Ethics and social responsibility are the foundation of trust in the business world. Businesses that prioritize these principles not only build stronger relationships with employees and customers but also set themselves up for sustained success. At Saskatchewan Polytechnic, nearly every course includes content on business ethics—a testament to its importance in the Canadian business landscape. Ethics and social responsibility are not just moral imperatives; they are critical to organizational success.

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The Role of Ethics in Business

Ethics in business refers to making decisions that are fair, transparent, and aligned with societal values. Ethical practices help businesses foster trust, which is essential in:

Building a loyal customer base: Consumers are more likely to support businesses they perceive as ethical and responsible.

Attracting and retaining top talent: Employees value workplaces that prioritize integrity and fairness.

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The Importance of Social Responsibility

Social responsibility goes beyond making profits; it involves contributing positively to society. Companies that adopt socially responsible practices often enjoy enhanced reputations, stronger community ties, and long-term sustainability.

When organizations balance ethical decision-making with social responsibility, they not only do the right thing but also achieve profitability and other goals more effectively.

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2.1 Define business ethics and social responsibility.

What Is Business Ethics?

At its core, business ethics means knowing the difference between right and wrong and consistently choosing to do what’s right. While this principle sounds straightforward, applying it in the business world introduces a level of complexity.

Acting ethically in business requires more than simply following laws and rules. It demands a commitment to:

Being truthful in all situations.

Prioritizing others’ interests—customers, employees, and the business—over personal gain.

Fairness and honesty in all decisions and actions.

While ethical behavior seems simple on paper, challenges often arise in real-world scenarios where short-term cost-cutting or profit-making can tempt individuals to compromise their principles.

Why Are Ethical Decisions Difficult Yet Essential?

Making ethical choices is often harder than taking the unethical route. However, acting unethically rarely pays off in the long run. Ethical business practices foster:

Trust, which attracts loyal customers and talented employees.

Long-term profitability, ensuring sustainable success.

By adhering to ethical principles, businesses contribute to a better society and position themselves for growth. Consider Costco’s decision to pay fair wages as an example of ethical decision-making that supports long-term success.

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What Is Corporate Social Responsibility (CSR)?

While business ethics focus on decisions within a business, corporate social responsibility (CSR) considers how those decisions affect society.

CSR involves an organization balancing its responsibilities toward stakeholders when making legal, economic, ethical, and social decisions (Andres et al., 2018). A socially responsible business considers the interests of all its stakeholders, including employees, customers, communities, and the environment.

Why Is CSR Challenging Yet Crucial?

CSR decisions often involve balancing competing stakeholder interests. For example:

Cutting costs in sourcing to reduce prices may conflict with paying employees a living wage or using environmentally friendly materials.

Despite these challenges, CSR is closely tied to business ethics. While cutting corners may yield short-term profits, it can harm long-term growth, reputation, and profitability. Younger generations, such as Millennials and Gen Z, increasingly expect businesses to prioritize ethical and sustainable practices.

Examples of Successful CSR Practices

Many businesses have embraced CSR as part of their operational philosophy:

Brands like Patagonia, LEGO, and Unilever lead the way in sustainability and community impact.

Various studies demonstrate how small businesses can integrate social responsibility into their operations.

2.2 Recognize ethical issues that may arise in business.

Ethical issues in business encompass a wide range of challenges that affect relationships, decision-making, and operations. Below are key categories, explanations, examples, and their implications:

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1. Conflicts of Interest

Explanation:
Conflicts of interest occur when an individual’s personal interests interfere with—or appear to interfere with—the interests of their employer or stakeholders. This undermines trust and fairness.

Examples:

Personal Connections: Working for a company that caters events and recommending your uncle’s bakery for desserts may seem harmless but could disadvantage your employer or raise concerns about favoritism. Solution: Disclose personal connections to your employer and ensure transparency in decision-making.

Insider Trading: Acting on confidential company information, such as selling shares before the announcement of a damaging recall, is both unethical and illegal.

Bribes vs. Gifts: Distinguishing between acceptable gifts and bribes is critical, especially in international business. For instance, some companies set limits on the value of gifts to avoid ethical breaches.

Why It’s Harmful:
Conflicts of interest can harm stakeholder trust and lead to unfair advantages, which compromise organizational integrity.

Prevention:
Adopting a clear Code of Conduct that outlines ethical boundaries and ensures transparency can mitigate these risks. For example, Bell Canada’s guidelines for accepting gifts emphasize cost, timing, and intent to safeguard against conflicts.

