BUINESS ETHICS

AND SOCIAL
RESPONSIBILITY
UNIT 1 INTRODUCTION
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“Life needs to be honored. Ethics is simply honoring that period between birth and
death. This is the basic rules of ethics- What we don’t others to do us; we don’t do that
to others. Ethics needs to be inculcated, cultivated and nurtured. The seed is already
present in every human being, it is already there, it just needs a little more nurturing-in
politics, business, faith-based organizations, and also in civic society. If all these four
institutions work together, we can definitely make a difference in this coming century.
H.H Sri Sri Ravi Shankar
Founder, World Forum for Ethics in
Business
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CONCEPT OF BUSINESS ETHICS
➢ Ethics is difficult to define in a precise way
➢ In a general sense, ethics is the code of moral principles and values that governs the
behaviors of a person or group with respect to what is right or wrong
➢ Ethics involves judgments as to good and bad, right and wrong, and what ought to be
➢ Ethics deals with internal values that are a part of corporate culture and shapes decisions
concerning social responsibility with respect to the external environment
➢ An ethical issue is present in a situation when the actions of a person or organization may harm or
benefit others
➢ Ethics can be clearly understood when compared with behaviors governed by laws and by
free choice
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➢ An individual’s personal values and morals, as well as the social context, in which
they occur, determine whether a particular behavior is perceived as ethical or unethical
▪Ethical behavior is behavior that conforms to individual beliefs and social norms about what is right and
good
▪Unethical behavior is behavior that individuals beliefs and social norms define as wrong and bad

➢ Ethics can be distinguished from “morals”, which are rules or duties that govern our
behavior as persons to persons (such as “do not tell lies” or “do not hurt another
person”) and from “values” which are ends or goals sought by individuals (such as
health and happiness)
➢ Human behavior falls into three categories:
1. Codified Law
2. Domain of free choice
3. Domain of ethical behavior
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➢ Of the businesspeople Baumhart interview, 50 percent defined ethical as “what my
feelings tell me is right,” 25 percent defined it in religious terms as what is “in accord
with my religious beliefs,” and 18 percent defined it as what “conforms to the golden
rule”
➢ Business ethics refers to ethical or unethical behavior by a manager or employee of
an organization
➢ Business ethics (also corporate ethics) is a form of applied ethics or professional
ethics that examines ethical principles and moral or ethical problems that arise in a
business environment. It applies to all aspects of business conduct and is relevant to
the conduct of individuals and entire organizations.
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IMPORTANCE OF ETHICS IN BUSINESS
➢ Most of us would agree that it is ethics in practice that makes sense; just having it
carefully drafted and redrafted in books may not serve the purpose
➢ All of us want businesses to be fair, clean and beneficial to the society
➢ For that to happen, organizations need to abide by ethics or rule of law, engage themselves in
fair practices and competition; all of which will benefit the consumer, the society and
organization
➢ Primarily it is the individual, the consumer, the employee or the human social unit of the society
who benefits from ethics.
 Various importance of ethics are: 7
I. Toimprove the brand image
II. To win customer loyalty
III. Toattract investors
IV. Toattract best employees
V. Toattract vendors/suppliers
VI. Creating credibility
VII. Long term goals
1. To improve the brand image:
8
➢ An ethical company will have a very good reputation in a market and that in turns helps
to enhance the brand image of thee company as well
➢ Also, a company with good corporate social responsibility is highly appreciated in the
society.
2. To win customer loyalty:
➢ No consumer wants to make a purchase from the company that are unethical, that has
bad reputation in the market, that lies, cheats on their customers
➢ For example: if a company sells a product that is of low quality and promotes it
claiming it to be the best one available in the market then after consuming that product,
customers might never return to them
➢ So, in order to win the trust of the buyers and make them be a regular customer, a
company should be ethical.
3. To attract investors:
9
➢ Ethical companies will have a good name in the market
➢ So an ethical company can attract investors and have a greater access to capital
➢ The ethical value they posseshelps them create an image in the market and hence,
attract many investors

