

2. Myth: Our employees are ethical so we don't need attention to business ethics.

Most of the ethical dilemmas faced by managers in the workplace are highly complex. Wallace explains that one knows when they have a significant ethical conflict when there is presence of a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on "stakeholders" in the situation. Kirrane mentions that when the topic of business ethics comes up, people are quick to speak of the Golden Rule, honesty and courtesy. But when presented with complex ethical dilemmas, most people realize there's a wide "gray area" when trying to apply ethical principles.

3. Myth: Business ethics is a discipline best led by philosophers, academics and theologians.

Lack of involvement of leaders and managers in business ethics literature and discussions has led many to believe that business ethics is a fad or movement, having little to do with the day-to-day realities of running an organization. They believe business ethics is primarily a complex philosophical debate or a religion. However, business ethics is a management discipline with a programmatic approach that includes several practical tools. Ethics management programs have practical applications in other areas of management areas, as well. (These applications are listed later on in this document.)

4. Myth: Business ethics is superfluous -- it only asserts the obvious: "do good!"

Many people react that codes of ethics, or lists of ethical values to which the organization aspires, are rather superfluous because they represent values to which everyone should naturally aspire. However, the value of a codes of ethics to an organization is its priority and focus regarding certain ethical values in that workplace. For example, it’s obvious that all people should be honest. However, if an organization is struggling around continuing occasions of deceit in the workplace, a priority on honesty is very timely -- and honesty should be listed in that organization’s code of ethics. Note that a code of ethics is an organic instrument that changes with the needs of society and the organization.

5. Myth: Business ethics is a matter of the good guys preaching to the bad guys.

Some writers do seem to claim a moral high ground while lamenting the poor condition of business and its leaders. However, those people well versed in managing organizations realize that good people can take bad actions, particularly when stressed or confused. (Stress or confusion are not excuses for unethical actions -- they are reasons.) Managing ethics in the workplace includes all of us working together to help each other remain ethical and to work through confusing and stressful ethical dilemmas.

6. Myth: Business ethics in the new policeperson on the block.

Many believe business ethics is a recent phenomenon because of increased attention to the topic in popular and management literature. However, business ethics was written about even 2,000 years ago -- at least since Cicero wrote about the topic in his On Duties. Business ethics has gotten more attention recently because of the social responsibility movement that started in the 1960s.

7. Myth: Ethics can't be managed.

Actually, ethics is always "managed" -- but, too often, indirectly. For example, the behavior of the organization's founder or current leader is a strong moral influence, or directive if you will, on behavior or employees in the workplace. Strategic priorities (profit maximization, expanding marketshare, cutting costs, etc.) can be very strong influences on morality. Laws, regulations and rules directly influence behaviors to be more ethical, usually in a manner that improves the general good and/or minimizes harm to the community. Some are still skeptical about business ethics, believing you can't manage values in an organization. Donaldson and Davis (Management Decision, V28, N6) note that management, after all, is a value system. Skeptics might consider the tremendous influence of several "codes of ethics," such as the "10 Commandments" in Christian religions or the U.S. Constitution. Codes can be very powerful in smaller "organizations" as well.

8. Myth: Business ethics and social responsibility are the same thing.

The social responsibility movement is one aspect of the overall discipline of business ethics. Madsen and Shafritz refine the definition of business ethics to be: 1) an application of ethics to the corporate community, 2) a way to determine responsibility in business dealings, 3) the identification of important business and social issues, and 4) a critique of business. Items 3 and 4 are often matters of social responsibility. (There has been a great deal of public discussion and writing about items 3 and 4. However, there needs to be more written about items 1 and 2, about how business ethics can be managed.) Writings about social responsibility often do not address practical matters of managing ethics in the workplace, e.g., developing codes, updating polices and procedures, approaches to resolving ethical dilemmas, etc.

 9. Myth: Our organization is not in trouble with the law, so we're ethical.

One can often be unethical, yet operate within the limits of the law, e.g., withhold information from superiors, fudge on budgets, constantly complain about others, etc. However, breaking the law often starts with unethical behavior that has gone unnoticed. The "boil the frog" phenomena is a useful parable here: If you put a frog in hot water, it immediately jumps out. If you put a frog in cool water and slowly heat up the water, you can eventually boil the frog. The frog doesn't seem to notice the adverse change in its environment.

