Professional Documents
Culture Documents
Introduction
Everyone remembers learning about ethics and morals in school — they’re the building
blocks of humanity. Yet “ethical” is one of those terms that’s defined and interpreted in so
many colors and flavors that it can be difficult to pin down exactly what it means, especially
when used in the context of business practice where financial gain has a tendency to convolute
values and a company’s moral compass. As Enron, Bernie Madoff, and the Lehman Brothers
Business ethics are not something you need to start worrying about when your company
reaches a certain size; they need to be sewn into the fabric of your startup from the get-go.
As such, ethical values are the building blocks of any startup. They can be critical in
determining how a company deals with certain situations and how it handles internal and
external issues. Values help business leaders stay aware of temptations and prevent lapses as
We’ll stop here and spare you from a philosophical lecture that might take you back to
the Business Ethics 101 course you took freshman year — you get the point, it’s important.
Instead, we’ll discuss the difference between business ethics and social responsibility, how to
apply these practices to your startup, unique examples of companies that have done it best, and
ways you can give back when you’re just getting off the ground.
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Business Ethics vs. Social Responsibility
University Silicon Valley, said it well: “The lessons (in business ethics) are the same for
startup tech businesses as they are for investment banks and for third-world economies.”
While business ethics and social responsibility go hand-in-hand, there’s often confusion
about the distinction between the two, especially because there are no widely accepted
definitions for both terms. Corporate social responsibility (often referred to as CSR), in
For the purposes of this guide, here’s what you need to know when deciding how you’ll
Business ethics is the very broad field of study concerning ethical decision-making in
commercial contexts. In short, it’s concerned with not just the social obligations of a business,
but also the obligations to its employees, customers, suppliers, and competitors. Business ethics
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Fraud and manipulation
Sustainability
Exploitation
Social responsibility, while under the umbrella of business ethics, focuses more
narrowly on a company’s social obligations. Social responsibility is about the extent to which
companies owe something to “society at large” or feel the duty to give back — i.e. to those
Now more than ever, how your business conducts itself, ethically speaking, can change
the trajectory of success. Here are four reasons why it’s important.
Business success is largely dependent on the ability to attract top talent, but finding
good employees means more than just offering a competitive salary. This is especially true
when you consider the generation of talent that will soon dominate the professional world —
Millennials.
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A Bentley University study found that a whopping 86 percent of Millennials consider
it a priority to work for a business that conducts itself ethically and responsibly. In fact, most
Millennials would be willing to take a considerable pay cut to work for such a business.
2. Employee Engagement
When you include your employees in larger processes and vision planning, such as
designing and implementing a socially responsible program for your company, they’ll feel like
they’re part of something bigger and more important than their day to day, and therefore they’ll
be more engaged.
3. Competitive Edge
When it comes to business ethics and social responsibility, another factor to consider is
the compounding nature of competition. As more businesses adopt and invest in ethical
Adopting ethical business practices and implementing social responsibility are good
ways to help build your brand, especially when you’re just starting out. While, you should
never implement these practices solely for marketing purposes — more on this in the “What to
Avoid” chapter — doing so can help create co-branding and marketing opportunities.
On the flip side, choose to hire in ethics can be hard to shake and can directly impact
your hiring and revenue pipeline, and therefore your company’s ability to succeed. These days,
a company’s history, public messages, and current staff are all publicly available information,
and all it takes is a quick Google search for a prospective employee to find it. For this reason
alone, company ethics are more important than they’ve ever been.
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How Startups Can Implement Business Ethics
Putting a strong ethical framework in place is key to making sure your startup doesn’t
Of course, that’s easier said than done. Here are nine tangible ways startup leaders can
instill an ethical framework for their company from the ground up, and why it’s essential to do
Your core values are the heart and soul of your business, informing things like hiring
By filtering every business decision you make through your core values, you’ll create
One way to focus on business ethics early on is to integrate it into your hiring process.
By being selective about who you choose to hire, you can save time, money, and conflict over
tendencies.
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3. Create a culture of openness and welcome dissent.
