What are business ethics, and why do they matter?
It’s no exaggeration that the Covid-19 pandemic transformed the business world. With millions of workers furloughed and redundancies rife, companies – both big and small – faced extraordinary challenges.
For those who remained in business, mass adaptations had to be made – from remote working to social distancing. Fostering a collaborative, communicative and sensitive company culture became essential.
In our post-pandemic reality, corporate responsibility continues to be tested. Our societal lens has shifted, with staff welfare a centre point of discussion, labour demand being questioned and misconduct reports on the rise. The very nature of the coronavirus has forced companies to consider wider health and safety implications, while other businesses have had to adapt, modify and change to meet ever-evolving consumer needs too.
Meanwhile, wider societal fears are on the increase. Amongst other telling statistics, the 2022 Edelman Trust Barometer reports a 6% global increase in public fear of experiencing prejudice or racism, a 3% increase in concern over climate change, and a notable anxiety regarding job security. And, with government distrust at a disarming high point, in the wake of the pandemic, the public have turned to NGOs and businesses to solve these escalating ethical concerns.
This is nothing new. In the 1960s, rising consumer-awareness and discourse on increased corporate responsibility underpinned the decade – and markedly, the concept of business ethics was first conceived. In times of global crisis, it’s been proven that they matter more than ever.
What are business ethics?
Business ethics refer to an essential system of policies and practices that uphold a corporation’s legal and moral responsibilities. At their core, they determine what is ‘right and wrong’ for a company and its employees and inform a wider code of conduct.
These ethical standards are reflective of various contributing factors to a safe and functioning workforce. Many are embedded in law, others are influenced by social and ethical dilemmas, while additional business practices may be adopted as part of a more ‘individualised’ company culture.
While organisations vary in nature, business ethics should typically address the following principles:
Personal responsibility
Workers strive to be reliable employees and complete the duties assigned to them to their best ability.
Corporate responsibility
Businesses uphold contractual and legal obligations to employees, stakeholders and clients – such as determining safe working conditions, meeting minimum wage requirements and upholding manufacturing standards.
Loyalty and respect
Addresses the ways in which a company, their stakeholders, employees and clients should interact with integrity to maintain positive business relations.
Trust
Businesses should cultivate trust, with employees trusting that terms of their employment will be kept, while clients can trust the business with their money and confidential information, for example.
Fairness
A company commits to holding all employees to the same standard, regardless of rank, and employs an equal treatment of customers.
Community and environmental responsibility
Businesses will consider their impact on wider society and adhere to environmental regulations.
Examples of ethical standards in action
General expressions of ethical behaviour within the workplace include maintaining data protection, prioritising workplace diversity, putting customer needs first, and operating fairly and transparently as a business. Other ethical practices are more sector-specific, such as food and cosmetic producers adhering to lawful product labelling; and, financiers protecting against bribery and insider trading.
Alternatively, cultivating a hostile workplace, ignoring conflicts of interest, favouritism or discrimination of employees and misusing company time would be examples of unethical behaviours.
Business ethics: the bigger picture
Business ethics also bleed into a wider framework of corporate social responsibility, which refers to the way in which a company works to achieve or support larger societal goals. Not governed by law, corporate social responsibility is largely a self-regulated practice, where a business independently and voluntarily decides how it can contribute positive action of a philanthropic, activist or charitable nature.
This could include a commitment to the reduction of a company’s carbon footprint, improving their labour policies, making charitable donations, strengthening diversity, equality and inclusion, and making socially conscious investments.
Some key real-world examples include Coca Cola’s commitment to sustainability and Ford Motor Company’s investment in electric vehicles. Starbucks, meanwhile, in a move to tackle racial and social equity, aims to represent black, indigenous, and people of colour (BIPOC) at 30% in corporate roles and 40% in retail and manufacturing by 2025.
Why are business ethics important?
Business ethics are important for a number of reasons. They ensure that a company operates lawfully, safeguarding both employees and the general public. They keep trade honest and fair, uphold manufacturing standards, and prevent false or bogus product claims. Plus, a strong ethical corporate culture fosters, amongst other things, improved performance and prevents employee burnout.
It works both ways, too. Any successful relationship is built on trust, and adhering to an evolved code of ethics can really benefit a business in terms of brand awareness and customer loyalty.
As Edelman states in its 2022 report: “Lasting trust is the strongest insurance against competitive disruption, the antidote to consumer indifference, and the best path to continued growth. Without trust, credibility is lost and reputation can be threatened.”
With regard to social responsibility, a values statement that addresses, challenges and attempts to solve both social and environmental issues paves the way to a business having real-world impact. With both millennials and Gen Z taking an amplified interest in brand activism and positive action, socially conscious companies are more likely to capitalise on reach, engagement and public investment.
Do business ethics make economic sense?
As we’ve seen, ethical decision-making breeds trust – and, in business, trust is currency.
A company that upholds ethical standards that reflect real-world concerns and plays to a rising consumer consciousness is more likely to attract monetary investment, loyal staff (reducing recruitment costs) and consistent clientele. A good reputation is valuable and ultimately results in stronger financial health, from share price to increased sales.
Getting caught for unethical behaviours, on the other hand, could cost a company custom and fines, lead to less competitive hires and drive down its share price. For example, when Reuters reported a Johnson & Johnson company cover-up involving asbestos-contaminated talcum powder, the accusation triggered a 10% drop in the company’s stock price.
Ultimately, leveraging business ethics wisely can result in increased brand equity overall.
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