This essay will be exploring the topic of the importance of business ethics, looking at how it can be defined and how businesses can embrace ethics and whether they should embed ethics in their working practice. In this essay examples of ethics within businesses will be explored to understand how embracing ethics can give companies a completive advantage, specifically looking at the use of palm oil within Iceland’s own labelled produce. Furthermore this essay will explore how ethics are useful for businesses to embed in their practices, focusing on how ethics are related to changing consumer habits and social trends. Additionally this essay will address the challenges of embracing business ethics including difficulties in defining what is ethically right or wrong and how ethics create a trade of between ethics and profit, focusing on the Volkswagen emissions scandal.
To begin to understand what business ethics is we must understand what they concern. Fahy and Jobber (2015) suggested that business ethics can be defined as the moral principles which can influence an organisations decisions and activities. Business ethics concern whether conduct is morally right or wrong , however challenges can arise defining what is actually right or wrong.
A major advantage of an organisation embracing business ethics is that it can give them a competitive advantage. To understand the importance of accepting business ethics we should look at the example of Iceland. Business Insider (2018) has reported how Iceland had its 2018 Christmas television advert prohibited from being shown as it was classified as political. This occurred after Iceland applied business ethics to its own labeled products by promising to ban palm oil from 100% of its own labelled produce by the end of 2018 (Iceland, 2018). This is an example of how a company has embraced business ethics as although there is no legal formality staying that a product should not contain palm oil, Iceland believe it is ethically wrong to use palm oil in its product. This is because to obtain palm oil there is mass destruction of orangutans habitats which has led to the population of orangutans becoming ‘critically endangered, with only 70,000 to 100,000 individuals remaining’, (Iceland, 2018). By encompassing business ethics Iceland has a competitive advantage over its other main supermarket competitors as it is the first supermarket to ban palm oil in its products. Not only does this give Iceland a competitive advantage it gives them first mover advantage. This is in turn is likely to increase its share of the market as consumers who are environmentally aware are more likely to purchase Iceland’s own labelled produce. As a result Iceland are then likely to have increased profits. This is a major benefit of embracing business ethics as although in the short term it is likely that production costs will rise due to finding palm oil alternatives in the long term it is likely that Iceland will become more profitable.
Businesses should embed ethics into their practices especially as there is a change in social trends where consumers are becoming more environmentally concerned and aware and are choosing to shop more environmentally consciously.
Business ethics can be difficult for businesses to embed in their practices as they can create a conflict between profit and ethics. Many companies outsource production and manufacturing to emerging economies where goods can be produced at very low costs and then sold on with higher profit margins, compared to if they were made in some developed economies where there are stringent stipulations regarding working conditions and pay. This creates a clash between making a profit for the company, which is likely to be their main aim and being ethically aware, which consumers are often concerned about. Outsourcing can help to improve profitability but this is often at the cost to workers who are often forced to work in poor working conditions, working long days for very little money. This has been exemplified by Fahy and Jobber (2018) who reported on an instance where in Bangladesh it was exposed by Channel 4 that minors were working in factories to produce Tesco own label clothing. Tesco claimed to be unaware of this as this was a clear breach of its ethical guidelines, especially as it is a member of the Ethical Trading Initiative. In this instance Tesco could have implemented business ethics into its practice by ensuring that all suppliers of its products had suitable factories and were employing suitably aged workers.
In contrast it has suggested by Brenkert (2010) that business ethics are often disregarded in organisations or not considered important. This can be highlighted by evidence provided by Jack (2018) about the Volkswagen emissions scandal.
Not only was this highly unethical it was also illegal and has left Volkswagen facing a large legal bill from customers who wish to sue (financial times article)