Addressing challenges like worker exploitation, data privacy, and deceptive marketing is crucial. What steps will businesses take to prioritise responsible practices and lead by example?
Table of contents:
- Introduction
- What are ethical issues in business?
- Key ethical issues in business
- Final thought
According to an ECI survey, 87% of employees say their workplace doesn’t have a strong ethical culture.
Businesses are no longer judged solely on their financial performance; they are increasingly evaluated on their ethical practices. They are increasingly evaluated on their ethical practices. With the rise of conscious consumerism, corporate responsibility, and stricter regulations, ethical behaviour has become essential for a company’s reputation and long-term success.
Ethical issues in business involve a wide range of moral challenges that affect not only the business but also its employees, customers, society, and the environment. How companies deal with these issues can make or break their credibility and operational stability.
This article explores the concept of ethical issues in business, examines the key ethical challenges companies face today, explains why they are important and provides insights into how businesses can work towards ethical solutions.
What are ethical issues in business?
Ethical issues in business refer to situations where a company’s actions or policies may be seen as morally questionable or go against certain ethical standards. These issues arise from the conflict between profit motives and ethical values.
Often, there are conflicting interests between the business’s need to grow and the well-being of employees, customers, society, and the environment. Ethical business practices are based on transparency, fairness, integrity, and responsibility.
Common examples of ethical issues include corporate governance failures, lack of transparency, worker exploitation, environmental harm, deceptive marketing, and misuse of data. These issues can damage the trust between a business and its stakeholders, lead to legal troubles, and harm the business’s reputation in the long run.
Key ethical issues in business
- Corporate governance and accountability
One of the most significant ethical issues in today’s business world is corporate governance. Poor governance can lead to a lack of accountability, where company leaders act in their own self-interest rather than in the best interests of the business, shareholders, and other stakeholders. Scandals like the collapse of Enron and the 2008 financial crisis highlighted how poor governance can cause harm to industries and economies.
Why it matters: Good governance encourages transparency, accountability, and ethical decision-making, which helps build trust with investors, employees, and consumers. Without strong governance, businesses are at risk of corruption, fraud, and financial mismanagement.
Solutions: Companies should have rigorous governance frameworks, ensure transparency in decision-making, and set up strong checks and balances. Independent audits, compliance with regulations, and maintaining open communication with stakeholders are key to ensuring accountability.
In the UK, corporate governance is controlled through a mix of laws, codes of practice, and guidance documents. One of the main frameworks is the UK Corporate Governance Code, which is managed by the Financial Reporting Council (FRC). This code is aimed at publicly listed companies and sets out principles for ensuring strong board leadership, accountability, and good relationships with shareholders.
The Companies Act 2006 also plays a key role in corporate governance in the UK. It outlines the duties of directors, including the need to act in the best interests of the company and its shareholders, avoid conflicts of interest, and make sure financial reporting is transparent.
A well-known example of UK corporate governance rules in action is the case of the Royal Bank of Scotland (RBS) during the 2008 financial crisis. RBS needed a bailout from the UK government after poor management and risky choices brought it close to collapse. This situation showed the need for stronger governance and accountability. As a result, new rules like the Senior Managers and Certification Regime (SM&CR) were introduced to make sure key people in financial services companies are accountable for their actions. The SM&CR aims to protect consumers and strengthen market integrity by holding senior managers more responsible.
- Environmental responsibility
Climate change and environmental damage are major global concerns, and businesses play a large role in both causing and solving these issues. Many companies are criticised for their environmental impacts, such as high carbon emissions, unsustainable resource use, and pollution. Businesses in sectors like energy, manufacturing, and agriculture face intense scrutiny for their environmental impact.
Why it matters: Environmental responsibility is both a moral and legal issue. Consumers prefer companies that focus on sustainability, and governments are imposing stricter environmental regulations. Ignoring environmental issues can lead to fines, boycotts, and a damaged reputation.
Solutions: Businesses can reduce their environmental impact by adopting sustainable practices, such as lowering carbon emissions, using energy-efficient technologies, and using eco-friendly materials. Being transparent about environmental policies and producing regular sustainability reports also demonstrates ethical environmental responsibility.
- Labour rights and exploitation
Exploiting workers, especially in global supply chains, is still a major ethical issue. Poor working conditions, child labour, forced labour, and low wages are common in industries like fast fashion, electronics, and agriculture. Globalisation has allowed companies to outsource production to countries with weaker labour laws, leading to worker exploitation.
