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Last Updated on March 2, 2023

Responsible management: definition and principles

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Responsible management definition still evades many people even though this gets practiced around us daily.

However, the concept is still entirely a new one.

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Therefore, due to this, there could be some debate as to what the actual definition is.

What is responsible management in business?

In business, responsible management is the commitment that management and business leaders consider the ethical and moral significance of their everyday decisions.

Responsible management in business has so far shown to be the most efficient and effective management structure for integrating ethics, sustainable practices, and the principles of entrepreneurship into any given business model.

The tool is not just a management system. It is a structure that ensures that certain standards are upheld as an integrated part of all the functions of a company.

Responsible management practices are important to ensure a more sustainable and inclusive socio-economic development.

It is the best management system that both business leaders and social entrepreneurs can use to advance sustainable practices and impact-driven initiatives in their enterprises.

On a bigger scale, responsible management has a greater propensity to boost the competitive edges of economies.

It does this when business leaders come up with social enterprises that are economically viable.

It can also lead to increasing the environmental and social appeal of enterprises.

In both mentioned cases, responsible management helps increase the achievement of sustainable development goals while also taking durability into perspective.

By general definition, there seems to be a certain level of an understanding of the concept from a global perspective.

The definition of responsible management can also be understood as looking for equilibrium in the whole world’s interest.

This global interest encompassed in the sustainable development goals represents the interests of people, businesses, and the environment to prosper and benefit both the present and unborn generations.

History of responsible management in business.

With the latest interest in environmental sustainability and inclusivity, responsible management in business has gained popularity once more.

However, the phenomenon is not new. Indeed, it can be traced back to the mid-to-late 1800s during the industrial revolution. During this time, there was a growing concern towards wellbeing of workers and productivity.

Increasing criticisms of the factory system, poor working conditions and unfair employment of women and children came to light.

Reformers voiced their opinions and asserted that the current employment practices were contributing to social problems such as poverty and labour unrest.

At this time, improvement in industrial working conditions and labour welfare were primarily viewed as a blend of humanitarianism and business acumen.

Interestingly, this time period also featured a rise in philanthropy. Industrialists such as Andrew Carnegie and John D. Rockefeller were well known for donating large portions of their fortunes to causes like education and scientific research.

However the term ‘Corporate social responsibility’ was officially coined in 1953 by American economist Howard Bowen in his publication ‘Social Responsibilities of the Businessman.’

Since then, the principles of CSR have become widely accepted as business norm across the world.

What are the 4 main areas of social responsibility?

Responsible management is comprised of social responsibility or socially conscious practices as one of its principles.

This helps to understand the corporate leadership structure and how they impact society through their everyday decisions.

It is important to state that regardless of the circumstances (even if they stand to lose millions). A good leader takes responsibility.

Its four primary areas in business are:

1). The responsibility towards owners/shareholders: A company has a certain responsibility always to be productive and make an income for its owners/investors/shareholders based on their initial investments. The business also has a responsibility to ensure that such investments are completely protected at all times.

2). The responsibility towards staff/employees/workers: A company/enterprise also has a certain level of responsibility towards its entire workforce. This means equal treatment of employees as well as treating them the way they deserve to be treated.

3). Responsibility towards its clients/consumers: A business owes its client base/customers an unflinching responsibility in producing the right quantity and quality of goods/services at all times. It is also important that these services/goods are made available at fair prices.

4). The responsibility towards authorities and the general society: A business has to abide by its home country’s laws and stipulations. This means honestly and regularly paying taxes. It should comply with all laws and not engage in acts that could be detrimental to society. This is one of the aspects of responsibility that most companies do not ignore.

Business ethics and social responsibility

Although they are almost similar concepts, there’s a slight difference.

The movement behind social consciousness is one part of the entire subject of business ethics.

The management system of socially conscious businesses came up predominantly in the 1960s.

Companies solely focused on making profits while ignoring the well-being of society.

Not until it got introduced that lots of businesses started considering the general welfare of the community.

This management system helps drive companies’ consciousness to be ethical in their every day dealing in matters that are significant to society’s general interest and the natural environment.

Consequently, It primarily relates to both the functions and policies of a company, especially related to the general public.

It is a moral compass to judge whether the activities of a certain enterprise are in the good interest of society.

Indeed, It is the study of the position of a certain company on matters involving the general public including its employees.

While the other is a guide an enterprise’s management on how they should behave when faced with certain controversial situations and dilemmas.

This often includes different scenarios on the pricing of materials, how the company is operated, their roles in society’s events, whether they produce harmful items to the community, and other things.

The field of ethics is very wide because it has various topics.

Many companies uphold high ethics to ensure that they are never into any lawsuit and help keep their public images clean.

This leads to sustained trust from the general public.