4. To attract best employees:

➢ No individual wants to work in an unethical company unless he is unethical himself
➢ Best employeesseek for the best place to work. The success of a businesslargely
depends on the type of employees they hire
➢ Tobe a successful company, they got to hire best employees and one of the best ways to
attract good employees is to remain true to your stakeholders and avoid unethical stuffs.
5. To attract vendors/suppliers:
10
➢ Same thing goes with vendors and suppliers as well
➢ A companywith great ethical valuestends to maintain a good relationshipwith the
suppliers
➢ They will be able to attract new suppliers as everyone wants to deal with the company
that has good reputation in the market
➢ Also, it will enable both the parties to negotiate things regarding business decisions to
end up in a win-win situation. So, it is important for a business to run ethically
6. Creating Credibility:
➢ An organization that is believed to be driven by moral values is respected in the society
even by those who may have no information about the working and the businesses or an
organization
➢ Infosys, for example is perceived as an organization for good corporate governance
and social responsibility initiatives
➢ This perception is held far and wide even by those who do not even know what business
the organization is into.
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7. Long Term Gains:
➢ Organizations guided by ethics and values are profitable in the long run, though in the
short run they may seem to lose money
➢ Tata group, one of the largest business conglomerates in India was seen on the verge of
decline at the beginning of 1990’s, which soon turned out to be otherwise. The same
company’s Tata NANO car was predicted as a failure, and failed to do well but the
same is picking up fast now.
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MYTHS ABOUT BUSINESS ETHICS

➢ Not everyone agrees that ethicsis a relevant subject for businesseducationor

dealings
➢ Some have argued that "business ethics" is an oxymoron, or a contradiction in terms
ethics is relevant to business transactions
➢ Businessmen are not immoral. And it would be disastrous to say that business people
commit unethical acts in doing business.
➢ Business, certainly is a good human activity. However, it is the business leaders’
wrong perception of the role of ethics in business that affect their decision, and in
some cases, forget to be ethical
➢ However, certain myths persist about business ethics
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MYTH 1: We learn ethics as little kids, not as adults
MYTH 2: Sitting in class doesn’t change your behavior. Only incentives change
behavior
MYTH 3: We all know what is right. It is just a matter of doing it
MYTH 4: Ethics is a matter of opinion; it’s just a matter of personal values. There
is no objectivity
MYTH 5: Ethics is about personal values
 MYTH 1: We learn ethics as little kids, not as adults
14
➢ Wrong: Ethical maturity grows with cognitive maturity
➢ Making ethical decisions requires brainpower
➢ Successful leaders tend to have more advanced ethical reasoning skills

MYTH 2: Sitting in class doesn’tchange your behavior. Only incentiveschange

behavior
➢ If this is true, let's shut down all business school in Nepal
➢ But it is not. You all are doing BBA; because you believe learning something will change
your behavior
➢ You will learn how to accomplish your goals.
MYTH 3: We all know what is right. It is just a matter of doing it
15
➢ If this is true, why we disagree all the time?
➢ In fact, every single issue that I will present in your class, you all will disagree. It
is not obvious what is right.

