Concept Of Business Ethics Commerce Essay

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The report defines the concept of business ethics. It goes on to highlight ethical issues that could affect the business. It illustrates the role Corporate Social Responsibilities by focussing on the examples of an established cosmetic company then focus on the code of practice. The final part debates the dilemma that the business manager faces in deciding which course of action to take in order to meet conflicting business ethics objectives.

Please find the enclose report.

Yours faithfully,




Task 1: Concept of Ethics.................................................................................4-6

Task 2: The Various Ethical Issues that Could Affect the Business................7-8

Task 3: The Role of Corporate Social Responsibility.....................................9-10

Task 4: The Role Of Company's Code of Practice.......................................11-12

Task 5: The Importance of Ethical Responsibility of Employees.................13-14

Task 6: Objectives That Can Influence the Ethical Operation of a Business....15



The following report will give an analysis of the significant of the business ethics and social corporate responsibility to the company as well as looking at the importance of the code of practice.

Business ethics issues of a company are linked to the code of practice of the business also as corporate social responsibility issues. In the face of increase environmental awareness campaigns and right activism, business needs to evolve and adopt environmentally friendly policies that make sure the company achieves its profit goals without causing harm to the environment or society.


Business ethics is a set of moral values and corporate standard of conduct in a business organisation. This conduct in a business that look at the issues if its address right or wrong in a situation, activities and decisions (bbc-gcse According to Pojman and Fieser, 2011 business ethics is a complex mixture of personal beliefs, economic theory and political philosophy.

There are many ethical theories which study the morality and the function of motive to notify definite policy and values that decide right and wrong in any certain situation (Crane and Matten, 2011). The graph below shows the relation of morality and ethical.

SOURCE: [Made by Author, 2011]

Business ethics concentrates on the moral standards as they apply to business policies, institution and behaviour. It means that moral norms and moral values shouldn't be only analyse buy also make effort to apply the conclusions into the business.

Traditional ethical theories can be differentiate into two groups; consequential theories which are often referred to as theological based on the root word of goal and non-consequential theory referred to a deontological, base on the root work for duty (IAM level 5 business ethics study guide, 2011). The graphics below explain more about these two theories.

Ethical Theories


In profitable cosmetics business like l'oreal, managers face the challenge of appeasing shareholders with the best possible profit for the risk they take in investing in the business whilst at the same time adhering to the laws of the land as well as responding to the increasing demands of customers for environmentally friendly products. Like l'oreal cosmetics business, who do not test their products on animals as a matter of ethical policy (www.l' By implication, a business meets the profit objective whilst without exploiting workers and the environment


Ethical issues that could affect the business are three-fold, that is systematic issues, corporate issues and individual issues. The graphs below explains the ethical question in this three issues.

SOURCE: [Made by Author, 2012]

Corporate governance and corporate social responsibility is important to know the variation. Corporate governance refers generally to the laws of each business which need to be fallowed and controlled. Parkinson (1993) says that corporate governance is a procedure of which stakeholder make ensure that their corporate is moving according to their intentions. It contains process of goal explanation, regulation, managing and endorsing. It consists of main people in the corporate who are the shareholder and the management who will implement of this to achieve their goals (IAM level 5 business ethics study guide, 2011).

L'Oreal product is known as a business with integrity and they respect and follow the laws of each country which can be saying as a good sample of business who operates the good corporate governance practices. By protecting and making the most effective use of company assets this deliver l'oreal a long-term nonstop shareholder value.

Businesses have a legal responsibility to abide by the law and pay taxes to the relevant authorities. Good ethical standards ensure an accurate record keeping and a consistent auditing practice to enable the provision of reliable information to the business, shareholder, creditors and authorities. In the process of maximising sales, it is essential that the business does not make a profit by taking advantage of the consumer making baseless price increases. For example it will be unethical for a business to profiteer by taking advantages of customers because it is only company in cosmetic business making a particular product that is quite popular with customer. A good ethical practice ensures that businesses protect the interest of the society that it serves. Equally good marketing can boost the sales of a particular cosmetics brand but it is in the company's interest not have misleading adverts for the sake of profits. The business can be penalised for misleading advertising and it can have a damaging effect on the brand name and sales in a long term. Scandals in which company individuals are involved corrupt practices in executing their duties raise a morale question for example paying kickbacks or conspiracy with competitors to fix prices. An ethical business also has a responsibility to create a safe working environment for its employees and fair reimbursement for labour. One way of doing this is doing health and safety assessment of the business activities and providing personal protective equipment when required. It is role of corporate governance to devise rules that control how the business is operated.