10. Myth: Managing ethics in the workplace has little practical relevance.

Managing ethics in the workplace involves identifying and prioritizing values to guide behaviors in the organization, and establishing associated policies and procedures to ensure those behaviors are conducted. One might call this "values management." Values management is also highly important in other management practices, e.g., managing diversity, Total Quality Management and strategic planning.

10 Benefits of Managing Ethics in the Workplace

Many people are used to reading or hearing of the moral benefits of attention to business ethics. However, there are other types of benefits, as well. The following list describes various types of benefits from managing ethics in the workplace.

1. Attention to business ethics has substantially improved society.

A matter of decades ago, children in our country worked 16-hour days. Workers’ limbs were torn off and disabled workers were condemned to poverty and often to starvation. Trusts controlled some markets to the extent that prices were fixed and small businesses choked out. Price fixing crippled normal market forces. Employees were terminated based on personalities. Influence was applied through intimidation and harassment. Then society reacted and demanded that businesses place high value on fairness and equal rights. Anti-trust laws were instituted. Government agencies were established. Unions were organized. Laws and regulations were established.

2. Ethics programs help maintain a moral course in turbulent times.

As noted earlier in this document, Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change -- times much like those faced now by businesses, both nonprofit or for-profit. During times of change, there is often no clear moral compass to guide leaders through complex conflicts about what is right or wrong. Continuing attention to ethics in the workplace sensitizes leaders and staff to how they want to act -- consistently.

3. Ethics programs cultivate strong teamwork and productivity.

Ethics programs align employee behaviors with those top priority ethical values preferred by leaders of the organization. Usually, an organization finds surprising disparity between its preferred values and the values actually reflected by behaviors in the workplace. Ongoing attention and dialogue regarding values in the workplace builds openness, integrity and community -- critical ingredients of strong teams in the workplace. Employees feel strong alignment between their values and those of the organization. They react with strong motivation and performance.

4. Ethics programs support employee growth and meaning.

Attention to ethics in the workplace helps employees face reality, both good and bad -- in the organization and themselves. Employees feel full confidence they can admit and deal with whatever comes their way. Bennett, in his article "Unethical Behavior, Stress Appear Linked" (Wall Street Journal, April 11, 1991, p. B1), explained that a consulting company tested a range of executives and managers. Their most striking finding: the more emotionally healthy executives, as measured on a battery of tests, the more likely they were to score high on ethics tests.

 5. Ethics programs are an insurance policy -- they help ensure that policies are legal.

There is an increasing number of lawsuits in regard to personnel matters and to effects of an organization’s services or products on stakeholders. As mentioned earlier in this document, ethical principles are often state-of-the-art legal matters. These principles are often applied to current, major ethical issues to become legislation. Attention to ethics ensures highly ethical policies and procedures in the workplace. It’s far better to incur the cost of mechanisms to ensure ethical practices now than to incur costs of litigation later. A major intent of well-designed personnel policies is to ensure ethical treatment of employees, e.g., in matters of hiring, evaluating, disciplining, firing, etc. Drake and Drake (California Management Review, V16, pp. 107-123) note that “an employer can be subject to suit for breach of contract for failure to comply with any promise it made, so the gap between stated corporate culture and actual practice has significant legal, as well as ethical implications.”

6. Ethics programs help avoid criminal acts “of omission” and can lower fines.

Ethics programs tend to detect ethical issues and violations early on so they can be reported or addressed. In some cases, when an organization is aware of an actual or potential violation and does not report it to the appropriate authorities, this can be considered a criminal act, e.g., in business dealings with certain government agencies, such as the Defense Department. The recent Federal Sentencing Guidelines specify major penalties for various types of major ethics violations. However, the guidelines potentially lowers fines if an organization has clearly made an effort to operate ethically.

7. Ethics programs help manage values associated with quality management, strategic planning and diversity management -- this benefit needs far more attention.

Ethics programs identify preferred values and ensuring organizational behaviors are aligned with those values. This effort includes recording the values, developing policies and procedures to align behaviors with preferred values, and then training all personnel about the policies and procedures. This overall effort is very useful for several other programs in the workplace that require behaviors to be aligned with values, including quality management, strategic planning and diversity management. Total Quality Management includes high priority on certain operating values, e.g., trust among stakeholders, performance, reliability, measurement, and feedback. Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their relationships with stakeholders. Ethics management techniques are highly useful for managing strategic values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their ethics programs into their strategic planning process. Ethics management programs are also useful in managing diversity. Diversity is much more than the color of people’s skin -- it’s acknowledging different values and perspectives. Diversity programs require recognizing and applying diverse values and perspectives -- these activities are the basis of a sound ethics management program.

