- What do we mean by Business Ethics?
- Business & Ethics
- 20 Reasons why business ethics are important
- 1. Improved reputation
- 2. Improved profitability
- 3. Better business relations
- 4. Encourage teamwork
- 5. Improved decision making
- 6. Increased employee retention
- 7. Lower expenses
- 8. Law compliance
- 9. Increased productivity
- 10. Customer loyalty
- 11. Community improvement
- 12. Maintenance of quality
- 13. Asset protection
- 14. Improved efficiency
- 15. Morale boost
- 16. Sales growth
- 17. Partnerships
- 18. Attract investors
- 19. Healthy competition
- 20. Sense of satisfaction
Simply, ethics are the standards of morality based on how we judge the behavior of a particular person. That’s why they are often described as the moral code. However, this “moral code” can be different from one person to another.
Similarly, ethics have also become an important part of the business landscape, which dictates the moral code of a business.
Technically speaking, ethics are not laws that need to be followed – Instead, they are standards that a business follows to uphold a moral code and build a good reputation. But why business ethics are important in today’s world? That’s what we will explore today!
What do we mean by Business Ethics?
There are multiple branches of ethics, and one of them is called “business ethics.” In short, these are a set of moral standards that dictate how a business should operate.
These ethics are adopted by the organization & are not enforced by law. Therefore organizations follow these ethics in business to improve their social reputation & build a desirable public image.
On a philosophical level, humans tend to have certain values to decide what is wrong and what is right. And when the same set of rules is designed on a business level. This dictates what is right and what is wrong for the business!
Business & Ethics
One of the key reasons why most businesses are established is to make profits. However, it is important to earn these profits through the right channels.
Otherwise, if a company has no business ethics, this may affect its reputation negatively. In turn, the company might lose public trust, which undermines both its success & profits.
Contrastingly, a business with a moral code is more likely to grow and succeed. After all, success is about attracting customers, and most customers are human beings who value a set of ethical standards.
So, if business ethics are important, what does it really mean?
Well, it means! Business ethics come with a lot of benefits for both the organization and society as a whole. And, they’re important for the success of any business.
For starters, an ethical business will look after its employees and even the community, which provides them with resources. If we didn’t have ethics in business, most of the products we see in the market would be frauds or phony!
I’m not saying that most businesses are ethical! What I mean is that business ethics necessitate that every company should provide value to the public. That’s because value equals brand loyalty, good public image, and eventually success!
20 Reasons why business ethics are important
So far, we have learned about ethics definition in business. Now, let’s take a look at 20 reasons why business ethics are important. And how They can benefit the organization, community, and customers!
1. Improved reputation
A recent study found that 60% of consumers claimed that their purchasing decisions are driven by the ethical values of the company. Furthermore, the study found that 42% claimed that they would stop buying products/services if the brand’s actions are against moral principles.
So when we talk about why business ethics are important! the first lesson is that it can affect what kind of reputation a company has. In other words, ethics can either improve a company’s image or ruin it.
On top of that, business ethics determine if customers will continue doing business with the brand or not.
2. Improved profitability
An unethical organization will soon find its reputation being tarnished in the eyes of customers. As mentioned earlier, a lot of customers can even stop buying the products/services once the company is deemed unethical.
If we look at the big companies such as Monsanto and Wells Fargo! Then, it becomes clear how their reputation was tarnished due to a lack of ethics. And this poor reputation ended up damaging their profitability as well!
That’s because a business reputation is directly linked to its success & profitability. When a company creates a good public image, it builds customer trust & loyalty. In return, this improves conversion rates and maximizes its profits.
This should be clear! A good reputation is the most important asset for any business.
3. Better business relations
A company with a positive reputation encourages other companies & brands to partner with it. For example, no one would want to deal with a company that has a poor reputation or is unethical.
However, other businesses would be more encouraged to deal with companies that are ethical and have a good public image. This is why business ethics are important!
Strong ethical business values ensure that both businesses can make good on their promise. As a result, this helps forge better business relations that lead to more success & growth.
4. Encourage teamwork
Business ethics include treating employees fairly & attending to their needs. When a business treats its employees ethically, it ultimately results in teamwork & better performance.
Also, ethical treatment of employees yields mutual trust & respect. And once that trust is established, we get a positive work environment. As a result, this helps businesses improve their overall performance/production, and achieve their goals.
5. Improved decision making
Another reason why business ethics are important is that it leads to strategic and improved decision-making. A business that follows a set of ethical rules ensures that all decisions made by employees & leaders are socially acceptable. As a result, all the major stakeholders can participate in the decision-making.
That’s because an ethical company is a company that has nothing to hide!
In other words, business ethics help create transparency & an open conversation. In return, this leads to better decisions that add to the growth and survival of a business.
6. Increased employee retention
An organization that follows business ethics also benefits from increased employee retention. When employees feel that their employers are treating them ethically and actually value their choices/rights. This encourages them to develop loyalty to the business, which in turn makes them stay with the company!
Let’s face it! Not everyone can stick with a company that lacks a moral compass. For example, if you’re an employee… Would you keep working for a company that is corrupt & lacks a moral code?
I bet you wouldn’t! Especially if there are other companies that are ethical and respectable.
Again, your self-image can be affected by whom you work for!
