Business ethics: Why is it important?

Organisations are facing more and more ethical challenges every day as the business and corporate world changes at drastic pace. Ensuring the sustainability of operations, for example, has gone from being a business choice to becoming a legal requirement in many markets. 

In addition, the implementation of new technologies such as artificial intelligence raises questions that are not easy to answer.

But business ethics is not new. It has always been part of business management. To strike a balance between economic growth, employee welfare, sustainable development, environmental protection and regulatory compliance, companies need specialised professionals. 

All these issues, and many others, fall under the umbrella of business ethics. Find out more about this field, which is studied in depth in number of programmes at Universidad Europea, such as the International Business degree or the bachelor in Business Administration.

Definition of business ethics

Business ethics encompasses all the principles and values that guide the conduct of an organisation. In a digital and globalised world, where transparency and social responsibility are fundamental, this discipline has acquired special relevance.

Having well-defined ethical principles not only helps companies to comply with legal obligations, but also has many other benefits:

• It improves the company's reputation: organisations that act with integrity have a more positive perception among the public.
• Strengthens customer relationships: consumers value transparency in the companies they interact with. Dishonest practices can generate distrust.
• Promotes a healthy work environment: employees tend to be more engaged and satisfied in companies with strong ethical principles. A good work environment increases productivity and makes it easier to attract talent.
• Competitive advantage: as customers tend to opt for socially responsible brands, sustainability in companies can be a differentiating element that helps them stand out in the market.

Examples of business ethics in practice

There are several examples of companies that enjoy a good reputation for the quality of their products and services, and for their sustainable and responsible practices. Let's take a look at some of them:

Patagonia

This sustainable fashion brand donates a percentage of its profits to environmental causes and encourages consumers to repair and reuse its products. Recently, control of the company has been transferred to a fund aimed at combating climate change.

Ben & Jerry's

Ben & Jerry's is known for its commitment to social and workers' rights, as well as its initiatives to combat climate change. The company has also integrated these values into its marketing campaigns.

IKEA

The Swedish chain has invested heavily in sustainable practices, such as the use of recycled materials and renewable energy in its operations. It also promotes sustainable production in its supply chain.

Starbucks

Known for its commitment to farmers and fair trade, Starbucks has developed initiatives to ensure that its coffee is ethically sourced. It has also worked to reduce its carbon footprint and is committed to renewable energy.

John Lewis

British department store, John Lewis, is well-known for its strong dedication to ethical business practices. As a company owned by its employees, it follows democratic values, giving its Partners (employees) a share in decision-making and profits. This structure encourages openness and responsibility within the organisation.

The relationship between business ethics and compliance

In order to understand business ethics, it is necessary to know what compliance is, as this is one of its most important pillars. Compliance ensures that the company complies with all current regulations and works to foster a culture of integrity. Compliance policies cover:

• Regulatory compliance: compliance ensures that the company operates within the legal framework.
• Promoting transparency: it promotes clarity in business processes and decisions.
• Reputation protection: a good strategy serves to prevent violations, avoid scandals and controversy, and maintain the company's positive image.

Emerging trends in business ethics

Ensuring the welfare and rights of employees remains one of the key objectives of compliance and business ethics. But, in parallel, a number of ethical issues are gaining prominence. Three in particular stand out:

Sustainability

Companies need to reduce their environmental impact and promote responsible development if their business models are to remain viable in the future. Whereas a few years ago sustainability was a purely ethical issue, today companies that neglect this aspect in their operations can face serious penalties.

Corporate social responsibility (CSR)

Organisations must invest in improving social, economic and environmental well-being. Corporate social responsibility is more important than ever now that regulations such as the EU taxonomy require ESG reporting.

Digital transformation

The adoption of cutting-edge technologies such as business intelligence, data analytics and automation must be done ethically. For example, users' personal information must be protected, and employees need to be trained to perform new technology-related tasks as certain functions become obsolete.

In short, business ethics are essential for any organisation that aspires to long-term success. A good compliance strategy not only avoids legal problems and protects the reputation of the business but can have a positive impact on the bottom line and help achieve business objectives.