The advocates of CSR often speak about the “business case” for CSR. What it implied is how CSR is beneficial for business in both tangible and intangible ways. It refers to bottom line financial benefits accrued to business by engaging in CSR activities. It forced me to set a parallel with business ethics – what is the business case for business ethics? How does a business get benefited by being ethical?
The benefit mostly implies quantitatively measurable indicators pointing towards saving or making money. Probably one simple way of answering this question is- First, ethical organizations are mostly compliant and hence unlikely to be on the wrong side of regulatory environment. Second, ethical organizations are happy organizations with a positive work climate. A happy organization is likely to be more productive than a toxic organization.
The problem arises when we flip the question and ask – are all successful businesses also ethical? Here successful businesses refer mainly to the financial performance of the business. The answer would be most likely a “no”. There are ample organizations around us that are financially successful but not ethical. There are organizations thriving even after exploiting employees, environment, customers, and legal provisions. So, can it be argued that organizations need to be ethical to be successful?
In fact, the reverse can be argued. There is always a business case for avoiding tax, bribing to get a contract, or tweaking numbers in balance sheet to appear profitable. Many of the biggest clothing brands have benefitted from outsourcing their production from countries with not-so-stringent labour laws (e.g., Bangladesh). These brands have thrived on exploitative labour practices. On the contrary, a company has to incur more costs by upholding labour standards in the supply chain and thus may end-up making less profit. It seems to be beneficial to compromise on labour standards to save costs and enhance profitability.
The general argument in favour of maintaining integrity in business is that in the long-run, such values help organizations to perform better. But how long is the long-term and who cares what happens in the long-run! It often seems to be more profitable in business when one acts in an opportunistic way, rather than stressing on integrity and fairness.
This instrumental value of ethics does not hold water. Ethics is not to be considered as a means to an end (profit in case of a business). In fact, on many occasions, it is more costly to act ethically and more cheaper to be exploitative. Has there been a business case for ethics, there was no need to make it mandatory for business to spend a mandated amount in terms of giving back to society. Companies would have voluntarily remained engaged in community development and environmental protection without caring much about publicizing the same.
Arguing for a ‘business case’ for ethics is actually detrimental because in a scenario, where there is no business case to present, it would become acceptable to act unethically.
Whether there is a business case or not, individuals in society generally care about ethics. The actions of individuals are driven by two sources – pursuit of self-interest and moral commitments. We are driven by both economic and moral concerns. Fairness or lack of it within an organization act as strong motivator/demotivator for employees because of the general concerns towards ethical conduct.
Trust and Values are the two critical benefits of ethics. While Trust amplifies reliability, Values act as guiding force during any kind of trade-off. Businesses that have been projected as reliable and consistent are often celebrated in history and society has been kind to their failures. On the contrary, making a “business case” for ethics is akin to demonstrating an opportunistic behaviour by doing good. Opportunistic behaviour is rarely driven by trust and fairness. In other words, the business case for ethics might end up being an unethical case!
The author, Sushanta Kumar Sarma, is Associate Professor – Organisational Behaviour and Human Resources (OB & HR) at the Institute of Rural Management – Anand (IRMA).
DISCLAIMER: The views expressed are solely of the author and ETHRWorld does not necessarily subscribe to it. ETHRWorld will not be responsible for any damage caused to any person or organisation directly or indirectly.