7. Lower expenses
If your employee retention is high, you don’t need to spend thousands of dollars on recruitment agencies. In return, this saves companies a lot of money, which reduces their costs.
Furthermore, an ethical business doesn’t have to waste money on law firms and lawyers to cover up its mess.
Another way through which business ethics can lower costs is that it allows an organization to make better deals with others thanks to its good public image.
8. Law compliance
Why business ethics are important? Because it allows an organization to ensure law compliance & thus avoid any hefty fines! For example, an organization that is ethically correct will comply with the law. It will also ensure the highest quality of products/services, and even files its taxes in time.
All of these things are a basic part of business ethics. And they help the company to prevent legal problems that might tarnish its image & value
9. Increased productivity
Good business ethics also play an important role in enhancing productivity. When employees know that they’re working for an ethical company! They’re more likely to work harder & more productively.
However, employees working at an unethical organization will have moral qualms. This may drain their motivation and energy at work. Thus, it leads to poor performance & productivity. So good business ethics are important to have a proud team of productive employees.
10. Customer loyalty
When an organization has loyal customers on its back, the only way forward is up! Apple is a classic example of this. Because it is a brand that enjoys exceptional customer loyalty! And it can be traced back to its high standards of business ethics.
In other words, a business that is governed by ethics is more likely to build customer loyalty. Again, business ethics help create a positive image for the public. This impacts potential customers & how they view a business brand.
In most cases, potential customers will trust a brand as long as its dealings align with decent human morals.
11. Community improvement
When a company contributes to the betterment of the community, its image & value improves as well. Moreover, this reflects its business ethics to the general public. All of this can help a company win the hearts of new consumers! And increase its brand awareness.
That’s because when improving the community, you directly improve the lives of people who live within it. Well, those people can become your future customers who keep your brand growing.
12. Maintenance of quality
Ethics in business ensures that quality is maintained at every step! Even in times of economic trouble or supply chain disruptions. This allows customers to enjoy the same high level of quality that they always had. On the other hand, it also fosters a good reputation and customer retention!
If we take Toyota for instance… you will realize that their business ethics helps them to build the best quality products for their customers.
After all the quality of products is a reflection of the company’s integrity & business ethics.
13. Asset protection
Another good reason why business ethics are important is that it offers asset protection! When employees follow a moral code – it means that they will protect and respect the assets of their company as well!
For example, employees will not waste precious company resources when it is not necessary. Such as making hour-long personal calls from the business line.
14. Improved efficiency
When a company follows a set of business ethics, it also encourages the company leaders to make better use of limited resources instead of wasting them.
For starters, this improves the efficiency of the company as it can better utilize its limited resources. It also helps the economy, community, and even the environment as resource waste is kept to a minimum.
In any business, one of the key metrics that determine its costs V.S profit can be led back to how effectively it uses resources.
15. Morale boost
The morale boost of employees is yet another benefit of business ethics.
If we look at the basics, they teach us to reward employees and treat them fairly. So when an employee is treated fairly and actually rewarded for their efforts, it ultimately boosts the employee’s morale!
And a direct result of this morale boost is better performance, more productivity, and good results.
16. Sales growth
Unethical practices may provide a temporary sales boost. However, it is not the answer to sustainable growth over a long period of time. The strategy of “easy win” is deemed to fail, and it doesn’t support consistent growth.
On the other hand, ethical practices ensure that a business continues to enjoy sustainable sales growth.
For example, a company may use unethical means to boost its sales! But it will only be a matter of time before the general public finds out. And when that happens, it can damage the long-term goals.
A business that actually follows a good business ethos will only make the highest quality products. This will increase its customer base, and in turn, lead to stable sales growth!
In the business world, it is very crucial to forge sustainable and long partnerships with other market players. This allows a business to improve its relations and even expand the marketplace.
But a company can only form good partnerships if its own reputation is built on good business ethics. For example, let’s assume that there is a company called ABC whose reputation is very bad. Now, no other well-reputed company would want to partner with company ABC. That’s because this will undermine their own reputation.
However, a company with a good reputation will have a lot of options & could form partnerships with other brands easily. For example, a company like Intel enjoys a good market reputation due to its strong business ethics. Thus, it has a long list of partnerships with other companies.
18. Attract investors
Another factor that tells us why business ethics are important is that it helps attract investors. To foster an investment-friendly business environment, the company must operate based on a moral code.
Normally, If you were an investor, the first thing you would want to see in a potential company is that it is safe & has sustainable growth in the future.
Well, Both of these factors can only be achieved by following business ethics to ensure sustainable growth & brand integrity
19. Healthy competition
Ethics in business also pave the way for healthy competition. This is actually a good thing for customers and competitors. In fact, healthy competition means that customers will be free to choose the best product from multiple choices – Through this process, customers will be driven toward a company that is more ethical.
20. Sense of satisfaction
Working in alignment with business ethics creates a sense of satisfaction. In fact, we can even say that it is an end in itself & can help you get the satisfaction of doing the right thing.
Following business ethics creates a chain cycle in which every party is satisfied. This includes customers, vendors, employees, and so on. For example, a customer will feel safe knowing that the product/service they are buying is ethical and not involved in anything bad.
Furthermore, it will also help the employees feel satisfied when they get to work, knowing that they are actually contributing toward something positive and ethical.