Business ethics is the study of moral values and ethical principles in corporate organisations. The concept also involves issues that arise during the business activities. It can be defined as a study related to each individual’s habit and code of code, including the organisation.
Business ethics improves the law by describing acceptable behaviour beyond government control. Companies establish business ethics to promote employee integrity and win the trust of key stakeholders, such as investors and consumers.
Definition of Business Ethics and Its Importance
Business ethics are a set of principles, rules, and standards for conducting business. The term aids in deciding whether activities are morally right or wrong. Moreover, it is simply defined as the implementation of ethical business practices and policies in the workplace.
Scholars also defined the study as including potentially controversial issues, for example, corporate governance, discrimination, insider trading, bribery, corporate social responsibility, and fiduciary responsibilities.
The importance of business ethics goes beyond employee loyalty and morale or the strength of the bonds between the management team. Like any business initiative, the ethical operation of a business is directly related to short- and long-term profits.
An organisation’s reputation among the surrounding community and individual investors is paramount in determining whether a business will be a profitable investment or not. If a company is seen as unethical, investors will be less likely to buy its stock or support its operations.
What are the Benefits of Business Ethics in Business Organisations?
Following business ethics brings a plethora of benefits to business organisations. It will be helpful for the business in multiple ways.
Enhances and Upgrades the Company’s Reputation
Ethical behaviour in the company’s premises helps to create a positive environment. This positivity will be further continued in the marketplace. It will attract and introduce new customers to the brand. This will further build and enhance the reputation of the company. On the other hand, unethical practices will create a negative impression, resulting in dissatisfied customers.
Contributes to Worker’s Rights
Decades ago, the business class ruthlessly exploited children, women, and workers. The growth of small businesses was hindered in the marketplace due to a lack of ethics. This has further led to the need for ethical practice and equal rights for workers.
This is why government agencies were established to recognize the importance of labor unions. Business ethics have played a crucial role in accelerating worker’s rights. Furthermore, the company will witness employee retention.
Aids to Avoid Legal Issues
Often, company management gets tempted to cut profits, for example, refusing to fully comply with labor or environmental laws, ignoring risks to workers’ health, or using poor quality materials in the products. Due to this, businesses have to face penalties, including legal fees and fines or sanctions from government agencies.
This negative impression can lead to long-lasting damage to the business and its reputation, even more costly than legal fees or fines. The benefits of business ethics become apparent in these situations because companies that maintain the highest ethical standards are unlikely to encounter such situations.
Builds and Improves Customer Loyalty
Consumers usually take chances to let a business take advantage of them at least once. However, if the customer feels they are treated unfairly, for example, being overcharged, they may not visit again or be less likely to become repeat customers. A loyal customer base is one of the ways to long-term business success because servicing existing customers does not involve marketing costs, unlike going for new customer acquisition.
Attracts Potential Investors Toward the Business
Suppose investors know that the company they have partnered with has a high ethical priority and will operate ethically. In that case, they will have peace of mind knowing that their money is being used responsibly. Investors will get the assurance that their money is invested in the right place.
Additionally, it means they can relax knowing that they are not indirectly contributing to unethical behaviour. Good business ethics is also an attractive quality, meaning other investors are more likely to be interested in putting money into the company, keeping the stock price high, and protecting the company from repurchase.
Competitive Advantage in the Marketplace
When a company maintains its ethical behaviour, it tends to attract new customers. Moreover, it also encourages brand loyalty. This is the result of Unilever’s survey showing that 1/3 of consumers, i.e., 33%, choose to buy from brands that have a positive impact on society or the environment.
Therefore, business ethics is a type of ethical motivation in the workplace. It protects the organisation’s reputation by building a positive and productive work environment. Moreover, it firmly balances the wishes and needs of stakeholders.
Implementing business ethics will not only protect the organisation from significant risks but also let the business grow. It safeguards the business from breaches of laws or company standards and significant damage to reputation. By following business ethical practices, brands can set an example for the future generation of business.