MYTH 4: Ethics is a matter of opinion; it’s just a matter of personal values. There
is no objectivity
➢ Remember this next time, when you are robbed. The robber has his values and
you have yours
➢ Suppose your teacher returns yours assignment with very low grades, and you ask
the reason. The teacher replies that it is because of your looks. You say it's not fair.
The teacher replies you have your values and I have mine.
MYTH 5: Ethics is about personal values
16
➢ It is not about personal values
➢ Ethics is about interpersonal values. It puts all of us on same page to generate rational
consensus. The whole point of ethics is to reach consensus.
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MORALE REASONING
➢ Moral reasoning can be defined as being the process in which an individual tries to
determine the difference between what is right and what is wrong in a personal
situation by using logic
➢ This is an important and often daily process that people use in an attempt to do the
right thing
➢ Every day for instance, people are faced with the dilemma of whether or not to lie
in a given situation
➢ People make this decision by reasoning the morality of the action and weighing that
against its consequences
➢ It is actually easier to do objective moral reasoning i.e. to say right or wrong but
difficulty lies in using our moral values, moral creativity, moral sensitivity, moral
judgment and perseverance to realize the consequence of our action.
➢ So, this mental process which sets a human’s mind in action to reach to a certain decision
of right and wrong is called moral reasoning 18
➢ It mostly depends on the person’svalues,learning and most of the time a person’s
psychology
➢ The right thing to do, the moral thing to do depends on the consequences that will result
from your action
Moral reasoning is required in business for these reasons
➢ Many times law does not cover all aspects of a problem. There are gray, difficult and
controversial areas
➢ Free-market and regulated market mechanismdo not effectively inform ownersand
managers how to respond to complex issues that have far reaching moral consequences
➢ Therefore, moral reasoning is necessary because complex moral problems require “
an intuitive or learned understanding and concern for fairness, justice, due process to
people, groups, and communities.”
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THE MORALITY OF PROFIT MOTIVE
➢ Profit motive refers to the underlying motivation of business to make more money
(profits)
➢ It is morally criticized because the owner of business is motivated by profit alone,
and monetary motives are associated with selfishness and greed.
➢ People are suspicious of profit, thinking that profit to one person must mean a loss to
someone.
➢ The major criticism against the profit motive centers at the idea that profits should
not supersede the needs of the people
➢ At the same time, many academicians believe that profit motive will in fact bring a
morally proper environment
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➢ An entrepreneur or a businessman who makes discoveries in the marketplace is entitled
to the rewards they generate
➢ That is, if customers demand safe products, or workers demands privacy, then they will
buy from or work for only those businesses that meet their demands
➢ Since this view maintains that the drive for profit will create morality, the strong version
can be expressed in the dictum that good business results in good ethics, which is the
converse of the above dictum
➢ But sometimes, in fact, the consumers may opt for less safe products if they know they will
be saving money.
➢ For example: Consumers may opt for cheaper car without air bags, even though doing so places their own
lives and the lives of their passenger at greater risk, which is morally irresponsible

➢ In short, not every business practice will simply emerge from the profit principle.
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THE GOODSIDE OF PROFIT MOTIVE

1. Profit motive motivates the people to do meaningful as it gives human life a goal
to pursue and something to live for
2. It helps to promote ingenuity and cleverness in running a business
3. It makes people productive
4. Profit-motive generates potential capital for the business and this potential capital
can be invested to establish new business which results in various job opportunity
and more goods and services to consumer
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THE BAD SIDE OF PROFIT MOTIVE

1. Profit-motive promotes rivalry among competitors as competition sometimes becomes stiff.

This certainly creates negative effect in business environment and people associated with it
2. Profit-motive makes people so focused only in making money rather than considering for
the actual need of the customer which builds negative trust among people
3. Profit motive may turn individual business person from being reflective and a questioning
person because it focuses his attention on the practical activity of making money
4. It may promote self-interest rather than the common good. It may create some social costs
that many people have to suffer. E.g. Depletion of natural resources, toxic wastes being
thrown in rivers„ pollution of the environment, and disregard for the next generation to
come.
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ETHICS AND PHILOSOPHY

➢ Ethics is a branch of philosophy that involves systematizing, defending, and

recommending concepts of right and wrong
➢ As a branch of philosophy, ethics investigates the questions "what is the best
way for people to live“
➢ There are three major areas of study within ethics and philosophy
1. Meta ethics
2. Normative ethics
3. Applied ethics
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1. Meta-ethics
▪ A brief definition of Metaethics: "A classification within western philosophy that attempts
to discover the origin or cause of right and wrong.“
▪ An example question within metaethics is: "How can we know what is right and wrong?“

▪ Some individuals may say that right and wrong are dictated by holy books, or philosophy
books, or political books, or by popular speakers, but there is not yet a good explanation
within philosophy that can illustrate the origins and nature of right and wrong that are
verifiable and acceptable to everyone
▪ It is an attempt to answer the fundamental philosophical questions about the nature of
ethical theory itself. Example: Are ethical statements such as "lying is wrong", or
"friendship is good" true or false?
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2. Normative ethics
▪ Normative ethics is a philosophy of ethics that tells us how we ought to live
▪ This theory attempts to provide actions-guide, proceduresfor answeringthe
practical question "What I ought to do"?

