Why does it matter? What effect does it have on business success/reputation? What can businesses do to be more ethical?
By Rebecca Doodson
Ethics is fast becoming an essential aspect of business in the modern world. We see ethical practices promoted in advertising, and the lack of ethical behaviour condemned in the media. From scandals focused on The BBC to Barclays and Tesco Beef Lasagnes; business ethics are being increasingly scrutinized.
If asked to think about companies that have lost public trust, what names would spring to mind? Amazon? Starbucks? Both have been the focus of media scrutiny following revelations of tax avoidance. But the interesting thing is tax avoidance is not illegal; instead the public were outraged at the departure from ethical standards. And it doesn’t stop there – ‘tax shaming’ is increasingly becoming an outlet for public anger at tax avoidance practices. Both Vodafone and Â Barclays have been victims of protest against tax avoidance and, more recently, protestors have utilised social media ‘trending’ the hashtag #boycottstarbucks.
Whilst some do boycott brands, the impact this has is relatively low. It is difficult to measure the direct impact of public anger on profits of companies but branding experts agree the reputational repercussions are key.
The 13th Annual Edelman Trust Barometer clearly demonstrates the impact financial scandals have had on public trust. When asked about the banking industry, the UK scored just 29% in overall trust – a number considerably lower than the US, Canada, China and Australia.
Once a company’s brand is damaged by ethical scandals, it can be very difficult to re-build the trust of existing consumers and even more challenging to attract new ones. Additionally, a lapse in reputation can leave a business open to attack from competition.
So what can businesses do to be more ethical? Implementing a code of ethics is a good start. A recent survey conducted by IBE revealed 73% of UK employees say their organisation provides written standards of ethical business conduct. However, only half said they would report misconduct if they saw it occur. Employees are at the ‘front line’ of customer service and often have the most influence over the customer’s perception of the business. Training and development is therefore essential. This can be done internally or through workshops by ethics training providers. Some companies also offer free updates and information, such as AAT’s ethics microsite which has interactive dilemmas, case studies and articles about the most recent ethics news.
The many scandals that have affected businesses, companies and entire industries are cautionary tales with the moral being that the role of ethics in business must take centre stage.
Rebecca Doodson has been Senior Conduct and Compliance Officer at AAT (Association of Accounting Technicians) since January 2011. She is responsible for content on AAT’s ethics microsite, and gives ethical advice to AAT members. Rebecca has worked at AAT for four years, managing disciplinary cases of non-compliance with the Regulations.