Top 8 Ethical Business Practices To Follow (2022)

Ethical business practices have far-reaching effects, impacting everything from how your employees, customers, and the general public perceive your company to the legality of your business. Often, to act ethically, it may be necessary to make decisions regarding controversial topics or go beyond the minimum of what is required of you.

What Are Ethical Business Practices?

Before going further, it’s important to understand the definition of ethical business practices. Let’s start by thinking about what we mean by ethics.

Ethics are the principles that regulate our behavior and ensure we do the right thing. Therefore, ethical business practices are a set of principles that govern your business. They concern your employees, customers, and stakeholders as well as society as a whole.

It’s important to note that some unethical business practices are legal. In terms of laws, there is nothing to stop you from adopting these practices. However, there are many reasons why you should want to behave ethically.

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Why Are Ethical Business Practices Important?

There are many benefits of ethical business practices for your company. In fact, many ethical actions can have big payoffs over the long term.

For one thing, employees at ethical companies tend to be more motivated. This leads to higher productivity and lower turnover. You’ll also find it easier to attract top employees in the first place.

In addition, customers are more willing to purchase from ethical companies, which results in loyalty, higher sales, and greater profits. Similarly, your company will be attractive to investors. This could provide you with more opportunities for funding or increase your share price.

Top 8 Ethical Business Practices To Follow (1)

Top Ethical Business Practices

To become an ethical company, it’s necessary to follow a few key ethical business practices. These will be applicable to your situation no matter what ethical issues you may face.

1. Define Your Values

Everyone at your organization needs to be familiar with your business values. The best place to include these values is the employee handbook, under a code of ethics section. When writing this section, be as clear as possible to avoid any opportunity for misinterpretation.

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A code of ethics is critical for everyone at your company, but it’s most important for those in a leadership position. Leaders should refer to your values when making important decisions, such as implementing a new strategy or dealing with employees. Your values are critical for everything from hiring and firing to figuring out how to improve operations.

To communicate your values with a wider audience, include a mission statement on your website. Creating a short statement will help you whittle down your values into a succinct description. This is important for making sure your values are easy to remember and apply. Plus, it helps you tailor your values to employees, rather than to regulators. To ensure your mission statement does serve its purpose, think about what makes your business unique and avoid stating the obvious.

2. Decide On Appropriate Disciplinary Action

There will be times when employees fail to adhere to your ethical standards. It’s crucial to be consistent with disciplinary action and ensure the punishment does fit the crime.

Create a set of policies from the start and enforce the rules. This will demonstrate that you stand by your values and have no tolerance for unethical behavior. It will also show employees what to expect if they are considering acting inappropriately.

3. Hold Your Leaders to High Standards

Leaders have great influence over their subordinates. By holding your leaders to a high standard, you show your employees what you expect from everyone and inspire each individual to act with integrity. This will also help you to develop future leaders in your current employees.

4. Incentivize Ethical Behavior

To increase ethical behavior, you need to use rewards as well as punishment. A reward can be as simple as praise in the face of good behavior — particularly when it would be easy for an employee to act unethically.

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Another option is to use a reward program, such as employee of the month. Most programs rely on pro-self bonuses, but you may see even better results if you use prosocial bonuses. For instance, you could encourage winners to use their bonuses to treat the rest of their team or you could donate the bonus to a charity of their choice. The benefit of this strategy is that it promotes good behavior in the short term and leads to a lasting sense of having done something important.

Non-financial incentives are also effective — often far more than business owners believe they will be. Just reminding employees of how actions can impact other people can incentivize them to make the ethically-right decision. Alternatively, you can emphasize how behaving ethically will ultimately improve the employees’ own lives.

5. Keep Ethics Top of Mind

Everyone from leaders to entry-level employees will behave more ethically if you frequently remind them of your company values. They’ll be less likely to justify an action that (deep down) they know is ethically wrong.

