What is business ethics and why is it important?

The long-term performance of a company is conditioned by its actions, as well as its chances of success or failure. In this sense, it is essential to know what is business ethics and why is it important?

What is business ethics and why is it important
Written by

Table of Contents

What is business ethics?

Business ethics is the set of principles and rules that govern the behavior of a company in its commercial sector. It is closely related to morality, as it distinguishes between right and wrong, and is based on ideals and values. 

A company’s ethics have a very broad scope. For example, in terms of its commitment to the care and conservation of the environment, considering that business activities should not have a negative impact on it and ensuring that its production models are managed with corporate responsibility to cause the least possible damage to nature. 

Likewise, business ethics is focused on avoiding unfair competition in the economic sector where it performs its activities, although there is always this competitive factor, when acting with moral commitment it is guaranteed to avoid those behaviors that may be detrimental to the harmony between businesses in the same line of business.

Another example of the scope of business ethics is to ensure the production and marketing of articles of proven quality.

This is especially important, since the users or customers of products and services acquire them with the intention that they can solve their particular problems or needs, hence the importance of complying with certain standards and delivering what is really offered to them.

When a company engages in misleading advertising with the purpose of selling or marketing products and services whose characteristics or qualities are not real, it is acting against business ethics. 

Finally, it is worth mentioning that business ethics must be present at all levels, from managers and owners of a corporation to its employees, including each department and service that conforms the business.

In this sense, it is of vital importance to ensure that positive values are transmitted so that work is carried out in a respectful and harmonious manner, far beyond production or sales rates.

Successful business partners
Unrecognizable businessman with laptop giving hand, greeting business partner

Importance of business ethics

Business ethics have an important influence on today’s society, considering that companies have the capacity to transform the lives of their workers by providing them with a dignified livelihood and the possibility of professional ethics advancement while meeting the needs of consumers or users and providing them with useful solutions to their requirements in the corresponding economic sector. 

However, these companies have to be in sync with the objectives of the society they serve, which means operating in accordance with business ethics. Otherwise, the long-term benefits of either party, whether the company itself or the public, would be affected. 

Taking care of business ethics is essential for the following reasons:

How are ethics are applied in a company?

Although it is essential to know the basic principles of business ethics, it is even more important to be certain of how actions should be implemented within a company to comply with these guidelines.

The following are some actions that demonstrate when a company follows business ethics.

Prioritize customer needs

When a company puts the customer’s needs first and trains its personnel to comply with this premise, it is demonstrating that it is acting in accordance with business ethics.

Acting with transparency

When it comes to business ethics, transparency and communication are key elements. In this sense, employees and customers must be treated with respect and sincerity to ensure trust in the business.

Ensuring diversity and equity within the company

An ethical company should provide equal entry opportunities to all applicants, so that any distinctions are made on the basis of their particular skills and not as a constraint when recruiting potential employees.

Respect each customer's personal information

Many companies request personal information from their customers as part of commercial transactions and one of their priorities must be to guarantee the protection of privacy and confidentiality of the data they provide.

A clear example of this can be found in the preparation of invoices, where it is necessary to include data such as address and personal telephone number of the client, which are provided for strictly fiscal purposes and should not be used for other purposes or handled outside the company’s system.

Enabling channels for detecting and correcting unethical behavior

As part of business ethics, it is important for companies to provide an effective communication channel so that any failure or inappropriate behavior can be captured through it in order to ensure good practices and maintain the correct conduct of its activities. 

A neutral office can be set up to deal with these types of requests, carry out the pertinent investigations and guarantee the corresponding actions to correct or penalize any eventuality that goes against business ethics.

More about Leadership.