A Companys Business Activity Commerce Essay

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The purpose of this essay is to firstly discuss and argue the impact a company's business activity has on society as well as its own organisational life and performance. Why do corporations have social responsibilities? And what are they? Secondly, discuss what the ethical concerns raised by CSR in terms of the conduct of people within organisation and other stakeholder groups are. One will illustrate these factors by using a multinational corporation set in the textile and clothing industry named "C-fashion" to embody the reality of corporate ethics.

Company profile

"C-fashion" is a multinational company with base in the UK. The corporation operates in the textile and clothing industry, selling their clothes in their own stores all over the world. With over 20 years on the back, C-fashion has established it self as one of the market leaders in the retail industry. Manufacturing, distribution and retailing are aspects C-fashion are conducting themselves, thereby managing channel coordination and channel structure within the corporation. The manufacturing of C-fashions clothes take place in Bangladesh, when finished they are shipped out in the world to reach the fashion hungry teenagers.

Business ethics

Ethics is the principles of conduct governing an individual, group or society. (Iversen and Johansen, 2007) claims it is the study of morality. Morality is described as the standards that an individual has about what is right and wrong, often concerned with norms, values and beliefs, known as "unwritten rules" of society. Business ethics concentrates on the moral standards as they apply to business policies, institutions, and behaviour. According to (Crane and Matten, 2007) business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. Business ethics has become an important subject and focus in our society the last couple of decades, although there are arguments both for and against to what extent a company can be ethically responsible for their actions.

According to the (United Nations conference on Trade and Development, 2003) Society grants all legal entities, including enterprises, a "licence to operate" by spelling out their rights and duties in laws and regulations. Liberalization and globalization have enabled enterprises to extend their business reach, thus putting them in a position to have an even greater impact on society. Despite the existence at the international level of treaties, agreements and conventions, there is no set of international rules to regulate business activities and their impact on society. This means that the increased power of corporations must be balanced by a sense of ethical business practices.

Corporate social responsibility (CSR) is generally seen as the business contribution to sustainable development, which has been defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs, and is generally understood as focussing on how to achieve the integration of economic, environmental and social imperatives (Strategis site, 2010). (Dahlsrud, 2006) defines corporate social responsibility broadly to be about extending the immediate interest from oneself to include one's fellow citizens and the society one is living in and is a part of today, acting with respect for the future generation and nature. Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.

According to (Carroll, 1983), corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. The first layer in the framework (pyramid), economic responsibilities, is the foundation up which all others rest, required by society. The second layer, legal responsibilities, states that law is society's codification of right and wrong, also this layer required by society. The third layer, ethical responsibilities, claims that the company has an obligation to do what is right and fair, avoiding harm. This layer is said to be expected by society. The fourth and last layer of the pyramid is the company's philanthropic responsibilities; these responsibilities are desired by society for the company to be a good corporate citizen. To be socially responsible then means that profitability and obedience to the law are foremost conditions when discussing the firm's ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent.

Stakeholder theory

A stakeholder in an organization is…any group or

individual who can affect, or is affected by, the

achievement of the organization's objectives

(Freeman 1984:46)

2. Main body

2.1 Business activity and impact on society

According to the United Nations conference on trade and development (2004) the concern about the impact of enterprises on society is global. The expectations of consumers, employees, investors, business partners and local communities as to the role of businesses in society are increasing. Guidelines, principles and codes are being developed for corporate conduct. Publications from the same conference argued that Governments, non-governmental organizations and local communities are demanding increased transparency and accountability, not only in enterprises' daily business operations but also with regard to how those operations affect society. With the recent financial and accounting scandals and their impact on capital markets and pensions, these concerns have become more acute. The rapidness of the fashion industry is increasing day by day, as demand for cheaper clothes is high amongst consumers. Each step of the clothing production process carries the potential for an environmental impact. For, example conventionally grown cotton, one of the most popular clothing fibers, is also one of the most water and pesticide dependent crops. At the factory stage, effluent may contain a number of toxics that runs out in the nature. In underdeveloped countries such as Bangladesh where C-fashion is manufacturing their clothes they do not have the resources to prevent these issues, the impact of toxic waist will eventually ruin crops and food supplies for the inhabitants, which again affects the society and life for the people living in these conditions. Fierce global competition in the clothing industry translates into poor working conditions for many workers in developing countries. One can argue that multinational companies create jobs for the inhabitants as they give hope to a society with lacking capabilities of own growth, but to what extent is the job a nice experience for the locals?

