Workplace Ethics and Corporate Social Responsibility: Prerequisites for Sustainable Organisational Success

The global economy has never been as volatile and dynamic as it is today. The concept of workplace ethics is attracting increasing attention, and companies are placing greater importance on Corporate Social Responsibility than before. In times when the concept of right and wrong is more vague than ever, an ethical framework becomes an extremely important thing to take principled decisions and actions.

Meanwhile, CSR also extends this ethical framework and adds to its corporation’s responsibility towards society, the environment and its stakeholders. Both these practices decide the ethical footprint of an organisation and play a crucial role in the long-term success, sustainability and reputation of the organisation. Through theoretical frameworks, practical implications and insightful examples, this article focuses on providing a comprehensive understanding of the significance of ethics and CSR in modern business practices.

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Workplace Ethics

Workplace ethics are the ethical standards to live by in a workplace environment. Some confuse it with laws, but ethics extends beyond what law requires. Simply put, these are the values and principles that guide interactions, decisions and overall behaviour at the workplace. The ethical framework of an organisation is detrimental to creating a harmonious work environment and fostering trust among employees. Continuous improvement, accountability, responsibility, trustworthiness, fairness, respect, integrity, etc are some of the key principles of Workplace ethics.

A research study by Edelman showed that 81% of employees from various companies consider ‘trust in their employer’ and ‘ethical leadership’ as a detrimental factor for job satisfaction. Another research by the Society of Human Resource Management (SHRM), found that 58% of employees consider the ethical framework of the organisation before continuing or leaving the job.

Meanwhile, a report by the Association of Certified Fraud Examiners (ACFE), showed that most organisations lose an average of 5% of their annual revenue by doing fraudulent activities.

Emphasising Workplace ethics can result in enhanced credibility and reputation. Moreover, it also develops a productive and supportive work environment. Even employees feel respected and valued which motivates them to contribute their best efforts to shared goals. A research study by Edelman showed that 81% of employees from various companies consider ‘trust in their employer’ and ‘ethical leadership’ as a detrimental factor for job satisfaction. Another research by the Society of Human Resource Management (SHRM), found that 58% of employees consider the ethical framework of the organisation before continuing or leaving the job.

Meanwhile, a report by the Association of Certified Fraud Examiners (ACFE), showed that most organisations lose an average of 5% of their annual revenue by doing fraudulent activities. It demonstrates that ethics are not just moral imperatives, but also the critical drivers for employee satisfaction, reputation management and even organizational performance.

Corporate Social Responsibility

CSR in a nutshell, is a self-regulating business model. Corporations considering CSR, feel socially accountable to the environment, stakeholders, and themselves. It is mostly the responsibility of large corporations i.e. the more the company is visible, the more it is responsible for setting standards. Anita Roddick (founder of The Body Shop says “The business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed.”

A recent study by Nielson found that 66% of customers globally are willing to pay extra for sustainable brands. Most MNCs today follow the CSR model, for example, Zomato’s “Feed India Campaign’ wherein the company contribute 1% of their profit to give food to the needy and with that the company also doesn’t use plastic to deliver food which promotes environmental sustainability.

After an amendment to THE COMPANY ACT, in APRIL 2014, India became the first country in the world to make CSR mandatory. Hunger, poverty, gender equality, education, etc were the suggested areas where Organisations could invest their profit in. A company defines Corporate Social Responsibility as its sense of responsibility towards the community and the ecological and social environment in which it operates.

Global trends related to CSR are shifting from traditional philanthropy towards more comprehensive and integrated strategies such as Employee Well-being, Ethical Supply Chains, Impact Investing, and Environmental Sustainability. These strategies create long-term value for both businesses and society.

Theoretical Frameworks

Workplace Ethics Theories

Some ethics are believed to contribute to the long-term success and the ethical reputation of a company. The three most important are explained below :

1. Duty-based Ethics (Deontological)

These ethics are related to the duties/rules of a professional not necessarily thinking about the result of that deed. It simply means doing activities out of moral obligation because doing that would be considered morally right in society. Its greatest emphasis is intention, which makes it different from other ethics. Compliance with regulations, respect for autonomy, paying on time, honesty, and integrity are some of the examples of ethical duties. Deontological ethics are different for different kinds of workplaces, for example, a civil engineer needs to prioritise the security and safety of users more than other considerations like meeting deadlines, etc.

2. Consequence-based Ethics (Utilitarianism)

Utilitarianism, as the name suggests, focuses on the utility of a process and not the process itself. It evaluates an action based on its overall outcomes and consequences. In the context of the workplace, it means that the moral worth of an action is directly dependent upon the well-being and happiness it is producing.

It is best suited for businesses as they provide goods and services to customers for maximising utility and this approach provides an apt code of conduct for ethically doing this. In the workplace environment, the focal point is to maximize the overall happiness or well-being of most people.