3. Applied ethics
▪ It is an attempt to answer difficult moral questions that actual people face in their
lives
▪ Example: Is abortion always morally wrong? Is euthanasia always morally wrong?
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Descriptive ethics:
➢ This branch of philosophy attempts to answer why people do what they do
➢ It brings perspectives from various other disciplines including psychology, sociology,
anthropology etc.
➢ It is the empirical (observational)study of the moral beliefs and practices of
different peoples and cultures in various places and times
➢ It aims not only to elaborate such beliefs and practices but also to understand them
insofar as they are causally conditioned by social, economic, and geographic
circumstances
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ETHICS AND MORALITY
➢ Morality is understanding the distinction between right and wrong and living according to that
understanding,and ethicsis the philosophyof how that morality guides individual and group
behavior. The two are closely related, with morality being the foundation of ethics
➢ A morality is a set of rules to guide the actions of an individual human being
➢ So, ethics and morality would seem to be synonymous but exactly it is not
➢ To differentiate between ethics and morality is a difficult task as human behavior is influenced by
emotions and sentiments
➢ As many big organizationsand big businessmenhave no predetermined ethics but they may
evaluate the good conduct of business on the basis of customs, expectations of society, and some
beliefs
➢ But in a way ethicsis not merely the code of conductbased on customs,conventionsand the
accepted courtesies of a society but it is the code of conduct developed by proper testing to guide
the human behavior
➢ In short, ethics and morality for all-purpose may be assumed to mean the same
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BENEFITS OF BUSINESS ETHICS
I. Positive effects on many performance aspects such as firm financial performance, firm market
value, stock market value and returns, and perceived future financial performance
II. Minimization of loss of reputation and financial losses due to legal costs and fine
III. Increased potential to achieve sustainable competitive advantage through the consideration of
various stakeholders inherent in an ethical approach
IV. Many employee benefits suchas higher organizational commitment,better identification with
company values, and higher job satisfaction
V. Higher customer trust and satisfaction
VI. Potential willingness for consumers to pay higher prices
VII. Potential to increase supplier diversity and benefit from these partnerships
VIII. Increasedinterest from investors
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CODE OF CONDUCTS
➢ A code of ethics is a written guide to acceptable and ethical behavior as defined by an
organization
➢ It outlines uniform policies, standards, and punishments for violations
➢ Employees know what is expected of them and what will happen if they violate the rules, a code
of ethics goes a long way towards encouraging ethical behavior
➢ However, codes cannot possibly cover every situation; companiesmust also create an
environment in which employees recognize the importance of complying with the written code
➢ Managers must provide direction by fostering communication, actively modeling, and
encouraging ethical decision making and training employees to make ethical decisions
➢ At many companies, a formal statement or code of ethics summarizes core ideologies, corporate
values, and expectations
➢ Codes Of ethics are formalized rules and standards that describe what a company expects of its
employees
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SIGNIFICANCE OF CODE OF
CONDUCT
➢ Typically Codes talk about expectations to: obey the law, conflicts of interest,
insider trading, preserving confidential information, bribery, corporate
opportunities, competition and fair dealing among other things
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SOCIAL RESPONSIBILITY: MEANING

➢ Social responsibility is an ethical framework and suggests that an entity, be it an

