16: Business Ethics

A person or organisation "conducts business" with another when they exchange a good or service in exchange for something of value, such as money. A business is also an organisation that exchanges commodities and services or sells items. It can be referred to as transactional activity as a business relies heavily on exchange.
Ethics establishes a certain level of trust and understanding between consumers and various forms of business participants.

“Business ethics can be defined as the study of the ethical implications of the exchange of products and services as well as the organisations that provide those goods and services”.

This covers associated activities like the creation, provision, promotion, exchange, and utilisation of commodities and services.^[1]

Origin of Business Ethics

Since the earliest forms of trading was based on the idea of equal exchange, the idea of ethics in business has existed. Many philosophers and economists have studied the subject, starting with Aristotle and his idea of justice and ending with Karl Marx's critique of capitalism. But the development of anti-big business protest movements in the US in the 1970s is when the contemporary notion of corporate ethics first emerged. In the 1980s, the concept of business ethics was brought to Europe and Japan as well. However, the term was difficult to translate and each nation's development diverged from that of the US due to variations in the sociopolitical and economic of companies.
Over time, the topic developed into a distinct academic field with branches in both philosophy and empirical research. Then, as a result of government legislation, ethics were integrated into company practices, as seen in corporate social responsibility plans and conduct codes today. In addition to being a well-established academic discipline, businesses now recognise the importance of business ethics.

Principles of Business Ethics

Ethical principles are universal guidelines for what is right and wrong that specify the types of actions that an ethical business or individual should and should not take. These principles not only set the standards by which companies' actions get evaluated by others, but they also serve as a guide for making decisions.

Honesty:

In all kinds of communication and behaviour, companies and their employees must be committed to telling the truth. This involves never intentionally making false assertions, exaggerations, or selective omissions of information. Sharing both positive and negative news with equal candour is another definition of honesty.

Fairness:

Everyone must be treated equally and given equal opportunity. It is probably unfair if a practice or behaviour would make you feel uneasy or prioritise personal or corporate gain over equality, politeness, and respect. Companies that uphold ethics should demonstrate a dedication to fairness, human equality, tolerance, and acceptance of diversity.

Loyalty:

Remaining loyal to coworkers, clients, business partners, and suppliers, by never divulging information that has been acquired in confidence, are ways to demonstrate loyalty. Employees that are loyal to their employer avoid conflicts of interest, contribute to preserving and enhancing the company's good name, and lift the spirits of their coworkers.

Integrity:

Businesses and individuals exhibit integrity by acting and speaking consistently through their thoughts, words, and behaviour. Moreover, integrity entails maintaining promises, upholding obligations, meeting deadlines, and abstaining from dishonest behaviour in both personal and professional endeavours.

Leadership:

Company executives who uphold the highest standards of ethics are aware of the opportunities and responsibilities that come with being in a position of authority. They strive to set a good example for others through their actions and by supporting the development of a culture that values moral reasoning and ethical decision-making.

Compassion:

Customers, business partners, the neighbourhood where a company is located, and employees should all be handled with consideration for their welfare. Executives who practise ethics are kind, sympathetic, and caring. They are aware of the concept of stakeholders—individuals who are impacted by a choice and have a stake in it—and they always think about the business, financial, and emotional repercussions of their decisions on all stakeholders.

Respect for law:

Companies should obey and abide by all local, state, and federal laws as the law back all the ethical principles, and failure to do so will lead companies to face penalties. It will also harm their brand image and reputation.

Accountability and Ownership:

Companies must be accountable to themselves, their coworkers, and their communities, ethical leaders realise and take personal responsibility for the morality of their choices and omissions. Encourage employees to take ownership of their work and hold themselves and others accountable for their actions.

Transparency:

Stakeholders are individuals who have an interest in a company, including shareholders, employees, the community where a company conducts business and the relatives of employees. Companies should make sure information about their financials, price adjustments, hiring and firing procedures, wages and salaries, and promotions are accessible to anyone interested in the success of the business without disclosing trade secrets.

Environment concern:

Companies depend upon the environment for their operations therefore it becomes very crucial for them to be aware of and concerned about the environmental effects a business has in a world where resources are few, ecosystems have been harmed by previous practices, and the climate is changing. Every employee should be encouraged to look for and report remedies to procedures that can worsen already done harm.
From leaders to middle management to the newest and youngest employees, clearly defined ethics programs provide a code of conduct that influences employee behaviour. When every employee acts morally, the business develops a reputation for moral conduct.

Ethics from a Legality Point of View

Two of the most significant anti-bribery legislation that works to combat corruption and unethical practices around the world are the Foreign Corrupt Practices Act and the UK Bribery Act. Along with other country-specific laws against unethical business practices, these laws back all the ethical principles of business.Organizations of all sizes who conduct business internationally or have foreign partners should think about providing online FCPA training to their workers as well as their agents and partners as necessary due to their large scope and extensive reach.

Case study

Starbucks is an American multinational company that is also the world’s largest coffeehouse chain across the globe. The company is known for its ethical business practices and has been honoured with several prestigious awards. Starbucks has been recognised by the Ethisphere Institute as one of the World's Most Ethical Businesses for the 12th year in a row. Starbucks was evaluated for its reputation, leadership and innovation, ethics and compliance program, governance, corporate citizenship, responsibility, and culture of ethics inside the company.

• Ethical sourcing
  Since 2015, Starbucks has been verified as having 99% ethically sourced coffee beans and has been the first-ever coffee retailer to achieve this standard. The verification programme measured farms against quality, economic, social, and environmental criteria.

• Economic Ethical Transparency
  Farmers, producers, and exporters who work with Starbucks are expected to provide documentation of all green coffee payments made along the entire supply chain, including the amount paid to farmers directly for their coffee. This makes sure stakeholders are aware of the farms they buy from, the farmers' names, and the amounts paid to each of them for their coffee.

• Ethical Social Responsibility
  Starbucks has been at the forefront along with their coffee producers, they have implemented various initiatives to provide a humane environment at farms as well to their employees whom they call their partners. Committed to providing fair wages and benefits, ethical hiring practices, and hours of work, use of protective equipment, access to medical care and education.

• Ethical practice towards environmental leadership
  Starbucks, C.A.F.E. Practices for growing and processing coffee include environmentally sound waste management techniques, water quality protection, water and energy conservation, biodiversity preservation, and a reduction in the use of agrochemicals.