Ethics In The Business: Understanding Ethical Behaviour

Modern-day businesses put a great deal of emphasis on business ethics. The definition, principles and importance of business ethics are considered foundational to long-term business growth, as a good code of conduct can drive higher productivity in employee behaviour, and build a lasting reputation that strongly reflects in a business’s revenue.

In this article, we’ll talk about what ethical behaviour is and why it matters in business. We consider how businesses can make decisions that follow ethical principles.

What Is Ethical Behaviour In Business?

Business ethics refers to a set of behaviours or a “code of conduct”, that outlines good principles, values and comfortable norms in the actions and behaviours of individuals and even organisations within the business environment. Maintaining ethical business practices is necessary for maintaining employee safety, adherence to law and regulation, and, more often, the sustainability of the environment.

Some examples of ethical conduct are:

• Fair treatment – Ensuring equal opportunity, fair wages and safe working environments.
• Work-life balance – Ensuring employees have a healthy balance between work and personal life, promoting their well-being and productivity.
• Diversity and inclusion – Valuing a diverse group within the workforce and ensuring their integration.
• Transparency and honesty – Providing accurate information about products and services to customers to ensure informed, easy decision-making.
• Data privacy – Complying with applicable laws and regulations regarding the protection of personal data.
• Customer service – Having a good customer relationship management system alongside policies that ensure concerns are addressed efficiently.
• Sustainability – Adopting practices that minimise adverse environmental impacts.
• Corporate social responsibility – Engaging in schemes, initiatives etc. that serve the wider community. Corporate social responsibility (CSR) emphasises the broader impact of ethical behaviour on stakeholders and society, highlighting the importance of prioritising ethical practices and long-term value creation.

The most effective way to ensure business ethics is to instil the values into the company culture. We have discussed the importance of company culture in other articles, and it is perhaps not surprising these are so intertwined.

Why Do Business Ethics Matter Now More Than Ever?

Business ethics have always mattered, but now more than ever, the consequences of unfair practice are magnified for a few reasons:

• Increased Communication – Social media outlets and other collaborative efforts in the digital age have increased the level of scrutiny companies receive from wider society. A good example is the infamous 2017 video of United Airlines staff forcefully removing a passenger from an overbooked flight, causing stock to plummet and loss of customer trust.
• Environmental Concerns – Britain, in particular, has a Net Zero Carbon goal by 2050 and uses many initiatives and schemes to incentivise and reward companies (and residents) for making the switch to green energy/energy efficiency measures. Aside from energy cost savings, investors would look more favourably at a company that can demonstrate sustainability through measures such as ISO 14001:2015 certification.
• Enhanced Brand Value – A study in 2021 by Edelman finds that 86% of consumers expect brands to take a stand on social issues. Those that do were viewed much more favourably by potential customers.

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

To maintain an ethical company culture, businesses should emphasise the importance of corporate culture in promoting ethical behaviour and preventing/reporting unethical behaviour. This can be done through the creation of:

• Code of conduct and ethics – Develop a well-defined code of ethics that outlines your specific company’s values, ethical principles and expected behaviours.
• Tone at the top – Ensure leadership sets the example consistently to reinforce the code’s importance.
• Ethical training – Provide training programmes that educate employees on ethical practices during work.
• Open communication – An employee being able to consult with higher management on a non-confrontational, productive basis makes employees feel secure in their ability to express concerns.
• Whistleblower protection – Mandating that reports can be made anonymously, and stay anonymous, encourages employees to come forward with concerns.
• Performance evaluation – Performance evaluations and rewards should be meted out to those who consistently display good ethics and work. A 2019 report by Ethisphere highlighted that the World’s Most Ethical Companies outperformed the S&P 500 by 13.6% over five years.

All in all, good conduct requires transparency. 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?

Business ethics do not all come with the same guidelines, with many adapting for relevant industries. That being said, we have examples from the Institute of Business Ethics, who recommend the following:

Honesty

Businesses should always prioritise ethical conduct in communications with customers and employees, as well as not misusing intellectual property or trade secrets for personal gain. Honesty typically involves aiding in informed buying decisions. For example, a pharmaceutical company could opt to be fully open about the potential downsides of its new Viagra drug. This could deter potential customers, but allow others to account for the new information.

Respect

Businesses should recognise that ethical principles impact employee behaviour, contributing to building a reputation for ethical behaviour. All stakeholders and shareholders have rights, but so do suppliers, consumers, and society in general. For example, allowing flexible work arrangements for employees, specifically in industries such as nursing, demonstrates respect and consideration for a person’s work/life balance.

Transparency

As mentioned above, organisations should be open about their activities to maintain ethical practices. This includes explaining policy decisions, disclosing information about conflicts of interest too, and not concealing gifts offered or accepted to curry favour with a government official or regulatory board. Aside from this, when it comes to customers, having a detailed outline of your suppliers to clear up issues such as potential abuse (e.g. slave labour in third-world countries) can promote integrity and trust for your company.

Responsibility And Accountability

All businesses should be answerable for their actions and take responsibility for the consequences of any ethical decisions they make. This means if poor decisions are made, there should be full transparency on why the decision was made and how the company will make up for it.

Justice

Organisations should demonstrate ethical behaviour by respecting 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. Businesses should develop ethical models and practices to guide their dealings, ensuring that all parties are treated fairly and that undue influence is not used to get a better deal for one side over another, nor profit from insider trading.

Respect For Communities And Corporate Social Responsibility

Businesses should recognise the impact they can have on community well-being through corporate social responsibility, whether it’s through pollution or excessive noise levels.

Incorporating ethical use of technology and ensuring information security in business operations is crucial for maintaining trust and integrity.

Ethical Companies Examples

• Toms Shoes – This shoe company donates one pair of shoes to children in need for every purchase made, not only providing footwear for those in need but also creating a positive brand image. According to the 2016 study by Cone Communications 87% of tallied consumers would prefer to make purchases for products they know result in social and environmental benefits.
• Patagonia – This clothing company creates products out of sustainable materials and promotes environmental awareness by donating at least 20% of its 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

• Google – 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 to improve their maps. This tarnished Google’s one cherished image of being the champion of open access to information, instead labelling them as information hoarders.
• Amazon – 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 to tempt them into shopping more.
• Nike – The sportswear giant has consistently been found to be in breach of child labour laws in various countries around the world, prompting Nike to relocate their factories to countries where there is less regulation.

Ethical Behaviour – Conclusion

Implement good business ethics to protect employees, show customers and society that the organisation is trustworthy, and ensure adherence to the law. Navigating ethical dilemmas is crucial as it emphasises the importance of ethical behaviour in business. Businesses have for decades often been viewed as the antithesis of ethical behaviour. Some cultures would almost view consideration of ethics over potential profit as a weakness to laugh at. These leaders aren’t laughing now.

Ethical behaviour can bring the best staff and open markets and unethical behaviour discussed in a social media world can close businesses in no time. Such behaviour is usually driven from the top and embedded within the business culture. So ask yourself the question – Is your business showing ethical behaviour?