8. Ethics programs promote a strong public image.

Attention to ethics is also strong public relations -- admittedly, managing ethics should not be done primarily for reasons of public relations. But, frankly, the fact that an organization regularly gives attention to its ethics can portray a strong positive to the public. People see those organizations as valuing people more than profit, as striving to operate with the utmost of integrity and honor. Aligning behavior with values is critical to effective marketing and public relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, puts it best: “Ethical values, consistently applied, are the cornerstones in building a commercially successful and socially responsible business.”

9. Overall benefits of ethics programs:

Donaldson and Davis, in “Business Ethics? Yes, But What Can it Do for the Bottom Line?” (Management Decision, V28, N6, 1990) explain that managing ethical values in the workplace legitimizes managerial actions, strengthens the coherence and balance of the organization’s culture, improves trust in relationships between individuals and groups, supports greater consistency in standards and qualities of products, and cultivates greater sensitivity to the impact of the enterprise’s values and messages.

10. Last - and most -- formal attention to ethics in the workplace is the right thing to do.

One Description of a Highly Ethical Organization

Mark Pastin, in The Hard Problems of Management: Gaining the Ethics Edge (Jossey-Bass, 1986), provides the following four principles for highly ethical organizations:

1. They are at ease interacting with diverse internal and external stakeholder groups. The groundrules of these firms make the good of these stakeholder groups part of the organizations' own good.

2. They are obsessed with fairness. Their groundrules emphasize that the other persons' interests count as much as their own.

3. Responsibility is individual rather than collective, with individuals assuming personal responsibility for actions of the organization. These organizations' groundrules mandate that individuals are responsible to themselves.

4. They see their activities in terms of purpose. This purpose is a way of operating that members of the organization highly value. And purpose ties the organization to its environment.

Doug Wallace asserts the following characteristics of a high integrity organization:

1. There exists a clear vision and picture of integrity throughout the organization.

2. The vision is owned and embodied by top management, over time.

3. The reward system is aligned with the vision of integrity.

4. Policies and practices of the organization are aligned with the vision; no mixed messages.

5. It is understood that every significant management decision has ethical value dimensions.

6. Everyone is expected to work through conflicting-stakeholder value perspectives.

Ethics Management Programs: An Overview

About Ethics Management Programs Organizations can manage ethics in their workplaces by establishing an ethics management program. Brian Schrag, Executive Secretary of the Association for Practical and Professional Ethics, clarifies. "Typically, ethics programs convey corporate values, often using codes and policies to guide decisions and behavior, and can include extensive training and evaluating, depending on the organization. They provide guidance in ethical dilemmas." Rarely are two programs alike.

"All organizations have ethics programs, but most do not know that they do," wrote business ethics professor Stephen Brenner in the Journal of Business Ethics (1992, V11, pp. 391-399). "A corporate ethics program is made up of values, policies and activities which impact the propriety of organization behaviors."

Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, adds: "Balancing competing values and reconciling them is a basic purpose of an ethics management program. Business people need more practical tools and information to understand their values and how to manage them."

Benefits of Managing Ethics as a Program

There are numerous benefits in formally managing ethics as a program, rather than as a one-shot effort when it appears to be needed. Ethics programs:

1.       Establish organizational roles to manage ethics.

2.       Schedule ongoing assessment of ethics requirements.

3.       Establish required operating values and behaviours.

4.       Align organizational behaviors with operating values.

5.       Develop awareness and sensitivity to ethical issues.

6.       Integrate ethical guidelines to decision making.

7.       Structure mechanisms to resolving ethical dilemmas.

8.       Facilitate ongoing evaluation and updates to the program.

9.       Help convince employees that attention to ethics is not just a knee-jerk reaction done to get out of trouble or improve public image.

8 Guidelines for Managing Ethics in the Workplace

The following guidelines ensure the ethics management program is operated in a meaningful fashion:

1.Recognize that managing ethics is a process.

