What does social contract theory in business ethics imply?

Social contract theory in business ethics implies that businesses have an implicit agreement with society to operate responsibly and ethically. This theory suggests that companies have a moral obligation to consider the impacts of their actions on the wider community and environment. In essence, businesses exist not only to generate profit but also to contribute positively to society by upholding ethical standards and addressing the rights and interests of stakeholders, including employees, customers, and the community at large.

This view emphasizes that businesses must be accountable for their actions, as society grants them the license to operate. The expectation is that businesses will engage in fair practices, respect human rights, and contribute to societal well-being, thus fostering trust and cooperation between businesses and the communities they serve.