Responsibility

Business Ethics, Corporate Social Responsibility and Sustainability Management

IMC University of Applied Sciences Krems, Austria
Roman Mesicek

SAG Part 2

Full reference list available at GitHub

Business Ethics

The challenge of ethical decision making

What is Business Ethics?

Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed.

Why is business ethics important?

  • Advances our understanding of the right and wrong in business
  • Corporate scandals in the world
  • Evolving nature of the job role of managers and management education
  • Personal level of business ethics
  • Addresses the power and influence in society
  • Brings significant benefits to organizations
  • Positive CSR or business ethics yields better performance

Defining morality, ethics and ethical theory

  • Morality: (norms, values, beliefs) embedded in social processes, which define right and wrong for an individual or a community
  • Ethics: study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a given situation. These rules and principles are called ethical theories
  • Ethical theories: the rules and principles that determine right and wrong for a given situation

Ethics and the law

  • Law can be defined as a system of rules that are enforced through social institutions to govern behaviour
  • If something is not illegal does not mean that this is ethical
  • Law is the 'floor' of acceptable behavior
  • Ethics deals with the 'grey' areas of business

Examples for ethical issues in the context of a multinational business I

  • Employees
    • Working conditions, job design, wages, work-life balance
  • Customers
    • Marketing and sales policies, product safety, pricing
  • Competitors
    • Anti-competitive behaviour, industrial espionage

Examples for ethical issues in the context of a multinational business II

  • Suppliers
    • Comparable prices, timely payments of invoices, preferential treatment
  • Civil Society (pressure groups, NGOs, local communities)
    • Respecting local customs and norms, accountability and transparency, gentrification
  • Government and Regulation
    • Taxation, provision of information, lobbying

Ethical values in large multinational companies

Based on a publication defining and measuring organizational values.

Sources: Junxion, 2025

Ethical values expected by employees

Results of an employee surveys meta study.

  • Trust and integrity
  • Transparency
  • Fairness
  • Responsibility
  • Caring
  • Compassion
  • Respect
  • Citizenship
  • Courage
  • Honesty
Sources: Global Tolerance, 2015

Relationship Business Ethics and Sustainable Development

Sustainability can be seen as a key goal of business ethics – in the sense, that ethical behaviour is also social, ecological and economic responsible behaviour and good for the society.

The Triple Bottom Line

The phrase „the triple bottom line“ was first coined in 1994 by John Elkington.

One is the traditional measure of corporate profit—the “bottom line” of the „profit“ and loss account. The second is the bottom line of a company‘s „people“ account—a measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the company‘s „planet” account—a measure of how environmentally responsible it has been.

Corporate Social Responsibility

The responsibility of corporations for their impact on society

Why do corporations have social responsibilities?

Moral reasons "THE MORAL CASE"

  • Corporations cause social problems
  • Corporations should use their power responsibly
  • All corporate activities have some social impacts
  • Corporations rely on the contribution of a wide set of - stakeholders in society, not just shareholders

Business reasons (‘enlightened self-interest’)
"THE BUSINESS CASE"

  • Extra and/or more satisfied customers
  • Employees may be more attracted/committed
  • Forestall legislation
  • Long-term investment which benefits corporation

CSR – What is this?


An Introduction by Thomas Beschorner (University of St.Gallen, 2012).

  • CSR = Corporate Social Responsibility
  • Good business for a good society – today and tomorrow
  • CSR is not charity – it is about how companies earn their profits.
  • It takes employees of integrity and appropriate organisational structure to realize CSR - It is a matter of individual and institutional ethics.
  • Soft law and governance mechanisms based on companies self commitment.

CSR Pyramid

The first theoretical framework for corporate social responsibility.

Sources: Carroll, 1991

The Path to CSR (Zadek 2004)

Using the theory of organizational learning Simon Zadek introduced a stage model to help categorize the level of corporate social responsibility maturity in companies

CSR definition according to ISO 26000

The responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that

  • contributes to sustainable development, including health and the welfare of society;
  • takes into account the expectations of stakeholders;
  • is in compliance with applicable law and consistent with international norms of behaviour; and
  • is integrated throughout the organisation and practised in its relationships.

*Note: International Standardisation Organisation (ISO) standard on Social Responsibility (ISO 26000 SR).

What are common motives for responsible business practices?

