Due to the very nature of business transactions and organizational growth, it’s not surprising that moral dilemmas arise each day in the business world. Ethics have long been an essential part of business, yet in recent years, there is increased pressure to ensure that all professionals—across all industries and levels—adhere to the moral principles and ethical guidelines in place. Ethical considerations not only impact an organization’s overall reputation and brand image, but its policies and guidelines can also affect its bottom line and long-term sustainability.
As ethical consumerism continues to trend worldwide and investor activism takes center stage, it’s become increasingly critical for businesses to prioritize ethical practices within their organizations. But what is business ethics, exactly, and what do modern frameworks for enforcing these best practices look like?
What Is Business Ethics? Beyond Compliance
Business ethics are the standards a business implements and uses to guide behavior within the organization and the decision-making process among leaders and employees.
Many of the moral principles and standards that are expected in any business environment have actually been codified into law. However, business professionals in today’s modern world and global economy are expected to go above and beyond compliance, consistently making intentional decisions that adhere to the organization’s values.
Commonly referred to as CSR, corporate social responsibility is a business practice that prioritizes accountability and self-regulation. It encourages businesses to acknowledge social and environmental issues as part of their overall organization. Given the rise of ethical consumerism, CSR is becoming increasingly important within the business landscape at large.
Principles of Business Ethics
According to Investopedia, there are 12 principles that underpin business ethics:
- Leadership – Business leaders are required to act according to the moral principles outlined by the organization, showcasing the importance of ethics in business.
- Accountability – At all levels of the organization, accountability should be a priority as everyone works to maintain ethical standards.
- Integrity – By holding the organization and all associated with it to a high standard, a business can achieve a respectable and admirable level of integrity.
- Honesty – An organization that values and prioritizes honesty often simultaneously enacts an open and transparent communications strategy, ensuring that all stakeholders are aware of valuable information.
- Respect for others – This principle requires businesses to prioritize dignity, equality, privacy and compassion.
- Transparency – Closely tied to honesty, transparency requires an organization to conduct all business as openly as possible and ensure stakeholders have the information they need to make solid decisions.
- Respect for the law – Leaders should work to follow all local, state and federal laws when conducting business for the organization.
- Loyalty – By making a commitment to ethical practices, business leaders can establish loyalty among the employees in their organizations.
- Fairness – Providing all involved in the organization with equal opportunity is one of the best ways to inspire loyalty and ensure long-term success.
- Compassion – A compassionate and empathetic approach to business allows an organization to prioritize the well-being of its employees and clients. This is another way to generate loyalty over time.
- Environmental concern – Recognizing the impact an organization can have on the local environment, businesses can work to address environmental concerns and promote sustainable practices.
- Responsibility – By maintaining accountability, leaders can inspire those within the organization to be responsible for their own actions. This sense of responsibility also translates well when corporate social responsibility practices are in place.
Why Is Business Ethics Important?
Business ethics don’t just guide the decisions of employees at an organization; these moral principles and business policies can actually have an impact on society as a whole. Ethical practices in business help an organization build trust, improve its reputation, attract and retain top talent, improve the workplace culture and foster long-term sustainability.
When an organization does not adhere to a strict set of ethical guidelines, there can be lasting detrimental effects. Some potential consequences of unethical behavior include financial losses, legal ramifications and damage to the brand’s image and reputation.
Types of Business Ethics
These are the core, overarching types of business ethics to consider:
- Personal ethics – The moral principles that guide an individual’s behavior, which can influence their actions within a business context.
- Professional ethics – The ethical standards and codes of conduct specific to a particular profession or industry.
- Organizational ethics – The values and principles that guide the behavior of an entire business entity.
- Societal ethics – The broader ethical expectations of society regarding how businesses should operate and contribute to the greater good.
Common Ethical Dilemmas in Business: A Closer Look
Even when an organization has a code of conduct in place and incorporates CSR into daily practices, there will still be ethical dilemmas to navigate. Acknowledging these while recognizing how organizational justice impacts the workplace can help you successfully maneuver through them. Below are some of the most common ethical dilemmas in business:
Conflicts of Interest
Defined by Indeed as a situation in which a business professional has competing obligations with individuals involved in a transaction, conflicts of interest are to be avoided at all costs within the corporate landscape. For example, if the leader of the organization is working to negotiate a deal with another company that is led by a family member, it may be seen as a conflict of interest.