The importance of ethics to an enterprise

Ethics are important to an enterprise for different reasons. In the first instance, ethics ensure that your company is run within the land’s stipulated laws.

These are management practices that companies use to ensure that they do not break the laws concerning their customers, employees, consumers, society, and other important parties.

There are lots of benefits that come from the awareness of ethics by companies who abide by them.

One importance is trust.

There are road signs in the city. On the first is written "trust" with right arrow, on the second is written "mistrust" with the left arrow.
Image by Gerd Altmann from Pixabay 

This increases between the consumers and the business.

If consumers trust a certain company, they will be willing to choose the company instead of its rivals.

Some companies can use some of their ethics/socially conscious aspects as a marketing tool. Especially if they have decided to emphasize a very popular social problem.

If ethics is wisely leveraged, it could result in an increased company brand equity.

One big program that most companies partake in to drive their ethics is their corporate civic responsibility program.

This is what separates an ethical company from one that is not.

Ethical companies are attractive to investors and shareholders.

These parties will be happy to invest more in the company because of adherence to standard ethical practices.

And properly leveraging them can easily clear up the path to success for lots of companies.

When companies follow good ethics, they end up becoming very attractive to top talents.

Employees do not only like an employer that is aware of their social needs but also acts in their best interests.

This can lead to a more devoted workforce and will certainly lead to minimizing employee turnover.

Types of Business Ethics:

This is a very important part of responsible management.

It has lots of concepts that can become the principles of responsible management.

All companies should strive to uphold these principles.

Trustworthiness

For a company to become trustworthy, the management and the lower-tiered workers have to become honest and transparent in their actions and communications.

If a company is trustworthy, it can be able to externally and internally impact people positively.

Most consumers like it when companies are open. It enables them to know how they function and conceptualize their business functions.

Employees also want their companies to be honest and open to them.

Respect

A company’s ability to respect its customers and employees delivers on every promise made while providing their honest apology if anything goes wrong.

It is also one of the principles of responsible management.

Responsible leadership dictates that a company respects its workers and consumers by compensating them when appropriate.

Vector image with handshake and inside of two arms are written some words like: "respect", "tolerance" etc.
Image by John Hain from Pixabay 

If a business does not respect its customers, the customers will go public with the problem, which will lead to a tarnished reputation for the business.

A lack of respect also leads to unhappy employees and ultimately forcing them to leave the company.

Fairness

One of the most important types of ethics in the company that is also a hallmark of responsible leadership is treating both employees and customers fairly.

It is quite unhelpful and unethical to engage in manipulative behaviors.

The primary priority of all enterprises is to help their employees and customers at their times of need.

Treating everyone equally is fairly important for the management of a company.

Compassionate

Companies are made up of humans.

Human beings work to produce the services or goods of a company that others consume.

Companies need to show the people on both sides of the spectrum some form of empathy and compassion. This is central to responsible leadership.

This is a valuable tool for companies to use to their benefit, albeit sincerely; when a company shows its employees and customers that it cares.

It boosts both the company’s external and internal perceptions.

Ethics and Social Responsibility

This is one of the principles of a company’s corporate ethics and an important part of responsible management, whereby people are held accountable for their civic responsibilities.

It also supports that an individual’s actions have to be beneficial to society as a whole.

This way, ethics, and civic responsibility look to create a balance between a company’s economic growth and the general welfare of the community and the environment.

Civic responsibility is attained only when this balance is maintained.

The new face of corporate responsibility

Millennials haven’t just left their stamp on working hours or even the activities that can now be labeled as work. They have also left an imprint on what falls under corporate social responsibility.

These picky, work-from home, social media addicts have forced companies to pay attention to issues that might have been considered fringe in the past.

Through their spending habits, this new generation supports brands that are vocal about the environmental impact of their activites.

Some of the causes this new generation has pledged allegiance to are companies that have policies on nursing mothers, environmental sustainability, climate change, animal rights protection,  social justice and inclusivity, and discrimination based on gender, race, sexual orientation, and others.

Many companies have gone as far as including these labels on their corporate websites and other company material to show how seriously they take the issues raised by their new breed of customers.

Examples of Responsible Management:

Lowering carbon emissions.

 Taking part in charitable activities.

• Community volunteering.

 Environmentally beneficial corporate policies.

 Making investments that are both environmentally and socially conscious.

• Producing products/services according to agreed qualities/quantities.

Benefits of social responsibility.

Brand recognition

Customers increase their support of companies that have demonstrated an ability to deliver great quality products at the right price.

Additionally, stories about fair employee treatment increase the respect and brand loyalty customers have for a company. This in turn influences their purchasing decisions in a positive way.

Investor relations

A study conducted by Boston Consulting Group, revealed that companies with high emphasis on social responsibility receive higher valuation than others.

It would appear that investors feel better about investing in a company whose values match their own.

