Why Are Ethics Important in Business?


What are business ethics?

Happily, most of us behave ethically in our social lives – for instance, we know to treat others with respect and show them support. But why are ethics important in business? In today’s competitive and fast-paced business world, ethics should be at the forefront of every successful organisation. So what exactly is ethics in business and why does it matter?

Business ethics refers to the moral principles and values that guide decision-making and behaviour within a company. It is about doing the right thing, even when it is difficult or not in the company’s short-term interest. It goes beyond the legal requirements for a company and is, therefore, about discretionary decisions and behaviour guided by values. Ethics in business is crucial for a number of reasons, from protecting reputation to the bottom line, yet, surprisingly, not all value its importance.

At Verita, we are frequently brought in to carry out a corporate investigation involving companies or individuals focusing on short-term gains instead of long-term success and ethical behaviour. So, in this article we will explore why ethics in business are important and what organisations can do to increase ethical behaviour.

Why are ethics important in business?

Ultimately, ethical behaviour is good for business because it helps to build trust between companies and their stakeholders, including customers, employees, investors, and the public. When businesses are seen as ethical, they are more likely to be successful in the long term.

Social media has had a significant impact on how companies handle business ethics. On the one hand, it is now easier for companies to connect with their customers and other stakeholders, and to promote their ethical values. On the other hand, social media has also made it easier for companies to be held accountable for their unethical behaviour.

Ethical businesses are more likely to be profitable in the long term because they have a number of advantages, including:

  • Stronger customer loyalty
  • Higher employee morale and productivity
  • Reduced risk of legal and regulatory problems
  • Enhanced reputation

A number of studies have shown that ethical businesses are more likely to be profitable. Of course, there are some cases where unethical businesses may be profitable in the short term. However, unethical businesses are more likely to face long-term problems, such as customer defection, employee turnover, and regulatory scrutiny.

What are some examples of ethical behaviour in business?

Many of the investigations we carry out involve unethical behaviour such as a safeguarding incident or allegations of bullying and harassment. Examples of ethical business behaviour include showing a commitment to equality, creating a fair and inclusive workplace free of sex discrimination and contributing to sustainable development by delivering economic, social and environmental benefits for all stakeholders.

As well as this, a business which behaves ethically may choose to pay its employees a fair wage, even if the minimum wage is lower, or a company may choose to have a transparent and accountable corporate governance.


How can business ethics promote safeguarding?

Safeguarding is a key element of business ethics because it aims to protect vulnerable members of society from harm. Business ethics play a role in promoting safeguarding by:

  • Creating a culture of respect and dignity.
  • Promoting open communication and reporting of concerns.
  • Ensuring that employees are aware of their safeguarding responsibilities.
  • Implementing policies and procedures to protect vulnerable people.

This safeguarding scandal at Oxfam showed that the policies in place were insufficient, resulting in reputational damage and reduced donations, impacting the prime mission of the organisation. A company’s code of ethics which includes a commitment to safeguarding vulnerable people sends a strong message to employees that safeguarding is important to the company.

An ethical business should have a safeguarding policy in place and provide training to its employees to help them understand their safeguarding responsibilities and how to identify and report potential safeguarding concerns.

The Oxfam case was reported by a whistleblower who sent written allegations to its leadership. Companies who manage their whistleblowing policy effectively allow employees to confidentially report suspected safeguarding concerns, therefore improving business ethics. Creating a positive work environment can reduce the risk of safeguarding incidents occurring.

What are the effects of business ethics on its employees?

A positive and supportive work culture will promote diversity and inclusion within the business, encouraging teamwork and collaboration where conflict is resolved fairly and constructively.  Ethical companies are also more likely to treat their employees fairly and with respect, such as providing competitive wages and benefits, creating a safe and supportive work environment, and offering opportunities for professional development.

Ethics in companies are important when it comes to attracting better employees. In today’s competitive job market, employees are looking for more than just a good salary and benefits. They want to work for companies that share their values and that are committed to doing business ethically.

Glassdoor’s Mission and Culture Survey found that over 77% of adults would consider the culture of a company before applying for a job there. Employees want to work for companies that they are proud of, share their values, and who they trust.

In addition to attracting new staff, existing employees who feel that their values align with that of the company are more likely to be engaged and productive. Employees who feel valued, comfortable and respected, and believe that their company is acting in a responsible and ethical manner, are more likely to be loyal to it, and behave with more integrity. Conversely, unethical behaviour in business can lead to reduced employee morale and productivity, making it difficult to achieve business goals and objectives.

