A code of ethics refers to a set of guidelines that are there to ensure that professional individuals and organisations conduct their business with integrity and honesty. It seeks to establish a company’s behaviour expectations for their employees and any third-party collaborators.
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Once tech companies have identified their future digital plans, they may choose to implement a code of ethics as part of their digital transformation strategy.
This is not unique to tech, though; many industries successfully implement a code of ethics into their operations, such as the UK Police Force, the Professional Association of Social Workers and the Institute of Business Ethics.
According to the job site Indeed, 28% of applicants may reconsider accepting a job with a company if their missions and moral values did not align – even if the job was perfectly suited to them in every other way.
A code of ethics is similar to an ethical code of conduct; however, there are some key differences.
The code of ethics document goes deeper into the principles that provide the foundation of a company’s actions and even goes so far as to outline issues such as conflict of interest, harassment, safety and whistleblowing.
While a code of ethics typically provides guidance on values and choices, a code of conduct explicitly says which behaviours and acts are proper and which are not.
It’s a useful resource for people to learn their duties and responsibilities inside the company, as well as the norms and standards to which they should adhere.
What a company stands for and how it operates in an ethical manner depend on the adopted code of ethics.
Having a comprehensive understanding of the different types of codes can establish a strong basis for businesses to effectively address ethical dilemmas and cultivate a culture centred around integrity.
It’s a set of rules that dictate the behaviour and conduct of individuals and groups within a specific industry or company, ensuring compliance with legal requirements and industry standards.
It covers areas such as employee hiring, compensation, as well as safety and health standards. Violations of these rules can result in penalties.
A value-based code of ethics provides employees with clear guidelines that align with the organisation’s core values.
Providing an overview of clear expectations guides employees in their day-to-day decisions and actions, ensuring that their behaviour aligns with the company’s ethical principles.
Certain professions have established their own codes of ethics for employees in their respective fields. Examples of industry-based codes of ethics include healthcare, finance, education, engineering, journalism, law and technology.
These codes outline the ethical responsibilities of professionals and cover topics such as confidentiality, conflicts of interest, and the duty to report violations.
Read more about the importance of ethical behavior:
Having an effective code of ethics in place is essential. It details the manner in which all staff members and associates conduct themselves on a day-to-day basis in order to maintain a respectful and socially acceptable working environment.
It is essentially the ‘moral compass’ of the company to which all employees are held, even upper management.
It also serves as a useful tool to cite when providing employees warnings about their conduct for any infractions that have been committed. If the actions of a staff member violate the code of ethics too severely, it can be used to justify termination from their position.
As well as individual organisations, codes of ethics are also important for setting industry-wide standards in a range of sectors. This guarantees that the methods and practices in place are of the highest standards by enforcing the ethics code by punishing violations with financial or legal action.
This helps to mitigate risks across industries and remove people from any potential harm.
The specific codes of ethics can vary depending on the industry, company size, and cultural context, but the most common elements are:
Professionalism refers to the qualities and behaviours expected in the workplace, such as being skilled and knowledgeable in your job, acting with integrity and reliability, treating others respectfully and presenting yourself appropriately.
Professional competence is about conducting yourself in a way that contributes to personal and organisational success.
Integrity is demonstrated through honesty, openness, taking responsibility, and adhering to legal and ethical standards. It involves acting in a consistent and trustworthy manner and taking responsibility for one’s actions.
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The notion of inclusion entails treating all employees fairly, honouring human rights, and appreciating and valuing diversity. When a company’s employees feel valued and respected, they are more likely to take the initiative and contribute to its success.
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A commitment to social responsibility means making moral choices after weighing the effects on everyone involved, from global corporations to local neighbourhoods.
Businesses can gain customers’ trust, improve their standing in the community, and make a beneficial impact on society as a whole by maintaining ethical conduct and engaging in socially responsible practices.
If you are interested in the topic of ESG in business, see also:
It means owning up to one’s actions and taking responsibility for any violation. The dedication to accountability is reflected, for example, by the fact that punishments, up to and including termination are available for violations of the code of ethics.
The code of ethics prioritises the respectful treatment of other employees. It underlines the importance of acknowledging and appreciating the value of every person while fostering a diverse and inclusive workplace.
A cornerstone of the code of ethics is a commitment to acting in accordance with all relevant statutes, rules and policies.
This means learning and following company code, policies and procedures and adhering to external legal and ethical norms. It minimizes the threat of getting into legal trouble and increases trust of all stakeholders.
There are many advantages to having a code of ethics implemented within an organisation. Some of them are obvious, others less so.
When it is implemented well, a code of ethics for business can provide a huge competitive advantage and result in an upturn in the company’s performance, increasing their financial position (which is the whole point of even having a company, right?).
Have a look at some of the most important code of ethics benefits below.