There are many ways to create constant reminders of values. One thing to do is to include an honor code at the beginning of forms. Too often, companies need to check a box and sign after they’ve already completed a form. By this point, it’s too late to change anything if the person has already provided dishonest information.

6. Become Active in Your Community

Just because you’re a for-profit company doesn’t mean everything you do needs to be about making money. Volunteering in your community can be a humbling experience and it can serve as a reminder to everyone at your company that other activities are perhaps more important than what your business is doing. You’ll also show customers that you care about enriching the lives of others.

7. Hire a Diverse Range of Employees

More companies are trying to increase diversity in their workforce — and their reasons extend beyond creating a better public image. Hiring employees from a diverse range of backgrounds brings a wider variety of perspectives. Not only will you receive fresh ideas for solving problems, you may even avoid introducing unforeseen problems into your products and services.

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8. Monitor Your Suppliers

It’s important to hold suppliers and other professionals you outsource to the same standards as your own employees. Choose suppliers whose values align with your own. It may we worthwhile to go so far as to vet them to ensure they are behaving ethically.

Ethical Business Practices Examples

To see ethical business practices in action, let’s examine some top companies in their respective fields.

Levi Strauss

Levi Strauss is committed to assuring social responsibility through its various programs. It has the Levi Strauss Foundation, which carries out philanthropic work in under-served areas where the company operates and its Red Tab Foundation provides employees and retirees with a financial safety net. In 2016, the company also released Levi Strauss & Co. Collaboratory — a program that brought fashion entrepreneurs together to tackle a different problem in the industry each year.

Costco

A major reason why Costco has so many loyal customers is due to its excellent service. The top-quality customer service is, at least in part, down to employee wages, which are much higher than the average for retail jobs. Costco regularly raises its wages to stay significantly above the national minimum wage — it reached $15 an hour in 2019. This is a great example of an ethical choice that is clearly a smart business move.

Best Buy

It’s difficult for a company that sells consumer goods to make a positive impact on the environment, but Best Buy has been successful. Barron’s awarded Best Buy with first place in the 100 Most Sustainable U.S. Companies in 2019. Best Buy has achieved sustainability through its Geek Squad, which collects electronics and appliances that consumers no longer want or need.

Aflac

An example of a company that extends ethical practices to its suppliers is Aflac. The company has a supplier code of conduct and the company expects suppliers to comply with its ethical practices. Aflac also has a fair purchasing policy, which states how it chooses suppliers — all the criteria is merit-based and there’s no favoritism allowed.

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CVS

Despite a risk to its bottom line, CVS decided to stop selling tobacco products in 2014. It’s impossible to know what (if any) impact this had on the number of smokers, although CVS says many did quit, as shown by the increase in patch sales.

Ethical business practices come down to individuals’ decisions to act the way they feel is right. Whereas the behavior of others is out of your direct control, company culture and leadership do have a major role to play. It’s up to everyone to insist upon making the right choices at individual and group level, create a culture of accountability, and avoid actions that involve unethical actions to see short-term gains.

Many business owners are hesitant to go the extra mile to ensure their companies are ethical. After all, this requires time, effort, and expense. However, the consequences of being unethical can be severe. Check out our blog post on the ugly truth of unethical business practices to see what we mean.

FAQs

What are the 8 elements of an ethical organization? ›

Eight Elements of an Ethical Organization
  • Respect: As an entrepreneur building a business, you need to respect yourself and surround yourself with people you can respect. ...
  • Honor: Good people are a fundamental part of good ethics. ...
  • Integrity: ...
  • Customer focus: ...
  • Results-oriented: ...
  • Risk-taking: ...
  • Passion: ...
  • Persistence:
12 Jan 2002

What are the 7 business ethics? ›

There are seven principles of business ethics including accountability, care and respect, honesty, healthy competition, loyalty, transparency, and respect for the rule of law.

