God grants us new birth by His grace (or favor). It is given to us unconditionally. It is not that there is no merit to this grace; it is that the merit is that of Christ. It is unconditional for us because Jesus merited the grace (favor) by becoming a sacrifice on our behalf. In this way, His acceptance of us is unconditional.
Even though we are completely accepted, God does not approve self-destructive behavior. He wants the best for us. He approves obedience to His Way, which is in our best interest. And He grants His favor, or approval, when we make good choices. This is independent of His acceptance.
In the same way, we ought to speak the truth with grace. To accept people for who they are while approving only those things that are beneficial. When we do this, we show God’s glory, His essence. Because this is what God does for us. He accepted us while we were sinners. He loved us before we loved Him.
Sometimes the truth is painful. We may not like what we hear. Current reality is an acquired taste. But “favor” (grace) is not about pandering, telling people what they want to hear. That is self-serving. In giving grace (favor) to serve the best interest of others, we should be focused on both what is true and how to communicate truth in a way that elevates and benefits.