Why it matters: Ethical labour practices are a human rights issue, and businesses that exploit workers face backlash from consumers, regulators, and advocacy groups. Unethical labour practices not only harm employees but can also lead to boycotts, legal action, and reputational damage.
Solutions: Businesses should ensure fair wages, safe working conditions, and respect for workers’ rights throughout their supply chains. Regular audits, partnerships with fair trade organisations, and adherence to international labour standards, such as those set by the International Labour Organisation (ILO), are essential for ethical labour practices.
Global organisations and companies are increasingly focusing on being environmentally responsible to tackle the urgent problems of climate change and sustainability. Programs like ZERO13, the United Nations Global Compact (UNGC), and the Ellen MacArthur Foundation are leading the way in reducing carbon emissions, promoting renewable energy, and encouraging sustainable use of resources. These groups work together with governments and businesses around the world, setting standards and creating guidelines to lessen environmental harm. Similarly, the World Wildlife Fund (WWF) and the Carbon Trust partner with companies in industries like agriculture and manufacturing to promote eco-friendly practices and cut down on deforestation, waste, and pollution.
Many large companies have also made commitments to sustainability efforts. For instance, Unilever has set bold goals to become carbon-positive by 2030, while Patagonia focuses on using recycled materials and reducing consumerism. Tesla supports zero-emission transport with its electric cars, and Google has promised to run entirely on renewable energy. These companies are helping to drive positive change across different industries.
- Data privacy and cybersecurity
With the digitalisation of business operations, data privacy and cybersecurity have become major ethical concerns. Companies collect large amounts of personal data from customers, making them responsible for protecting this information. Data breaches, misuse of personal data, and weak security measures have raised ethical concerns about how businesses handle sensitive data.
Why it matters: Data breaches can have serious consequences for businesses and consumers. For businesses, breaches can cause financial loss, reputational harm, and legal penalties under regulations like the General Data Protection Regulation (GDPR). For consumers, data misuse can result in identity theft, financial loss, and a loss of trust in businesses.
Solutions: To address data privacy concerns, businesses must invest in strong cybersecurity measures, follow data protection regulations, and be transparent about how they collect, store, and use personal data. Allowing customers control over their data and responding quickly to security issues is crucial for maintaining trust.
OneTrust is a popular data privacy platform that helps businesses meet regulations like GDPR by managing consent, mapping data, and conducting privacy assessments. Another example is TrustArc, which provides tools for data governance, ensuring that companies follow privacy laws and maintain data security standards. These platforms enable businesses to manage and protect personal data effectively while keeping customers informed about how their data is used.
For cybersecurity, businesses typically use a mix of strategies to protect sensitive information. Encryption is a common approach where data is transformed into a secure code to prevent unauthorised access. Multi-factor authentication (MFA) is another measure that adds extra security by requiring users to provide two or more forms of verification before accessing a system. In addition, firewalls and antivirus software help monitor and block suspicious activity, reducing the chance of cyberattacks. By applying these measures, businesses can safeguard data and maintain strong cybersecurity practices.
- Deceptive marketing practices
Deceptive marketing is another significant ethical issue. This can include false advertising, misleading product claims, greenwashing (misleading consumers about environmental practices), and hidden fees. Businesses that engage in deceptive marketing break the trust with consumers and violate ethical standards of honesty and transparency.
Why it matters: Deceptive marketing can lead to legal penalties, including fines and lawsuits, and harm a business’s reputation. Consumers are increasingly aware of false claims, and businesses that engage in misleading practices risk losing customer loyalty.
Solutions: Ethical marketing should focus on honesty, transparency, and fairness. Companies should avoid exaggerated claims, provide clear and accurate product information, and avoid using deceptive tactics. Clear marketing guidelines and regular reviews of advertising content can help ensure compliance with ethical standards.
The Volkswagen emissions scandal came to light in 2015 when it was discovered that the company had installed software in millions of its diesel cars to cheat emissions tests. Volkswagen had falsely promoted these vehicles as environmentally friendly, even though they released nitrogen oxide pollutants far above the legal limits. This act of greenwashing not only misled customers but also breached environmental laws and ethical marketing standards.
