Ethics in Business

by Simon Webley

Ethics and business

Ethical values play an increasingly important role in business today.

Firstly, companies do not operate in a vacuum, but are part of a society which expects a certain standard of behaviour from businesses. According to Ipsos–MORI research in September 2006, 83 per cent of the British public say they consider that a company’s social responsibility is an important factor when deciding which product or service to purchase. At the same time, 67 per cent believe that industry and commerce do not pay enough attention to their social responsibilities.

Companies require what is often called ‘a licence to operate’. In other words, they need the approval of society in order to continue doing business. People expect companies to look after their staff and tell customers the truth. They also increasingly expect companies to address their environmental impacts and make sure that the people who make their products are treated fairly, wherever the company operates.

Secondly, ethical values are relevant in providing guidance to staff in situations where it is not clear what is the right thing to do. Employers cannot take for granted that their staff understand what ethical standards are expected of them in carrying out their work on behalf of the company. Provision of guidance is therefore essential.

An organisation’s core ethical values and standards should underpin everything that it does and the way its employees conduct their everyday business. Business ethics is about ‘doing things ethically’.

Ethics issues

Some of the key issues addressed in current codes of business ethics are bribery and corruption, gifts and hospitality, conflicts of interest, diversity, health and safety, environmental stewardship, and political donations and lobbying. According to IBE/MORI research published in October 2006, the three major areas of public concern are speaking out/whistleblowing (32 per cent), environmental responsibility (32 per cent) and discrimination in treatment of people (31 per cent). Executive pay (27 per cent) and harassment and bullying in the workplace (25 per cent) also cause the public concern.

Among newer business ethics concerns is supply chain management, which is increasingly important for companies, as consumers learn more about the potential environmental and social impact of the way the products they purchase are produced. Other concerns include customer data protection, work-home balance and the responsible treatment of suppliers.

As well as being asked to identify and address their wider impacts on society, companies have been under pressure to consider ‘product responsibility’: for example, the nutritional value of the products of fast food companies has come under public scrutiny, while alcohol companies are being asked to consider their responsibility for ‘binge drinking’ by young people.

Ethical dilemmas

An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. Ethical dilemmas make individuals think about their obligations, duties or responsibilities in an organisation. These dilemmas can be highly complex and difficult to resolve.

Easier dilemmas involve a right versus wrong answer. The majority of people will agree, for example, that it is morally unacceptable to pretend that someone else’s work is their own. However, complex ethical dilemmas often involve a decision between right and right. An example is where you uncover a colleague’s misconduct (say, fiddling expenses). You have a duty to your employer to report it, but also a duty to be loyal to your friend in a situation that could lead to his or her dismissal.

Some companies provide employees with ‘ethical tests’ to help them to make decisions. These might involve a series of questions to ask yourself, such as

Is it legal?

  • Is it consistent with the company’s code of business ethics?
  • What would my mother think?
  • How would I feel about it being on the front page of tomorrow’s newspapers?
  • Would my decision be considered fair by those who are affected?

CSR and SRI

How an organisation approaches the social and environmental impacts of its business operations, combined with its voluntary contribution to the wellbeing of the global and local communities in which it operates, is often known as Corporate Social Responsibility (CSR). It is often about ‘doing ethical things’. It is preferable, however, to talk about Corporate Responsibility (CR), implying a wider concern, rather than using the more limiting ‘social’ tag.

An organisation cannot be genuinely responsible without an embedded and inherent culture that is based on ethical values, such as trust, openness, respect and integrity.

Socially Responsible Investment (SRI) can be traced from a few ethical funds that were started in the 1980s to an estimate at the end of 2005 of £6.1 billion invested in the stocks of companies considered to behave responsibly.