“And speak to people good words.”

And recall when We took the covenant from the Children of Israel, enjoining upon them, "Do not worship except Allah; and to parents do good and to relatives, orphans, and the needy. And speak to people good words and establish prayer and give zakāh." Then you turned away, except a few of you, and you were refusing.

The phrase is one clause of a covenant. Surah al-Baqarah lists what was taken from the Children of Israel — worship Allah alone, be good to parents and relatives and orphans and the poor, speak well to people, establish the prayer, give zakah — and good speech is placed there among the obligations, not among the courtesies. The commentators gloss it as saying what is right and refusing what is wrong, without harshness or severity.