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Friday, October 15, 2021

Business Ethics – How important is it for your company?

Business Ethics can be considered as the implementation of adequate business policies in order to tactfully manage controversial and conflicting issues. Such issues could include a variety of things such as insider trading, corporate social responsibility, bribery, corruption, business governance and fiduciary duties. Business Ethics can then be essentially understood as a compilation of laws and norms that help organize a business and foster a sense of trust between the clients and the organization.

Why Business Ethics is important

Business ethics as a concept arose in the 1960s. It was borne out of the decade’s increased attention towards social issues. Business ethics thus gave birth to a more socially aware customer base where the aim was to construct a consumer-oriented society that dealt with issues like social and environmental causes and corporate governance. The business ethics definition and connotations have changed drastically since its inception. Business ethics principles therefore do not deal in binaries of black and white-morally wrong or morally right any more. It attempts at maintaining a fine line between what businesses must do in order to remain ethically relevant while keeping up with their competitive edge over other businesses.

Thus governing norms are important because they tend to have lasting impressions on many fronts. A company’s reputation might be at stake with the increased awareness towards governmental, social and environmental issues, whereby an investor or a potential customer could back out if they spot a company partaking in unethical business practices. Like a person who owns stakes in the company cannot sell the share ones faced with a cut in salary, because he/she shall be privy to insider information. Similarly there could be a data breach on part of the company or a customer’s privacy could be impinged upon due to poor corporate governance. Business ethics helps effectively handle all of these issues and prevents the company name from being demeaned.

What kind of practices does business ethics restrict?

A typical case would be makeup companies which violate their own ingredient list in the name of organic products. For example if a certain brand called Eco Beauty claims to make a green skincare range but tampers with its ingredient list to hide the ingredients that do not conform with their company values, it would be considered as a violation of business ethics. Similarly if a certain company claims to provide a certain health benefit such as fat loss or hair growth on the intake of the product, but in reality has nothing to do with the desired effect, it would be considered as a violation as well. Many companies have been running for years with various malpractices running within the operations of the brand. Sometimes companies leave off certain information from the label of their product in order to alleviate litigation charges or get approved by the FSSAI. Business ethics in the office could help immensely in certain cases. If the delivery of a certain washing machine is taken for example, every part is shipped distinctly. If one part at the quality control department does not get a clear pass, ideally every other shipment should undergo a check. However since the shipment window is small, sometimes the brand goes ahead without quality checks, relying on the fact that the other parts are defect free. This could be considered a violation of corporate ethics because in case a certain part is faulty, the company would receive immense backlash on the end of the customer. Hence to avoid a blow to the reputation of a brand name, business ethics are something that must be religiously followed, in order to create a sustainable brand image in the market.

The problems faced while formulating business ethics principles: 

In order to formulate necessary business ethics it is important for companies to function over feedback. For necessary feedback companies then have to rely on employees to report any malpractices or unethical behaviour by others. Employees however often fail to do so in fear of a backlash. So the hindrances of unethical behaviour stems from within the organisation itself. 

 In 2021, the Global Business Ethics Survey published by the Ethics and Compliance Initiative, surveyed over fourteen thousand candidates in workplaces over a vast stretch of ten countries about the different kinds of misconduct they could have faced while working. The stats were alarming. About 50% of the employees informed of having observed a malpractice or a misconduct of which 22% of the behaviour could be considered borderline abusive. About 86% of the candidates reportedly informed the organisation of the observed misconduct. When they were asked if they had faced a backlash for it, an alarming 79% of them mentioned that they had. Most of the HR management can confirm that employees cite fear of retaliation as one of their primary reasons for not informing about a certain unethical behaviour. Such outcomes could be prevented by the company by simply acknowledging an employee’s courage in reporting an incident and encouraging others to not shy away from it.


An investor or a stakeholder’s primary concern before investing in a business is whether the business practices ethically or not. Consumer fraud, abusive behavior or simply dishonest practices could all be considered violations to business ethics. The system which produces goods needs to be ethical alongside the means of production. Property of the company would entail not just produced goods, but also protection of human rights and intellectual property. Big business heads have been known to employ people from concentration camps so that they could be exploited under meagre wage and deplorable livable conditions, because regular human rights law doesn’t apply to them. Similarly plagiarism or theft of intellectual property otherwise stands as a big threat to a company’s ethics. The study of Business Ethics as a discipline and its eventual application for practical purposes hence, becomes a given.

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Josie Patra
Josie Patra is a veteran writer with 21 years of experience. She comes with multiple degrees in literature, computer applications, multimedia design, and management. She delves into a plethora of niches and offers expert guidance on finances, stock market, budgeting, marketing strategies, and such other domains. Josie has also authored books on management, productivity, and digital marketing strategies.

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