What are the 5 examples of ethical business behavior? ›

Examples of ethical behaviors in the workplace includes; obeying the company's rules, effective communication, taking responsibility, accountability, professionalism, trust and mutual respect for your colleagues at work. These examples of ethical behaviors ensures maximum productivity output at work.

What are ethical business practices? ›

DEFINITIONS. Ethical Business Practice (EBP) is about creating a culture where people make decisions and act in ways that build sustainable businesses, care for the needs of all stakeholders and comply with their ethical and legal obligations.

What are good business ethics? ›

Integrity, respect, self-transcendence, loyalty and compassion are all values that managers should champion in their capacity as thought leaders. Integrity is vital as it is the cornerstone of the trust placed by customers and vendors on the company. Dealings must be fair and honest in all facets.

What are the 5 ethical standards? ›

Moral Principles

Reviewing these ethical principles which are at the foundation of the guidelines often helps to clarify the issues involved in a given situation. The five principles, autonomy, justice, beneficence, nonmaleficence, and fidelity are each absolute truths in and of themselves.

What are the 6 ethical values? ›

These values were identified by a nonpartisan, secular group of youth development experts in 1992 as core ethical values that transcend cultural, religious, and socioeconomic differences. The Six Pillars of Character are trustworthiness, respect, responsibility, fairness, caring, and citizenship.

What are ethical practices? ›

Ethical practice is the application of ethical values in organisational behaviour. It applies in all aspects of organisational conduct, including corporate governance, employment practices, sales techniques, stakeholder relations, accounting practices, and issues of product and corporate responsibility.

Why are ethical business practices important? ›

Business ethics enhances the law by outlining acceptable behaviors beyond government control. Corporations establish business ethics to promote integrity among their employees and gain trust from key stakeholders, such as investors and consumers.

What are the 4 ethical principles? ›

The 4 basic ethical principles that apply to forensic activities are respect for autonomy, beneficence, nonmaleficence, and justice.

What are the 4 codes of ethics? ›

The four Principles of Ethics form the underlying philosophical basis for the Code of Ethics and are reflected in the following areas: (I) responsibility to persons served professionally and to research participants, both human and animal; (II) responsibility for one's professional competence; (III) responsibility to ...

How do you ensure ethical business practices? ›

  1. Develop Ethical Standards. An integral first step is to formalize your expectations and make it clear about which behaviors are and aren't acceptable. ...
  2. Ensure Leaders Exhibit Proper Behavior. ...
  3. Be Diligent About Enforcing Policies. ...
  4. Praise Positive Behavior. ...
  5. Promote Community Involvement.
28 Jul 2016

What is a good example of ethics? ›

Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty.

What are examples of ethical values? ›

Recommended Core Ethical Values
  • Integrity, including. Exercising good judgment in professional practice; and. ...
  • Honesty, including. Truthfulness; ...
  • Fidelity, including. Faithfulness to clients; ...
  • Charity, including. Kindness; ...
  • Responsibility, including. Reliability/dependability; ...
  • Self-Discipline, including.

What is the best reason for a business to be managed ethically? ›

A business should be managed ethically for many reasons: to maintain a good reputation; to keep existing customers and attract new ones; to avoid lawsuits; to reduce employee turnover; to avoid government intervention; and to please customers, employees, and society.

What is an unethical business practice? ›

The unethical business practices definition encompasses anything that falls below minimum standards for business code of conduct. This includes any behaviors that are widely accepted as being morally wrong and lead to the mistreatment of people, animals, or the environment.

What are the top 10 work ethics explain each? ›

The ten work ethic traits: appearance, attendance, attitude, character, communication, cooperation, organizational skills, productivity, respect and teamwork are defined as essential for student success and are listed below.

What is business ethics explain with example? ›

An example of business ethics is when moral rules are applied by a corportion to determine how best to treat its employees, shareholders and customers. An example of business ethics are accounting ethics - especially for accountants of publicly-held corporations - which depend upon complete honesty and transparency.