Moral case

  • Ethical motivations of owners or executive management
  • Societal expectations with regard to repsonsible behavour
  • Responsibility for global challenges and future generations

Business case

  • Increased competitiveness (e.g. cost reduction, productivity, innovation)
  • Differentiation (e.g. supply chain, reputation, products and services)
  • Capital access (e.g. through better ratings)
  • Risk reduction (e.g. legal, reputation, HR)
  • Customer loyalty
  • Regulatory compliance
  • Brand value
  • Attractiveness as an employer and employee loyalty
Sources: Porter & Kramer, 2006; PwC, 2016; Faber-Wiener, 2011

Example "Motives": Lego

"Everything is NOT awesome": Global campaign to ditch Shell as marketing partner led to more than 1 million people asked Lego to end its partnership.

Example "Motives": Erste Bank

Zweite Sparkasse (second chance banking for people facing financial exclusion)

Example "Motives": Innocent

1999 founded: "Healthy drinks on campus"

Example "Motives": Unilever

  • Unilever "Sustainable Living" Brands (26 brands)
  • Purpose-led Brands
  • Growing brands

Sustainability Management

Integrating social and ecological issues in operation

Relation between Sustainability, CSR and ESG concepts

The value chain view of the company

Supply chain: Sequence of activities or parties that provides products or services to the organization.

Value chain: Entire sequence of activities or parties that provide or receive value in the form of products or services.

  • Parties that provide value include suppliers, outsourced workers, contractors and others.
  • Parties that receive value include customers, consumers, clients, members and other users.

The value chain is used as a framework to identify the positive and negative social impact of a companies activities (“inside-out”) as well as the influences on the business (outside-in”).

The concept of materiality

Relevant for strategy, operations and reporting

Principles of social responsibility

These are the principles for businesses based in the ISO 26000.

  • Accountability
  • Transparency
  • Ethical behaviour
  • Respect for stakeholder interests
  • Respect for the rule of law
  • Respect for international norms of behaviour
  • Respect for human rights

Full structure it the ISO 26000:

Image source: ISO 26000

Topics of social responsibility

These are the 7 core subjects according to the ISO 26000.

Image source: ISO 26000

Topics of sustainability reporting

These are the core sustainability topics according to the European Sustainability Reporting Standard (ESRS) version from 2025.

Image source: EFRAG

Stakeholder Engagement

Who or what is a Stakeholder?

The concept of "Stakeholder Theory" was defined by R. Edward Freeman in 1984 and can be sumarised as "The Purpose of the corporation should be defined as creating value for all of it's stakeholders".

Introduction to the topic (Institute for Corporate Ethics, 2009).

Stakeholder Engagement: Core Concepts

The term "Stakeholder Management" is used for the internal processes and "Stakeholder Engagement" refers more generally to the overall processes including the interaction.

  • Stakeholders: individuals, groups or organizations that can affect, be affected by, or perceive themselves to be affected by a decision or activity
  • Engagement: interaction between an organization and its stakeholders
  • Influence/Impact: How stakeholders affect the organization and vice versa
  • Materiality: Most significant impacts and dependencies

Why Stakeholder Engagement Matters

A combination of moral and business case arguments.

  • Risk Management: Identify and mitigate risks early
  • Innovation: Gain insights for new products/services
  • Reputation: Build trust and credibility
  • Compliance: Meet regulatory and social expectations
  • Competitive Advantage: Differentiate through strong relationships
  • Social License: Secure permission to operate
  • Value Creation: Generate shared value for all parties

Excerpt from the AA1000SES

The Accountabilty Stakeholder Engagement Standard

Purpose, scope and stakeholders

Level of engagement

Image sources: AA1000SES

Keys to Success in Stakeholder Engagement

  • Authenticity: Genuine interest in stakeholder views
  • Transparency: Clear about objectives and limitations
  • Responsiveness: Act on feedback received
  • Flexibility: Adapt approach as needed
  • Leadership Commitment: Top management support
  • Integration: Link to core business processes
  • Long-term Perspective: Build lasting relationships

Maturity

Measuring the maturity of sustainability and responsibility in businesses

Maturity assessment

According to the Business Sustainability 3.0 concept.

An Introduction by Thomas Dyllick (University of St.Gallen, 2016).

Business Sustainability 3.0 Typology

Sources: Dyllick & Muff, 2015

--- # Why is business ethics it important? ## **Goal**: Explore the importance of business ethics in modern organizations.