Ethics is a matter of values and associated behaviors. Values are discerned through the process of ongoing reflection. Therefore, ethics programs may seem more process-oriented than most management practices. Managers tend to be skeptical of process-oriented activities, and instead prefer processes focused on deliverables with measurements. However, experienced managers realize that the deliverables of standard management practices (planning, organizing, motivating, controlling) are only tangible representations of very process-oriented practices. For example, the process of strategic planning is much more important than the plan produced by the process. The same is true for ethics management. Ethics programs do produce deliverables, e.g., codes, policies and procedures, budget items, meeting minutes, authorization forms, newsletters, etc. However, the most important aspect from an ethics management program is the process of reflection and dialogue that produces these deliverables.

2. The bottom line of an ethics program is accomplishing preferred behaviors in the workplace.

As with any management practice, the most important outcome is behaviors preferred by the organization. The best of ethical values and intentions are relatively meaningless unless they generate fair and just behaviors in the workplace. That's why practices that generate lists of ethical values, or codes of ethics, must also generate policies, procedures and training that translate those values to appropriate behaviors.

3. The best way to handle ethical dilemmas is to avoid their occurrence in the first place.

That's why practices such as developing codes of ethics and codes of conduct are so important. Their development sensitizes employees to ethical considerations and minimize the chances of unethical behavior occurring in the first place.

4. Make ethics decisions in groups, and make decisions public, as appropriate.

This usually produces better quality decisions by including diverse interests and perspectives, and increases the credibility of the decision process and outcome by reducing suspicion of unfair bias.

5. Integrate ethics management with other management practices.

When developing the values statement during strategic planning, include ethical values preferred in the workplace. When developing personnel policies, reflect on what ethical values you'd like to be most prominent in the organization's culture and then design policies to produce these behaviors.

6. Use cross-functional teams when developing and implementing the ethics management program.

It’s vital that the organization’s employees feel a sense of participation and ownership in the program if they are to adhere to its ethical values. Therefore, include employees in developing and operating the program.

7. Value forgiveness.    

This may sound rather religious or preachy to some, but it’s probably the most important component of any management practice. An ethics management program may at first actually increase the number of ethical issues to be dealt with because people are more sensitive to their occurrence. Consequently, there may be more occasions to address people’s unethical behavior. The most important ingredient for remaining ethical is trying to be ethical. Therefore, help people recognize and address their mistakes and then support them to continue to try operate ethically.

8. Note that trying to operate ethically and making a few mistakes is better than not trying at all.

Some organizations have become widely known as operating in a highly ethical manner, e.g., Ben and Jerrys, Johnson and Johnson, Aveda, Hewlett Packard, etc. Unfortunately, it seems that when an organization achieves this strong public image, it's placed on a pedestal by some business ethics writers. All organizations are comprised of people and people are not perfect. However, when a mistake is made by any of these organizations, the organization has a long way to fall. In our increasingly critical society, these organizations are accused of being hypocritical and they are soon pilloried by social critics. Consequently, some leaders may fear sticking their necks out publicly to announce an ethics management program. This is extremely unfortunate. It's the trying that counts and brings peace of mind -- not achieving an heroic status in society.

6 Key Roles and Responsibilities in Ethics Management

Depending on the size of the organization, certain roles may prove useful in managing ethics

in the workplace. These can be full-time roles or part-time functions assumed by someone already in the organization. Small organizations certainly will not have the resources to implement each the following roles using different people in the organization. However, the following functions points out responsibilities that should be included somewhere in the organization.

1. The organization's chief executive must fully support the program.

If the chief executive isn't fully behind the program, employees will certainly notice -- and this apparent hypocrisy may cause such cynicism that the organization may be worse off than having no formal ethics program at all. Therefore, the chief executive should announce the program, and champion its development and implementation. Most important, the chief executive should consistently aspire to lead in an ethical manner. If a mistake is made, admit it.

2. Consider establishing an ethics committee at the board level.

The committee would be charged to oversee development and operation of the ethics management program.

3. Consider establishing an ethics management committee.

It would be charged with implementing and administrating an ethics management program, including administrating and training about policies and procedures, and resolving ethical dilemmas. The committee should be comprised of senior officers.

4. Consider assigning/developing an ethics officer.

This role is becoming more common, particularly in larger and more progressive organizations. The ethics officer is usually trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas.

