According to a 2021 global survey conducted by the information management solutions company OpenText, a growing number of consumers look for companies with ethical and sustainable business practices. The survey reveals that 88% of consumers prefer to buy ethically sourced products, and 83% are willing to spend more money on these goods.1 As a result, many companies are striving to increase transparency and adopt ethical business practices.
However, making ethical decisions isn’t always straightforward. Laws and professional organizations dictate some ethical standards, but corporations often have to make decisions that have no obvious right or wrong choice. In these cases, you may wonder, what are ethical business practices, and why are they important? This article covers the definition of ethical business practices, methods to apply these principles in the workplace, and why business ethics matter.
What are ethical business practices?
Ethical business practices involve rules and codes of behavior that apply to everyday business operations and policies.2 They shape how an organization interacts with customers, stakeholders, staff, the media, and the environment. Under this type of system, it’s believed that all employees are responsible for upholding their company’s values.
Organizations teach their employees about ethical business practices through formal codes of conduct, ethics pledges, rules, and training programs. Additionally, corporations often model ethical behavior informally through the actions of leaders, the company culture, and the treatment of staff.
Ethical business practices can cover every aspect of a company’s operations, from advertising to sourcing materials. Examples of some ethical principles include:
Companies collect vast amounts of data from customers and staff, such as addresses, credit card information, and transaction histories. But many businesses fail to keep this information private and secure. In 2021 alone, over 22 billion records were leaked in 4,145 publicly disclosed data breaches.3
Businesses have an ethical obligation to safeguard the privacy of data subjects. Investing in top-notch cybersecurity measures can help prevent leaks. Additionally, the Federal Trade Commission regulates consumer data security as part of the Federal Trade Commission Act, which bans misleading business practices.4 The commission requires companies to be transparent about how they plan to use and store collected data. For instance, it’s unethical for a business to sell customer data or add people to email lists without their consent.
According to Pew Research, 67% of Americans believe that large businesses aren’t doing enough to reduce the effects of climate change.5 But many ethical companies of all sizes have already embraced eco-consciousness and sustainability as a core part of their business models. These eco-friendly organizations implement many practices to reduce or eliminate their impact on the planet.
For instance, many sustainable businesses decrease waste by using recycled materials to create products. Companies can also donate money to environmental nonprofits and host paid staff volunteer days to clean up local parks and rivers. And research from the International Energy Association shows that hybrid and remote work arrangements reduce energy consumption for employees who live more than three miles from their jobs.6
Diversity, equity, and inclusion
Inequalities are present in many companies worldwide. In a 2021 survey by the International Labour Organization, only 25% of workers reported that women made up 40% or more of their company’s top management. Additionally, 33% of respondents said that no people with disabilities held senior roles in their organization.7 Ethical business practices counter this troubling trend by embracing diversity, equity, and inclusion, otherwise known as DEI.
Companies that embrace DEI principles increase their staff’s performance and capabilities. Research shows that cultivating a diverse workforce has many advantages. For instance, businesses with executive leaders from various ethnic backgrounds tend to outperform their peers financially. Similarly, the highest-performing companies tend to have more women in top leadership roles.8 Also, a survey by the consulting firm BCG revealed that hiring leaders with varied perspectives can drive innovation in the workplace.9
Companies can support DEI by recruiting and promoting employees from a wide range of cultural and social backgrounds. Additionally, businesses should take steps to improve accessibility, like mandating the use of closed captions during video conferences. Many employers also provide training to prevent bias and discrimination in the workplace. These measures are intended to ensure that all employees are treated with respect.
Companies rely on their staff to attract customers, create products, and perform many other essential services. Ethical business practices include treating employees with compassion and fairness.
The Occupational Safety and Health Act requires companies to provide healthy and hazard-free working conditions for staff.10 Additionally, some organizations require business professionals to prioritize worker safety. For example, the American Staffing Association’s code of ethics mandates that members must assign their employees to safe work environments and ensure that they receive necessary training.11
Why are ethical business practices important?
Many ethical business practices are optional, but adopting these policies can have significant benefits for companies, such as:
Better customer relationships
People prefer to support businesses that act with honesty and integrity. According to Salesforce’s 2019 State of the Connected Consumer Report, 80% of customers report that they have more loyalty to companies that they consider ethical, and 68% refuse to buy products from businesses with poor ethics.12 Ethical business practices can help companies attract and retain clients.
Improved company culture
Ethical business practices can nurture positive and welcoming company cultures. According to the 2021 Global Business Ethics Survey published by the Ethics and Compliance Initiative, employees are more likely to report ethical lapses in the workplace if their company has a strong company culture.13 Reports of misconduct can help companies eliminate workplace discrimination and comply with government regulations.
Increased social and environmental impact
Companies with ethical business practices can make a tangible impact on their communities and the environment. Ethical actions like using sustainably sourced materials and minimizing travel can help mitigate deforestation and climate change. Also, businesses that donate to charities can support social justice and other vital causes.
Enrich your knowledge of business ethics at Marquette University
Adopting ethical business practices takes time, dedication, and often money. But doing the right thing has many benefits, like boosting a brand’s image and improving employee satisfaction.
You can enhance your ethical decision-making by pursuing an online Master in Management (MIM) at Marquette University. You’ll study the latest ethical dilemmas and learn new strategies to implement business ethics in the workplace. Contact an admissions outreach advisor today to explore how the Online MIM program can advance your career as an ethical business leader.
- Retrieved on May 4, 2023, from opentext.com/about/press-releases/opentext-survey-shows-increase-in-demand-for-ethically-sourced-goods
- Retrieved on May 4, 2023, from files.eric.ed.gov/fulltext/EJ1219282.pdf
- Retrieved on May 4, 2023, from securitymagazine.com/articles/97046-over-22-billion-records-exposed-in-2021
- Retrieved on May 4, 2023, from ftc.gov/system/files/documents/reports/privacy-data-security-update-2018/2018-privacy-data-security-report-508.pdf
- Retrieved on May 4, 2023, from pewresearch.org/short-reads/2023/04/18/for-earth-day-key-facts-about-americans-views-of-climate-change-and-renewable-energy/
- Retrieved on May 4, 2023, from iea.org/commentaries/working-from-home-can-save-energy-and-reduce-emissions-but-how-much
- Retrieved on May 4, 2023, from ilo.org/global/about-the-ilo/newsroom/news/WCMS_841085/lang--en/index.htm
- Retrieved on May 4, 2023, from mckinsey.com/capabilities/people-and-organizational-performance/our-insights/delivering-through-diversity
- Retrieved on May 4, 2023, from bcg.com/publications/2018/how-diverse-leadership-teams-boost-innovation
- Retrieved on May 4, 2023, from osha.gov/workers
- Retrieved on May 4, 2023, from americanstaffing.net/asa/asa-code-of-ethics/
- Retrieved on May 4, 2023, from salesforce.com/news/stories/state-of-the-connected-customer-report-outlines-changing-standards-for-customer-engagement/
- Retrieved on May 4, 2023, from ethics.org/wp-content/uploads/2021-ECI-GBES-State-Ethics-and-Compliance-in-Workplace.pdf