Business Ethics | The Impact of Ethics on Business

Summary

This video explores the concept of business ethics, emphasizing the importance of moral conduct beyond legal obligations. It highlights the significance of fair treatment towards employees, suppliers, customers, and the environment. The video suggests practical steps businesses can take to enhance ethics, such as offering fair wages, employee benefits, ethical sourcing, and fair trade practices. It also discusses the impact of tax payments on a company's ethical reputation and challenges the notion that ethics must compromise profits, arguing that ethical businesses can gain customer loyalty and premium pricing.

Takeaways

• 📚 Business ethics involves operating beyond legal requirements and doing what is morally right.
• 💼 Ethical businesses should treat employees, suppliers, customers, and the environment fairly.
• 💰 Implementing ethical policies might come at the cost of short-term profits.
• 👷‍♂️ Businesses can be more ethical by providing safe workplaces and fair wages to employees.
• 🍽️ Companies like Google offer extensive benefits to enhance employee satisfaction and productivity.
• 🛒 Treating suppliers well includes paying fair prices and making timely payments.
• ☕ Fair trade practices ensure suppliers are paid fairly for their products, like in the coffee industry.
• 🌱 Ethical sourcing involves using materials that are not produced through worker exploitation and have minimal environmental impact.
• 💼 Lush Cosmetics is an example of a company with a strong ethical buying policy.
• 💵 Paying fair taxes is crucial for a company's ethical reputation, as tax avoidance can lead to negative public opinion.
• ♻️ Despite the potential for increased costs, ethical practices can lead to long-term financial benefits through improved brand image and customer loyalty.

Q & A

What is the primary focus of business ethics?

Business ethics focuses on going beyond legal requirements and doing what is morally right, ensuring fair operations towards employees, suppliers, customers, and the environment.

How can a business demonstrate ethical treatment of its employees?

A business can demonstrate ethical treatment by providing a safe workplace, paying a fair wage above minimum standards, offering financial incentives like bonuses or share schemes, and creating a supportive work environment with benefits such as free food, healthcare, and flexible hours.

What are some examples of employee benefits provided by Google to enhance ethical business practices?

Google provides employee benefits such as free food, free medical and dental care, gyms, student loan repayment assistance, flexible working hours, and excellent communal spaces to create a positive work environment.

Why is it important for businesses to treat their suppliers ethically?

Treating suppliers ethically is important because it ensures fair prices and timely payments, supports fair trade practices, and helps in building long-term, mutually beneficial relationships, which are crucial for business sustainability.

What does the fair-trade logo signify in the context of business ethics?

The fair-trade logo signifies that the business has paid the producers a fair price for their goods, adhering to ethical standards that include fair wages, safe working conditions, and no child labor.

How does Lush demonstrate ethical sourcing in its business operations?

Lush demonstrates ethical sourcing by having a strict ethical buying policy that ensures suppliers have good workers' rights, safe working conditions, no animal testing, and that materials are produced in an environmentally sustainable way.

Why is paying the fair share of taxes considered an ethical business practice?

Paying the fair share of taxes is an ethical business practice because it contributes to the community and the country's economy, supports public services, and maintains transparency and accountability, which are essential for a company's reputation.

What was the consequence for Starbucks when they paid no corporation tax in the UK in 2011?

Starbucks faced a public boycott and negative press coverage, which eventually led to them paying 20 million pounds to HMRC to rectify the situation and restore their reputation.

How can an ethical business approach potentially benefit a company financially?

An ethical business approach can benefit a company financially by allowing it to charge premium prices for products, improving public opinion, enhancing brand image, and increasing customer loyalty due to alignment with customers' values.

What is the counterargument to the idea that being ethical comes at the expense of profits?

The counterargument is that while ethical practices may increase costs, they can also lead to financial benefits through premium pricing, improved reputation, and customer loyalty, which can outweigh the initial costs.

Why is it crucial for businesses to adopt ethical practices in today's climate?

In today's climate, where consumers are more aware and active on social media, it is crucial for businesses to adopt ethical practices to avoid negative exposure and maintain a positive public image, as unethical actions can quickly damage a company's reputation and financial performance.

Outlines

00:00

🌟 Ethical Business Practices and Their Impact

This paragraph discusses the concept of business ethics, emphasizing the importance of moral conduct beyond legal requirements. It highlights that ethical businesses should treat their employees, suppliers, customers, and the environment fairly. The paragraph suggests that while ethical practices might seem counterintuitive due to potential profit sacrifices, they are crucial. It lists various ways businesses can act ethically, such as providing safe workplaces, fair wages, financial incentives, and comprehensive benefits to employees. Google is cited as an example of a company that excels in employee satisfaction through its generous benefits package. The paragraph also touches on fair trade practices, ethical sourcing of materials, and paying suppliers fairly, using the coffee industry and Lush as examples. It concludes by discussing the importance of paying taxes ethically, mentioning Starbucks' tax controversy as a cautionary tale.

