We all have a moral compass and code of ethics that guide us in daily decision-making. Ethics aid us in deciding if something we do is right or wrong. Individual morals are generally formed during childhood and the developing years and are significantly influenced by family, religion, friends, education, and the surrounding community. Still, they may change somewhat with maturity and because of life experience.
Businesses are made up of people, so ethics will play a decisive role in any company, and they apply to all aspects of how a business is managed.
Can Ethics and Business Co-Exist?
Ideally, companies should have an ethical code by which they do business. Personal ethics will be a part of business ethics, but business ethics go beyond individual morality. They are a shared philosophy that guides company operations and is vital for providing employees with guidance on how to behave in a variety of circumstances.
While it may be assumed that personal ethics and business ethics are synonymous, there are some differences. Personal morality is determined by the environment people grow up in and their personal life experiences. What may be right for one individual may be wrong for another contributing to gray areas and business disputes. Companies have numerous people working for them, each with an individual moral compass.
In this sense, business ethics will reflect the company’s philosophy of shared moral values together with compliance with pertinent legal standards for the specific business.
Business vs. Ethics
Some may maintain that business success is measured in profit, and therefore ethics are incompatible with good business management or at best take a backseat as they can limit the profitability of a company. Limited profits will negatively influence a business’s perceived success.
Dedicating resources and committing to ethical management will inevitably limit profit-making opportunities.
Some companies may be in direct conflict with ethics due to the nature of the business itself. Restaurants are prime examples in that they serve meat and fish that require the killing of animals. Fuel companies that destroy and pollute are another example and will remain so until fuels are replaced by sustainable energy alternatives. Automobile industries share the same issue.
What Determines an Ethical Business?
While there is no specific or commonly held definition for what an ethical company is or is not, today most would agree that ethical businesses do not negatively impact the environment or society. Many companies will even adopt a social cause to positively impact where they do business.
Do Truly Ethical Businesses Exist?
For a business to be truly ethical is almost impossible due to the profitability issue. Many companies may publicize an ethical stance on paper but do not translate an ethical philosophy into concrete actions. Growing popular sentiment for sustainability across the globe is stimulating a push for companies to adopt ethical practices, especially regarding environmental issues.
As ethical operations become more important to more people, companies that embrace business ethics may experience an increase in customers which will aid profitability. Already some businesses may have survived thanks to a commitment to sustainability and business ethics.
Smaller pet food companies that use only sustainably resourced ingredients are an example as is a powerhouse company like Starbucks that uses only 100% sustainably sourced coffee implementing ethical practices during the phases of planting, harvesting, and processing. Starbucks also uses third-party verification for its ethical sourcing.
Walking the Tightrope of Pursuing Business Ethics
What is considered to be unethical in business is no longer limited to non-compliance with existing laws. Now what is morally proper is also the issue regardless of legislation. Tax avoidance through loopholes, employee exploitation, and failure to respect and protect the environment are unacceptable to society and society is watching.
Balancing business and ethics is now an incredible challenge as customers become more demanding that ethics be prioritized. Companies may be tempted to ignore the moral compass because of a profit reduction, and this may work in the short term.
Yet, business ethics continue to increase in importance for customers, hence businesses that do not place a premium on ethical practices may find that they lose customers and consequently their profitability as their unethical practices are made public.
By maintaining a strong brand identification with ethical practices, companies command respect for their services and products and can enjoy higher retention of their customers as the Starbucks example demonstrates. Initially, commitment to ethical practices may reduce profits, but as appreciation increases, companies may be able to command higher prices while increasing their customer base.
Having to choose ethical operations can induce stress and increase pressure on management. Ethical gray areas often due to personal perceptions will not lighten the load. Managing a company that prioritizes ethical operations is challenging, as management must find the balance between profitability and ethics.
Nonetheless, the call for ethics in business from consumers mandates that for businesses to remain profitable, ethics must be a priority.
