Running a business requires constant consideration of any legal implications that your actions may have, however, there is also an underlying ethical responsibility towards all the procedures and practices, which can make or break your social perception as a brand. 

What are business ethics?

Business ethics are a set of guiding principles that organisations should follow to create a strong reputation within their industry. These principles relate to any ethical dilemmas or controversial issues faced by a company. The actions businesses take in response to these dilemmas and controversy are the defining factors that can build trust and respect with consumers, which can be developed through the implementation of action, procedures and clear communication.

Business ethics is a multifaceted concept that integrates basic legal principles with the ethical traits of humanity. By law, concepts such as minimum wage, environmental conditions and insider trading are strictly regulated. Other concepts (including but not limited to) treatment of employees, ethical partnerships and producers and honest practices, all fall under the category of business ethics.  

Why are business ethics important?

Business ethics are used to outline and guide the acceptable behaviours of a business beyond the regulations implemented according to law. Business ethics are vital for an organisation to promote integrity with employees and earn trust from any key stakeholders, including investors and customers. 

If a business does not follow ethical procedures the company will quickly lose customers and sales due to loss of trust. This can potentially cause harm to employee retention and business sales and operations. Without business ethics, the company may also be subject to a higher level of scrutiny from government agencies which can result in vendors questioning their connection and support of your business. 

Business ethics evolve over time according to the social consensus on the each individual matter, therefore, it is important for business owners to understand their evolving social responsibility towards controversial topics such as climate change. To be an effective ethical business there are 12 key ethical principles which are vital to follow:

1. Honesty.
2. Fairness.
3. Leadership.
4. Integrity.
5. Compassion.
6. Respect.
7. Responsibility.
8. Loyalty.
9. Law-Abiding.
10. Accountability.
11. Transparency.
12. Environmental Consciousness.

Ethics and Sustainable Development Goals (SDG) 

Sustainable Development Goals (SDGs) were adopted by the United Nations in 2015. According to the UN there are 17 goals which act as a “universal call to action to end poverty, protect the planet and ensure that by 2030 all people enjoy peace and prosperity”. 

Business ethics has a fundamental role in achieving these goals as the leadership of a business contributes to the global impact of various ethical initiatives. The type of ethical business decisions can impact economic growth and employment, technology and innovation, financial investment sources and the value chain. 

What is Corporate Social Responsibility?

Corporate social responsibility is a type of business model that companies can use to guide their operations to minimise the chance of their actions from having an economic, social or environmental consequence; therefore systemising and promoting positive business ethics in practice.

Ethical Leadership 

Leadership governs the overall ethics of the company and it is therefore vital to ensure that the person in the leadership role must act according to ethical leadership practices.

Aspects of ethical leadership

1. The leader as a steward - able to assess ecological and cultural environments and is a guardian of social, moral, and environmental values and resources.

2. The leader as a global citizen - supports the idea of efficiency driven organisations with the intention to create thriving communities and a good society whilst being concerned about civic health and stakeholder needs.

3. The leader as social agency/architect - ability to initiate and support value-conscious and sustainable change while designing an inclusive culture with management and monitoring processes that support the achievement of a shared vision and integrated bottom line.

4. The leader as storyteller and meaning maker - creates shared systems of meaning, sense making, and dialog. As a communicator of meaning a leader can promote individual and organisational responsibility.

5. The leader as visionary - appeals to stakeholders and gives organisations directions for linking people and issues, enabling a common purpose that balances values creation, sustainable business models and the economic success of nature and society.

The first step to having an effective ethical business is to have several guidelines in place for your employees to understand how their actions have legal and/or ethical implications in the workplace. Having an effective code of conduct is a structured way to enforce ethical behaviour throughout the entire company. Business Kitz offers a fully customisable Code of Conduct Template, which will allow you to maintain a structured work environment.

Legal Advice

There is a fine line between acting according to business ethics, and acting according to the law. If you are unsure which practices are governed by law, our sister company, Legal Kitz can assist you. To arrange a FREE consultation with one of their highly experienced solicitors, click here today, or contact us at info@legalkitz.com.au or 1300 988 954.