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Blog > What Is the Importance of Ethics in Business?

What Is the Importance of Ethics in Business?

VComply Editorial Team
March 6, 2021
3 minutes

In a highly competitive environment that thrives on doing anything and everything it takes to succeed, ethics are a key system used to govern business operations. Business ethics, by definition, is a system of beliefs that serves to guide a business organization and the individuals within that organization. These largely revolve around the behaviors, decisions, and values of all involved, and are sometimes incorporated into regulatory norms.

For most businesses, some laws dictate ethical protocol as well, some of which commonly include:

  • Minimum wage norms
  • Environmental regulation
  • Restrictions against collusion and insider trading

It is interesting to note that the attributes and factors that qualify as business ethics are now vastly different from those of the past. Naturally, businesses now operate on a much larger scale and leverage more advanced technologies and media. As such, there are standards both unspoken and known that should be followed for optimal business operation. More to the point, companies and organizations with a defined ethical protocol are often known to be more successful. 

This is proven by the fact that companies on the World’s Most Ethical Companies list were found to outperform the U.S. Large Cap Index by a significant 13.5% for a 5-year period. In short, good ethics translates into good business and it is a no-brainer that it benefits businesses to invest in a well-defined ethics program. For more insight on what this entails and the consequences of ignoring business ethics, take a look at these pointers.  

What are the different areas of ethics? 

There are 3 main areas of ethics, and all have a role to play in any organization. A lack of any, and in any form, exposes the entire company to risk or non-compliance. The first, and arguably most important, are the ethics in leadership. For any business ethics program to successfully become a part of its culture, the senior management has to be proactively involved and must be seen doing so. 

With senior management instilling ethics, other leaders at various levels are able to transmit the message forward effectively. Moreover, when the higher-ups lead by example, a long-lasting ethics culture is created, promoting beneficial operations. 

Some of the benefits of establishing ethics in leadership include:

  • Attracting better talent
  • Retaining a high-quality workforce 
  • Building a positive reputation in the community 
  • Establishing stability within the company 

The second area of ethics deals with employee ethics. Employees are known to benefit from a well-designed business ethics program greatly. For instance, business ethics can guide employees and help them make better business decisions, quicker. In addition to this, employee ethics also: 

  • Increases productivity
  • Promotes employee loyalty
  • Enhances employee morale

Additionally, when employees are part of businesses that operate by maintaining a high standard for ethics, they are more likely to improve their ability to do their job more effectively. This all goes back to how good ethics makes for good business. 

The third area to note are industry-specific ethics. These are trickier to navigate as they vary with industry and country. For instance, an energy company will have to employ a very strict and clearly defined environment ethics program to ensure that it can continue to operate as needed. Any ethical oversights or mistakes are likely to draw in the public’s wrath and the numerous regulatory bodies. On the other hand, there are companies, like Google, Amazon or other e-commerce platforms, that don’t have a direct impact on the environment. These are bound by ethics related to customer security and data privacy. In fact, ethics in marketing is a hot topic within this sector as it involves selling user data for marketing gain. 


ethics in business
Ethics in Business

What should an ethics program achieve?

Considering that ethics promote employees to conduct their work with integrity, it is clear that every company needs one. However, it is important to consider the deeper role and significance of such a program. As per the U.S. Department of Commerce, any ethics program that is deployed must first relate to all business functions. This aids seamless integration of the program across the various departments, after which businesses can focus on maximizing its impact. 


In order to do so, it is crucial that an ethics program be designed to meet set goals. As per Gartner, a global research and advisory firm, an ethics program should:

  1. Manage behavior ethics
  2. Offer training and communication regarding ethics
  3. Monitor and mitigate risks
  4. Reinforce behavioral expectations
  5. Create a clear program mandate
  6. Have policies and procedures defined
  7. Provide necessary support to allegations of misconduct

Why are business ethics important?

Business ethics are important because they facilitate operating with integrity. They also promote all the benefits mentioned previously, catering directly to business longevity and sustainable employment. However, besides these reasons, business ethics also offer the benefit of increased profitability. Because operating within ethical norms boosts a business’ reputation, there is data that suggests stakeholders and investors are now investing differently. Investors are actively seeking out companies that operate ethically as it is arguably the smart choice. Companies that are known to disregard ethics are being sidelined, and investors are more reluctant to buy in or invest. 

What are the risks of operating unethically? 

When any business chooses to operate outside ethical norms, it is actively choosing to squander the benefits of being ethical. In essence, the company has increased exposure, which brews a negative culture that will almost certainly spiral into the illegal. Some of the more common risks of operating unethically include:

  • Destroying the company’s reputation in the industry and community
  • Forcing employees to commit wrongful or unfair business practices 
  • Loss of work culture, leading to lower employee morale
  • Loss of trust among stakeholders, customers and any professionals in the industry
  • Increased possibilities for illegal acts leading to the incarceration of employees
  • Loss of livelihood due to a break in the supply chain

Considering the risks associated with operating unethically, it comes as no surprise that companies are actively investing in business ethics programs. However, in today’s ever-changing regulatory environment, establishing ethical practice can’t be achieved in just one sitting. 

Companies will now require specialized tools to manage such programs, adapt them for newer technology and update them, as needed, without incurring massive overheads. The VComply GRC suite offers such a solution and helps companies handle risks efficiently and effectively. With just a single program, your company can adopt and enforce risk programs seamlessly, to ensure that your business ethics are always a priority. 

Discover what makes VComply a top G2 high performer in the GRC platform category. Book your demo now and explore its robust capabilities.