Business ethics is about going beyond what is legally required by law and is about doing what is morally right. Being an ethical business means operating in a way that is fair to its employees, suppliers, customers, and the environment. This approach can sometimes be counterintuitive for a business as implementing ethical policies can sometimes come at the expense of profits.
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Treating employees ethically can be achieved by providing them with a safe place to work and by paying them a fair wage. This does not mean just paying the minimum wage but is about paying them a fair wage that properly reimburses them for the work they do and that allows them to live a comfortable life.
Companies can also provide other financial incentives that benefit employees when the business performs well. Such as bonuses or a share scheme where employees receive shares in the company they work for. By owning shares in the company the employee directly benefits from share price increases and dividend payments when the business operating successfully.
One business that always tops the charts for employee satisfaction is Google. Not only do Google pay their employees well but they have a whole host of employee benefits that help create an excellent working environment for employees. Some of the benefits include free food, free medical and dental care, gyms, money towards student loan payments, flexible working hours and excellent communal spaces where employees can relax and socialise. Google does not have to provide these things by law but they do so in an attempt to be more ethical and treat employees well in the hopes of them being happier and more productive at work.
The second step to being more ethical is treating suppliers well. Paying fair prices and making payments on time are ways a business can act ethically towards their suppliers.
Fair trade prices have been established to ensure suppliers are paid a fair price for the materials they produce and sell. A popular industry that has fair trade products is the coffee industry. If a product has the fair-trade logo on the packaging this indicates that among other things the business has paid the grower fairly for the coffee, they have produced. The fair-trade logo has become a symbol that a business is acting ethically towards suppliers.
Ethical sourcing means that materials have not been sourced through the exploitation of workers and that environmental and social impacts have also been considered.
One excellent example of a business that has a track record of treating their suppliers well and sourcing goods that are ethically produced and grown is Lush. Lush has an ethical buying policy that outlines exactly how they treat their suppliers, covering things such as making sure their suppliers have good workers’ rights, safe working conditions (including no child labour), that the products they buy are never tested on animals and that the materials have been produced in an environmentally sustainable way. By having these policies Lush is taking a stance against suppliers that act unethically in turn increasing their ethical credentials. Lush has built a business around treating their suppliers well but mainly around the ethical sourcing of the materials that go into their products.
Paying their fair share of taxes is another ethical approach to business. Tax payments can be substantial for major corporations and ensuring these are paid fully is vital if the business it to be seen as ethical.
This is because many global brands use legal loopholes in the tax law to avoid paying tax legally. But remember what is ethical and what is legal are two different things and although tax avoidance is not illegal it is not looked upon favourably by consumers and governments and can instantly give a business an unethical reputation through negative press coverage.
Starbucks is an excellent example of this, as they paid 0 corporation tax in the UK in 2011, which resulted in a public boycott of the brand and an eventual payment of 20 million pounds to HMRC. Companies paying their fair share of tax is a hot topic and if the correct tax is not paid it can instantly impact a business’s reputation.
Ethics vs Profits
Many argue that being ethical comes at the expense of profits. This is because for a business to pay workers well, source ethically produced materials, pay suppliers fairly and pay their share of tax all means increased costs to the business, which in turn can have an impact on their profit margins in comparison to businesses not taking an ethical approach.
However, there is a strong argument that there does not have to be a trade-off between ethics and profits as many businesses can recoup these increased costs because ethical credentials allow a business to charge premium price for their products in comparison to their unethical rivals. Plus, an ethical business also benefits financially from things such as improved public opinion, a better brand image and increased customer loyalty due to the business having values that align with their customers.
In fact in today’s climate where customers are much more aware of how businesses operate, it can be financially costly not to take an ethical approach to business as companies are increasingly exposed in the press and most noticeably on social media when they act unethically and take advantage of employees, suppliers and the environment.