Employee participation

Although money is important, it is not the only factor employees point to when stating what they love about certain companies.

CSR-related initiatives are more likely to increase employee retention and loyalty over the long run. Indeed, workers tend to stay longer at companies they believe in.

Helps avoid risks

The result of bad corporate policies such as discrimination against employees, disregard for the preservation of natural resources or other forms of abuse of social responsibility can have negative unintended consequences, such as litigation.

This can be extremely costly for the company, not just in terms of settlement payments but also company reputation.

How to develop principles of responsible management in your business

Assessment

Sometimes a business might already have CSR initiatives within its framework without even being aware of it.

Therefore, the first step is to conduct an assessment. Review your businesses policies and practices around environmental, social and governance areas.

With this stage, the point is to first be aware of what you’re already doing and what impact your products or services might be having.

Some companies design a business corporate assessment in order to gain a good picture of their performance.

Define objectives

After having assessed where your business is with regards to your CSR score. The next step is defining objectives that will guide management efforts in the company.

These objectives will underpin not only the production, storage, and disposal of goods (in case of waste) but also the treatment of employees.

Determine priorities

At any given point in time, there are many ‘potential fires’ or situations that demand the attention of business leaders.

Therefore, it’s important for all members of the company to understand clearly what their priorities are and how they contribute to the entire organization’s policies.

Develop key action plan and follow up

Finally, your business should have an action plan that clearly explains the various policies. Plus what employees are going to do to achieve them.

Ensure you have regular meetings and discussions to keep track of progress. When it comes to CSR initiatives, here are some metrics that might be worth keeping track of:

  • Amount of donations. (cash amount, employee hours dedicated to the cause etc.)
  • Score on Greenhouse Gas Equivalency Calculator. This tool is available for free online.
  • B impact assessment.
  • Emissions volume.
  • Diversity in employees and suppliers.

Here’s a brief look at how some of the biggest global brands incorporate responsible management in the running of their businesses.

Global brands that got CSR right

Google

Customers appreciate this company across the world not only for its unparalleled technology products and services but also for its environmentally friendly initiatives.

The company’s data centres use 50% less energy than others in the world. It has also committed over $1 billion to renewable energy projects.

Netflix & Spotify

Through the prism of social inclusivity and employee welfare, companies such as Netflix and Spotify are top-ranking.

For instance, Netflix offers 52 weeks of paid leave to new parents (both parents) and extends this benefit to parents of adopted children.

Spotify also offers a similar program, although theirs lasts only 24 weeks. Still, it stands out among other benefits offered by other companies in the technology space.

TOMS

The company donates a pair of shoes for every pair they sell. It’s amazing mission has resulted in the donation of over 100 million pairs of shoes to children in need.

This company even goes a step further and donates its profits to assist the visually impaired by providing prescription glasses.

These are just a few examples of huge philanthropic initiatives the company continues to undertake.

Bosch

This company has set one of the most ambitious goals for protecting the environment, with an aim of reducing its ecological footprint through climate action, water usage and a circular economy.

The efforts the company initiated towards this end seem to have paid off since most of its locations are currently carbon neutral.

GE

Over a decade ago, General Electric launched its renewable business strategy. The main aim was to increase investment in clean technology and generate over $20 billion in revenue from green products.

Last year it awarded five people $100,000 each to develop their innovations which were all clean energy technology innovations.

Starbucks

From the beginning, Starbucks set itself apart as an equal opportunity employer. Therefore, the company implemented policies to ensure its workforce would be diverse.

The company has pledged to hire 25,000 US military veterans and spouses by the year 2025 to mirror its socially responsible values.

So far, the company has already managed to hire 5000 veterans and military spouses every year. Similarly, to combat racial and social equity, the company announced a mentorship program that connects people from different races to senior leaders and to invest in partnerships.

Through this, the company aims to shatter the race ceiling and have more people of colour, in its management ranks.

LEGO

This company has pledged to invest over $400 million over the next three years to increase sustainability. The brand is reconsidering its one use packaging and hopes to have achieved great strides by 2025.

It is also investing in more zero waste, carbon neutral products as its contribution towards battling climate change.

The Washington Post

In the realm of unconventional CSR, The Washington Post’s efforts towards combating fake news definitely makes the cut.

The company uses its social media platforms such as TicToc to spread real news in the short-form videos and viral content.

Following the prevalence of fake news on social media, it was becoming increasingly difficult for people to tell what was real and what wasn’t.

The Washington Post noticed the gap in the market and took it upon itself to tackle misinformation on the internet.

Conclusion

Corporate Social Responsibility (CSR) has been called by many names and has been undertaken to solve different problems over the years.

For companies interested in implementing responsible managerial initiatives into their work, there is no shortage of unique challenges and problems they can aim to solve.

CSR has many advantages and is therefore worth the effort in crafting and implementing.


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