Conflicts of interest can be avoided by:
- Creating company policies that prohibit conflicts of interest.
- Providing ongoing training about what conflicts of interest may be and how to avoid them.
- Requiring employees to sign non-compete agreements that can help minimize conflicts of interest in the workplace.
- Establishing consequences for employees who let conflicts of interest interfere with business transactions.
Whistleblowing
Employees who are aware of wrongdoing in an organization may feel obligated to tell the truth, yet they may face difficulty addressing their concerns. The act of reporting wrongdoing within an organization is called whistleblowing, and it’s essential that organizations in today’s modern and complex business landscape create protections for employees who wish to report these issues. Employees should not be retaliated against for speaking the truth and promoting business ethics within the organization.
Discrimination and Harassment
Discrimination and harassment are sadly two of the most common ethical dilemmas to occur in a workplace environment.
Discrimination occurs when an individual is treated unfairly based on a specific characteristic. There are legal protections in place that outlaw discrimination in the workplace based on sexuality, gender, age, ability, race, religion, nationality and marital status.
Harassment occurs when an individual is consistently and relentlessly provoked by another person within the organization; the most common types of harassment include sexual harassment, verbal harassment and physical harassment. Similarly to discrimination, there are legal protections to help protect employees from harassment.
Despite the applicable laws that help promote a safe and inclusive work environment, organizations still must actively work to raise awareness and enact policies that prevent discrimination and harassment.
Environmental Concerns
In an age where ethical consumerism is on the rise—with the impacts of climate change visible on a daily basis—businesses have a heightened obligation to promote and protect environmental concerns. Businesses should implement policies that minimize the organization’s environmental impact and promote sustainable practices. By considering the long-term consequences of business decisions made today, organizations can work toward a more sustainable future.
Ethical Challenges in Technology
Technology is a driving force in the world of business, but organizations have to recognize the ethical implications that may be associated with the latest, most advanced technology. Some of the most prevalent ethical challenges related to technology today include data privacy, automation and the application of artificial intelligence within the business landscape. While the latest technology offers promises of streamlined operations and even increased revenue, businesses need to create ethical frameworks to minimize damaging consequences and create guidelines for using technology within their respective environment.
Building an Ethical Business Culture: A Roadmap
Creating and promoting an ethical business culture begins with leadership. Organizations of all sizes and across all industries can foster a culture of ethics and morality when they lead by example.
The Crucial Role of Leadership
Ethical leadership can significantly shape organizational culture. Leaders are obligated to model ethical behavior and adhere to the moral principles and business policies in place. Through their words and actions, leaders can communicate the importance of business and corporate ethics while simultaneously creating a welcoming, inclusive and safe environment in which employees feel empowered to speak up about any concerns they have.
Establishing a Robust Code of Ethics
While leadership can set the stage for an ethical workplace culture, it is also crucial to have a clear and specific code of ethics that outlines expectations for conduct in the workplace. Organizational leaders should collaborate with team members to develop a code of ethics that reflects the values of the company while addressing today’s most relevant ethical issues as well.
Implementing Effective Ethics Training
By developing and implementing an engaging ethics training program for employees at all levels, organizational leadership can raise awareness about ethical issues while equipping employees with the skills needed to make values-based decisions. This commitment to training also reinforces the company’s overall commitment to ethical behavior.
Encouraging Open Communication and Whistleblower Protection
In addition, leadership can work to create a safe and supportive environment in which transparency and accountability are valued. Employees at an organization that actively works to promote open communication will be more comfortable reporting any ethical concerns they have, as they feel confident knowing they will not face retaliation for doing so. Organizational leaders can actively work to create this type of environment by:
- Establishing confidential reporting channels.
- Implementing whistleblower protection policies.
- Encouraging open communication between employees, supervisors and leadership.
Fostering this culture benefits organizations across all levels because they can easily address ethical issues that arise while preventing more complex ethical dilemmas in the future.
Develop an Ethical Business Foundation at Johnson & Wales University
Moral principles and ethical policies will continue to serve as the foundation for business success, particularly in a world that is growing increasingly aware and inclusive. At Johnson & Wales University, ethics in business is a central theme in our degree programs. We offer an online bachelor’s in Business Studies as well as an online MBA program that explores business and corporate ethics in depth.
For more information about completing your degree online, complete the Request Info form, call 855-JWU-1881, or email [email protected].