Guidance helps to steer a company or employee’s ethical course of action when it is not obvious or apparent. It ensures that individuals within the organisation have a framework to rely on when facing difficult decisions and helps maintain ethical standards even in challenging circumstances.
A code of ethics helps to acquaint its staff members with their values and company culture, and serves as an everyday reminder. This also extends to the company’s associates, third party contractors, and even customers.
Consistent management standards help to establish uniform management standards in terms of their responsibilities to their staff and serve as a layer of protection for staff in positions of power who may otherwise, with or without malice, abuse said power.
Complex government regulatory standards can be tricky to manage, and a code of ethics helps in traversing these issues.
For example, in the USA, the Sarbanes-Oxley Act of requires that all public companies must have a code of ethics in place for all senior financial officers in order to protect the company, its staff and their customers.
A code of ethics goes a long way to ‘walking the walk’ in terms of being a good, honest business so that customers and colleagues alike can understand your transparent values.
It demonstrates that the company is taking their ethical responsibilities seriously, which will attract responsible investors and build trust in the brand.
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Having a code of ethics ensures that there are mechanisms in place with which to defend the company in case of a lawsuit (as long as it is followed correctly).
When it comes down to it, the main, and most obvious, benefit is that it maintains a high level of moral standard. This demonstrates with actions the lengths to which a company will go to prove their commitment to good ethical practices, which in turn will translate into high morale with their staff, investors and customers.
This promotes and develops positive social change, ultimately contributing in a highly positive manner to good business practices.
There are a few best practices for a code of ethics that must be followed when implementing your plan. The following code of ethics template should serve to be a guide when successfully setting up a code in a business.
First and foremost, it’s important to establish what your business priorities are when it comes to your code of ethics. Doing this from the outset will help to facilitate company growth in alignment with the overall company ethics.
As the business scales up with success, onboarding and maintaining new staff members will be much easier with a clear ethical code which visibly details the company’s values, priorities and moral lines.
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When determining the company values, first consider what you feel is ‘unacceptable’ behaviour in a business, e.g. when searching for new clients or deciding on profit margins. These ‘unacceptable practices’ will help to understand where you draw the line when it comes to your operations and can help begin your code of ethics document.
This can also extend to less serious issues, but important nonetheless, such as company dress code, working times, sick leave and so on.
Collaborating in a team-wide effort to create your code of ethics is a key process as it not only gets everyone involved and having a say in the final outcome, it helps all staff members to really understand its value and importance, especially the small details when it comes to understanding why certain elements are included.
Involving your team will result in better support for the idea and adherence to the code moving forwards will be much smoother. In addition, as the old saying goes, ‘many hands make light work’, and it is likely that your team may suggest additions to the code of ethics that could have otherwise been overlooked.
This will help to establish a much more well-rounded final code.
Typically known as the ethical or compliance officer, it’s important to assign one employee to have the overall responsibility for not only the creation of the code of ethics, but also the ongoing duty to ensure that it is adhered to.
Even if you have the support of senior management, having one specific person be responsible for the document creation and maintenance ensures that it is not overlooked and is constantly being considered in the day-to-day operations.
This person may typically be from HR (human resources), and will most likely have a strong commitment to the success of the organisation, be highly reliable and with good integrity, and have great interpersonal skills. As the business grows, so will the scope of the code of ethics.
The compliance officer will be responsible for updating the document in line with the expansion of the company’s operations, and will take the lead in any cases of abuse or misconduct.
If you are a large company with a well-established HR department, then you will probably be able to create a wide-sweeping code of ethics without issue.
Likewise, if you are a small company that operates in a low-risk field, you will most likely to put a basic code in place easily.
However, it’s worth at least having a communication pathway open to a human resources professional just in case you get thrown into a situation that could potentially cause some difficulty for the company. Their expertise will be on hand, even from afar, to guide you in employee behaviour and company conduct to make sure that your code of ethics is drafted and adhered to in the proper manner.
Even in larger companies, having a specialist to hand when needed is useful, especially if you don’t have a robust code of ethics in place.
As mentioned previously, transparency, fair treatment of employees, avoidance of conflicts of interest, and respect for the right to privacy are all examples of how a company’s code reflects its commitment to upholding important values.
Many businesses maintain a good reputation through their company policies:
The Body Shop is a cosmetics brand known for its unwavering dedication to ethical sourcing and environmental sustainability. They prioritise using natural and responsibly obtained ingredients, abstain from animal testing, and actively contribute to numerous social and environmental initiatives.
TOMS is a well-known shoe company with a unique business model based on corporate social responsibility. TOMS gladly gives away another pair of shoes for every pair purchased. They are also involved in numerous community and environmental projects.
The need for more transparency: Hyper-transparency, or the increasing availability of information about businesses and their operations, is a trend that will influence the direction of business principles in the future.
