The importance of business ethics for your organization

The importance of business ethics refers to the principles and values that guide the behaviour of individuals and organisations in the business world, including nonprofits. It dictates that organisations consider the impact of their decisions on various stakeholders, such as customers, employees, suppliers, shareholders and the communities they serve.

The ways an organisation responds to right and wrong is a reflection of its business ethics. In many ways, business ethics go hand-in-hand with social responsibility. Both concepts are essential in every workplace, including nonprofit organizations’ activities and operations.
Here, we help you better understand the concept of the importance of business ethics by discussing the following topics:

  • A definition of business ethics and its principles
  • The importance of business ethics
  • The difference between business ethics and social responsibility
  • How to write a code of business ethics with examples

What is business ethics?

‘Ethics’ comes from the Greek word ethos, which means moral character. Ethics means knowing the difference between right and wrong and doing right.
Boards often make ethical decisions based on the law, the nonprofit’s principles, or their consciences.

Business ethics refers to policies and practices related to such things as:

  • Corporate governance
  • Bribery
  • Discrimination
  • Social responsibility
  • Fiduciary responsibilities

Boards are responsible for establishing policies and procedures, and ethical processes set the tone for an ethical nonprofit culture; this includes ethical responsibility in the workplace. With a BoardEffect board management system, your non-profit can put its policies and procedures at your board members’ fingertips.

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What principles do ethical businesses follow?

The 11 principles of business ethics include:

  • Integrity
  • Honesty
  • Fairness
  • Compassion
  • Leadership
  • Respect
  • Loyalty
  • Transparency
  • Environmentally conscious
  • Law-abiding
  • Responsibility

Non-profit boards should embrace these principles when dealing with employees, volunteers, donors, vendors, beneficiaries of programs and services, and each other. Why Are Business Ethics Important?

Exercising ethical behavior in business is essential for the following reasons:

  • It can help build trust and credibility with stakeholders
  • Promote long-term sustainability and profitability
  • Prevent reputational damage, legal problems and loss of business

Our laws set the official standard for business ethics. Nonetheless, non-profits, corporations, and other organizations must use their best judgment to decide what is morally and ethically correct.

The premise behind business ethics is that business activities shouldn’t harm people, products or services.

What is the difference between social responsibility and business ethics?

We’ve noted that business ethics refers to moral principles that serve as the foundation for how a nonprofit conducts itself and the behavior of individuals and organizations in the business world. By contrast, social responsibility is concerned with the impact of those behaviors on society and the environment.

The main differences between social responsibility and business ethics are listed below:

Social Responsibility

  • Focuses on ethical concerns that affect societies
  • Affects society as a whole
  • Requires accountability to the organization, stakeholders and the public

Business Ethics

  • Defines what is right and wrong
  • Affects the people within an organisation
  • Requires ethical decision-making

Business ethics is a necessary foundation for social responsibility, but social responsibility goes beyond simply following ethical principles to actively contributing to the greater good.

Creating a code of business ethics: Step-by-step

Each ethics program is unique to the organization. Therefore, an excellent place to start creating a code of business ethics is to look to your non-profit’s vision and mission statements for inspiration. A committee dedicated to the task will streamline the process.
With that in mind, here is an eight-step process for creating a business code of ethics for your non-profit:

  1. List your non-profit’s values.
  2. Ask for input from your staff and volunteers.
  3. Assess areas of risk (discrimination, reputation, security, confidentiality, etc.).
  4. Develop a framework for ethical decision-making.
  5. Determine how the framework dovetails with other policies.
  6. Write out the code of business ethics.
  7. Get board approval.
  8. Communicate the code of business ethics to staff and volunteers and post it on your website.

Business ethics can be challenging because our decisions often reflect our own beliefs and cultures in addition to the nonprofit’s culture.

Moreover, relationships are complicated, and there’s not always a clear-cut appropriate answer. Cultural assessments can be valuable in understanding whether certain behaviors align with a company’s code of ethics.

Business Code of Ethics examples

We can take cues from businesses and organizations we are familiar with as examples of business codes of ethics.

Here are some worth reviewing:

American Heart Association
In part, the American Heart Association’s ethics policy reads:
“The purpose of this ethics policy is to support a culture of openness, trust, and integrity in all American Heart Association management and business practices. A well-understood ethics policy requires the participation and support of every AHA volunteer and employee.
At the American Heart Association, we are dedicated to working with our volunteers, employees, partners, vendors and customers to reduce disability and death from cardiovascular diseases and stroke. We are committed to conducting all of the AHA’s affairs and activities with the highest standards of ethical conduct. The AHA Code of Conduct in the Human Resources Policy Manual provides guidance for decisions and actions during our daily work.”

The American National Red Cross
The American National Red Cross states the following in its code of business ethics and conduct:

“As a charitable organization, the American Red Cross (the “Red Cross”) places the utmost importance on acting with integrity. In other words, the way we approach our work is just as important as the results we achieve.”

Dementia UK
The Dementia UK Ethical Policy states its purpose and context:
“The purpose of this policy is to provide guidance in relation to the type and nature of companies and events (including those undertaken by Individuals and Groups who are fundraising in aid of Dementia UK) that Dementia UK will, and will not, work with in order to raise funds to support the delivery of its mission, vision and objectives.”

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