05:01

💹 Balancing Ethics and Profits in Business

The second paragraph argues against the notion that ethics and profits are mutually exclusive. It posits that businesses can recover the costs of ethical practices by charging premium prices due to their ethical credentials. The paragraph outlines the financial benefits of being an ethical business, such as improved public opinion, a better brand image, and increased customer loyalty. It emphasizes the current consumer climate where ethical business practices are not just beneficial but necessary to avoid negative press and social media backlash. The paragraph concludes by encouraging viewers to engage with the content and subscribe for more business-related videos.

Keywords

💡Business ethics

Business ethics refers to the moral principles and values that guide the decisions and actions of a company. It goes beyond legal compliance to ensure that the business operates with integrity and fairness towards all stakeholders, including employees, suppliers, customers, and the environment. In the video, business ethics is exemplified by companies like Google and Lush, which prioritize fair treatment of employees and ethical sourcing of materials, respectively.

💡Employee treatment

Employee treatment encompasses the fair and respectful ways in which a business treats its workforce. This includes providing safe working conditions, fair wages, and additional benefits that contribute to employee satisfaction and well-being. The video highlights Google's approach to employee treatment, offering benefits like free food, medical care, and flexible working hours, which are not legally required but demonstrate ethical business practices.

💡Fair wage

A fair wage is a compensation that is commensurate with the work performed and allows employees to live a comfortable life. It is more than just the minimum wage and is a reflection of a company's ethical stance towards its employees. The video emphasizes that paying a fair wage is a key aspect of ethical business practices, as it ensures that employees are properly reimbursed for their work.

💡Financial incentives

Financial incentives are bonuses or rewards given to employees when the business performs well. These can include bonuses, share schemes, or other forms of compensation that directly benefit employees from the company's success. The video mentions that companies can enhance their ethical standing by offering such incentives, which align the interests of employees with the company's performance.

💡Supplier treatment

Supplier treatment refers to the ethical practices a business employs in its dealings with suppliers. This includes paying fair prices and making timely payments, which are crucial for maintaining good relationships and ensuring the suppliers' financial stability. The video discusses the importance of treating suppliers well, using the fair-trade coffee industry as an example where businesses pay growers a fair price for their products.

💡Fair trade

Fair trade is a system of trade that aims to ensure that producers, particularly in developing countries, receive fair prices for their goods, which helps to improve their working and living conditions. The video mentions the fair-trade logo as a symbol of ethical business practices, indicating that the business has paid suppliers fairly and adhered to ethical standards.

💡Ethically sourced materials

Ethically sourced materials are those that are obtained through processes that do not exploit workers and consider the environmental and social impacts. The video uses Lush as an example of a company that has a strict ethical buying policy, ensuring that their suppliers provide goods that are produced and grown in an environmentally sustainable and socially responsible manner.

💡Tax payments

Tax payments are the financial contributions that businesses make to the government as part of their legal obligations. Ethical businesses ensure they pay their fair share of taxes, which is crucial for funding public services and infrastructure. The video points out that while tax avoidance may be legal, it is not ethical and can harm a company's reputation, as illustrated by the case of Starbucks paying no corporation tax in the UK in 2011.

💡Ethical vs. Profits

The video discusses the common belief that being ethical may come at the expense of profits, as ethical practices like paying workers well and sourcing ethically produced materials can increase business costs. However, it argues that there is no inherent trade-off, as ethical businesses can charge premium prices for their products and benefit from improved public opinion, better brand image, and increased customer loyalty.

💡Public opinion and brand image

Public opinion and brand image are the perceptions and reputation that the public has about a company. Ethical businesses can enhance their brand image by aligning their values with those of their customers, which can lead to increased customer loyalty and financial benefits. The video emphasizes that in today's climate, where customers are more aware of business practices, a negative public opinion due to unethical behavior can be costly for a company.

Highlights

Business ethics involves going beyond legal requirements to act morally right.

Ethical businesses operate fairly towards employees, suppliers, customers, and the environment.

Implementing ethical policies might come at the expense of profits.

Treating employees well is a key step towards ethical business practices.

Paying a fair wage that allows employees to live comfortably is crucial.

Financial incentives like bonuses and share schemes can benefit employees.

Google is an example of a company with high employee satisfaction.

Google offers extensive benefits like free food, medical care, and flexible working hours.

Fair trade prices ensure suppliers are paid fairly for their products.

