Why It’s Important for Businesses to be Ethical

Why it’s Important for Businesses to be Ethical main image

It’s important to be a decent human being, wouldn’t you agree? Treating people with respect, acting fairly, and thinking about the bigger picture.

Ethics in business isn’t too dissimilar. Decisions made within an organization will affect employees, the community, and in some cases the economy.

Decisions made within a business could be made by an individual or a collective group, but the company’s culture will have a part to play in influencing the choice.

It’s a moral decision to behave ethically. Employees need to decide what they think is the right course of action, and in some instances it may involve rejecting the route that would lead to the biggest short-term profit.

Whether it’s hiring employees on zero-hour contracts with the possibility of instant termination, using child labor, or destroying the habitats of wildlife in the rainforest – there’s still a lot that needs to change.

I’m of the opinion that it isn’t hard to be ethical, but it is of course a personal decision whether you choose to be. However, we live in a world where ecological issues could soon hit breaking point if the global community doesn’t act swiftly.

There are no downsides to being ethical if you care more about people than profit, fair trade over deceptive practice, and the wellbeing of employees over treating them as cattle.

Benefits of being ethical

Ethical behavior and corporate social responsibility (CSR) can bring many benefits to a business, including:

  • Attracting customers to the firm's products, and in turn boosting sales and profits
  • Ensuring employees want to stay with the business, reducing labor turnover and therefore increasing productivity
  • Drawing in more employees wanting to work for the business, reduce recruitment costs and allow the company to get the most talented employees
  • attract investors and keep the company's share price high, thereby protecting the business from takeover

Above all else, ethical behavior will help your business build customer loyalty, avoid legal problems and attract and keep talented employees.

In contrast, unethical behavior or a lack of CSR will likely damage your business’ reputation, making it less appealing to stakeholders and causing profits to fall as a direct result.

The power of a name

In essence, a business is only as big as its name. Does your organization have a good reputation? Branding a company is important, it lets the world know what your values are, the company’s character, and gives a sense of attitude.

One example of a company acting for the greater good (and boosting its image thereafter), is the Dawn Soap Company and its parent company Procter and Gamble. Following an oil spill, they helped clean up animal victims using their soap.

Dawn Soap did the right thing, because it was the right thing. Doing something proactive can also boost company morale, help the environment, and show the world your business cares about more than just product sales.

Caring for employees

Google’s loyalty to employees is a prime example of why happy staff mean a happy company. The organization provides free healthcare (including on-site doctors), free legal advice, a cafeteria staffed by world-class chefs and elaborate rec-rooms.

As Google treat their employees as important and valued, employees are likely to remain at the company for a long time, while giving their all.

Intel is another company that focuses on the wellbeing of its employees, not just the profit they can create. Staff at Intel are reassigned to new work every 16 to 24 months so they don’t become jaded by their role.

Another way Intel hopes to promote good values is by encouraging STEM education for young people, especially young girls and underprivileged minorities.

Examples of unethical companies

ASDA WalMart

ASDA (owned by US company WalMart) is a retail giant. Over the years the company has failed to embed corporate social responsibility into its supply chains and operations across the globe.

This failure has lead to workers' rights abuses at supplier factories, accusations of discrimination by staff, and a host of other charges.

Amazon

Over the years, Amazon has seen its fair share of negative publicity due to a number of scandals, including tax avoidance, and also stories about poor treatment of workers at their fulfillment centers. 

Coca Cola

Coca Cola has had a long history of workers' rights violations at its bottling plants. In the mid-2000s the company came under fire for its water practices, accused of taking water supplies from rural communities and falsifying environmental data.

By 2007, college students in the US called for a nationwide boycott in support of Indian farmers who accused Coca-Cola of stealing their water and in turn their livelihood. This uproar was an international PR nightmare that threatened the business’ global business strategy and brand image.

Learning as we go

We make mistakes in life, we’re only human after all, but some errors in judgment will cost a company a lot more than a slap on the wrist.

Think long and hard before you make a hasty business decision, as it could affect not only your business brand, but also present and future sales. Remember, some business moves can’t be undone. 

Written by Niamh Ollerton

Niamh is Assistant Editor of TopMBA.com, creating and editing content for an international MBA student audience. Having gained her journalism qualification at the Press Association, London and since written for different international publications, she's now enjoying telling the stories of the business world.  

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