5. Consider establishing an ombudsperson.

The ombudsperson is responsible to help coordinate development of the policies and procedures to institutionalize moral values in the workplace. This position usually is directly responsible for resolving ethical dilemmas by interpreting policies and procedures.

6. Note that one person must ultimately be responsible for managing the ethics management program.

Corporate social responsibility

Corporate social responsibility is concerned with the relationship between the corporate sector and society, and focuses particularly good corporate citizenship. The World Business Council for Sustainable Development defines it like this:

"Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large."

Some models of corporate social responsibility accentuate the primacy of a corporation’s economic responsibility to survive by making a profit. These models suggest other responsibilities came after: to abide by societal expectations and ethical principles, to meet legal standards and to indulge in discretionary charitable actions (Carroll, 1979). Others argue the emphasis should be placed first and foremost on the responsibility of business to support individual managers to make socially responsible decisions, followed by the imperatives of conforming to ethical behaviours and obeying the law, and lastly, making a profit. As Wood (1994) says, "It is of no importance at all whether a particular business remains competitive or not. Businesses that cannot remain competitive while fulfilling legal, ethical, and discretionary social responsibilities should not be in business at all."

As governments around the world withdraw from operating business enterprises, private sector corporations are increasingly under pressure to take a more active role in society, to be good 'corporate citizens'. Despite the currently high profile of the call for corporate citizenship, this is not a new phenomenon. At the end of the 1960s, similar pressure was mounting. In the United States, the Committee for Economic Development went so far as to assert that ‘business has an obligation to help alleviate social problems and meet social needs’. But not everyone agrees with this sentiment. Many would avow that solving social problems is the role of government, not the private sector, and that the responsibility of corporations is bounded by the business mission.

Social standards change and society expresses these changing standards in new laws and regulations. In the 1970s, the desire to end discrimination against women and minorities led to various anti-discrimination, equal opportunity and affirmative action laws; the desire to curb pollution and environmental damage led to environmental laws and the establishment of environment protection agencies. So far there has been no similar move to introduce new laws to institutionalise society’s contemporary concern with responsible corporate behaviour. But a number of government reviews are underway. The UK Department of Trade and Industry, for example, is undertaking a wide ranging review of company law that, amongst other things, is looking at the concept of stakeholders and corporate governance.

Corporate Social Responsibility and Management Practice

There is a range of strategies to turn a commitment to corporate social responsibility into practical action. These include:

1.    Articulating a relevant organisational philosophy and incorporating it into an existing mission, vision and values statements.

2.    Designing an organisational structure with relevant roles to assure the necessary work gets done. The responsibility to keep employees from harm, for example, can be facilitated by occupational health and safety managers; the responsibility to prevent harm to the environment can be facilitated by environmental managers.

3.    Developing and implementing appropriate organisational systems to assure socially responsible outcomes. The responsibility to assure public safety or minimise environmental pollution and waste, for example, can be supported through using a life-cycle product design system; the responsibility to assure ethical behaviour can be supported through implementation of relevant audit systems.

4.    Constantly communicating with various public groups to ensure up-to-date knowledge of key social issues. This should include engaging with key stakeholder groups; reporting on social and environmental aims, programs and outcomes as well as financial results; discussing uncertainties as well as stating facts.

5.    Partnering with community sector organisations to further socially desirable goals. For example, the Earthwatch Institute partners with corporations to give managers personal experience of ecosystems operating in field conditions. This experience not only increases understanding of the imperative of good environmental practices but is an excellent example of best practice in management development.

The table below provides a useful model of the why, the how and the what of corporate social responsibility:

Principles of corporate social responsibility	Processes of corporate social responsiveness	Outcomes of corporate behaviour
Principle of institutional legitimacy ■companies are responsible for earning and maintaining a 'licence to operate' granted by society	Environmental assessment: ■scanning the environment, gathering information, adapting to changing conditions	Social impacts: ■of products and services, of policies and programs
Principle of public responsibility: ■companies are responsible for solving the problems they cause, and for helping with problems related to their operations	Stakeholder management: ■engaging in dialogue with key stakeholders, collaborative problem-solving, corporate social performance reporting, corporate partnerships	Social programs: ■formal policies that guide company behaviour and legal compliance, informal company culture and values
Principle of managerial discretion: ■managers are responsible for behaving ethically and in favour of socially responsible outcomes	Issues management: ■anticipating issues, managing crises	Social policies: ■discretionary activities directed at specific goals

