With the world becoming more and more aware of environmental issues, fair trade practices, and suitable working conditions, businesses that want to succeed need to be very mindful of their reputation. Ethical behaviour means businesses acting in a way which is open, fair, and honest, and takes into account everyone from customers, to employees to shareholders. Businesses that behave in an ethical way are more likely to be seen as trustworthy and dependable by their customers and to be viewed as a positive force in society.
In this article we’ll talk about what business ethics are, why they matter, and how businesses can make decisions that follow these principles.
What is ethical behaviour in business?
Ethical behaviour refers to the moral principles, rules and attitudes that organisations demonstrate in their conduct and dealings. Ethical behaviours are necessary for maintaining employee safety, adherence to law and regulation, and protection of the environment. Business ethics also include a number of specific principles and practices which help an organisation perform well as an enterprise but also with a sense of social responsibility.
Why do business ethics matter?
Ethical behaviour is actually in a business’s interest because it can have a positive effect on their bottom line. In 2011, research from the Global Reporting Initiative found that 84% of consumers said they would be more likely to buy goods and services from a company if it acted responsibly. This is especially important for companies looking to target millennials – 78% of whom say ethical behaviour is an important factor when purchasing products.
In addition, there are legal requirements around ethics in certain industries like healthcare or finance which require businesses to act ethically as part of complying with regulations set by government regulators or auditors. If businesses don’t comply, they risk sanctions or legal actions against them. A business that acts ethically will have a lower probability of committing fraud, engaging in bribery and corruption and breaking the law on employment rights like discrimination or harassment.
How to create an ethical company culture
In order to maintain an ethical company culture, businesses should set out clear expectations about what behaviour is acceptable and unacceptable from employees. This can be done through company policy or procedure and by educating employees on established ethical principles.
It’s also important for companies to be honest in their dealings with consumers. They should provide accurate information about products and the business itself, including any potential risks. Businesses should never mislead customers by telling half truths or concealing relevant facts from them. Transparency is at the heart of running an ethical company because it means that everyone knows what goes on inside the organisation, and the appropriate individuals can be held accountable if things go wrong.
What are the main principles of business ethics?
There are various principles that different individuals and organisations believe should underlie business practices. For example, the Institute of Business Ethics has their own code which businesses can follow to guide behaviour:
Businesses should always be truthful in communications with customers and employees, as well as not misusing intellectual property or trade secrets for personal gain.
Businesses should recognise that all stakeholders and shareholders have rights but that so do suppliers, consumers, and society in general.
As mentioned above, organisations should be open about their activities. This includes explaining policy decisions, disclosing information about conflicts of interest too, and not concealing gifts offered or accepted in order to curry favour with a government official or regulatory board.
Responsibility and accountability
All businesses should be answerable for their actions and take responsibility for the consequences of any decisions.
Organisations should respect human rights such as labour laws and equal opportunities legislation where these exist. They should ensure that workers have safe working conditions, and always follow discipline and dismissal laws.
Fairness in dealings
Business should treat all parties fairly and not use undue influence to get a better deal for one side over another.
Respect for communities
Businesses should recognise the impact they can have on community well-being, whether it’s through pollution or excessive noise levels.
What is leadership’s role in business ethics?
An important aspect of running an ethically sound company is leadership’s ability to adhere to these principles and make the right decisions when faced with difficult circumstances. These are often incidents where there is a conflict between the wants or needs of shareholders, and what is right for employees, the environment, or society in general. A leader must be able to understand the perspective from all sides before making the best decision.
Examples of ethical companies
This shoe company donates one pair of shoes to children in need for every purchase made.
This clothing company creates products out of sustainable materials and promotes environmental awareness by donating at least 20% of their profits to grassroots environmental organisations. They also educate customers on how they can make an impact with the clothes they buy, such as getting rid of plastic water bottles or recycling old items instead of throwing them away.
Examples of unethical companies
Various criticisms have been levelled at the web giant including allowing China to run a restricted search engine service, and Google’s unsanctioned tracking of users in order to improve their maps.
Despite Jeff Bezos’s obscene wealth, Amazon’s treatment of its warehouse and delivery employees has long been criticised. Furthermore, Amazon was caught surveying the data of their Prime customers, and then creating a service that provides lower prices for items they had viewed in order to tempt them into shopping more.
The sportswear giant has consistently found to be in breach of child labour laws in various countries around the world, prompting Nike to relocate their factories in countries where there is less regulation.
Business ethical behaviour is so important. It helps protect employees, show customers and society that the organisation is trustworthy, and ensure adherence to the law. Far too often, the most successful businesses act unethically in order to make more money or bypass the law. However, with so many social and environmental issues causing real existential crises, it is vital that businesses start to take ethics seriously.