organization or individual, has an obligation to act for the benefit of society at large
➢ Social responsibility is a duty every individual has to perform so as to maintain a
balance between the economy and the ecosystems
➢ Social responsibility is the idea that businesses should balance profit-making
activities with activities that benefit society; it involves developing businesses with a
positive relationship to the society in which they operate
➢ Social responsibility means that individuals and companies have a duty to act in the
best interests of their environments and society as a whole
➢ Social responsibility as it applies to business is known as corporate social
responsibility (CSR)
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➢ Additionally, some investors use a company's social responsibility, as an investment
criterion
➢ As such, a dedication to social responsibility can actually turn into profits, as the idea
inspires investors to invest and consumers to purchase goods and services from the
company
➢ Putting simply, social responsibility helps companies develop a good reputation
➢ The idea of social responsibility supposes that the corporation has not only economic and
legal obligations, but also certain responsibilities to society which beyond these
obligations
➢ Tom’s Shoes, created their own program in which a pair of shoes is donated for every
pair sold
➢ On the other hand, Starbucks created its C.A.F.E. Practices guidelines, which are designed
to ensure that the company’s sources grow and process coffee by evaluating the
economic, social and environment aspects of coffee production
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SOCIAL RESPONSIBILITY IN PRACTICE
➢ Social responsibility takes on different meanings within industries and
companies. For example, Starbucks Corporation and Ben & Jerry's
Homemade Holdings Inc. have blended social responsibility into the core of
their operations
➢ Both companies purchase Fair Trade Certified ingredients to manufacture
their products and
 actively support sustainable farming in the regions where they source
ingredients
 The ethical obligations of business are to:
1. Provide safe products
2. Create jobs
3. Protect the environment
4. Contribute to the standard of living in society
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IMPORTANCE OF SOCIAL
RESPONSIBILITY
➢ Social responsibility is important to business because it demonstrates to both
consumers and the media that the company takes an interest in wider social issues
that have direct impact on profit margins
➢ It is in the best interest of business to promote and improve the communities
➢ Social responsibility helps to improve public image of the firm
➢ These social responsibilities of an organization bring to their suppliers and business
associate more confidence to the organization and thereby helping stock price
➢ It can play a role in building customer loyalty based on distinctive ethical values
 35
i. Social responsibility improves financial performance and reduces operating costs
ii. Social responsibility enhances brand image and reputation
iii. Social responsibility increases customer loyalty and sales
iv. Social responsibility increases the ability to attract and retain employees
v. Social responsibility brings less regulatory / activists oversight
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EVOLUTION OF CSR
➢ In USA, idea of corporate social responsibility (CSR) appeared around the start of 20th
century
➢ Corporations at that time came under attack for being too big, too powerful and guilty and
using anticompetitive practices
➢ In this protest, few farsighted business executives advised corporations to use their power and
influence voluntarily for broad social purpose rather than profits alone
➢ Steelmaker Andrew Carnegie who became great philanthropist gave much of their wealth to
education and charitable donations
➢ Henry Ford developed paternalistic programs to support the recreation and health needs of
employees
➢ These business leaders believed that business has responsibility to the society that went
beyond their only efforts to make profits
➢ Two broad principles emerged in society about CSR
a. The charity principle
37
b. The stewardship principle

a. The charity principle:

➢ The wealthiest members of the society should be charitable to the less fortunate ones
➢ It is kind of private aid to the needy members of the society
➢ This is a voluntary action to promote social good
➢ Example: Andrew Carnegie and John D. Rockefeller are usually credited as Pioneers of great
modern philanthropists.
b. The stewardship principle:
➢ Many of today's corporate executivessee themselvesas stewards, or trustees,who act in
38
general people's interest
➢ Business leaders who follow the stewardship principle believe that they have an obligation to
see that everyone particularly, those in need or at risk benefits from their firms' actions
➢ Corporate managers control vast resources and these resources can affect people in
fundamental ways
➢ Now, these organizations have a responsibility to use these resources in ways that are good not
just for the stockholders alone but for society generally
➢ This thinking eventually produced the modern theory of stakeholder management
 39
The evolution of CSR

to to
community to sustainable
affairs corporate business
to strategic community integrated
from philanthropy investment
giving linked into business
profit focus passive strategic
to business functions,
a company donations to partnerships
interests goals,
exists only charities initiated by
(includes strategy
for short- when company
cause-
term share requested related
holder profit
marketing)
 40
HISTORY OF CSR IN NEPAL
➢ The CSR in Nepal started mostly in the form of philanthropic contribution
➢ There are many examples of admirable philanthropic practices in Nepal; such as the guthi
(trust)
➢ Almost all major temples in the country have a large area of land donated to them, usually
managed by the guthi
➢ The income from such property is used for rituals and maintenance of the shrine, and for the
service of the needy people
➢ This system ensures that the temple has a continuous source of income for maintenance and
preservation.
➢ Construction of wells for drinking water, rest places for travelers and porters (pati, pauwa &
chautara), rest houses for pilgrims (dharmashalas), donations of land and money for schools,
hospitals, and orphanages and traditional rituals of donation (daan) to the poor and needy are
other examples of philanthropic acts rooted in Nepali culture and tradition
➢ The dominant culture and religion of Nepal "Hinduism" is reflected in the practices of CSR
 FEW PRACTITIONERS OF CSR

Company Action
Formation Day care centre, medical and scholarship facility to
Carpet weavers and their children
Photo Concern Donation to the cancer hospital every month by
collecting Rs. 2 from every roll developed and
printed

Standard HIV AIDS awareness in the workplace and ‘Seeing

Chartered Bank is Believing’ (cataract operation)
FEW PRACTITIONERS OF CSR CONT…

Company Action
Surya Nepal Awareness to youth on smoking hazards, donated
ambulance and are working on safe water drinking
facility in the factory area
Buddha Air Partnering with a local level NGO for agriculture
development like teaching farmers on soil
management, ways to market their products.