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2. Fairness and Honesty

Explanation:
Ethical business practices require adherence to the law, honesty, and a commitment to avoid harming others maliciously. Misleading communication—whether intentional or accidental—violates ethical principles.

Examples:

Misleading Advertising: False claims, as highlighted by the CBC’s report on “too-good-to-be-true” advertising, damage consumer trust.

Workplace Bullying: Unethical behavior like bullying harms employee well-being and productivity, leading to absenteeism and higher turnover rates.

Cutting Corners: Pressure to meet sales quotas, as seen in TD Bank’s 2017 unethical sales practices, can lead to compromised integrity.

Incrementalism:
Small ethical lapses can escalate over time, creating a slippery slope. This phenomenon, often referred to as the “Boiling Frog Syndrome,” underscores the importance of maintaining ethical standards from the start.

Why It Matters:
As Warren Buffet famously stated, integrity is a key attribute for success in business, surpassing intelligence and energy. Ethical practices build long-term trust, essential for sustainable success.

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3. Ethics in a Global Context

Explanation:
Operating in international markets introduces challenges as practices, cultural norms, and ethical standards vary widely.

Examples:

Facilitation Payments: In some countries, bribes were historically viewed as acceptable for business operations. Since 1999, stricter regulations in Canada and the U.S. prohibit these practices to maintain ethical integrity globally.

Grey Areas:
The ambiguity of international standards often creates ethical dilemmas. For instance, a small gift in one culture may be seen as a bribe in another.

Why It’s Complex:
Businesses must balance local customs with global ethical standards, ensuring compliance with stricter regulations while respecting cultural practices.

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4. Integrity in Decision-Making

Explanation:
Integrity involves consistent adherence to ethical principles, even under pressure. It ensures fairness, honesty, and transparency in all interactions.

Workplace Ethics During COVID-19:
During the pandemic, remote work raised concerns about employee accountability. Interestingly, productivity increased by 47% (Forbes), highlighting employee dedication. However, it also emphasized the need to balance hard work with maintaining ethical work-life boundaries.

As you’ll find out in the next learning outcome, Canadian businesses increasingly operate in a global world. As you can imagine, standards, established practices and accepted ways of doing things vary greatly between different countries and different cultures.

This can lead to a lot of confusion and even more “grey areas” when it comes to ethical decision making.

One example is the “facilitation payments”. For years, bribes and corruption in foreign countries were customary and considered acceptable, meaning a Canadian company operating in a part of the world where bribery was the norm would be forgiven for following local customs and could pay bribes. This attitude started to change in 1999, when both the U.S. and Canadian governments started to pass tougher rules governing how North American companies conducted business globally.

2.3 Review how ethical behavior in business can be improved.

Preparing for Ethical Business Dilemmas

You can study countless examples and read extensive literature on business ethics, but until you’re faced with an ethical dilemma, it’s hard to predict how you’ll respond. However, you can equip yourself with the right tools to make ethical decisions when the time comes. In this section, we’ll explore three key tools to enhance ethical decision-making and behavior:

Ethical decision-making frameworks

Codes of ethics (or codes of conduct)

Whistleblowing

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1. Ethical Decision-Making Framework

An ethical decision-making framework provides a structured approach to evaluating dilemmas and making morally sound choices. These can be distilled into four simple questions:

Is the action legal?

Is it fair to all stakeholders?

Does it align with the organization’s values?

Would you feel comfortable if your decision were made public?

If you can answer yes to all four questions, you’re likely making an ethical decision.

Class Exercise:

Hand out copies of the BUS104 Business Ethics Dilemmas document.

Divide students into six groups and assign each group one of the six questions to discuss.

After discussing their assigned question, groups can explore the others as well.

Each group will present their insights on their assigned question to the class.

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2. Codes of Ethics (Code of Conduct)

Many organizations formalize their ethical expectations in a code of ethics or code of conduct. SaskPolytech, for example, has its own code, which we’ll explore further in the section on whistleblowing.

A code of ethics serves as a guide for employees, outlining the organization’s expectations for interactions with stakeholders, including customers, suppliers, and colleagues. These codes vary in detail—some provide step-by-step rules, while others offer general principles. Regardless, they are typically featured prominently on company websites and in employee handbooks.

Does a Code of Ethics Ensure Ethical Behavior?
While a code of ethics is a valuable tool, it’s not enough on its own. To foster an ethical culture:

Unethical behavior must be punished.

Ethical behavior must be rewarded.

These distinctions must be clear and public.

Leaders must model ethical behavior, as their actions set the tone for the entire organization.

