Sample Paper on Business Ethics and Corporate Social Responsibility

Introduction and Background Information

Description of Business Ethics and CSR

Ethics and corporate social responsibility (CSR) are synonymous with modern business environment. Contemporary businesses must ensuretheir operations are legal and ethical. Besides, the modern business organization has to give back to society through elaborate CSR interventions. Business ethics focuses on the morality of the operations and value systems that underlie the governance of an organization or firm. Business ethics examines the ethical dilemmas and moral problems that can arise in a business environment. Since businesses form an integral part of the social, economic, political, and environmental systems surrounding them, they have the mandate to give back to society. CSR thus focuses on the business activities that reach out to people, the environment, and other systems that constitute the society. Both business ethics and CSR are important in the creation of customers, which is key for long-term profitability and corporate sustainability. Contemporary business organizations need to integrate the concepts of business ethics and CSR interventions to ensure that their activities are aimed at promoting corporate sustainability and environmental sustainability.

Background Information on Saudi Al-Rajhi Local Company

The Al-Rajhi Bank is one of the largest Islamic banks in the world. It is a Saudi Arabian bank though it has six regional offices in various Middle East countries such as Kuwait, Jordan, Malaysia, and Syria. The Al-Rajhi Bank is the largest bank in Saudi Arabia with more than 9,500 employees working in over 600 branches with an estimated value of over $80 billion in assets (Al Rajhi Bank). The Al-Rajhi Bank was established in 1957 with its headquarters located in Riyadh, Saudi Arabia. The bank is owned by the Al-Rajhi family, one of the richest families in Saudi Arabia. In 2006, the Al-Rajhi company joined the Saudi Arabian Stock Exchange where it is currently traded. The Al-Rajhi Bank, in 2006, made its foray in international banking by opening a branch in Malaysia. Several controversial issues rocked the company after the September 11, 2001 bombing of the United States. The bank was accused of aiding and abetting the terrorists responsible for the September 11 attack by the United States government. The bank denied the claims and was later acquitted of the charges by the United States Supreme Court in 2002. The Al-Rajhi Bank is involved in several CSR interventions, particularly in the housing and education sectors in Saudi Arabia.

Background of HSBC International Company

The HSBC Holdings plc. (HSBC) is one of the largest and wealthiest banks in the world. HSBC was founded in 1865 in Hong Kong with its first office being located in Shanghai, China. HSBC currently has more than 3900 offices spread around 65 countries in the world. The current headquarters of the HSBC is located at Canary Wharf, London. The HSBC has a presence in all continents in the world and has more than 35 million customers (HSBC). In 2014, Forbes ranked the HBSC as the sixth-largest public company in the world (HSBC). The HSBC has been involved in many controversies with regard to its international operations. In 2003, the HSBC was accused by the United States of having weak money laundering policies (HSBC). In 2011, the HSBC was accused of holding billions of dollars of assets for the Libyan Investment Authority on behalf of Colonel Gaddafi (HSBC). The bank has also been accused of engaging in unethical practices, especially in Malaysia and Indonesia.

Literature Review

Business Ethics

Business ethics are judged by the moral defensibility of the actions, governance or practices of a given business organization. Goel and Ramanathan hold that business ethics can only be defined in terms of morality and this is fleeting given the fact that morality mutates and evolves (49). Since morality is difficult to codify and translate into a single dialectic theory, business ethics should be identified as a set of norms that are practiced by a given firm. Business ethics must comply with the legal directives of the government or a regulatory body to be deemed effective (Goel and Ramanathan 51). Therefore, contemporary business ethics comprise of the legal norms that regulate the corporate governance of a firm or business.

CSR

CSR is important in creating and maintaining the relationship between a business organization and its surrounding society. Quarshie, Salmi, and Leuschner argue that business organizations are embedded in the social, biological, economic, and political systems that surround them (82). Every action of a business organization affects its surrounding environment and society either negatively or positively. Changes in the societal and environmental systems of business also impact corporate performance. Businesses must take responsibility for the impact they have on stakeholders and on the external society and environment, which supports their existence (Rupp et al. 15). Business corporations are morally responsible to look after the concerns of shareholders and stakeholders including customers, employees, and the society (Quarshie et al. 85). Most businesses, in their desire to make profits, end up creating destructions and disruptions in the environment. For companies whose operations lead to societal destructions, CSR is considered to be a fee charged on the returns derived from the wrongs committed by entrepreneurship. Thus, CSR is more of a right that a society is entitled to from businesses.

