Importance of Business Ethics; Social Responsibility

Understand Why Business Ethics and Social Responsibility are Important

jaro Education
1, January 2023
6:22 am

In today’s global business environment, business ethics and social responsibility have become essential pillars for sustainable success. Companies are increasingly held accountable not only for their financial performance but also for their impact on society and the environment. This shift is driven by heightened consumer awareness, employee expectations, and investor demands for transparency and ethical conduct.

Recent Data Highlights

Ethics and Financial Performance: According to Ethisphere’s 2025 report, companies recognized as the World’s Most Ethical Companies outperformed a comparable index of global companies by 7.8% over five years from January 2020 to January 2025.

Employee Expectations: An earlier 2023 report revealed that 84% of Millennials and 65% of employees want their companies to help them get more involved in their communities, indicating a strong preference for employers with robust CSR initiatives.

Consumer Behavior: A 2025 survey found that 63% of consumers are looking to the role of ethics in businesses to take the lead on social and environmental change, highlighting the importance of CSR in influencing purchasing decisions.

In this article, we’ll discuss why business ethics and social responsibility are important and how businesses can incorporate them.

Understanding Business Ethics and Social Responsibility

Business ethics are the set of values and principles that guide how a company conducts its operations. These values include honesty, integrity, respect, and fairness. They also include principles such as transparency, accountability, and social responsibility. The importance of business ethics is often codified into a company’s code of conduct, which outlines the company’s expectations for employee behavior and decision-making.

Social responsibility is a company’s commitment to doing what is right for the community, environment, and stakeholders. This includes activities such as reducing waste, using renewable energy sources, and engaging in philanthropy. Companies have a responsibility to ensure that their operations have a positive impact on the environment and society.

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Recent Real-Life Cases Illustrating Business Ethics and Social Responsibility

Dior’s Ethical Oversight in Supply Chain

*Logowik

In 2024, Dior, a luxury brand under LVMH, faced scrutiny when Italian prosecutors uncovered labor abuses in its supply chain. Subcontractor AZ Operations, despite passing multiple audits, was found to exploit undocumented workers through a front company. This led to Dior’s manufacturing arm being placed under administration, highlighting the need for rigorous ethical oversight in supply chains.
Reuters

2. HomeGround Real Estate’s Social Enterprise Model

*homegroundrealestate.com.au

HomeGround Real Estate in Melbourne operates as a social enterprise, reinvesting 100% of its profits into community services to end homelessness by 2030. Managing nearly 400 properties, with 40% rented below market rates, HomeGround exemplifies how the role of ethics in businesses can prioritize social responsibility while maintaining operational excellence.

Unilever’s Shift Towards ‘Realistic Sustainability’

Under CEO Hein Schumacher, Unilever re-evaluated its sustainability goals to balance environmental commitments with financial performance. This approach, termed “realistic sustainability,” involves setting fewer but more impactful targets, reflecting a pragmatic stance on corporate Social Responsibility Ethics

Why are Business Ethics and Social Responsibility Important?

The importance of business ethics and social responsibility is a concept that is closely intertwined. Let’s understand why it’s important for any role in ethics in business to adhere to them.

Create a better working environment

Business ethics promote fairness, trust, and transparency among all organization members. Adhering to business ethics protects the interests of everyone involved and ensures that the organization is operating ethically. The role of ethics in businesses that respect the rights of employees and treat them fairly can create a better working environment with a strong and unified team of employees.

Better sales and profitability

In this age of social media, where customers are becoming more vocal about their experiences, businesses need to maintain a positive reputation. Customers are more likely to purchase from a company that they know is honest and trustworthy. The importance of business ethics provides a framework for organizations to adhere to and helps to build customer trust and loyalty, which leads to increased sales and profitability.

Minimize legal risks

Businesses that practice ethical principles ensure that their role in ethics in business practices and behaviors is within the boundaries of the law. Such companies are less likely to be accused of unethical practices, which minimizes their legal risks.

