We, as the general public, usually expect companies to behave responsibly when they are carrying out their business activities.
The concept of business ethics includes the moral principles (what is right or wrong) that ought to be considered by the owners, investors, directors, managers and workers when making business decisions.
Ethical issues are extremely important for any business with tremendous impact on the firm’s reputation, brand image and long-term profitability. Socially responsible and ethical businesses can easily attract and retain good quality workers, attract new customers and retain existing ones, receive good publicity and have positive Public Relations (PR).
Examples of ethical business practices
Many businesses on the market are very ethical. Ethical firms act in a socially responsible way towards their stakeholders, especially customers, employees and the local community. Examples of ethical objectives include:
- Be truthful about your products. Some businesses will never try to lie, mislead or cheat their customers. They will always aim to provide goods that are safe to use.
- Pay on time and in full. Ethical firms choose to pay what is due to their workers and suppliers, and they will pay it on time. They also treat their suppliers and workers fairly by paying reasonable prices and offering decent wages, and providing good terms of trade and conditions.
- Educate suppliers. Businesses need to make sure that ethical practices are followed by all parts of their supply chains, starting from suppliers through distributors up to the sales people. Apple is a company which pays a lot of attention to qualities of their supply chains.
- Trade fairly. Fair Trade is a global movement that tries to ensure better prices for producers, fairer working conditions and sustainability for producers in less developed and developing countries. Many famous business organizations such as Starbucks or McDonald’s have set up their own charitable foundations to help the local communities.
- Protect natural environment. A business can protect the natural environment by using resources efficiently, recycling raw materials and minimizing waste. Ethical businesses always consider the environmental impact of their business operations publishing their efforts in annual Environmental Audits.
- Do not window-dress final accounts. Ethical businesses are accurate and realistic about their financial performance. They refrain from presenting company’s financial results in a way that is too favorable, and prevent their accountants from boosting short-term performance of the business to make the numbers look better.
- Conduct Social Audits regularly. Ethical businesses are prepared to have external Social Audits conducted and examined by an external agency. The Social Audit reports a firm’s involvement in community projects, the level of pollution caused, the efficiency of its waste management processes, and its ability to provide staff with healthy and safe working environment.
Examples of unethical business practices
Although business ethics is not always enforced by law, it has a vital role to play in business decision-making. Some businesses, however, do not behave in an ethical way. Some examples of unethical business practices include:
- Confusing customers. Deliberately failing to tell customers about hidden extra costs, or creating so many complicated choices to make price comparisons literally impossible.
- Lying. False advertising of goods and services. Providing goods and services that are unsafe for use. Non-disclosure of risks associated with the product.
- Offering poor working condition. Employing workers below the legal minimum age and allowing them to operate in unhealthy working conditions.
- Discrimination. Unfair remuneration payments to employees based on gender, nationality, ethnic group, religion and age.
- Hiring child labor. Unethical businesses will try to use child labor to lower labor costs by producing in sweatshops, where the working environment and working hours do not meet health and safety standards. In many countries, legislation also exists as a form of protection against those businesses that try to exploit young workers.
- Insider trading. Trading of company’s stocks by individuals (usually the CEO and directors) who have knowledge of sensitive non-public information. So, they take the advantage over other investors on the market who do not have access to that kind of insider knowledge.
- Harming natural environment. Improper waste disposal. Exceeding pollution levels set by the government.
- Corruption. Dealing with corrupt suppliers or governments. Offering bribes.
- Infiltration marketing. Writing positive (but completely made up) comments on shopping portals by acting as ordinary customers.
- Ambush marketing. Associating yourself with a global public event without actually becoming the official sponsor and incurring any sponsorship costs.
- Pester power. Target young and innocent groups in the society by advertising to children, so they nag their parents to buy them toys, snacks or computer games.
- Dumping. Selling products at the very low cost to drive out competition from the market.
Businesses must make sure that they satisfy to the fullest extent the interests of all stakeholders, whether they are individuals, organizations or the local community.