2.2 Business activity and impact on organisational life and performance

(Crane and Matten, 2006) argues that corporations take on social responsibility to promote it own self-interest. They also believe that corporations perceived as being socially responsible might be rewarded with more satisfied customers, whilst perceived irresponsibility might result in boycotts or other undesirable consumer outcomes. (Greening and Turban, 2000) States that employees might be attracted to work for, and even be more committed to, corporations perceived as being socially responsible. There is also the fact that voluntary committing to social actions and programmes may prevent legislation and ensure greater corporate independence from the government. (Crane and Matten, 2006) believe that making a positive contribution to society might be regarded as a long-term investment in a safer, better-educated and more equitable community, which subsequently benefits the corporation by creating an improved and stable context in which to do business.

In their search for balance between the lowest possible production cost, to protect their competitiveness, and the maintenance of a good social image likely to satisfy consumers and pressure groups, multinational enterprises in the Textile and Clothes sector have little room for maneuver, hence the extreme sensitivity to the subject in the context of globalization (Sajhau, 2000). It should however be pointed out that although theoretically the importance of the ethical aspect in the management of enterprises has been widely recognized, it is only recently that a number of financial analysts have noted that enterprises which applies codes of conduct performed better than average on the stock exchange. Some investment consultancy firms now take account of ethical elements in their criteria for the composition of stock exchange portfolios.


According to (Marsh, 2009) Responsibility, as we know, implies accountability, with the authority to make decisions. As business ethicists have noted responsibility in the corporate sense implies an obligation to something, for example, the environment, or to someone, as in our example, the most poverty-stricken groups of people, as well as to society in enhancing the quality of life. The concept of corporate social responsibility demands of the corporation a collective sense of the organization operating in time and through history. A corporation may not only be considered "responsible," it is capable of collectively building a reputation, demonstrating integrity as a collective entity. Indeed, organizations can outlive their founders, key executives, influential boards, multitudes of employees, and so forth. The stakeholder approach is relevant, as Dr. Davidson notes, as we understand that the corporation's "constellation of stakeholders" includes much more than shareholders and top executives. A corporation is responsible to many

At the individual level, CSR has been constructed by Ackermann (1975) as managerial discretion. According to this view managerial actions are not fully defined by corporate policies and procedures. So although managers are constrained by their work environment they nonetheless have to weigh the moral consequences of the choices they make. The view of CSR is strongly anchored in the business ethics literature (Jones, 1991; Donaldson & Dunfee, 1994; Crane & Matten, 2003).

The latest literature tradition to have impacted our understanding of corporate social responsibility is that of sustainable development. It was the Brundtland Commission (1987) that for the first time systematically emphasized the link between poverty, environmental degradation, and economic development. Its definition of sustainable development, as meeting the needs of the present, without compromising the ability of future generations to meet theirs, extends the responsibility of firms both inter- and intergenerational.

Thus firms are expected to also consider traditionally unrepresented stakeholders such as the environment and as well as future generations. Although many CSR authors have taken up the notion of a "triple bottom line" (Elkington, 1997) there remain important tensions between the CSR and the sustainable development debate (i.e. Dyllick & Hockerts, 2002).

(Freeman, 1984) explains that in the 1980s focus moved from legitimacy and morals towards a new theory of the firm. Social considerations was no longer outside an organization but became part of its purpose of being. Davis (1973) describes the iron law of responsibility, as the fact that firms exercising power will eventually be held accountable by society.

A stakeholder in an organization is…any group or

individual who can affect, or is affected by, the

achievement of the organization's objectives

(Freeman 1984:46)

3. Conclusion

Khoury et al., 1999

Khoury G, Rostami J, Turnbull JP. 1999. Corporate Social Responsibility: Turning Words into Action. Conference Board of Canada:


Corporate social responsibility is the overall relationship of the corporation with all of its stakeholders. These include customers, employees, communities, owners/investors, government, suppliers and competitors.

Elements of social responsibility include investment in community outreach, employee relations, creation and

maintenance of employment, environmental stewardship and financial performance