Business ethics is about the moral values, principles and standards that govern and inform how companies conduct themselves and how individuals behave in relation to their work. It covers everything from day-to-day decision-making to long-term corporate strategy and beyond. Ethics shapes and underpins how a business acts towards employees, investors, customers, suppliers and wider stakeholders including society. Issues also change and evolve over time in line with society’s expectations of business. Human rights and the environment, for example, are now ethical issues in ways that would have been inconceivable to companies twenty years ago.
Why does business ethics matter?
Tackling business ethics is good corporate governance and makes sound business sense. Ethics can have a considerable impact on a company’s brand value, reputation and social license to operate. Good business ethics has a multitude of further benefits from improving employee attraction and retention to reducing financial and non-financial risk.
Where do I start?
Values are a good starting point. Engage with employees and other internal and external stakeholders to explore how they view the organisation and the boundaries of its responsibilities. What do they like and dislike about what they see? What motivates them and what do they care about? What do you do well and where could you do better? What are you trying to achieve as a business? Use that information to work out a set of core values that reflect your organisation as it is right now and where you might want it to be in the future.
The values that define a company are typically a mix of ethical and business values. Integrity, fairness and transparency are ethical values while profitability, innovation and boldness are business values that don’t necessarily have an ethical dimension. Values don’t always fall neatly into one or the other category so quality, passion and teamwork, for example, may be ethical values or business values, depending on how you define them. As this illustrates, business ethics is rarely neat and tidy. Ethics is complex, challenging and full of grey areas.
After all, we don’t all agree on what ethics is or entails. Even if we can agree that a specific ethical value like integrity is fundamentally important, people will still interpret it very differently. One company’s products may be vegan because the business owners believe that eating meat is morally wrong. Another company may see vegan customers as a valuable market and make vegan products purely for business reasons, without any view on the ethics of eating meat. The board of a third company may have inclusion as a core value and believe that their customers should be offered choices that reflect and accommodate their diverse beliefs. In this case, the company may decide to introduce vegan products alongside their traditional products, if that is what their customers want. Three different organisations, three different interpretations.
Translating values into behaviour
Given that ethics is complicated and open to interpretation, it is important for companies to translate their core values into principles and standards of behaviour. These codes of business ethics (also often known as codes of conduct) provide rules and guidance for employees and other stakeholders on how they are expected to behave and what they, in turn, can expect from the company. They provide clarity and make it simpler for employees to make decisions.
Companies must decide for themselves what to include in their code. Some codes focus predominantly on compliance with legislation, while others cover a much broader range of ethical issues that go well beyond legal requirements. Some encourage employees to think for themselves, while others give specific guidance on a series of key issues. Company codes also vary enormously in length, style and approach. The larger and more complex a business is, the more valuable a code is likely to be.
Is having a code of ethics enough?
Sadly not. Identifying values and producing a code of ethics is a starting point. Anyone expected to adhere to your code needs to understand what it means in practice. Importantly, they also need to remember to refer to it when faced with a difficult ethical decision.
What you really want is to help your employees develop ethical literacy. That way, they can make sound decisions under any circumstances, using your code for guidance. This applies as much to a board director as to a shopfloor worker, because all of us make some form of ethical decisions on a daily basis. It is important for companies to encourage everyone to take personal responsibility for ethics, whatever their role within the organisation. Using ethical tests and sharing dilemmas with employees are two effective ways to build ethical literacy as part of an ethics programme.
Ethical tests and dilemmas
Companies sometimes publish a series of questions that employees are encouraged to ask themselves as part of their ethical decision-making. Known as ethical tests, these questions nudge individuals into seeking help and/or thinking about decisions from different or broader perspectives. They include questions like:
An ethical dilemma is a scenario with no easy answers, designed to encourage your employees to think about ethical decision-making. A standard approach would be to introduce a dilemma and give employees time to come up with a response on their own or in groups. After getting their thoughts and feedback, you can then talk them through ways to deconstruct the dilemma. That way they can explore how to recognise, think about and tackle any ethical dilemma they might come across in future, such as the example below:
An accidental discovery
Your company has just awarded a major contract to a new supplier and your line manager, Susan, was closely involved in that decision. You pop into her office to get a copy of the contract for the CEO, but your manager isn’t there. Spotting a thick envelope from the supplier among some papers on her desk, you open it and scan the contents, assuming it is the contract. You quickly realise your mistake – it is a personal letter of thanks to ‘Auntie Sue’ and plane tickets in the name of her and her husband. What do you do?
Teaching employees to unpack ethical dilemmas helps them to develop and improve their critical thinking skills. This is a particularly valuable skill in our often-polarised modern world, where people can be quick to judge and condemn those with viewpoints different from their own.
The importance of speaking up
Ethical literacy alone is not enough. An organisation also needs an open culture where employees are encouraged to disclose and discuss ethical issues. This won’t happen unless they feel that it is safe to speak up and that their concerns will be listened to and, where necessary, acted upon. Achieving this level of trust is no mean feat, but the results are likely to be transformative.
Think of all the corporate scandals that might be avoided if companies were to welcome and listen to employee worries and warnings, then address them before they snowball. And think of all the opportunities that might come a company’s way by tuning in to the different perspectives and wisdom of its workforce and stakeholders. Of course, this presupposes that the board and senior management understand the value of ethics, are ethically literate and are enlightened enough to be open to feedback and criticism. And that’s where this work starts.
Finally, here are a couple of scenarios to help demonstrate the possible impact of a company’s culture on the future of its business. Which of these two companies would you prefer to run or work for?
Scenario 1: Reckless and Sons Limited
Martin is a junior manager at a production plant for electronics manufacturer Reckless and Sons. The company has received a major order from a German retail chain after their usual supplier was unable to deliver to their tight deadlines. Martin has raised concerns about the company’s ability to deliver the products in time while maintaining proper safety procedures, but the boss – Mr Reckless senior – has refused to listen to his “foolish” concerns and made it clear that he “won’t tolerate failure”. Mr Reckless has offered the workers a cash bonus for meeting the deadline and everyone except Martin seems happy to proceed. Martin worries that the production line workers and the equipment are being stretched beyond their capacity, with potentially lethal consequences. Martin’s night shift replacement arrives and he clocks off, crossing his fingers that nothing bad happens and resolving to start looking for a new job in the morning.
Scenario 2: New Horizons plc
Fatima is in middle management at publishing company New Horizons. The Black Lives Matter protests have made her uncomfortably aware that, unlike her, all of the senior management at New Horizons are university educated white men of a certain age. Feeling frustrated by the situation, she decides to try out the company’s ‘open door policy’ and makes an appointment with the CEO. He welcomes her, listens to her perspective and, to her surprise, asks if she will help and advise him on how to tackle the situation. A year later, Fatima is heading up the company’s new diversity and inclusion taskforce and overseeing changes at all levels of the organisation. The board composition is starting to change, and the company has received accolades from advocacy groups for the honest and transparent way it has communicated with employees and taken action.
Too many companies regard business ethics as nice to have rather than essential and don’t get around to addressing it properly until a crisis hits. Simply publishing a set of values and a code isn’t enough to safeguard companies and their people in an increasingly complex world. Furthermore, there are real advantages to tackling ethics, building an open culture and both listening to and learning from your employees and other stakeholders. Today might be a good day to start to think again about ethics.
Sophie Hooper Lea. GameShift Partner.
Sophie is part of the Purpose and Sustainability team at GameShift. Having worked in sustainability and business ethics for more than 20 years, Sophie understands the complexities of balancing profits and principles. A creative problem-solver and sustainability enthusiast, she is keen to find and explore ways to build better futures for all of us.