Parameters Found in the 10 Commandments of Social Responsibility

Most contemporary businesses engage in a wide range of CSR initiatives. To ensure that these CSR interventions are pertinent and effective, there are commandments of CSR. The ten CSR commandments enable the ranking of CSR interventions according to their effectiveness. The most important element is the fifth, which holds that a business should be active in supporting community social programs (Rupp et al. 19). This forms the basis of CSR in the corporate environment giving validity to other commandments (Rupp et al. 20). The second rule arguing that companies should seek input from impacted stakeholders in any problem to be addressed is also vital for the concept of CSR. Companies should work collaboratively with their respective communities during their CSR interventions to ensure that the interventions help improve the lives of people in society (Rupp et al. 22). The sixth commandment requires companies to ensure environmental sustainability in all of their actions. Rupp et al. argue that sustainability is the modern trend on matters of corporate governance and CSR practices (24). Companies also need to follow the ninth commandment of CSR that requires companies to be committed to publicly supporting social causes.

Critical Evaluation

Concepts of business ethics and CSR can be amalgamated to ensure that businesses attain both corporate and environmental sustainability. Businesses need corporate sustainability policies and practices to ensure that they achieve long-term profitability (Quarshei et al. 88). On the other hand, a key cost of business activities is the degradation of the environment. The degradation isexpensive when the impact of environmental degradation on humans is considered. As such, businesses need to find a way of achieving both corporate and environmental sustainability. Environmental sustainability is the best CSR initiative a business can give back to the society (Quarshie et al. 90). The incorporation of sustainability into contemporary business governance, operation, and CSR practices is the only practical way of achieving sustainability (Goel and Ramanathan 50). Sustainability involves the economic utilization of resources both natural and man-made to preserve them for future generations. The integration of sustainability into business ethics achieves long-term profitability and relevance and offers the best CSR initiatives to businesses’ respective societies.

Discussion, Evaluation, and Benchmarking

Five CSR Initiatives of Saudi Al-Rajhi Bank

The Al-Rajhi Bank is involved in several CSR interventions, particularly in its country of origin, Saudi Arabia. The Al-Rajhi Bank has invested heavily in the Education sector of Saudi Arabia. Driven by the need to change the lives of the ordinary Saudis, the bank established the Al-Rajhi Bank Training Program that works in collaboration with the Ministry of Social Affairs to improve the lives of the youths in Saudi Arabia (Al Rajhi Bank). The Al-Rajhi Bank Training Program is designed to mentor and train young professionals interested in working in the baking environment. The Al-Rajhi bank, as part of its CSR initiatives, opened a university, Sulaiman Al Rajhi University, as a means of reaching out to the local community. Secondly, as a CSR intervention, the Al-Rajhi bank has also invested heavily in the provision of health care services to people in Saudi Arabia. The CSR plans of the Al-Rajhi bank include the development of various healthcare institutions to cater for the less fortunate Saudis. The Al-Rajhi bank invests more than 4 million Riyals in the Saudi Public Health Ministry annually to facilitate the provision of affordable health care among the needy and less fortunate in Saudi Arabia (Al Rajhi Bank). The Al-Rajhi bank also promotes the development of Islam, a fundamental aspect of the Saudi Arabian culture. The Al-Rajhi Bank has invested millions of Riyals in the construction of mosques such as the Sulaiman Al-Rajhi mosque in Riyadh. The Al-Rajhi bank also helps in the spread of Islam through its halal banking services that are in tandem with Islamic teachings. As part of their CSR initiatives, the Al-Rajhi bank also funds anti-famine and hunger programs in Saudi Arabia. In 2017, the Al-Rajhi Bank spent more than 7 million Riyals in the fight against hunger and famine in Saudi Arabia (Al Rajhi Bank). The bank is also involved in the construction of affordable housing as one of its CSR projects. It provides housing aid to a tune of 4 million Riyals annually to poor Saudi Arabians (Al Rajhi Bank). The housing aid is aimed at providing quality and affordable housing to Saudis living in rural areas.

Benchmarking the Local Corporation with Similar International Businesses

The CSR initiatives undertaken by the Al-Rajhi bank are in line with most of the provisions of the ten commandments of CSR. Actions of Al-Rajhi Bank are in accordance with the fifth commandment that provides for the active support of social programs by a business. The Al-Rajhi Bank is at the forefront of promoting education, housing, and religion in Islam in Saudi Arabia. The ninth commandment holds that a company needs to be committed to the support of social causes. The Al-Rajhi fulfills this commandment through its publicly commitment to the development and improvement of all spheres of the Saudi Arabian public life. The Al-Rajhi Bank follows the third commandment by engaging all public stakeholders before engaging in any corporate work in Saudi Arabia. The bank collaborates with the government and Saudi people to ensure their CSR projects advance the interests of the Saudis. The Al-Rajhi Bank is an international bank like HSBC. Its CSR programs are benchmarked against those of HSBC. Provisions of the Ten Commandments of CSR are used to evaluate the CSR initiatives of the two banks.