Social media, whistleblowers and government restrictions all play a role in fueling this movement.
The moral challenges raised by technological advances: Technological progress has created some of the most pressing ethical problems for modern businesses.
While innovation and data-driven solutions are crucial to a company’s success, they also frequently force organisational leaders to make challenging ethical decisions without well-established industry practices or regulatory guidance.
Responsibility for the environment: It’s our duty to take care of the environment. Most companies are under increasing pressure to assess and address their effects on the natural world.
Acting ethically means that waste must be minimised, resources must be conserved, and all applicable environmental laws must be followed.
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The benefits and importance of having a well-thought-out and wide-reaching code of ethics in an organisation in place are clear.
All organisations, both large and small, should seriously consider putting a code in place, regardless of how much ‘risk’ their operations are.
A code of ethics is the moral standard to which the company and its employees must hold themselves.
It will be a firm set of guidelines that will help steer an organisation in times of trouble and an invaluable asset to a well-functioning and successful enterprise.
In today’s time, business ethics meaning and importance in running a business aren’t just realized by the business owners but also by consumers. Therefore, running an ethical business is as imperative as running the business itself. With a consumer-centric approach like Design Thinking, run a business in the most ethical ways.
As a business owner, knowing the importance of business ethics is no longer optional. While you might think business ethics meaning and importance are limited to a company’s code of conduct, it’s not true. As per studies, 6 in 10 younger consumers assess a company’s ethical ideals before purchasing its items. This demonstrates the value of ethics in creating an ideal brand for your consumers.
Nowadays, customers are the new boss. Hence, it is important to build an ethical culture that makes your business desirable for your employees and customers. If you’re wondering how do ethics apply to business, let’s introduce you to Design Thinking. Design Thinking, a consumer-centric approach to problem-solving, can be helpful for businesses to run an ethical business.
“Ethics must begin at the top of an organization. It is a leadership issue and the chief executive must set an example.”—Edward Hennessy, Philanthropist, and Retired Chairman and CEO of AlliedSignal Inc.
Many ethical business owners, while starting off with their ventures, do ask themselves a question: How do ethics apply to business? Being an ethical person yourself is the first step towards the journey. The next step is, however, to be able to put yourself in the shoes of a consumer. That’s because what is ethical for you must also be feasible for your consumers. And how exactly consumers involved in the whole process of creating an ethical business can help your business?
Business ethics meaning and importance are something that needs to be understood in a proper way. Customers will always favor a company that upholds its ethical standards. Brand loyalty encourages people to select a specific brand over rivals and upholds trust. A significant portion of consumers choose to select a brand that has a positive influence on society and the environment. Consumers, while deciding if a brand is a good investment, take into account its reputation as compared to other brands. This in turn boosts the brands’ reliability in the local community and among investors as well.
For instance, Sundaram Finance, a company owned by TVS group in Chennai, serves all its senior citizen customers in under 10 minutes. They also provide customers with tax-related financial advice without any charges. It has about crores in fixed deposits, in which the majority comes from senior citizens. Although slightly higher than what banks offer, the deposit interest rate is not very high. But the money keeps coming in because of the reliability of the company. No customer has ever gone without receiving any interest payments at any time. This is how brand ethics help a company keep not only existing customers intact but gain new customers as well. A corporation can benefit long-term from building a foundation on the basis of ethics.
Now, to answer how ethics apply to business, let’s go through the following points where business ethics are mostly applied:
The way in which a brand interacts with its consumers is the aspect where business ethics are majorly applied. To establish and uphold a favorable reputation among consumers, honesty and transparency are a must. Developing an ethical reputation with consumers also requires honest and open discussions in marketing communication across all channels. For instance, Ritual, an LA-based brand for women’s nutritional supplements, brags about its transparent supply chain of ingredients. Transparency is a great way to show customers how the brand uses ethical ways to run business.
Business ethics meaning and importance also apply to how staff members are treated internally. Age, color, ethnicity, gender, sexual orientation, religion, and handicap are not factors in hiring practices while running an ethical business. Paying salaries timely, providing breaks, giving honest feedback, and listening to complaints about unethical practices, etc., are good employee ethics. Additionally, ethical businesses offer an environment that complies with ethical guidelines and also conducts open communication with employees.
Given the rise of green standards in the marketplace, business ethics can also be applied to sustainability. Today, customers are keen to buy products/services that employ procedures and practices that minimize negative consequences on the environment. Recycling programs and the reuse of material during production are the two ways in which business ethics meaning and importance can address environmental concerns. Environmental concerns are addressed by ethical businesses in two ways: through recycling programs and the reuse of materials during production.
The concept of “Design Thinking” has gained popularity during the last ten or so years. Design Thinking is a problem-solving approach that helps you find solutions by taking into account the end consumers’ needs. When it comes to business ethics meaning and importance of business ethics, the concept may help organizations in creating a culture that is ethical not only from a business perspective but also from a consumers’ perspective. Hereby, finding an out-of-the-box solution to a unique problem.
