Abstract
The chapter addresses how ethical actions deliver value through sustainable competitive advantage. Corporate social responsibility (CSR) has a proven role in developing audience trust that increases brand equity among target audiences, thus ensuring that the brand sustains its competitive advantage through improved profitability, increased social trust, and favorable reputation in the market. Not only do businesses have a social responsibility to the markets from which they earn revenues, but buyers expect ethical businesses to have an established CSR program in place. Socially fluent, publicly held firms that share their ESG (environmental impact, social impact, and governance) ratings with stakeholders enjoy the reputational benefits of increased trust and confidence regarding corporate ethical behavior. Businesses that engage in CSR activities within the process of corporate brand management experience stronger reputation that drives loyalty and sales, resulting in a competitive, sustainable market advantage.
TopCorporate Ethical Behavior
Ethical behavior as an organizational endeavor may be defined and exacted in multiple ways. In their exploration of ethics in international business situations, Amine, Chakor, and Alaoui (2012) indicated that integrating ethical dimensions into overall organizational values represented a company’s commitment to an ethical approach. At the same time, Amine et al. determined that a firm’s leadership established the relevant ethical values that ultimately were institutionalized by way of incorporation into the decision structure. Jose and Thibodeaux (1999) declared that the formal, explicit incorporation of ethics into organizational culture, leadership, and communication revealed a deep commitment to ethical behavior. Peloza and Shang (2011) recognized ethical behavior as taking the form of socially responsible business practices, philanthropy, and product-related aspects such as biodegradability or quality. Many cohorts within an organization can exhibit, benefit from, or influence ethical behavior, including company leadership (Ponnu & Tennakoon, 2009; Pučėtaitė & Lämsä, 2008), employees (Valentine & Barnett, 2003), corporate marketers (Murphy, Laczniak, & Wood, 2007), and even corporate reputational character (Valenzuela, Mulki, & Jaramillo, 2010).
Ethical behavior is an expectation by key stakeholders, which may include company shareholders, internal workforce, current and potential customers, suppliers and partners, regulatory agencies, and financial markets. Failure to meet these expectations of ethical behavior can harm the firm’s reputation with catastrophic results to shareholder value.
Key Terms in this Chapter
Corporate Legitimacy: A perception that the activities and actions of a business are appropriate, genuine, and preferred.
Social Trust: The bond among individuals that facilitates transactions, permits individual creativity, and legitimizes collective action
Brand Reputation: How a brand is perceived by customers and the communities in which it operates.
Corporate Philanthropy: Investment of resources by an organization to enable a social benefit.
Brand Performance: A form of corporate financial performance based on the contribution of a brand to corporate revenues.
Brand Equity: The value of a known brand wherein greater brand recognition, integrity, and character equates to increased revenues.