Ethics play a more significant role in everyday business transactions than many realize. Business ethics are the set of practices and policies that companies use to guide them through decisions about finances, negotiations and deals, corporate social responsibility and more.
Much like finances and marketing, ethics have become more and more important for businesses.
Without a strong set of ethics, a business can run afoul of the law and encounter financial pitfalls and moral dilemmas. But good business ethics hold companies accountable for doing the right thing.
Business ethics aren’t laws that companies must follow but they are a set of guiding principles that they should follow if they want to build a good reputation.
More about business ethics
Business ethics refers to the standards for morally right and wrong conduct in business. It represents a standard behaviour, admired values, trustworthy methods of operation and respect for customers that a company incorporates and insists that all employees adhere to.
Law partially defines the conduct, but “legal” and “ethical” are not necessarily the same. Business ethics enhances the law by outlining acceptable behaviours beyond government control.
How business ethics affect a company’s reputation
Brands are not solely owned by the company they represent anymore. Employees, consumers and stockholders increasingly feel that a brand belongs to them as well.
According to Accenture Strategy’s global survey of 30,000 consumers in 35 countries, 42% of consumers will stop doing business with a company if they disagree with its words or actions on a social issue. More than 60% of consumers say they make purchasing decisions based on a company’s ethical values and authenticity.
Business ethics helps to ensure a good reputation for your company and that’s good for business. When your company has a consistent reputation for being ethical and how you treat employees, customers and the community, more people will want to do business with you.
Sets baseline behaviour for employees
According to the 2021 Global Business Ethics Survey, one in five employees (21%) were in workplaces with a strong ethical culture. Employees who observed misconduct in 2020 were more likely to report their observations than they were in 2017 (86% compared to 69%).
When management ethically leads an organization, employees follow in those footsteps. Employees will make better decisions when good business ethics are a guiding principle. This increases overall employee mood and productivity. When employees work in a way that is based on honesty and integrity, the whole organization benefits.
Organizations that practice good business ethics are less at risk for legal trouble. Law and regulations are complicated, but a lot of trouble can be avoided by just doing what is ethically and morally right. If business decisions are made with that in mind, you can save a lot of stress of having to defend your company against scrutiny, lawsuits and fines.
In summary, when executives and employees at all levels of an organization make ethically sound decisions, it benefits everyone. These factors above help an organization grow, have bigger profits and set a strong baseline to follow.