Although everyone sees themselves as ethical beings, many of us don’t actively take human-oriented values into account when developing products or services or running a business. As a result, we cut corners and miss the consequences of our products/services on the consumers. With Design Thinking, you can take a human-centric approach to design the integrity and values to build a strong brand. (DT also helps in building strong brand)
With design thinking, we can combine what is both technologically and economically practical and desirable to consumers. To find a solution through design thinking, one has to go through five stages: empathizing, defining, ideating, prototyping, and testing. With these design thinking principles, you can create a strategy for defining the ideal business ethics meaning and importance. Let’s discuss the five stages of design thinking and how business ethics meaning and importance apply to business:
Empathy is the most underrated asset when it comes to running a business. The first step in creating good business ethics is getting to know whoever you are dealing with. To be your most ethical self, one must dig deeper into the code of conduct in each department to understand if they provide the customers what they deeply desire from your brand or not. The idea is to keep yourself in their place and think about what you would like to have from the brand if you were them.
Let’s understand from the example of Ritual multivitamins given earlier. As a consumer of a nutraceutical product herself, the Founder & CEO of the brand, Katerina Schneider, herself struggled with finding vitamins with the right ingredients. She decided to start her own nutraceutical brand so that no other women like hers had to struggle as she did. By having an empathetic eye, she founded the brand with the conviction to share not only where each ingredient is from but also why it’s there in the product, which is what consumers always want to know when it comes to consuming nutraceuticals.
However, it is understandable that not every founder can be the consumer of their own product or service. In such situations, you can conduct interviews with your target audience and gain some insights as to what they think would be an ethical practice from a brand like yours. To implement and understand business ethics meaning and importance, it is essential to be empathetic.
Defining is the stage where you get the first few ideas about your potential challenges that need to be solved during the entire design thinking process. At this stage, it is possible to have numerous ideas floating around in your mind that will come once you have insights from the empathy stage. Collaborate with your team and brainstorm to create various ethical guidelines that can be applied to each and every department of your business. Remember the three points that we discussed in the earlier section of this article? Communication, Employee Treatment, and Sustainability – ideate your ethical guidelines in such a way they can be uniform across these three aspects of your business.
As you further get to know what your problem statements are, you can ideate the potential solutions to those problems. But one needs to keep in mind the three essential pillars of Design Thinking while using the process to find ideal solutions to the problem. These 3 pillars are desirability, feasibility, and viability.
When you decide on developing business ethics, use the three pillars of design thinking. For instance, energy efficiency and green practices are the most desirable practices by consumers, hence firms must reduce packaging waste if they want to properly convince audiences that they are fully committed to renewable solutions. However, while choosing their packaging material, they must look for a material that’s not only biodegradable but is technologically feasible to create in their manufacturing unit. At the same time, it should make sense to your business as well. If you have a food storage product company like Milton, you can’t be using paperboard that’s used to make biodegradable tetra packs.
In design thinking, prototyping is an essential stage. As you go ahead with potential solutions to the problems, you might come up with more than one solution. But you need not choose one solution right away. Instead, create prototypes, or in this case, temporary versions of your business ethics guidelines, and introduce them to the business for a temporary time period. Define business ethics meaning and importance and make your prototypes accessible to your consumers for feedback.
Prototyping and testing are crucial for refining business ethics. They involve creating prototypes to gather feedback from a select audience. Negative responses are possible and should be expected, as Design Thinking encourages learning from failure. Continuous prototyping and testing are essential for keeping ethics relevant and adapting them as needed.
When your business expands globally, your ethics must adapt to new changes, including recruiting local resources, aligning policies with international standards, and targeting a different audience. Initially, you’ll face challenges due to limited experience, but by prototyping and testing your ethics in the international market, you can become more agile and adaptive.
The Bottom Line
It’s more crucial than ever for businesses to create business ethics that are right for your business as well as your customers, given the increased scrutiny of business practices. With design thinking, creating business ethics for your organization becomes both enjoyable and practical!
About the author
A Haryanvi by origin, an entrepreneur at heart, and a consultant by choice, that’s how Ajay likes to introduce himself! Ajay is the Founding Partner at Humane Design and Innovation Consulting (HDI). Before starting HDI, Ajay founded the Design Thinking and Innovation practice at KPMG India. His 16+ years of professional career spans across various roles in product and service design, conducting strategy workshops, storytelling, and enabling an innovation culture. He has coached 50+ organizations and + professionals in institutionalizing design and innovation practices. He loves to blog and speak on topics related to Design Thinking, Innovation, Creativity, Storytelling, Customer Experience, and Entrepreneurship. Ajay is passionate about learning, writing poems, and visualizing future trends!
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