Being social responsible project the image of the business and its brand is depend on by creating trust in the company. Companies with good social responsible programs have a good reputation and enhance staff performance. Customer responds well to socially responsible companies as well as the investor which are most important pillars of business success.

Corporate social responsibility (CSR) is divided into four organized element which are economics; legal; ethical and philanthropic responsibilities (IAM level 5 business ethics study guide, 2011).

Pyramid of Social Responsibility

SOURCE: [A. Crane and D. Matten, 2007]

Philanthropic responsibilities involve the business activities for the benefit of the community in which they operate. This includes financial support to social causes, donations to charity and strategic partnership in health, education and sports (Rendtorff, 2009).

Since 2007, the L'Oreal Corporate Foundation was developed to promote women in scientific research and encourages scientific vocations with it's "For Women and Science" programme. This is carried out with partnership with UNESCO in 107 countries. The Foundation also supports vulnerable sectors of the population; those in situation of extreme precariousness, or who's deformed by disease, war or malnutrition (

As a responsible corporate company L'Oreal cosmetics, play their part in creating a world of beauty and fairness. They are mindful with their impact on the natural environment, including biodiversity, also resolute to avoid compromising tomorrow for the sake of today. L'Oreal cosmetics make a positive contribution to the countries and communities in which we are present, and respect local culture and sensitivities; they are committed to respect human rights. L'Oreal actively seek out and favour business partners who share their values and their ethical commitments (

L'Oreal cosmetics company produce strategies based on continuous venture in precise scientific research and development. This delivered their brand name with safe to use and manufactured to the most demanding standards of quality and safety.


It is important for the company to adopt an ethical policy in form of Code of Practice. Successful business like Bodyshop and L'Oreal to all stakeholders of the company made on behalf of the company by management and directors of the company.

The key elements of Code of Practice are as below (L. J. Brooks and Dunn, 2010)

Elements of Code of Practice

Commitment to compliance

Company commits to comply with the law and best business practice. It is commitment made from the very senior office of the company in the form of director or the chairperson of the business concerned.

Identify responsible compliance personnel

Company must appoint a senior executive responsible for compliance; for example L'Oreal has a group of director responsible for ethics. The executive's role is to ensure compliance.

Best practices statement

Company must devise a best practices statement for critical areas of operation these defined the manner in which services are delivered.

Providing information and training

Relevant information required by staff should be freely available and accessible to employees in the business. Quality training and support for apprentices and training should be provide in addition to management tools for decision makers

Consultation for compliance

Employees will be encourage to consult with the compliance executive on critical decisions before implementing them

Auditing of practices

Company must keep all relevant documents relating to transactions and promote a culture of regular audits to draw some lessons from past mistakes.


The behaviour of employees in executing their duties plays a critical role on the reputation of the company and as such employees have an ethical responsibility to the employer and other stakeholder like customers, society and environment. Employees are expected to hold their office with values like honesty, and must have morale standard in their individual capacities. Employees are expected to have an ethical duty to comply with the labour contract and loyal performance and must abide with the law and not be involve in corrupt practices. Employees must not abuse the employer's property for personal gratification. Ethical responsible employees prevent unnecessary loss to the company tend to reward loyal performance which can create a win-win situation for both parties.

In a business it is important to persuade their employees to be vocal and discuss definite issues. Businesses have a set of understanding regarding that the people have commitment made between themselves and their company also can be called psychological contract. Psychological contract explain that in every company, managers have expectation to their employees to do the expected effor and employees also got expectation to their employer to pay them right and grant them self development that they need to do their job well. Psychological contract associates between employer and employees and purposely concern at common expectation of effort and effect (Collins, 2009).


The iceberg model represents the basic contract of employment. On the right sides shows what are the expectation from the employees, while on the left side shows the reward of the employer to every effort of the employees. In every effort of the employees has a tendency of success in a business, and as a good employer supporting their worker they act with moral agent (IAM level 5 business ethics study guide, 2011).


An ethical business has an objective to meet its shareholders expectation to earn them a profit for the money that they have invested in the business in the form of capital. Equally the ethical business faces environmental demands of an ethical way doing business. For examples environmentalist hold entrepreneurs accountable for their actions to do their businesses in environmentally friendly manner. In the cosmetic business, animal rights activists are campaigning against testing product on animals, human rights organisation and whistleblower are on guard for any possible forced labour/ child labour practices. The business is faced with the challenge of meeting the profit objective whilst remaining socially and environmentally.

Businesses code of practice is a document where company believes that employees must respond in circumstances that dispute their integrity and social responsibility. Code of practice can be change according to the business environment.