As a result, Volkswagen faced heavy fines, numerous lawsuits, and significant damage to its reputation. The scandal highlighted the need for honesty and transparency in marketing, as consumers trust companies to give accurate information about their products. This case shows why businesses must avoid deceptive practices and focus on ethical marketing to maintain trust and customer loyalty.
- Diversity and inclusion
Diversity and inclusion are becoming ethical priorities in the workplace. Companies that fail to promote an inclusive environment or discriminate against employees based on race, gender, age, or sexual orientation face ethical and legal challenges. Workplace inequality and discrimination not only harm employees but also affect company culture and performance.
Why It matters: Inclusive businesses tend to be more innovative, productive, and successful. Moreover, consumers and employees are demanding that businesses take a stand on social issues like gender equality and racial justice. Companies that fail to promote diversity and inclusion risk losing talent and customers.
Solutions: Businesses should adopt policies that promote diversity and inclusion at all levels of the organisation. This includes training programmes, diverse hiring practices, equal pay initiatives, and creating safe spaces for employees to share their concerns. Reporting on diversity metrics can also help hold companies accountable.
International organisations are putting more emphasis on Diversity, Equity, and Inclusion (DE&I) to encourage businesses to build more inclusive workplaces. A key initiative in this area is The Valuable 500, a global movement focused on making disability inclusion a priority for business leaders. The Valuable 500 collaborates with major companies worldwide to ensure that disability inclusion is an integral part of their diversity efforts. With more than 500 companies involved, including big names like Microsoft and Unilever, the organisation promotes equal opportunities and helps businesses create more accessible and inclusive workplaces for all employees.
- Supply chain transparency
With the growth of global supply chains, ensuring ethical practices and transparency throughout the supply chain has become a significant challenge. Many companies face ethical dilemmas regarding the sourcing of raw materials, working conditions of suppliers, and environmental impact.
Why it matters: Supply chain transparency is vital for maintaining ethical standards, especially in industries like fashion, electronics, and food production. Consumers are demanding more information about where products come from and how they are made. Lack of transparency can lead to scandals, fines, and boycotts.
Solutions: To ensure ethical supply chains, businesses should conduct thorough audits of their suppliers, work with ethical sourcing organisations, and provide clear information about their supply chains. Technologies like blockchain can help track products from source to sale, ensuring greater transparency.
Patagonia, an outdoor clothing brand, has taken major steps to ensure ethical practices across its supply chain. The company is dedicated to sharing detailed information about the sources of its raw materials and the working conditions of its suppliers. Patagonia offers an interactive supply chain map on its website, allowing customers to trace the origins of their products and see how they are made.
The company also collaborates with third-party organisations, such as the Fair Trade Certified program, to make sure its products are sourced responsibly and that workers receive fair wages and work in safe conditions.
Final thought
Ethical issues in business today are complex, impacting everything from corporate governance to environmental sustainability and data privacy. As businesses operate in a global and connected environment, they face increasing pressure to address these ethical challenges responsibly.
To maintain trust, protect their reputation, and ensure long-term success, businesses must prioritise ethical decision-making in all areas of their operations. By embracing transparent governance, promoting sustainability, protecting labour rights, safeguarding data privacy, and fostering diversity, businesses can not only reduce ethical risks but also build a strong foundation for future growth.
In an age of informed consumers and regulatory scrutiny, the importance of ethical practices cannot be overstated. Businesses that uphold strong ethical standards will stand out as leaders in their industries.
Key takeaways
- Ethical business practices are essential for maintaining a good reputation, earning trust, and achieving long-term success.
- Businesses face various ethical challenges, such as poor corporate governance, environmental harm, worker exploitation, data privacy concerns, and deceptive marketing.
- Companies can address ethical issues by promoting transparency, using sustainable practices, ensuring fair labour standards, and protecting customer data.
- Promoting diversity and inclusion helps improve company culture and performance, while also meeting the demands of employees and consumers.
- Maintaining ethical supply chains is crucial, and businesses can use audits and technologies like blockchain to improve transparency.
Himani Verma is a seasoned content writer and SEO expert, with experience in digital media. She has held various senior writing positions at enterprises like CloudTDMS (Synthetic Data Factory), Barrownz Group, and ATZA. Himani has also been Editorial Writer at Hindustan Time, a leading Indian English language news platform. She excels in content creation, proofreading, and editing, ensuring that every piece is polished and impactful. Her expertise in crafting SEO-friendly content for multiple verticals of businesses, including technology, healthcare, finance, sports, innovation, and more.