Examples:

Starbucks: The company states, “Conducting business ethically and striving to do the right thing are vital to the success of the company.” Explore their Ethics and Compliance page for more details.

BCE: Review BCE’s code of ethics here.

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3. Whistleblowing

Whistleblowing involves exposing unethical, illegal, or harmful activities within an organization. Ralph Nader defined it in 1972 as “an act of a man or a woman who, believing in the public interest overrides the interest of the organization he serves, publicly blows the whistle if the organization is involved in corrupt, illegal, fraudulent, or harmful activity.”

Famous Whistleblowers:

Christopher Wylie (Cambridge Analytica Scandal): In 2018, this Canadian whistleblower revealed how Cambridge Analytica harvested personal data from millions of Facebook users without consent, sparking global outrage.

Frances Haugen (Facebook): In 2021, Haugen leaked internal documents exposing Facebook’s awareness of its platform’s harms, including its impact on teens’ mental health and the spread of misinformation.

Edward Snowden: Disclosed extensive surveillance programs by the U.S. government, highlighting privacy concerns.

WikiLeaks: A non-profit organization that publishes classified information from anonymous sources.

TD Bank Employees: Reported unethical practices to Go Public, demonstrating the importance of internal whistleblowing.

Legal Protections for Whistleblowers:
Public support for whistleblowing is growing, and so are legal protections. Employers cannot threaten employees with retaliation for reporting illegal activities. Laws are increasingly punishing employers who attempt to silence whistleblowers.

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Key Takeaways

Ethical decision-making frameworks provide a structured way to evaluate dilemmas.

Codes of ethics set clear expectations but must be supported by a culture of accountability and leadership.

Whistleblowing is a critical tool for exposing wrongdoing, and whistleblowers are increasingly protected by law.

By understanding and applying these tools, you can better navigate ethical challenges and contribute to a culture of integrity in any organization.

2.4 Describe the nature of social responsibility.

Understanding Business Ethics vs. Corporate Social Responsibility (CSR)

While business ethics focus on the decisions made within a business, corporate social responsibility (CSR) is about the impact of those decisions on society. CSR encompasses the broader obligations a business has to its stakeholders and the environment.

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The Four Dimensions of Social Responsibility

CSR is often broken down into four key dimensions:

Economic Responsibility:

Businesses must earn profits to remain sustainable and provide value to shareholders.

Legal Responsibility:

Businesses must comply with all applicable laws and regulations.

Ethical Responsibility:

Businesses must go beyond the law to do what is right, fair, and just. This aligns with the ethical decision-making principles discussed earlier.

Voluntary Responsibility:

These are optional activities that promote human welfare, goodwill, and community development. Examples include charitable donations, environmental initiatives, and employee volunteer programs.

Together, these dimensions form the foundation of corporate citizenship, which reflects how well a business meets its legal, ethical, economic, and voluntary responsibilities to its stakeholders.

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Carroll’s CSR Pyramid

The four dimensions of CSR are often visualized as a pyramid, a model developed by Archie B. Carroll, a renowned business professor at the University of Georgia. This framework emphasizes that businesses must balance their responsibilities to all stakeholders, including:

Owners and Shareholders

Customers

Employees

Community

Society

Video Resource:
Watch Carroll’s CSR Pyramid to gain a deeper understanding of this model:
Carroll’s CSR Pyramid Video

As you watch, consider how businesses can demonstrate responsibility toward each stakeholder group.

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Discussion: Corporate Social Responsibility Reports

Many businesses publish Corporate Social Responsibility (CSR) Reports to showcase their efforts and achievements in meeting their social and environmental responsibilities. These reports are often available on company websites and highlight initiatives such as sustainability programs, community engagement, and ethical business practices.

Activity:

Choose a business and search online for its CSR report.

Go to the Discussion Forum: Course Content Student Discussions and locate the Corporate Social Responsibility Report discussion area.

Start a new thread with a link to the CSR report you found.

In your post, answer the following questions:

Do you think the business’s statement of responsibility to its stakeholders is effective?

Does it demonstrate a genuine commitment to the environment and all stakeholders?

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Key Takeaways

CSR goes beyond business ethics to address the broader impact of business decisions on society.

The four dimensions of CSR—economic, legal, ethical, and voluntary—provide a comprehensive framework for responsible business practices.

CSR reports are a valuable tool for businesses to communicate their commitment to sustainability and stakeholder welfare.

By understanding and analyzing CSR initiatives, you can better evaluate how businesses contribute to society and uphold their responsibilities as corporate citizens.

2.5 LO2 – Business Case