CSR Initiatives of the International Company

The HSBC engages in several CSR initiatives spearheaded by its multiple branches globally. The HSBC has invested heavily in environmental sustainability as its main CSR project. The HSBC has invested more than $100 million in its effort to advocate for sustainable environmental practices globally (HSBC). Also, the bank only deals with businesses that have a proven sustainability record. The HSBC, as part of its CSR program, has invested heavily in the development of future skills and talent. In the United Kingdom, for instance, HSBC has invested more than $15 million in the development of youth centers (HSBC). Here, youths are taught how to improve their skills and talents. The HSBC also supports individuals living with disabilities through CSR programs. For example, HSBC invested more than $1.5 million in the London Alzheimer’s Society responsible for the fight against Alzheimer’s in the UK (HSBC). The HSBC has also invested millions of dollars in the fight against illiteracy, particularly in the developing world (HSBC). As part of its CSR initiatives, HSBC is leading from the front in the fight against illiteracy in Africa and the UK. Moreover, HSBC funds various sporting events globally as part of its CSR program. For example, HSBC funds the HSBC Golf Championships and the World Rugby Series thus impacting millions of lives annually.

Evaluation and Comparison of Social Responsibility of AL-Rajhi and HSBC

HSBC has a superior and more effective CSR program compared to that of the Al-Rajhi. The CSR program of HSBC is centered on the fifth and sixth commandments of CSR. Notably, most of the HSBC’s CSR programs are focused on the sustainability of the global environment. However, sustainability, particularly environmental sustainability, is not a key factor in the CSR programs of the Al-Rajhi Bank. HSBS also takes into account the first commandment of CSR through its focus on sustainability. The sustainability-led business ethic of HSBC enables it to detect and correct problems before they impact the company through sustainable management. The HBSC Company, through its annual CSR budget, is committed to publicly supporting social causes compared to the Al-Rajhi Bank in Saudi Arabia.

Source: https://www.alrajhibank.com.sa/en/alrajhi-group/corporate-social-responsibility

Table 1: Ranking of The CSR Initiatives of HBSC And the Al-Rajhi Bank

Local Corporation

Al-Rajhi bank

International Corporation

HBSC

Ten Commandments 1 2 3 4 5 1 2 3 4 5
2. Seek input from all impacted stakeholders in any problem that needs to be addressed 1. Proactive in taking action to correct problems before they impact the company
5. Active in supporting community social programs 2. Seek input from all impacted stakeholders in any problem that needs to be addressed
9. Committed to publicly supporting social causes 5. Active in supporting community social programs
6. Active in supporting community social programs
9. Committed to publicly supporting social causes
Total: 3 Total: 5

 

Conclusion

Business ethics and CSR are important aspects of contemporary corporate management. Business ethics and CSR enable a company to give back to society, which is essential in creating a good public reputation and relations. The HBSC and AL-Rajhi banks are two of the biggest international banks in the world. The HBSC is headquartered in London while Al-Rajhi’s headquarters is based in Riyadh. The two companies have astute business ethics and CSR programs. However, the CSR program for HSBC is built around sustainability while that of the Al-Rajhi is built around humanitarian grounds. The two banks provide a good model of how modern companies can incorporate ethics and CSR to ensure that they give back efficiently to their societies.

Recommendation

The Al-Rajhi bank should incorporate the concept of sustainability into its CSR programs. The present CSR program of the bank is largely focused on improving the humanitarian needs of the poor and needy in Saudi Arabia. Although humanitarian help is commendable and laudable, it limits the impact of the CSR projects of the Al-Rajhi Bank to only the poor and needy. A switch to a pro-sustainability CSR model will enable the impact of the bank’s CSR projects to be felt in the Saudi nation as a whole.

 

 

Works Cited

Al Rajhi Bank. “Corporate Social Responsibility.” Corporate Social Responsibility, www.alrajhibank.com.sa/en/alrajhi-group/corporate-social-responsibility

Goel, Mridula, and Preeti E. Ramanathan. “Business ethics and Corporate Social Responsibility-Is there a dividing line.” Procedia Economics and Finance 11.1 (2014): 49-59., https://doi.org/10.1016/s2212-5671(14)00175-0

HSBC. “Community.” About HSBC | HSBC UK, www.about.hsbc.co.uk/hsbc-uk/community

Quarshie, Anne M., Asta Salmi, and Rudolf Leuschner. “Sustainability and corporate social responsibility in supply chains: The state of research in supply chain management and business ethics journals.” Journal of Purchasing and Supply Management 22.2 (2016): 82-97.https://doi.org/10.1016/j.pursup.2015.11.001

Rupp, Deborah E., et al. “Organizational justice, behavioral ethics, and corporate social responsibility: Finally the three shall merge.” Management and Organization Review 11.1 (2015): 15-24.https://doi.org/10.1017/mor.2015.8