How can leaders promote business ethics?

Leaders play a critical role in promoting business ethics because they have a significant influence on the behaviour of their employees. They set the tone for the organisation and should create a culture where employees feel comfortable reporting unethical behaviour and where ethical decisions are rewarded. This can be done by creating a safe and supportive work environment, and by recognising and praising employees who demonstrate ethical behaviour.

A culture of ethical business behaviour is created by courageous leadership which plays an important role in preventing and addressing workplace abuse. Leaders should demonstrate ethical behaviour in their own work. This means being honest, fair, and respectful of others. It also means following and communicating the company’s code of ethics and policies.

A toxic workplace culture is often a fundamental source of poor performance so the behaviour of leaders where bullying and inappropriate or offensive behaviour is avoided, is crucial to business success.

Leaders also have a responsibility to make ethical decisions, even when it is difficult. This means considering the potential impact of their decisions on all stakeholders, including employees, customers, suppliers, and the community.

How can business ethics can impact the bottom line?

Business ethics can affect the bottom line in a number of negative ways. If a company is perceived as unethical, customers may be less likely to buy from it. This can lead to lost sales and revenue. The repercussions of cases of illegal or unethical behaviour in business can be costly, such as legal fees, fines, penalties and regulatory problems.

Moreover, this sort of behaviour can damage a company’s reputation, making it more difficult to attract investors, partners, and customers leading to lost business opportunities and lower profits.

Business ethics can lead to higher productivity because employees are more likely to be engaged and motivated if they feel the company they work for behaves ethically. Ethical businesses also have a better reputation, which can attract investors, partners. Perhaps most importantly, customers are more likely to buy from and support businesses that they perceive as ethical.

What can a business do to improve ethics?

Many businesses have ethics programs which is a set of policies, procedures, and training programs designed to promote and maintain ethical behaviour within a company. Ethics programs can vary in size and scope, but they typically include the following elements:

  • A code of ethics, which is a document that outlines the company’s core values and ethical standards.
  • Ethics training for employees, which helps employees to understand the company’s code of ethics and how to apply it in their work.
  • A whistleblowing policy, which provides a confidential way for employees to report unethical behaviour.
  • An ethics ombudsperson, who is a neutral third party that employees can go to for advice and assistance with ethical issues.
  • Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. It is about businesses taking responsibility for their impact on society and the environment, and working to make a positive difference.

Improving ethics within a business requires a comprehensive and ongoing effort. Managers should lead by example, demonstrating integrity and ethical behaviour in actions and decisions and they should regularly communicate the importance of ethics and the company’s values. Employees should have the necessary resources and support to make ethical choices and ethics should be integrated into their performance evaluations and reward systems to reinforce ethical business behaviour.

By implementing these steps, businesses can create a culture that values ethics and ensures that ethical behaviour is ingrained in every aspect of their operations.

How can an independent corporate investigation help improve ethics standards?

As an experienced independent investigation company Verita can help identify and address ethical violations that may be occurring within a company to prevent them from happening in the future. An independent investigation could find that the company’s code of ethics is not clear or comprehensive enough and make recommendations for how to improve ethics standards. This can include recommendations for changes to governance, policies and procedures or training programs.

This will also send a strong message to employees that the company is committed to ethics and that it will not tolerate unethical behaviour, leading to a more ethical culture within the company. However, it is important to note that an independent corporate investigation is not a guarantee that ethics standards will improve. It is important for the company to take action on the findings of the investigation and to implement the recommended changes. The company must also have a strong commitment to ethics from its leadership.


Ethics should be the cornerstone of every successful business. By prioritising ethics, companies can build trust and credibility, attract and retain top talent, and contribute to a more sustainable and inclusive society. Ethical behaviour benefits not only the company but also its customers, employees, and other stakeholders.

Through ethical decision-making, businesses can navigate complex challenges and make choices that align with their values and principles to create a positive and ethical business environment that fosters long-term success.

Verita can assist with an independent corporate investigation to ensure your business operates with the highest ethical standards. If you need to start from scratch, or to benchmark what you do, or simply need quality assessment on your existing approach, we are here to help.

If you would like to learn more about the importance of business ethics then please book a free consultation or contact Ed Marsden on 020 7494 5670 or [email protected].


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