Business ethics refers to the way firms behave with regard to conducting business. Business ethics involves following legal requirements for business, but, also involves considering issues which may be legal but not necessarily beneficial for society.
Business Ethics may involve.
- Treatment of workers, shareholders, stakeholders, suppliers etc
- Care not to mislead consumers and workers with misleading information and marketing campaigns
- Concern for the Environment. e.g. taking steps to avoid impact on environment – pollution and carbon footprints.
Key Principles of Business Ethics
- Honesty – being truthful in all business dealings, advertising, and communication.
- Fairness – treating employees, customers, and competitors equally and without discrimination.
- Accountability involves taking responsibility for decisions and their effects on others.
- Respect means valuing people’s rights, opinions, and diversity in the workplace.
- Legal – following law and spirit of law – compliance with legal rules and industry standards.
- Environmental – taking reasonable steps to reduce pollution and using resources sustainably.
- Social responsibility – contributing positively to society and the local community.
Does Ethics Conflict with Profit?
Ethics and profit can often come into conflict, but they do not always oppose each other. In the short term, a business might make more money by cutting corners, paying low wages, creating monopoly power, avoiding taxes, or harming the environment.
There is a risk that such behaviour creates a bad company image, but evidence suggests that even consumer boycotts, e.g. of Shell/Texaco offer limited impact on a firm’s bottom line.
In the long run, ethical behaviour can support profit. Companies that treat workers fairly, produce safe products, and respect the environment may be able to build customer loyalty and attract skilled employees. Ethical businesses are also less likely to face legal trouble or public criticism. However, it depends on the industry; something like a cosmetic or clothing line may have more ethically aware consumers, but when it comes to oil and banking, there’s too much profit to make a difference if a few consumers try to boycott.
Business Ethics and Marketing
Firms have been accused of advertising products in a way that does not do justice and seeks to mislead consumers. Many businesses say they adhere to voluntary guidelines, such as not advertising alcohol targeted at young people. Another example is avoiding negative advertising which seeks to demean rivals products.
Promoting the importance of business ethics may in itself be a clever marketing ploy. For example, firms such as the Body Shop, try to market itself as a firm who consider the wider community and environment, rather than being a run of the mill profit making firm.
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