The importance of business ethics in corporate social responsibility auditing

The importance of business ethics in corporate social responsibility auditing

Ethical awareness is expanding, causing a shift in mentalities, with the attention now focused on employees instead of revenue. Ethics is an intrinsic part of eastern cultures while in western countries, its relevance is now been recognized in the business environment. Its influence on the workforce is palpable during social responsibility audits, so what is business ethics?

The implementation of ethical values through codes of ethics and codes of conduct show the increased compliance with ethical requirements. Ethics have been part of daily lives for centuries but were not often recognized.

They found new grounds of support in 2011, when ten UN Principles were published, as underlined in a previous article about corporate social responsibility

Ethics in eastern versus western cultures

In eastern societies, “Ethics is the foundation of everything, and an ethical conduct is basic: in our [eastern] society, cheating somebody, whether you believe in a religion or not, is unethical”1. Ethical values are behind in western societies because individualism has taken over, forgetting values such as “honesty, kindness, compassion, respect and personal responsibility”.2

For centuries, growth focused on the financial success of a company: employees worked to reach goals and rarely received consideration beyond the agreed stipend. Social benefits evolved through time and radical changes happened in the last decade: ethics and human rights emerged as new pillars of entrepreneurship, seemingly leaving behind centuries of little or no consideration to employees.

1 Geshe Tashi Tsering, 2005. The Four Noble Truths. pp. 125-128.
2  www.ethicssage.com, 8 August 2018. What are values?

The prevalence of ethical values

Growing numbers of companies are now requested to implement ethical practices at different levels:

1. Internally, a company must respect human and labor principles among its employees.
2. Externally, a company is bound to control human and labor principles among its supply-chain.
3. Consumers are now requesting transparency regarding the products they purchase.

Ethical rules vary from country to country and greatly influence the human context of work. Rules are also influenced by the ethical approach of companies’ leaders. The implementation of mandatory ethical guidelines in businesses around the world was crucial in the emergence of social responsibility.

Business Ethics

Business ethics is often seen as an abstract concept; however, as a social responsibility auditor, I discovered that the ethical involvement of a company is revealed during employee interviews.

I look for evidence confirming whether a company’s business is conducted ethically and with its employees, clients, suppliers and stakeholders’ best interests in mind.

DETRIMENTAL BUSINESS ETHICS:
it is deceiving to see high-ranking employees act unethically, but it is a well-known business fact. The ethical example usually comes from the top and employees tend to speak up about inequalities in their workplace during social responsibility interviews. 

It is difficult to act upon unethical behaviors because they tend to be well-orchestrated with the support of internal key partners, such as department heads, accounting managers, even the general manager. The outcome benefits a few and frustrates the majority, usually kept silent. Although this case is not unusual, my focus goes towards positive business ethics.

SUCCESSFUL BUSINESS ETHICS:
starts at the top and trickles down: an ethical behavior within the workforce encourages personal growth, work satisfaction, polyvalence, increasing revenues and decreasing absenteeism. In chapter four of my book Journal of a social auditor, I describe the well-intentioned owner of a French industrial bakery whose social commitment focuses on business ethics, resulting in high indicators year after year, such as 15% annual sales increase and a low 2.3% turnover.

What is an ethical audit?

Ethical and corporate social responsibility audits are part of the compliance group because certifications mandate that companies comply with rules and regulations to be certified. The audit measures compliance to rules included in the standard, or evaluation document, and determines the tasks, if any, a company must complete to obtain and maintain its certification. 

The audit outcome provides a company with an evaluation of its internal processes, pointing out best practices, observations and non-conformities. Social responsibility audits help spread the prevalence of ethical practices in the workplace, as working conditions improve when social assessments are carried out. Compliance with requirements means that employees work in healthier and safer environments. Companies now tend to monitor their suppliers, to check the ethical compliance of their supply chain.

BRCGS Global Standard for Ethical Trade & Responsible Sourcing was created in 2019 and is currently being implemented, a process slowed by the COVID 19 pandemic. This certification, for which I was trained, requires a transparent commitment of upper management towards its workers now that corporate social responsibility has made the employee a top priority.

Two case studies of successful ethical practices

Two companies took business ethics seriously, Cadbury Schweppes and Costco.

Cadbury Schweppes is described by Business Case Studies as a global believer in business ethical behaviors, with a strong corporate social responsibility commitment applied at three levels:

1. The traceability of raw materials and ingredients that go into production is made possible thanks to a systematic initial questionnaire to all suppliers. The goal is to have a supply chain in agreement with the company’s beliefs.

2. Internally, the corporation sets environmental goals while policies trickle down to reach all entities. Employees are treated with respect and their working environments follow strict health and safety manufacturing regulations.

3. Externally, the corporation is committed to its customers and is continuously adjusting its products and policies to comply with changes in consumers’ demands.

Costco stands out above corporations because its ethical practice started with its first store in the 1970s. With a ‘high volume – low price’ business approach, getting the right product, in the right place for the right price has granted the company an excellent global reputation because of three key points:

1. Leadership: each store has a flat, fast and flexible managerial style and is treated as a mini corporation to ensure that product flow and sales are efficiently controlled by a committed team. The company empowers its employees while wages and benefits are above market rates and in return, employees are loyal to their employer.

2. Business ethics is the ability to engage employees’ behaviors for their own satisfaction and the financial stability of the company. This approach allows growth through accrued performance while keeping the balance between the demands of consumers, suppliers, and stakeholders.

3. Business diversity: diversification of business styles within the company allows access to a wider set of tools when communication issues arise. Disagreements have a negative impact on human performance, therefore teamwork is required to solve conflicts internally and without delay.

One key element in the success of these two companies is their happy workforce: good salaries attract quality workers who tend to stay longer, while reliable and stable teams allow business to grow.

How to evaluate the presence of ethical values in your business?

  • Start by asking your employees about their work satisfaction.
  • See whether their response is what you expected.
  • Be ready to make adjustments that may include business ethics.

This introduction to ethics shows the prevalence of ethical values in today’s business world. The employee is now at the center of attention while research shows how a happy workforce allows business to grow. A corporate social responsibility audit is a safe context to evaluate a company’s business ethics, providing information regarding the needs and the opportunity to set new corporate ethical values in place.

Thank you!

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