Member Article

Why ethics matter when doing business

There are many good examples of large companies not being ethical in their actions. Money laundering or not complying with specific regulatory framework are some of the bad practices that have put many organisations in the spotlight, damaging their reputation and public trust.

For this reason, we conducted research to understand the ethical behaviour and values of their smaller partners: microbusinesses and SMEs. The results showed that the bigger the business, the less likely it is for business owners to trust their employees to act ethically. Only 37 per cent of SMEs trust their staff to do the right thing compared to 66 per cent of microbusinesses.

Our research also showed that as the number of employees increases, businesses are more likely to find a member of staff dedicated to ethical behaviour as well as having a formal code of conduct. Nearly two thirds of microbusinesses do not have someone looking after ethical behaviour and one third of these types of businesses do not have a code of ethics.

The scenario is different when we look at SMEs. Only 19 percent of small businesses admit to not having a business code of ethics and 39 per cent do not have someone responsible for looking after ethical conduct.

It’s also important for microbusinesses and small businesses to examine their supply chains. This ensures that the people they are doing business with also act ethically and will protect brand reputation, safeguarding fair play within industry sectors. We found that 37 per cent of microbusinesses do not consider the ethical behaviour of their suppliers before agreeing to work with them, whereas only 23 per cent of SMEs do not take this into account.

There are a few things that you can do if you are a start-up business and haven’t got a code of ethics yet:

1. Firstly… develop a code of ethics. This sets out your organisation’s ethical values to the world.

2. Get people involved. Your staff can contribute to the development of your values, but of equal importance, they need to understand how they should apply your organisation’s values in their role.

3. Designate an ‘ethics champion’. This person can be a point of contact for colleagues who need to seek advice on ethical dilemmas.

4. Regularly engage with staff on ethics. Any new employee should be aware of the ethical values you have enshrined in your code during their induction. In the same way, existing employees need to be reminded of these values on a regular basis through staff meetings or workshops with real life examples where people are asked to give their input. This is a good exercise to put employees’ training in ethics to the test.

5. Remember – customers will judge your organization based on your ethical values. It takes a lifetime to build a good reputation in the market. It only takes one ethical failing for customers to lose trust and confidence in your organisation.

6. If you work with unethical suppliers, your organisation will be judged for this. Your supply chain is as much of a reflection of your organisation as your employees are. Working with suppliers with values at odds with your own can undermine the credibility of your ethical stance.

7. Consider business ethics when planning. When planning new ventures, consider the ethical implications in light of your values and if there are any ethical risks. This will help prevent ethical problems occurring in each activity the business does.

8. Highlight the impact of your organisation’s ethical approach to the market. New clients are drawn to work with organisations demonstrating integrity. If you’re doing this – tell the world you are!

9. Remember – ethical companies are sustainable companies. Preparing your organisation to survive in the future is no easy process. But we have seen large corporate entities fail on the basis of ethics – don’t let this happen to you.

10. Most importantly… an ethical culture needs to be led from the top. Make sure your Chief Executive or Managing Director lives the values of your organisation, and expects the same of the senior management team. Staff will expect to be led by example.

This was posted in Bdaily's Members' News section by AAT (Association of Accounting Technicians) .