Maintain a positive reputation

Social responsibility encompasses the idea of corporate social responsibility ethics, which involves organizations taking responsibility for the impact of their actions on society and the environment. By taking responsibility for their actions, organizations can help to combat climate change and improve public health. Socially responsible companies often have a better reputation and attract more customers, as well as employees who are committed to the company’s mission.

What is Corporate Social Responsibility (CSR)?

CSR, or corporate social responsibility, is a business model in which companies integrate social, environmental, and ethical concerns into their operations and interactions with stakeholders. Rather than focusing solely on profits, CSR encourages businesses to act in ways that benefit society and the planet while still maintaining economic viability.

OR

Corporate social responsibility refers to a company’s voluntary commitment to conduct business ethically and contribute to sustainable economic development. This includes improving the quality of life of employees, their families, the local community, and society at large.

CSR includes:

Environmental sustainability initiatives
Ethical labor and human rights practices
Community outreach and education
Diversity and inclusion programs
Philanthropy and social impact investments

Ethics + CSR: A Powerful Combination

While ethics define what’s right, CSR is about acting on those values. Ethics is the foundation; CSR is the application.

For example, an ethically driven company may commit to fair wages not because of regulations, but because it’s the right thing to do. CSR transforms that ethical commitment into formal policies and measurable actions.

Key Trends in Business Ethics and Social Responsibility 2025

Enhanced Supply Chain Transparency: Companies are increasingly scrutinizing their supply chains to ensure ethical labor practices and environmental compliance.

Integration of Social Enterprise Models: Businesses are adopting models that prioritize social impact alongside profitability, as seen with HomeGround Real Estate.

Pragmatic Sustainability Goals: Firms like Unilever are setting realistic and impactful sustainability targets, balancing ambition with feasibility.

Employee Well-being Initiatives: Organizations are investing in mental health support and flexible work arrangements to promote employee well-being.

Circular Economy Adoption: Companies are embracing circular economy principles, focusing on recycling, reuse, and sustainable product design to minimize environmental impact.

How to Pursue an MBA at Dayananda Sagar University (DSU): A Step-by-Step Guide

Snapshot: Executive MBA- Dayanand Sagar University

The dynamic business world of the moment demands that individuals upskill and stay applicable at every step of their career. There’s a dire need for postsecondary education to make a pool of the highest quality. The 17-month E-MBA by Dayananda Sagar University is the key to sustainable career development in the field of operations. The program is designed specifically to suit the working professionals with flexible online classes and alternate weekend on-lot sessions, which can be profited from remote locales too, helping them advance in their careers at their convenience.

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Conclusion

Businesses that prioritize ethical behaviors and social responsibility ultimately benefit from improved profitability, employee engagement, and customer loyalty. As businesses continue to grow and expand, it is essential that they remain mindful of the ethical and social responsibilities they have to their stakeholders. Doing so will ensure that their actions and decisions align with their corporate values, which can lead to a stronger reputation and more sustainable profits.

Frequently Asked Questions

What is business ethics?

Business ethics refers to the moral principles and standards that guide behavior in the world of business. It involves applying ethical values like honesty, fairness, integrity, and respect to business decision-making and practices.

What is social responsibility in business?

Social responsibility in business means that companies should operate in a way that enhances society and the environment, rather than contributing negatively. This includes ethical labor practices, environmental sustainability, community engagement, and philanthropy.

Why are business ethics important?

Business ethics help build trust with stakeholders, protect a company’s reputation, prevent legal issues, and create a positive work environment. Ethical businesses are more likely to sustain long-term success.

How does social responsibility benefit a business?

Social responsibility enhances brand image, improves customer loyalty, attracts top talent, and can lead to cost savings through sustainable practices. It also strengthens relationships with the community and regulators.

What are some examples of unethical business practices?

Examples include: