Ethics is the branch of philosophy that studies the nature of action, striving to answer the question of which actions to undertake and which to avoid. In business, the premise of ethical responsibility is that, because businesses are agents that carry out actions that affect the world around them, they have a responsibility to behave in ways that don't cause unjustified harm, suffering, waste or destruction. You can understand ethical responsibility in terms of who or what the company's actions affect.
TL;DR (Too Long; Didn't Read)
Ethical responsibility means recognizing when the company's actions might be having an adverse effect of people or the environment, and taking steps to reduce the harm.
Ethical Responsibility to Employees
Employees are, first and foremost, the people directly responsible for a company's success. Without their labor, the company could not function and would go nowhere. Similarly, a company is most directly responsible for an employee's personal success. The money and other benefits that an employee earns for her work provide her livelihood, without which she would not be able to pay for food and shelter or afford any of life's luxuries.
A company has an ethical responsibility to pay its employees what their labor is worth, to provide a respectful workplace free of harassment and dehumanization, and to operate a safe facility or supply the appropriate safety equipment to deal with hazards. Historically, unethical behavior toward employees has been responsible for political unrest, legal and judicial intervention and the rise of labor unions.
Responsibility to the Environment
Pollution, resource depletion and land use are the inevitable consequences of virtually any business activity. There is also usually an impact on wildlife. This isn't inherently bad, but the potential for adverse effects is enormous. Environmentally irresponsible business practices have poisoned communities, squandered vital resources into economic non-viability and driven entire species extinct forever. The opposite of this, ethical responsibility to the environment, invites political debate, because it necessarily places limits on business. At minimum, however, such responsibility requires that a company seek to minimize the harm it causes to people and wildlife and take reasonable measures to conserve resources for subsequent generations.
Responsibility to Society
Economic activity is a boon to society. It creates wealth and leads to the advance of technology, which allows people to attain a better material quality of life and escape the hardships of poverty. Nonetheless, there are many ways that a company can behave irresponsibly toward society, all of which entail plundering the society for short-term gain. Social responsibility, then, requires a company to take an interest in the long-term success and prosperity of the community where it does business and in the welfare of the national economy on which it ultimately depends. This means obeying the law and respecting society.
More to the point, it means striking a balance between developing short-term profits, a certain amount of which are vital to a company's success, and forgoing even more of those profits in favor of spreading the wealth into the society whose laws, people and wider economy provide the landscape for the company to succeed in the first place.
Responsibility to Shareholders and the Company
A company has an ethical responsibility to earn a profit for itself and for the shareholders who invested in it. The company needs profit to continue to exist as a viable business entity, and the investors deserve a profit because they took a risk with their money by investing in the company.
In the long term, all the other forms of ethical responsibility in business build up to this one, because satisfied employees, a prosperous society and a healthy world are a boon to the fundamentals of business. Unfortunately, many people inside business don't see it that way and instead look to maximize shareholder value in the short term at the expense of all other considerations – a disposition that invites continuing political debate. Even so, nearly all parties agree that – all else being equal – a business should strive to be profitable for those who own and finance it.
Josh Fredman is a freelance pen-for-hire and Web developer living in Seattle. He attended the University of Washington, studying engineering, and worked in logistics, health care and newspapers before deciding to go to work for himself.