Pooja Soap Donated 10 paisa of each bar soap sales to the

orphanage
 43
A MORALE ARGUMENT OF CSR
➢ Corporate social responsibility, also referred to as CSR, can be described as embracing
responsibility for a company's actions and encouraging a positive impact through its activities
on the environment, consumers, employees, communities, and other stakeholders
➢ Profits are necessary for any business entity to exist, but at the same time, all groups in
society should strive to add value and make life better
➢ CSR is recognition of that inter-dependence and a means of delivering on that obligation, to
the mutual benefit of businesses and the societies within which they are based
➢ Milton Friedman and other conservative critics have argued against CSR, stating that a
corporation's purpose is to maximize returns to its shareholders (or shareholder value) and that
it does not have responsibilities to society as a whole
➢ Part of the critics' argument is that managers should not select social causes on behalf of a
diverse set of owners
 44

➢ Rather, CSR opponents believe that corporations benefit society best by distributing
profits to owners, who can then make charitable donations or take other socially
responsible actions as they see in
➢ Other critics, rather than targeting the concept of CSR, point to examples of weak CSR
programs
➢ For example, the term green washing refers to instances where businesses have spent
significantly more resources advertising being "green" (that is, operating with
consideration for the environment) than investing in the environmentally sound practices
themselves
➢ CSRbroadly represents the relationship between a company and the principles expected by
the wider society within which it operates. It assumesbusinesses recognize that for-profit
entities do no exist in a vacuum and that a large part of their success comes as much form
actions that are congruent with societal values as from factors internal to the company.
The moral arguments for CSR are:
45
1. The externalities argument:
➢ Companies have a moral responsibility to deal with the negative externalities they cause,
such as pollution, resource depletion, or community problems, insofar as they are not dealt
with by governments
2. The Power argument:
➢ Organizations have access to resources and they should use the power and resources
responsibly in society
➢ It's more like Spiderman maxim: "With power comes great responsibility“
3. The dependency argument:
➢ Corporations rely on the contribution of much wider set of constituencies, or stakeholders,
in society (such as consumers, suppliers, local communities), rather than just shareholders,
and thus have a duty to take into accounts the interests and goals of these stakeholders as
well as those of shareholders
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INCREASING RELEVANCE OF CSR

