Is it really possible for a business to be ethical?Many people would argue that a business cannot be both ethical and profitable, which would mean that only non-profit organisations would stand a chance of being truly ethical. However, this doesn’t have to be the case, as has been proven by many ethical companies across the globe. Read on to learn more about the argument of whether a profitable business can be ethical.
What is an ethical business?There’s no agreed definition of an ethical business, with many people having their own interpretation of the term. However, it’s generally agreed that an ethical business is one which considers the impact of its actions, products and services on both society and the environment. Ethical businesses will try to minimise any negative impact that their actions may have on society and the planet. They may also take action to positively impact a specific cause, known as social enterprise.
Does business have an ethical conflict?It’s hard to run a business without running into ethical issues. For example, a company which produces envelopes could be called unethical due to their contribution to deforestation. However, they could counteract this by planting new trees and by using recycled paper wherever possible. Businesses often have to make a decision between being profitable and being ethical. This is because ethical operation doesn’t come cheap. By opting to operate ethically, a company will often need to sacrifice a portion of their turnover for the ‘greater good’, reducing their profitability.
The argument for business not being compatible with ethicsLet’s take a look at some of the reasons why many people say that business cannot be compatible with ethics. Firstly, different people understand ethics in different ways. What is ethical to one person may be unethical to another, making it hard to define the rules when it comes to running an ethical business. In our modern world, profitability is the key to business. The success of a business is measured in how profitable that business is, without taking ethics into consideration. If a business wants to be seen as successful, it needs to make a profit. Unfortunately, ethical business operation limits a business’ profitability, reducing its success. Running an ethical business also takes time and effort. This requires resources which many businesses just don’t have. Allocating resource to ethical operations can also lead to missing opportunities for profit, limiting the success of a business. Finally, some businesses are unable to follow ethics. For example, a steakhouse could never operate ethically as it relies on animals being slaughtered for food. This means that many businesses are simply incapable of taking an ethical approach to business as the purpose of their business is compatible with ethics.
Can a business ever be truly ethical?There’s no doubt that it’s extremely difficult for a business to be fully ethical, especially when the balance between ethical operation and profitability is so delicate. But is it possible for a business to be truly ethical? In answering this question, we can look towards the examples set by ethical companies across the globe. Whilst there are many companies who claim to be ethical in writing but don’t put their ethics into practice, there are also many successful companies who have strong ethics. Not only do these ethical businesses set a great example and lead other businesses in adopting ethical practice, but they also attract higher customer numbers due to their ethical operation, aiding in their profitability. In fact, you could even say that these businesses have survived due to their commitment to follow ethics and provide ethical and sustainable products and services.
Examples of ethical businessesLet’s take a look at some examples of businesses who have made a name for themselves through their ethical operation, using their ethical practices to give something back to the world whilst earning a name for themselves across the globe. Here are three companies which have put ethics at the forefront of the way in which they operate.
StarbucksStarbucks is a great example of a company which is committed to ethical and sustainable practice, whilst also remaining a profitable business. This globally recognised coffee giant has committed to ensuring that its coffee is sourced 100% sustainably. This is done by purchasing coffee at fair prices and ensuring the every step of the production process is done ethically, from planting and harvesting the crops to processing and purchasing the finished product. To demonstrate its commitment to achieving ethical practice, Starbucks even uses third parties to verify that its sourcing is ethical. This has led to Starbucks being recognised as the industry standard for ethical sourcing. Although Starbucks coffee may be seen as more expensive than other brands, it carefully targets customers who are committed to purchasing ethical products. This means that Starbucks is able to make a healthy profit whilst supporting farmers across the globe. Its ability to remain profitable whilst setting an industry standard for sustainability is a testament to Starbucks’ hard work and commitment to ethical practice.
H&MMany people view the fashion industry as one of the biggest challenges in sustainability in the modern world. So called ‘fast fashion’ is particularly problematic in terms of ethical sourcing, with many shoppers now trying to recycle clothing and turning to second-hand stores rather than buying new every time. H&M is turning this around, working to enhance the transparency of its supplier list whilst reducing its environmental impact. The business now publishes a list of 98.5% of its suppliers’ details on their website, updating the information on a quarterly basis. This transparency aims to give the public reassurance in the supplier standards set out by H&M. The company has also pledged to move to using only 100% recycled or sustainably sourced materials by 2030 – an ambitious goal for any company. This has enabled H&M to become an ethical leader in the clothing market. It will take a lot for the fashion industry to be seen as sustainable once again, but H&M is leading the way in this change. Its dedication to ethical practices and sustainability, without compromising on profits, could change the fashion industry forever.