It also involves making efforts to create a balance between short-term losses or gains to long-term consequences. It aims for the greatest good for the greatest number. For example, a manager of a manufacturing company is encountering a situation wherein the introduction of new machinery in the company will lead to a significant cut in production cost but, it will also mean laying off some employees.

According to the utilitarian perspective, the consequences of both situations should be evaluated. This process is called ‘Utilitarian Calculation’. After considering the potential harms and benefits, the option which is outweighing others should be chosen.

3. Character-based ethics (Virtue Ethics)

it is safe to assume that an employee’s traits and moral character dictate his/her behaviour in the workplace. This theory of ethics professes that a good person will always be a good employee. The best part about this approach is that it does not see an employee as a whole, rather, looks to reinforce their positive traits and good parts of their character. Excellence, empathy, fairness, courage, and integrity are the most desired virtues in a workplace which are believed to contribute to a positive work environment.

It can be better understood by an example of a team leader of software engineers, he would look to reinforce and promote the virtue of integrity among team members. He might choose to display an integrated behaviour to inspire team members or communicate its importance. This will result in employees applying this virtue in their daily interactions and decision-making which in turn will lead to a more harmonious and ethical work environment.

Corporate Social Responsibility Theories

Below explained theories below try to communicate the evolution of CSR theories as well as the evolution of priorities in organisations :

1. Carrol’s Pyramid in CSR

Archie B. Carrol proposed a pyramid of CSR in which, he talked about four responsibilities or in other words four important areas to prioritize:

• Profitability: overall internal profit and financial transparency should be the first and foremost concern of any organization. Only when a company is profitable, can it create and sustain jobs for society. And only then can it afford to have the liberty of other external important things like ethics and charity.
• Legality: it involves ‘Obeying the law’. The safety and security of employees as well as customers should not be compromised at any cost. Other legal issues that should be kept in mind are paying taxes and protection from penalties, etc.
• Ethics: if an organization’s profitability is in check and there are no legal hassles, the organization can start focusing on ethical issues. These ethics are beyond the law. It is simply choosing to do the right and fair thing even if it is not in the law.
• Philanthropy: it emphasizes being a ‘Good Corporate Citizen’ which involves actively improving the world around you. Volunteering in non-profit programs, taking initiatives for the well-being of the community providing company expertise to NGOs, etc are some of the philanthropist activities a large organization can do.

2. Stakeholder theory

R. Edward Freeman, an American Philosopher, and Professor suggested that an organization should be considerate about the kind of impact and benefits that a business action has on its shareholders. The stakeholders are the entities that are interested or concerned with the outcomes or operations of an organization. It includes internal stakeholders like employees, shareholders and managers/executives and external stakeholders like customers, suppliers, investors, government and NGOs. Freeman suggested planning strategies to deal with all stakeholders. Loyalty, expertise, participation, and know-how are of prime importance for achieving a company’s CSR goals.

3. Triple Bottom Line

It is the latest addition to approaches to CSR which is essentially a sustainability framework that should revolve around the 3 Ps which are

1. People: suggests being considerate of the whole community in which that organization operates.
2. Planet: involves keeping in check and hence controlling the impact on the natural, environment, and ecological systems.
3. Profit: it involves not just the usual accounting of internal profits but the holistic economic benefits like tax paying and job creation which the whole society receives.

Importance of Workplace Ethics and CSR

• Building Trust and Reputation: Commitment to ethical behavior and CSR activities demonstrates a positive contribution to society which in turn helps the organization by enhancing trust among the general public, customers, investors, and other stakeholders, etc.
• Legal Compliance and Risk Management: Indulging in ethical behaviour has the greatest benefit of preventing legal issues and penalties. Unethical behaviour always has a risk of legal hassles which might become detrimental to the organisation.
• Employee Morale and Productivity: Engaging in ethical behaviour and properly managing social responsibilities enhances psychological variables like subjective well-being, quality of life, self-perception, self-efficacy, etc. which in turn betters Employee Engagement, Retention, and Productivity.
• Long-term sustainability and Resilience: Focusing on ESG factors that are Environmental, Social, and Governance helps an organization to grow holistically. Moreover, it builds a great amount of resilience against the changing needs of society and fluctuations in the market.

In today’s day and age, it has become highly important for all organizations to focus on ethical behaviour and CSR activities as it’s not merely an optional initiative anymore, rather these are the important prerequisites for the sustained success of an organization. By fostering ethical behaviours and indulging in socially responsible activities, organizations attract the best talent, investors, and retention.

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Global Economy has turned extremely socially conscious and interconnectedness has also increased in the last few decades, so it becomes all the more important to shift focus on Workplace ethics and Corporate Social Responsibility as its positive impact on society would enhance resilience with stakeholders as well as relevance in the market.