Business and capitalism have a reputation for being cold and mechanical, a place where people put on fronts for profit. Countless industries, including the very largest companies in the world (Amazon, for example) have prioritised shareholders to the expense of both the environment and even employees, as decision making is influenced by increasing profit.
So, does business ethics have no place? In this article, Real Business will examine what makes business ethics important, how it affects the workplace, and the power of the positive reputation that comes from it.
Table of Contents
What does ethics look like in the business world?
In order to make business ethics attractive, it needs two things – concrete values that should effect decision making, and concrete net positives alongside profit. Of the two, it’s the former we lack the most. There are no concrete, set definitions for what business ethics is.
It’s generally agreed that a business that prides itself ethical values should consider the impact of its actions, products and services on society, its workers and the environment. Not only should ethical leadership include treating workers well, but also ensuring that they uphold corporate social responsibility (CSR), which revolves around balancing stakeholder needs with the broader impact on society and the environment.
Examples of business ethics are:
- Honesty and integrity
- Fair treatment of workers
- Corporate governance
- Environmental responsibility
- Transparency in communication and reporting
- Anti-corruption and anti-bribery measures
- Respect for local laws and international regulations
What are the positives of business ethics?
Listing the pros of ethical behaviour seems a bit obvious at first glance. So, we’ll pair them with real-life examples to prove the efficacy of adopting ethical business practices:
- Long-term loyalty – Reputation means a great deal in business operations, just like in personal life. Being known for good business ethics over a long period proves to the outsider that the ethical climate of your company is positive. John Lewis did this with their “John Lewis Partnership” scheme, where they’d operate on an employee-ownership model that made every staff member a business partner. This empowered employees and improved the reputation and outcomes of their business dealings, leading to them being consistently ranked highly in YouGov’s BrandIndex for trust and customer satisfaction.
- Protect brand reputation – In the event of accusations of unethical behaviour or other scandals that go beyond isolated incidents, a reputation built on business ethics will protect you in the long run. For example, Marks & Spencers’ robust food sourcing standards and environmental responsibility helped avoid unfair association with the 2013 UK horse meat scandal, saving their brand name and becoming even more of a trusted, premium retailer where others took a serious hit.
- Improves employee satisfaction – Staff that are treated fairly and can develop skills freely, all while working for an organisation with good business ethics, will be less likely to leave. For example, Lush Cosmetics. They ethically sourced their products by banning cruel testing and fostered a progressive internal culture, with transparency on pay and involvement in activism. They became the face of ethical decision-making amongst retail and cosmetics and have very low staff attrition.
- Ethical investors – Some investors prefer to opt to back companies with strong ethical principles, helping their own reputation in the process. For example, Legal and General Investment Management (LGIM) refuses to invest in companies with poor ESG (Environment, Social, Governance) scores – famously removing ExxonMobil from its Future World Fund over climate inaction.
- Avoids legal trouble – Unethical behaviour can range from angering the public, to angering legal authorities – and the latter can only lead to erosion of a company. Starbucks, for example, was revealed to have paid only £8.6m in UK tax over 14 years despite billions in sales. This resulted in outrage, and they voluntarily paid £20m in corporation tax over the next two years, and overhauled its tax structure to be transparent.
- Sustainable innovation – By sticking to strict ethical behaviour, you push innovation in the sustainability sector. For example, Innocent Drinks invested heavily in carbon-neutral factories to offset the high energy demand (and carbon emissions) that manufacturing demands, achieving fully recyclable bottles.
- Competitive advantage for consumer markets – Consumers understand that the one thing they can do to help the environment is send their money to a company with strong ethical values. The Co-Operative Group is one of these companies, and is deep into ethical trading, fair treatment of farmers and community involvement. 83% of their retail customers say ethical sourcing influences their food shopping decisions.
What are some examples of ethical dilemmas?
To run into an ethical issue in the course of doing business means having to choose between business growth or embracing (or avoiding) the possible negative impact of certain business decisions.
A couple of famous examples:
- Volkswagen emissions scandal – VW installed software in some of their vehicles to cheat emission tests, marketing their vehicles as being cleaner and safer than they are. This boosted sales temporarily, but the fallout was devastating – costing millions in fines and a loss of trust, devastating public relations.
- Uber’s toxic workplace culture (2017) – Uber came under fire from repeated claims of harassment, discrimination and executive misconduct. Whilst Uber, at first, defended their leadership, they realised that in order to shield themselves from further scrutiny and possible loss of business, they can to take on business ethics to reform their culture.
Supporting the points made in the previous section, it’s clear that business ethics is the natural course to take when public loss of trust and business threatens them.
What are some examples of ethical businesses, both good and bad?
Ethical companies demonstrate a strong sense of corporate responsibility by prioritising ethical practices and contributing positively to society, and whilst they are not necessarily paid in dividends as a result of their ethical culture, the reputation they gain is a power in and of itself.
Here are three companies which have put ethics at the forefront of how they operate.
Ben and Jerry’s
Ben and Jerrys are known for their outspoken stance on social justice, environmental issues and ethical sourcing via their use of fair-trade-certified ingredients, and their support of causes such as Black Lives Matter, climate action etc.
They pay living wages to employees, above the industry standard, and have managed to maintain a strong brand identity despite being owned by Unilever.
McKinsey and Company
This company is known for their global consulting services to major corporations and governments, and their failed approach to ethical dilemmas. For example, they were involved in advising opioid manufacturers like Purdue Parham, boosting sales during the US opioid crisis that caused wide-scale addiction and worse. Their unethical practices cost them nearly $600 million in settlements and serious reputation damage as a result.
They haven’t been able to repair their reputation since.
Body Shop
Body Shop pioneers the ethical practice of sourcing cruelty-free beauty and sustainability in the cosmetics industry. They are the first major brand to ever campaign against animal testings back in the 1980s, and they have kept that mentality through their strong ethical supply chains and community trade programmes. They push positive environmental impacts and human rights throughout the globe.
They have an iron-tight consumer trust to this day.
Ryanair
Ryanair was known for their low-cost air travel and aggressive cost-cutting, and later for their combative public relations. They were frequently accused of mistreating staff, such as pilots and cabin crews on zero-hour or contractor terms. They refused to pa compensation for delayed or cancelled flights, and they have failed to prove their carbon offset claims in the fact of accusations of the latter.
Ryanair continues business to this day through its strong product, but they are hated in terms of customer service and business ethics rankings.
Conclusion
Overall, ethical conduct is a net positive. The power of a strong brand identity means playing the long-game, rather than making poor ethical decisions in the name of profit. Becoming an ethical leader is no small responsibility, and whilst it may not bring short-term gains and may result in you missing opportunities, it brings a competitive edge in the public eye.
Consumers are normal people, and normal people who do not have the time to champion social causes in everyday life can at least choose to give their money to companies with ethical principles.
FAQ – 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.
FAQ – What is unethical behaviour in business?
An ethical business doesn’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 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.