TOMSTOMS is another business that is leading the way with ethical practice and corporate philanthropy. In fact, ethics is a big part of TOMS’ company values and brand. The company was founded in 2006 by Blake Mycoskie. During a trip to Argentina, Blake noticed that people living in areas struck by poverty were forced to live without shoes. He decided to make this a focus of his company, donating over 60 million pairs of shoes to children in need across the globe since the company’s formation. That’s not all either. TOMS has also donated more than 400,000 pairs of glasses to people who lack access to optical care, TOMS has further diversified to donate more than 400,000 pairs of glasses to people who lack access to optical care, ploughed money into clean water initiatives and trained birth attendants to help over 25,000 women give birth safely. It’s not easy for a company to earn itself a name as an ethical business whilst also remaining profitable, but TOMS is leading the way with its impressive global initiatives.
Is it beneficial to be known as an ethical business?There’s no denying that making a name for yourself as an ethical business can help you to stand out from the crowd. This can help you to expand your customer base, as well as attracting a higher price for your goods or services. The increased levels of respect that you’ll command in the community won’t just increase the value of your products and services either. A brand with strong moral values will often also discover that they will enjoy higher customer retention rates, as customer loyalty will increase. Being known as an ethical business has many advantages, but it isn’t without its struggles. There is a delicate balance between being an ethical company and being a profitable business, and it isn’t always easy to get that balance right. However, if you manage to achieve the right balance, the benefits are worth it.
Are there any disadvantages to being an ethical business?Although the benefits of being an ethical business are clear to see, there are also some disadvantages of ethics in business. Firstly, there is no hiding from the fact that being an ethical business will reduce your profitability, at least initially. This is because ethical operation comes at a price. However, in the long term you may be able to achieve higher prices for your products or services whilst enjoying increased customer loyalty, which could negate the cost of being an ethical business. Making ethical decisions also adds to the long list of things that business owners already have to consider. Debating whether or not every decision is ethical will add to your stress levels and the pressures that you already face as a business owner. In a world where we are already pulled in every direction due to time constraints, an added pressure is extremely undesirable. Finally, there will always be a moral grey area in every decision that you make. This means that whilst ethics are important, some decisions won’t ever be able to be categorised as ethical or unethical and will need to be analysed on a case by case basis as a subjective matter. This can take time away from other business matters and lead to some people identifying supposedly ethical choices as unethical due to their personal perceptions.
Can a business survive without ethics?Ethics is becoming increasingly important in the world of business, with customers looking to support ethical and sustainable companies. Businesses which do not prioritise ethics may find themselves losing their customer base, with their profits reducing. To keep up with the changing demands of the modern world, companies need to prioritise ethics whilst also ensuring that their profits are maintained – a challenging balance for any business.
What is unethical behaviour in business?An ethical business don’t just focus on the legalities of running their business – they ensure that they do what is morally right, whether or not anyone notices. Unethical behaviour in business refers to the actions that aren’t seen as acceptable by society. This could include exploiting workers, utilising tax loopholes and causing damage to (or failing to protect) the environment.
The future of business lies in ethicsMany businesses are tempted to ignore ethics as it may reduce profitability and take up valuable time which is already at a premium. However, being ethical is the only way for a business to survive in the long term. Businesses which rely on unethical practice may benefit in the short term but risk being exposed eventually. When their unethical acts come into the limelight, the negative publicity caused could spell the end for the business. Ethical businesses enjoy increased levels of customer loyalty, as well as being able to attract a higher premium for their products and services. Businesses such as Starbucks, H&M and TOMS are testament to the high levels of success that ethical companies can attract. Although operating as an ethical business isn’t always easy, and requires a delicate balance between ethics and profit, it’s essential for businesses to prioritise ethical if they want to stand out in a competitive market.
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