Source: D. Wood, Business and Society, Harper Collins, New York, 1994

Measuring Corporate Social Responsibility

Some years ago, economists started to question the usefulness of national indicators like the Gross Domestic Product (GDP). In an influential article in a 1995 edition of the Atlantic Monthly, Daly and Cobb asked "If the GDP is up, why is America down?" In it, they argued that indicators measuring financial transactions alone, such as the GDP, fail to account for ‘felt quality of life’. The economy might be booming, but social indicators like suicide rates, drug use, and marriage breakdown, show the quality of life is deteriorating. To remedy this conundrum, they proposed an alternative indicator dubbed the ‘Genuine Progress Indicator (GPI)’. Calculating the GPI takes into account the fact that some transactions, despite contributing positively to GDP, in reality detract from the quality of people’s lives. Car accidents, for example, contribute to the GDP because they lead to car repairs and sometimes to treatment of personal injuries that involve financial exchange – but car accidents are clearly not desirable.

Similar rethinking of performance indicators has been happening in corporations. Academics and management consultants have started to challenge the traditional focus on the business bottom line – ie, the financial bottom line. John Elkington, Chair of the UK consultancy SustainAbility, suggests corporations should drive for progress on not just one but three bottom lines: the economic, the environmental and the social. In the US, accountant-turned-social-advocate Ralph Estes has developed a new set of accounts for corporations known as the Sunshine Standards, so called because of the power of sunlight to reveal dark corners and heal sickness.

The power of triple bottom line thinking has even touched traditional market analysts. Late in 1999, the global market analyst firm Dow Jones introduced its new Sustainability Index, which tracks the share market performance of the world’s top 200 sustainability-driven companies. These companies are chosen by assessing their performance on the triple bottom line of economic viability, environmental quality and social equity.

While measures of sustainability are still evolving, the model gaining most adherents is the Global Reporting Index. This joint effort, involving groups ranging from the United Nations to Greenpeace to Amnesty International, has developed a set of measures corporations can use to test their own performance and standards.

A valuable website launched in February 2002, Corporate Impact Reporting, is a new online research tool for those interested in how businesses impact the communities in which they operate.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes[9] found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy.

The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation,[10] or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme.

The business case for CSR within a company will likely rest on one or more of these arguments:

Human resources

A CSR programme can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. See also Corporate Social Entrepreneurship, whereby CSR can also be driven by employees' personal values, in addition to the more obvious economic and governmental drivers.

Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.[13] Several major brands, such as The Co-operative Group, The Body Shop and American Apparel[14] are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.

License to operate

Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment.

Business Ethics and Corporate Social Responsibility in the Philippines

From July to early October, 2007, Newsbreak Magazine conducted a survey among 104 large-scale companies, local and multinational, asking them 11 questions with triple-choice responses and ranking options. Out of this number, 54 companies responded. The questions were so formulated to determine if CSR was embedded in the company in terms of structure and leadership, funding and logistics, and reporting and assessment. Follow-up interviews were conducted.

Here are the key findings: (1) In most of the companies, the CEO initiates CSR programs; (2) The entry point for CSR practice has been concentrated on two aspects: community work and PR; (3) Getting the other functional groups involved in embedding the CSR strategy into the way the company plans and implements products and services is rare; (4) Many companies leave the CSR implementation to the corporate foundation, while half say they let the public relations or corporate communications group take the lead; and (5) Next to the community, the employees are the stakeholders that the companies target for their CSR. Investors are low priority.

In the 2007 Philippine CSR report, 19 billion pesos were poured by the business sector into social development programs for the last ten years. Of this, 46 percent went to human services development, especially education and training; 27 percent was spent on livelihood and employment; and 25 percent was allocated to the environment.

Ethics is the jump-off point at the De La Salle Professional School, Inc.’s School of Business to introduce the concept of CSR to graduate and post-graduate students. MBA students are required to take a subject on Ethics, Career and Family Life while doctoral students take a subject called Business Ethics and Corporate Social Responsibility and another subject on Sustainable Business. The interweaving of CSR content in all graduate courses, according to Associate Dean Ben Teehankee, is “a work in progress.”

