1.5 Business Ethics and Social Responsibility

Business Ethics

Business ethics are moral principles guiding decisions and behavior in the workplace. Ethical businesses act with honesty, fairness, and integrity toward employees, customers, suppliers, and the community — even when not legally required. Ethical lapses (fraud, false advertising, discrimination) can destroy trust, invite lawsuits, and damage a company's reputation and profits long-term.

Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a business's commitment to operate in ways that benefit society, beyond just maximizing profit. This includes environmental sustainability, fair labor practices, charitable giving, and community involvement. CSR can improve brand image, attract customers and talent, and build long-term stakeholder trust, even though it may raise short-term costs.

Stakeholders vs. Shareholders

Stakeholders are all parties affected by a business's actions — employees, customers, suppliers, communities, and shareholders (owners who hold stock). Ethical, socially responsible businesses balance the interests of all stakeholders, not just shareholder profit. Ignoring stakeholder concerns (e.g., pollution, unsafe products) creates reputational and financial risk, while considering them can create sustainable, trust-based growth.

Key terms

Business Ethics

Moral principles guiding honest, fair decision-making and behavior in business.

Corporate Social Responsibility (CSR)

A company's commitment to benefit society through sustainability, fair labor, and community involvement, beyond just profit.

Stakeholder

Any person or group affected by a business's actions — employees, customers, suppliers, community, and shareholders.

Shareholder

A person who owns stock in a company and has a financial interest in its profits.

Benefit of ethical behavior

Builds trust and reputation, reducing legal risk and supporting long-term business success.

Try an AP-style question

Business ethics refers to…

1. moral principles guiding business conduct
2. the laws that set tax rates
3. a company's marketing budget
4. the price of a company's stock