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Ethics are about having standards of behaviour and ‘doing the right thing’. This means that an ethical business will act in a socially responsible way, doing what is right even if it is not required to do so by legislation, and regardless of the impact it might have on profits.

Most business activity involves workers, suppliers and customers. The way that a business treats these three groups of stakeholders is a good sign of how ethical it is.

Treating workers ethically

Examples include:

• paying a fair wage
• providing good working conditions
• allowing flexible working

Treating suppliers ethically

Examples include:

• paying fair prices
• having reasonable expectations
• paying bills on time

Treating customers ethically

Examples include:

• Exceeding expectations through putting customers at the heart of everything. This can include offering excellent customer service, quality products or services and making the customer feel valued and appreciated.
• Only providing what customers need – this means ensuring that the business thinks about the needs of the customer and meets these rather than selling a business extra products or services to meet their own profit targets. For example, not selling a customer a mobile phone contract that they will not use.
• Giving clear and accurate product and service information to allow customers to make informed decisions.

Reasons to be ethical

Businesses that behave in an unethical way are more likely to receive bad publicity and get a poor reputation. For example, retailers that buy from suppliers that use child labour to produce goods may be targeted by negative articles in the media.

Businesses that behave ethically can benefit from good publicity, which is likely to attract customers and increase sales. For example, businesses that have signed up to the Ethical Trading Initiative can show that they have taken steps to address the use of child labour in the production of the goods they sell.

Ethics vs profit

Being ethical will often result in a business incurring higher costs. This is because ethically sourced supplies are often more expensive to buy. Some businesses argue that this would make them less competitive, leading to lower sales and reduced profit margins.

However, other businesses believe that there does not have to be a trade-off between ethics and profit. These businesses believe that the benefits of doing the right thing far outweigh the costs. These benefits include:

• motivated workers, who work more efficiently
• customers who want to support businesses that behave in a socially responsible way
• investors who want to be associated with businesses that are ethical

All of these benefits can help to establish a positive reputation, which can increase sales, actually leading to higher profits.