Advantages and Disadvantages of Business Ethics in the Real World

While some people believe that the only thing companies should focus on is making money in a lawful way, other people believe companies should do this ethically too. Business ethics can bring significant benefits, especially to a company’s reputation, but they also have some drawbacks. Here are the advantages and disadvantages of business ethics.



Advantages of Business Ethics

green building for business

Provide a Competitive Advantage in Terms of Customers

When a company behaves ethically, they can attract customers to their products and services and sway them towards loyalty. This is indicated by a Unilever survey which found a third of consumers (33 percent) choose to buy from brands that are making a positive social or environmental impact.

Such a mindset might be a fashion brand whose clothes are sourced, designed and produced in ways that are kind to the environment and the workers. Or it could be a print company whose materials are sourced sustainably, the labourers are paid an appropriate living wage and the printing processes do not damage the environment.

Whatever the industry, an ethical way of doing business can be that company’s USP (unique selling point). This boosts a company’s reputation which in turn, can boost sales. Customers feel better about parting with their money if they know the goods will have been produced ethically and responsibly.

Improve Employee Happiness

Employees will feel more comfortable working for a business that’s behaving ethically than one that’s not. After all, they don’t want to be partially responsible for any unethical consequences, such as contributing to the deforestation of an area or poverty due to underpaying labourers.

This will boost productivity, as indicated by a 2015 survey of more than 2,000 Brits which found that 36 percent of people would work harder if they knew their company helped society.

Business ethics don’t just make current employees want to stay. It can also give businesses a competitive edge with regards to employee recruitment, particularly among the younger generation. The same survey found that 62 percent of people born between 1981 and 1996 (millennials) want to work for a company that makes a positive impact.

Attract More Investors

If investors know that the company they work with prioritises having high morals and will operate in an ethical way, they will be safe in the knowledge that their money is being used in a responsible way. Plus, it means they can be comfortable knowing they’re not indirectly contributing to unethical practices.

This is an advantage because investors will be more likely to continue funding the company.

Strong business ethics are also an attractive quality, which means other investors are more likely to be interested in investing their money into the company, keeping its share price high and protecting it from takeover.

Better for Society

Business ethics are beneficial for the company by attracting customers, investors and employees). But that’s not all. When a company cares about its behaviour, impact and environmental footprint, it’s also better for society overall.

For example, a print company might care about sourcing their materials sustainably and producing their products in a way that’s environmentally friendly. Both of these approaches help to benefit society in a number of ways:

  • The print company’s stock (such as paper, card etc) will be sourced in a way that doesn’t impact the environment. For every tree that’s cut down to make the stock, another might be planted in its place.
  • The labourers who plant, maintain, chop and produce the stock will be paid a good living wage and ensure their business doesn’t damage the local way of life.
  • When the printed products are being made, it’ll be in an environmentally friendly way – such as using sustainable inks or energy saving printers.

Being kinder to the environment ultimately benefits society because it means consumers can live in a world that’s at its best rather than at its worst or suffering. It also means consumers can start to become more aware of business ethics and choose companies who uphold strong morals to help ethical practices continue. Which help to boost the benefits even more.


Disadvantages of Business Ethics

Limited Ability to Maximise Profit

The main drawback of business ethics is that they can reduce a company’s ability to maximise profit.

For example, having factories in developing countries can reduce costs. This is because companies can have practices in place, such as child labour and low wages, which help to maximise profit. But although these practices are legal in those countries, they’re also incredibly unethical and will obviously never be tolerated by a company following ethical practices.

Improvements in working conditions, such as providing workers with living wage and having proper health and safety standards in place, are ethical but raises the amount it costs to run these factories. This, in turn, reduces profit which might not be an issue for large companies who can afford to allocate costs. But it can be an issue for small businesses, especially if they’re evolving.


Time Consuming to Implement the Practices

Developing, implementing and maintaining business ethics can be time consuming, particularly if a company is looking to become more ethical when they’ve previously followed unethical practices. Ethical practices also need to be continuously updated according to changes in laws and regulations, especially as a company grows.

Companies can streamline the process by hiring an ethics officer but this adds to the costs needed for business ethics.


But Despite the Drawbacks, It’s Important to Consider the Positives…

However, although a company might have less freedom to maximise profit, acting responsibly benefits the wider society. Ethical behaviour also significantly boosts a company’s reputation, which has a knock-on effect on attracting and retaining customers, sales, investors and employees.

So, when you take this into account, these disadvantages might not be particularly negative after all.


Interested in Reading More About Business Ethics?

Ethical behaviour can significantly benefit a company, namely by improving their reputation which can help boost sales and profits. But the development, implementation and maintenance of ethical practices can limit a company’s freedom to maximise profit.

Luckily, there are many different ways to operate ethically so companies can choose the ethical practices and approaches that best suit them. For example, advertising can considerably boost a company’s brand awareness. If you choose an outdoor print solution from a print specialist who can produce these products ethically, you can boost your reputation among your target audience even more.

{{cta(’63b793a2-c291-469b-a8b8-5ea5678c2f0e’)}}