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Business Ethics and Corporate Social Responsibility (CSR)

Employees at conference table discussing business ethics and corporate social responsibility

Engaging in proper business ethics is crucial to the longevity and reputation of a company. Maintaining good business ethics means a company does the right thing when faced with ethical dilemmas. As times and societal priorities change, these moral dilemmas also adapt– such as a heightened focus on companies’ environmental impact in recent decades. Under the umbrella of business ethics are four types of corporate social responsibility (CSR). Corporate social responsibility refers to the duty that a company has to act in the best interest of its community, even if that means forgoing a profitable opportunity. While maintaining business ethics and corporate social responsibility may seem detrimental to a company’s profit in the short term, ultimately, businesses that prioritize these may experience greater stability and longevity.

What Are Business Ethics?

Business ethics refers to policies and practices a corporation should implement to do the right thing regarding societal standards. Engaging in appropriate business ethics is usually necessary to gain public approval, help a company maintain business partners, and stay popular among consumers. Generally, business ethics are guided by laws that determine the ethical violations that merit serious consequences. Still, the law only covers relevant business ethics and corporate social responsibility practices. Examples of categories that business ethics encompass are corporate corruption and bribery, social causes, accounting fraud, and the four types of corporate social responsibility.

Good business ethics allows for trust between the corporation and the consumer. With respect to bribery, the guidelines are set by laws such as the FCPA and enforced by the DOJ and Securities and Exchange Commission (SEC). Regarding ethical issues covered by U.S. laws, there is a clear set of consequences ranging from significant fines to prison time to encouraging corporations to practice good business ethics and corporate social responsibility. Additionally, the SEC implemented a whistleblower program and award to motivate employees or other individuals with vital information on corporate crimes to come forward. With the help of a qualified whistleblower attorney, these individuals can even report anonymously and receive protection from retaliation.

However, there are also ethical issues not necessarily covered by U.S. laws and instead reflect public opinion– which can be crucial to long-term financial success. Social and environmental problems have become tantamount to other ethical violations in recent decades, inspiring boycotts and lost business partners. Numerous instances of societal backlash directly influence business ethics and four types of corporate social responsibility. For example, in April of 2000, Mitsubishi had to pull out of an industrial salt project in Mexico due to a successful boycott campaign launched by those who cared about the project’s negative environmental impact.

While ensuring a corporation’s impact on the environment and the community may seem secondary to turning a maximum profit, researchers at NYU have found evidence that corporate governance and engaging in good business ethics increase financial performance. Companies engaging in good business ethics often foster better workplace environments, attracting stronger talent. Over time, it is clear that successful businesses take business ethics and corporate social responsibility into account.

What Are the 4 Types of Corporate Social Responsibility?

Corporate social responsibility is itself a subcategory of business ethics. It refers to specific strategies and goals for a business to meet stakeholder expectations while considering its impact on its community. Within CSR, a company should consider four main categories of responsibility.

Economic Corporate Responsibility

Economic, corporate responsibility focuses on bolstering the economic well-being of the communities in which it operates. The expectation is not for the company to take on a significant financial burden to meet this obligation but to step in to maintain good business ethics and corporate social responsibility. For example, a larger corporation can source its products and services locally or contribute to economic development initiatives within its local community.

Philanthropic Responsibility

Philanthropic responsibility is the second of the four types of corporate social responsibility. Similar to economic responsibility, it focuses on giving back to communities via charitable donations, employee volunteer programs, sponsoring community events, or creating a foundation. The critical difference is that economic responsibility refers to the financial well-being of its community. In contrast, philanthropic responsibility refers to various causes, such as education and social welfare.

Environmental Responsibility

Environmental responsibility is an essential pillar of business ethics and corporate social responsibility. As a business’s obligation to minimize its operation’s negative impact on the environment, this can range from merely recycling and composting at your offices to rejecting profitable opportunities that could cause significant harm to the environment.

Ethical Social Responsibility

The final of the four types of corporate social responsibility, ethical and social responsibility, refers to honest, transparent business practices that align with societal values, laws, and regulations. Within this category, you will see the most oversight by government bureaus such as the DOJ and SEC. However, this pillar of business ethics and corporate social responsibility also focuses on treating employees somewhat and engaging with partners and suppliers that follow ethical standards.

The Benefits of CSR

The impact of CSR strategies on a business could be harmful, with the expectation to donate profits and adhere to ethical standards that rule out potentially lucrative business opportunities. However, setting goals within these four types of corporate social responsibility comes with many benefits, ranging from risk mitigation to cost savings. For example, when a company sets a goal to prioritize business ethics and corporate social responsibility– they can avoid situations where projects are halted due to protests, thus protecting their reputation, saving money, improving their relationship with stakeholders, and encouraging innovation in seeking projects that are guided by CSR.

Moreover, CSR initiatives can be beneficial in unexpected ways. Investing in environmental CSR strategies may come with a higher upfront cost, but often, plans such as reducing energy consumption or waste will ultimately save companies money. Additionally, good business ethics and corporate social responsibility initiatives enhance a business’ reputation, attract and retain talent, and improve satisfaction at all company levels.

How Business Ethics Relate to Reporting Corporate Crime

While the obligation of CSR strategies belongs to the business, it’s essential to maintain integrity and business ethics as an individual. At FBR, our expert attorneys apply their passion for justice by helping the people brave enough to report corporate crime. The SEC whistleblower program provides just compensation and retaliation protection to whistleblowers who hold corporations accountable for unethical practices.

Out of the four types of corporate social responsibility, it is most likely a breach of ethical, social responsibility that leads to a crime. If you think you have relevant information regarding an illegal violation of business ethics and corporate social responsibility, do not hesitate to take our award-winning whistleblower evaluation. Then, contact FBR for a free, anonymous consultation.

John Peterson

New York attorney John Peterson has a decades’ worth of expertise covering the FCPA, whistleblower and securities laws, and regularly contributes to major media outlets such as Reuters, MSN, and Bloomberg. John leads the FBR team, and uses his experience from nearly a decade of working on corporate crime and corruption cases, to represent clients in multi-national investigations involving the SEC, DoJ, FBI, and more. As one of the only whistleblower attorneys focusing specifically in FCPA reporting, John has a long history of helping clients report millions of dollars in corrupt payments. Email FBR for a free, anonymous consultation with John.

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drnayyar@fbr.org.uk

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