The University of the Philippines School of Labor and Industrial Relations offers two subjects touching on CSR in its Master in Industrial Relations program, which are Special Problems in HRD and HRD at the National Level, both of which tackle, in part, the business foundations’ involvement, through their CSR programs, in the promotion of training and education.

At the School of Management of the University of Asia and the Pacific, students learn about CSR at the undergraduate level – third year students are required to take a three-unit subject titled Introduction to People Development – Corporate Social Responsibility just before they decide on the focus of their master’s program.

Other schools will soon join the fray. By next school year, colleges and universities all over the country will be required to include a three-unit subject on CSR and Governance in the curriculum of undergraduate students.

A number of corporate foundations which are members of the League of Corporate Foundations (LCF) are actively involved in education and training. Three of them, featured below, are Petron Foundation, Meralco Foundation (now MFI Foundation), and Union Bank Foundation.

Petron Foundation. The thrust of the Foundation is education for children in marginalized families. In 2002, Petron sealed its social development efforts for youth when it shifted from providing college scholarships to enabling elementary-aged children to attend and complete primary school. Poverty is largely driven by a lack of education and/or inaccessibility of education to a large portion of society.

Initiated in 2002, the Tulong Aral program of Petron has since put thousands of impoverished children into 80 public elementary schools. Its first graduates are showing how, given a chance, they can make their benefactors proud of giving this gift of education. Of the initial batch of Petron scholars, 329 have been recognized as outstanding students while 42 received medals as honor students.

The first batch of Petron elementary scholars graduated in 2008, many of them with top honors. The dreams of some 1,137 students under the program were finally turned into reality with the successful partnership between Petron and the Department of Education through the Adopt-A-School Program.

Meralco Foundation. Whenever the name of Meralco Foundation (now MFI) is mentioned, Technical and Vocational Education comes to mind. The Foundation has been at the forefront of tech-voc education in the country. A certificate from MFI is considered the gold standard and a guarantee for employment.

One of its most successful programs is Educational Technology. It is a three-month intensive program implemented in collaboration between MFI and the Consuelo Foundation, with funding from the World Bank, the International Youth Foundation, and Lucent Technologies. The program provides disadvantaged youth with marketable demand driven skills by giving partner institutions the technical capability to handle and manage an integrated education program for out-of-school youth.

In 2002 alone, the project benefited 470 out-of-school youth nationwide, with most them now either self-employed or gainfully employed in various establishments. Another educational program of the Foundation is the well-acclaimed Family Farm School in Bais City, Negros Occidental. This school offers a three-year Special Secondary Agriculture and Technology curriculum.

Union Bank Foundation. CSR has stepped up efforts for Philippine education that, in the past few years, have provided billions upon billions of private sector contributions – much-needed support for DepEd. Of course, a lot of these CSR pesos for education are earmarked for hardware – for school buildings, computers, and the like.

Departing from the usual hardware projects is Union Bank’s As A Filipino project. The project, anchored on the specially commissioned story book with the same title, aims to help public elementary schools develop the reading skills of young learners and inculcate in them time-honored Filipino values.

Other corporate foundations involved in the promotion of quality education are Ayala Foundation (Gilas), Coca-Cola Foundation (Little Red Schoolhouse), Lopez Group (Knowledge Channel), McDonald’s House of Charities (Bright Minds Read), Lucio Tan Group of Companies (Foundation for Upgrading the Standard of Education), and Metrobank Foundation (Search for Outstanding Teachers).

REFERENCES

Books

Berenbeim, R. E. (1992, Spring). "The Corporate Ethics Test". Business and Society Review,    31(1), 77-80.

Carroll, A. B. (1990). "Principles of Business Ethics: Their Role in Decision Making and in Initial            Consensus". Management Decision, 28(8), 21-23.

Fulcrum Consulting Group, 1093 Snelling Ave. South, Saint Paul,

McNamara, Carter (2010). Complete Guide to Ethics Management: An Ethics Toolkit for Managers.    Authenticity Consulting, USA.

Wood, D. 1994, Business and Society, Harper Collins, New York.

Yuzon, Isagani Antonio F. Corporate social responsibility. April 11, 2009.

World Wide Web Links:

Extensive list of lists of Websites, of institutes and of topics (http://www.duke.edu/~wgrobin/ethics/surfing.html)

General business ethics resources at the Center for Applied Ethics (http://www.ethics.ubc.ca/resources/business/)