What is the most important ethical principle? ›

There are also significant differences between autonomy and truth-telling, justice and truth-telling and confidentiality and truth-telling. Therefore, non-maleficence is the most important principle and truth-telling the least important principle.

What are the 7 principles of ethics in nursing? ›

There are seven primary ethical principles of nursing: accountability, justice, nonmaleficence, autonomy, beneficence, fidelity, and veracity.

Why are the 4 ethical principles important? ›

These principles are autonomy, beneficence, non-maleficence, and justice. Each of these principles has a unique objective, but the four come together to empower you as a health care professional and ensure that patients are receiving high quality and ethical health care.

What are ethical standards? ›

Ethical standards refer to the principles that promote trust, good behavior, fairness and governing the conduct of a person.

What are ethical elements? ›

Ethical decision-making is based on core character values like trustworthiness, respect, responsibility, fairness, caring, and good citizenship. Ethical decisions generate ethical behaviors and provide a foundation for good business practices.

What are the essential elements of an organizational ethics program? ›

The industry has now defined the following as the components of an effective compliance and ethics program (not all inclusive): Code of conduct and relevant compliance policies and procedures. Oversight and accountability by the board for the compliance program. Education, communication, and awareness.

What is an example of an ethical organization? ›

Patagonia

On the flip side, popular outerwear brand Patagonia has built their brand around the idea that their consumers should be encouraged to “buy less”. Their unconventional approach to marketing has helped establish their reputation as a notably ethical and environmentally conscious company.

What are the 6 basic principles of ethics? ›

The principles are beneficence, non-maleficence, autonomy, justice; truth-telling and promise-keeping.

What are the 4 main ethical principles? ›

The 4 basic ethical principles that apply to forensic activities are respect for autonomy, beneficence, nonmaleficence, and justice.

What are the main ethics of an entrepreneur? ›

Ethical conduct comes down to values. Some suggested values for ethical conduct of entrepreneurial endeavours: respect, honour, integrity, customer focus, results-orientation, risk-taking, passion, and persistence.

What are the main determinants of business ethics? ›

Now let's discuss in detail all the above factors influencing Business Ethics.
  • Personal Code of Ethics (Individual Ethics) ...
  • Legislation. ...
  • Leadership. ...
  • Government Rules and Regulations. ...
  • Ethical Code & Policy of the Company. ...
  • Social Pressures. ...
  • Ethical Climate of the industry.
2 Jun 2022

How can you tell if a company is ethical? ›

An ethical business demonstrates respect for its employees by valuing opinions and treating each employee as an equal. The business shows respect for its customers by listening to feedback and assessing needs. An ethical business respects its vendors, paying on time and utilizing fair buying practices.

What are the 5 ethical standards? ›

Moral Principles

Reviewing these ethical principles which are at the foundation of the guidelines often helps to clarify the issues involved in a given situation. The five principles, autonomy, justice, beneficence, nonmaleficence, and fidelity are each absolute truths in and of themselves.

What are professional ethics examples? ›

Typically these include honesty, trustworthiness, transparency, accountability, confidentiality, objectivity, respect, obedience to the law, and loyalty.

How do you implement business ethics? ›

Here are a few sample points:
  1. Identify and Renew Company Values. ...
  2. Secure Visible Commitment From Senior Managers. ...
  3. Engage the Board of Directors. ...
  4. Develop an Ethics Code or Code of Business Conduct. ...
  5. Build Ethics Into Mission and Vision Statements. ...
  6. Integrate Ethics Into all Aspects of Company Communications.
22 Nov 2019

What is the most ethical business? ›

While for some brands, ethics equals reducing risks by “doing no harm,” other companies have realized a huge potential of business ethics.
...
24 Most Ethical Companies of 2022
  1. Aflac Incorporated - 16 Times Honoree. ...
  2. Ecolab - 16 Times Honoree. ...
  3. International Paper - 16 Times Honoree. ...
  4. Kao Corporation - 16 Times Honoree.
10 Apr 2022

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