➢ CSR no longer simply affects relationship between business and society

➢ It had become a way of rethinking the role of companies in society, which takes
governance and sustainability as its core values and changes the focus of CSR public
policies
➢ It is associated with a lot of benefits
➢ It brings benefits in terms of customer and stakeholder engagement, stronger
performance and profitability and human resource management
➢ E.g.; Haagen-Dazs loves honeybee, Body shop
➢ Companies find CSR relevant 47
➢ A recent survey conducted in Nepal found that 70% of consumers say it is important for
companies to be socially responsible
➢ It is time that Nepalese companies refine their approach to CSR by more closely relating
social causes to their core business
CSR is becoming increasingly relevant for business today because of five identifiable
trends:
1. Growing affluence
2. Ecological sustainability
3. Globalization
4. The free flow of information
5. Brands
i. Growing affluence
48
➢ This is true within developed nations, but also in comparison to developing nations
➢ Affluent consumers can afford to pick and choose the products they buy
➢ A society in need of work and inward investment is less likely to enforce strict
regulations and penalize organizations that might take their business and money
elsewhere
ii. Ecological sustainability:
➢ An increasein general affluence and changing social expectations is enhanced by a
growing concern for the environment
➢ We are approaching the earth’s limits and the potential consequences of our actions are
complicated issues
➢ Human economic activity is depleting the world’s resources and causing dramatic
changes to mix of gases in the earth’s atmosphere- changes that could become
irreversible in the near future
iii. Globalization
49
➢ The growing influence of the media sees any ‘mistakes’ by companies brought
immediately to the attention of the public
➢ In addition, the Internet fuels communication among like-minded groups and consumers—
empowering them to spread their message, while giving them the means to co-ordinate
collective action (i.e. a product boycott)
➢ The result of this mix is that consumers today are better informed and feel more
empowered to put their beliefs into action
➢ From the corporate point of view, the market parameters within which companies must
operate are increasingly being shaped by bottom-up, grassroots campaigns
➢ NGOs and consumer activists are feeding, and often driving, this changing relationship
between consumer and company.
CSR is particularly important within a globalizing world because of the way brands are
built—on perceptions, ideals and concepts that usually appeal to higher values. CSR is a
means of matching corporate operations with stakeholder values and demands, at a time
when these values and demands are constantly evolving.
iv. The free flow of information:
50
➢ The growing influence of global media conglomerates make sure that any CSR lapses by
companies are brought rapidly to the attention of the worldwide public, often
instantaneously
➢ scandal is news, and yesterday’s eyewitness is today armed with pocket-sized video
cameras or pictures taken by mobile phones that provide all necessary to convict by TV
v. Brands:
➢ Brands today are often a focal point of corporate success and should be protected by
integrating a strategic CSRperspective throughout the firm
➢ Consumers try to establish popular brands in consumer’s mind because it increases their
competitive advantage
➢ Brand value is critical to firms, and today the value of intangible brand is more than the
tangible assets
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OUTCOMES OF CSR

➢ CSR initiatives can reinforce the company’s business purpose and seamlessly leverage
its operational competencies
➢ The most important outcome of CSR initiatives is strong relationship, and trust
between the company and clients
➢ Improved financial performance, lower operating costs, enhanced brand image and
reputation, increased sales and customer loyalty and more ability to attract and retain
employees
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SOCIAL RESPONSIBILITY AND ETHICS
➢ Social responsibility is an ethical theory, in which individuals are
accountable for fulfilling their civic duty; the actions of an individual must
benefit the whole of society
➢ There must be a balance between economic growth and the welfare of
society and the environment. If this equilibrium is maintained, then social
responsibility is accomplished
➢ Social responsibility and business ethics are often regarded as same concepts
➢ However, the social responsibility movement is but one of the overall
discipline of business ethics
➢ Every individual has a responsibility to act in manner that is beneficial to
society and not solely to the individual
➢ Maintaining social responsibility within a company ensures the integrity of
society and the environment are protected
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➢ Corporations are increasingly being challenged in Nepal and around the world to act in
ways that serve the best interests of society
➢ Many companies are aggressively seeing strategies that can allow them to “do well by
doing good” leaving a positive “footprint” on the world and avoiding actions that could
harm consumers, employees, investors, competitors, suppliers and the general public
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CSR DOMAINS

➢ There are three domains of CSR

a. The economic domain ( to be profitable)
b. The legal domain (to obey the law)
c. The ethical domain ( to sustain legitimization/be ethical)
a. The economic domain: 55
➢ The economic domain ( motive: to be profitable) includes those activities which are
intended to have either a direct or indirect positive economic impact on the company
➢ This can be seen in terms of maximizing shareholder value or maximizing profit

b. The legal domain:

➢ The legal domain (motive: to obey the law) refers to a company’s responsiveness to and
compliancewith legal expectations and laws about different standards
➢ It includes both standards about waste, resources, working conditions, products, services,
packaging, suppliers etc
➢ Hence, the infrastructure of the environment in which an organization exists
c . The ethical domain: 56
➢ The ethical domain (motive: to sustain legitimization) submits an organization’s ethical
(and social) responsibility to its environment
➢ This responsibility is the aggregated societal expectations from all stakeholders
(external, internal, active, and passive) i.e. the ethical domain constitutes the complexity of
CSR
➢ This also explains why the economic domain is not sufficient if an organization wants to
sustain its legitimacy
➢ The motive of maximizing profit or shareholder value may always be present
➢ However, it is vital that an organization incorporates and makes salient the ethical and
legal domain in its CSR strategy as well, in order to comply with the societal expectations
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