We live in a business-oriented world. This means that you can find examples of ethics around you on a daily basis. You see businesses trying to improve their relationships with their customers everywhere you go. And the reason behind that is simple; the more ethical the company is perceived by its customers, the more successful it will be in the market.
When a business acts in ways that are harmful to both its customers and the world, it can affect its reputation in a big way. Those wrong perceptions can cause more people to leave than if the business acted in ways that were just beneficial to itself.
What is business ethics?
Business ethics is the set of principles that govern how an organization conducts its business. Business ethics are similar to corporate governance in that they are a set of conventions, rules, and policies that govern business practices. These rules help ensure that its activities align with its stated mission and values while preventing unethical behavior.
A study from Stanford University states that since business activities shape the world we live in, we can either shape it for good or for the worse. That’s why companies must have standards of business ethics to protect both their employees and clients from wrongdoing. In addition, companies are accountable for their actions under the law, and they must demonstrate respect for the public.
So before establishing any business, entrepreneurs need to educate themselves on the ins and outs of the business world, so they are more capable of spearheading and representing their company ethically.
Where does business ethics apply?
A company should do what’s right, even when it wouldn’t be suitable for its competitors. It can’t always sacrifice its profit to win the business war, but it must always keep its customers happy.
You can find every kind of ethical dilemma in business—from doing things that hurt consumers and are against public policy (like selling tobacco products) to doing something that would raise eyebrows among other companies (such as selling alcohol on-premises).
One situation where we can see this in action is how companies source their materials or labor.
In the world of today, the global economy is inextricably linked. We are more connected than ever before, which has had a significant impact on how we conduct business. And thus, different companies are increasingly sourcing their materials and labor from developing countries where they can get lower prices. This means that companies need to emphasize ensuring that these suppliers comply with ethical standards. This is especially true for ensuring that employees are treated fairly and that manufacturers adhere to strict environmental standards.
This has had a knock-on effect on how businesses communicate with each other and their customers. Companies could focus on the bottom line in the past, and there was very little need for communication to go beyond this. However, there are many stakeholders within an organization’s sphere of influence, and ethical standards must be maintained across the board. We also have social media where a single post criticizing any company’s unethical action can severely affect the business.
This has led to companies taking a closer look at their internal operations and their partners, clients, and competitors. It has also led to increased transparency as everyone knows that any missteps will be highlighted in the media or on social networks almost immediately.
All of this means that business ethics are now more critical than ever before if you want to ensure your customer and client base and your company’s reputation.
Why do business ethics matter?
If you want to build a successful business, you should ensure that it works for everyone, not just your company. It’s important to consider how your business might impact the environment, the community, and the world.
Every industry has its ethical rules, and some business choices are unethical—like intentionally cheating people or lying to them. Other decisions may be less clear-cut, such as providing poor service or making inferior quality products but are still unethical at a basic level. A company with customers who are likely to be unhappy won’t have a long-term benefit in growing and thriving because those unhappy customers will tell their friends about the problem and spread bad word-of-mouth about the brand.
Here are some more specific reasons why business ethics matter:
They shape your company culture.
Business ethics are essential in shaping the culture of your business. They dictate what’s acceptable and what isn’t and how employees should act towards one another and customers.
For example, if you want your employees to collaborate well, your business ethics should focus on respect for one another’s ideas. If you want your employees to treat customers well, your business ethics should focus on kindness and helpfulness.
They’re important to customers.
Business ethics are also important in terms of customer perception and satisfaction. When customers hear that a company has good business ethics, such as being eco-friendly, they’re more likely to buy because they trust the brand more.
Businesses with bad business ethics such as lying about product features can damage their reputation over time and lose existing and potential customers.
They represent the business.
You will often have to make business decisions that will affect your business and other businesses as well. You may have to choose whether you want to collaborate with another company or not. Or, if you do, you have to build that relationship the right way for it to be mutually beneficial for both parties. This is where business ethics come in.
How you or your employees represent your company to other businesses is reflective of your business ethics. It’s best to move your feet forward in a professional manner when dealing with professional collaboration or contracts.
Examples of business ethics
There are a lot of different ethical codes and standards for business. If you’re going to run a business, it’s essential to know what’s expected of you in the community you operate in.
Below is a list of some standard ethical business practices:
Fair treatment of employees
Treat your staff as well as you would like to be treated. This includes offering them reasonable wages, ample time off, a reasonable benefits package, etc.
Strict compliance with legal requirements
You don’t have to violate the law to have an unethical practice—just failing to comply with that law could make you an unethical employer. But if you’re worried about this, check with your state’s department of labor for more information about legal requirements and how they apply in your industry.
Honest advertising and marketing practices
Advertising is often thought of as lying or misrepresentation, but it can also be done responsibly if done correctly. However, many companies use deceptive advertising by making false claims about their products or services—this is unethical and should be avoided. Advertisements are supposed to be truthful, so they violate this principle of ethical business practices if they’re not.
Avoiding conflicts of interest
Conflicts of interest can lead to bad decisions, but they also can affect how well you work with others and how much respect you get from others. This also reflects a poor standard that can bring down employee morale.
Honor your contracts with customers
If you do business with someone, that person has contractual rights and obligations, and you must honor those, or you may lose your customer base gradually.
Don’t trample on others’ intellectual property
Every business has ideas to protect, even if they are just the best for their particular product or service. Be sure to pay proper homage to these ideas when you take them in any form.
Deceptive pricing
The price of your products or services should be realistic and not misleading to potential customers, leading to lost sales and possibly lawsuits.
Businesses operate in a regulated environment, which means that there are rules to follow. The ultimate goal of these rules is to ensure the continued success and growth of the organization.
Suppose you’re still unsure and need more guidance to build and scale your business legally and ethically. In that case, you can check out our online courses on entrepreneurship and the basics of building businesses.
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