The coffee industry is a popular sector for fair trade products.

Lush has an ethical buying policy that ensures fair treatment of suppliers.

Ethical sourcing of materials is important for businesses to be seen as ethical.

Paying fair share of taxes is vital for a business's ethical reputation.

Starbucks faced backlash for not paying corporation tax in the UK in 2011.

Ethical practices can lead to increased costs but also premium pricing and improved public opinion.

Ethical businesses can gain customer loyalty and a better brand image.

Acting unethically can lead to negative press and social media exposure.

Transcripts

Business ethics is about going beyond what is legally required by law and is about doing

what is morally right.

Being an ethical business means operating in a way that is fair to its employees, suppliers,

customers, and the environment.

This approach can sometimes be counterintuitive for a business as implementing ethical policies

can sometimes come at the expense of profits.

But what changes can a business make to be more ethical?

Well, the first thing a business can do to be more ethical is treat their employees well.

This can be done through providing an employee with a safe place to work and by paying them

a fair wage.

This does not mean just paying the minimum wage but is about paying them a fair wage

that properly reimburses them for the work they do and that allows them to live a comfortable

life.

Companies can also provide other financial incentives that benefit employees when the

business performs well.

Such as bonuses or a share scheme where employees receive shares in the company they work for.

By owning shares in the company the employee directly benefits from share price increases

and dividend payments when the business operating successfully.

One business that always tops the charts for employee satisfaction is Google.

Not only do Google pay their employees well but they have a whole host of employee benefits

that help create an excellent working environment for employees.

Some of the benefits include free food, free medical and dental care, gyms, money towards

student loan payments, flexible working hours and excellent communal spaces where employees

can relax and socialise.

Google does not have to provide these things by law but they do so in an attempt to be

more ethical and treat employees well in the hopes of them being happier and more productive

at work.

The second step to being more ethical is treating suppliers well.

Paying fair prices and making payments on time are ways a business can act ethically

towards their suppliers.

Fair trade prices have been established to ensure suppliers are paid a fair price for

the materials they produce and sell.

A popular industry that has fair trade products is the coffee industry.

If a product has the fair-trade logo on the packaging this indicates that among other

things the business has paid the grower fairly for the coffee they have produced.

The fair-trade logo has become a symbol that a business is acting ethically towards suppliers.

Another way that businesses can move toward being ethical is by only using materials that

are ethically sourced.

Meaning that the materials have not been sourced through the exploitation of workers and that

environmental and social impacts have also been considered.

One excellent example of a business that has a track record of treating their suppliers

well and sourcing goods that are ethically produced and grown is Lush.

Lush has an ethical buying policy that outlines exactly how they treat their suppliers, covering

things such as making sure their suppliers have good workers’ rights, safe working

conditions (including no child labour), that the products they buy are never tested on

animals and that the materials have been produced in an environmentally sustainable way.

By having these policies Lush is taking a stance against suppliers that act unethically

in turn increasing their ethical credentials.

Lush has built a business around treating their suppliers well but mainly around the

ethical sourcing of the materials that go into their products.

Paying their fair share of taxes is another ethical approach to business.

Tax payments can be substantial for major corporations and ensuring these are paid fully

is vital if the business it to be seen as ethical.

This is because many global brands use legal loopholes in the tax law to avoid paying tax

legally.

But remember what is ethical and what is legal are two different things and although tax

avoidance is not illegal it is not looked upon favourably by consumers and governments

and can instantly give a business an unethical reputation through negative press coverage.

Starbucks is an excellent example of this, as they paid 0 corporation tax in the UK in

2011, which resulted in a public boycott of the brand and an eventual payment of 20 million

pounds to HMRC.

Companies paying their fair share of tax is a hot topic and if the correct tax is not

paid it can instantly impact a business’s reputation.

Many argue that being ethical comes at the expense of profits.

This is because for a business to pay workers well, source ethically produced materials,

pay suppliers fairly and pay their share of tax all means increased costs to the business,

which in turn can have an impact on their profit margins in comparison to businesses

not taking an ethical approach.

However, there is a strong argument that there does not have to be a trade-off between ethics

and profits as many businesses can recoup these increased costs because ethical credentials

allow a business to charge premium price for their products in comparison to their unethical

rivals.

Plus, an ethical business also benefits financially from things such as improved public opinion,

a better brand image and increased customer loyalty due to the business having values

that align with their customers.

In fact in today’s climate where customers are much more aware of how businesses operate,

it can be financially costly not to take an ethical approach to business as companies

are increasingly exposed in the press and most noticeably on social media when they

act unethically and take advantage of employees, suppliers and the environment.

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