Having different points of view and internal constructive critics are a startup leader’s
best friends. Too often, founders are blinded by their own enthusiasm for their creative vision
and surround themselves with “yes-man” employees who don’t challenge their practices.
When this happens, founders can quickly fall out of touch with reality and lose their
ethical bearings. Creating a culture of openness is a good way to establish internal checks and
balances.
4. Lead by example.
As we all know, actions speak louder than words. Similarly, leadership behaviors
demonstrate company culture. Practicing what you preach can help your team identify optimal
behavior habits.
Defining core values is not enough. It’s critical that startups craft values that everyone
can own. Not only can this help attract good employees early on but it encourages your team
Many founders make the mistake in thinking that the unique quality of their business
means that their leadership values are also unique. In doing so, they fail to grow.
In fact, successful icons like Steve Jobs and Michal Dell patterned themselves after
other brilliant founders. Startup books are great tools to expand your leadership knowledge by
While it can be difficult to imagine the day you’re succeeded as the leader of your
startup, if you have plans for large growth in the future, it’s important to prepare for the day
when you’ll no longer be the lone day-to-day internal boss and primary external ambassador.
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Know your limits and when it’s time to pass the torch.
Egomaniacal moves, personal grandiosity, greed, and deception create impressions that
are hard to erase. Once you cross that line it can be nearly impossible to regain good standing
Because venture capital firms often demand a majority of board seats as a condition for
their investments, conflicts inevitably arise. In many cases, the board serves the needs of VCs
This can mean a loss of independent and objective voices that alert startup founders to
ethical red flags. Establishing an independent board means that members have an obligation to
Sticking to your values isn’t always easy, but it can be the difference in setting you
apart from your competition. Not to mention, companies with a strong sense of purpose and
Example 1:
Take Costco, for example. Wall Street analysts have long chastised Costco’s CEO, Jim
Sinegal, for paying high wages and keeping employees around long-term, because this results
But Sinegal stands by his belief that keeping good employees is strategic for Costco’s
long-term success and growth, and this works out in the company’s favor. Costco’s per-
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employee sales are considerably higher than those of competitors like Wal-Mart and Target.
Not to mention, customer service at the stores is phenomenal and fast and Costco continues to
expand, both in the number of warehouses and in products and services for business and
customers.
Example 2:
Another stellar example of business ethics in practice is Ultimate Software. For the past
four years, Ultimate Software has been awarded the #1 spot on Fortune’s Best Workplaces in
Technology list.
Ultimate Software is another shining star of a company that puts its employees first.
They continue to offer 100 percent healthcare coverage for their employees and their
dependents. The company also gives its employees an all-expenses paid vacation every two
years.
Example 3:
Maybe you’re a startup that doesn’t have the luxury of offering salary incentives or
covering healthcare benefits, but maybe you can focus your efforts on where your supply chain
Since 1994, they’ve used organically grown cotton instead of pesticide-heavy cotton
crops for all of their products. Patagonia also altered its entire supply chain to ensure
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Earlier this year, Patagonia won the United Nations Champion of the Earth award, a
top environmental honor, for its entrepreneurial vision and thorough policies that place
Because one of the biggest challenges startups face is simply getting off the ground,
carving out the resources to give back can seem like a daunting prospect or even a luxury
reserved for larger corporations. But that doesn’t have to be the case.
However, before you start putting together plans for how your startup will integrate
social responsibility into its core values, you need to learn how to prioritize it. Even startups
that have access to the right assets can find the prioritization of social responsibility a
challenge.
Answering these questions will give startups a sense of the social issue(s) you want to
1. In what ways does your business impact — both positively and negatively — its
employees, the environment, the local community, society, customers, and suppliers?
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2. What are your business’ core strengths?
3. What are the pressing needs in the major communities where your business operates?
4. Are competitors practicing responsible business? If so, how can you differentiate
yourself?
5. What resources are available to execute socially responsible strategies, from manpower
to product to funding?
Startup Social Responsibility: How to Give Back When You’re Getting Off the Ground
change the world. Not only is this unrealistic, but it can take away from the ways you can
For startups that don’t have a corporate-sized budget or even the resources to allocate
towards social responsibility, oftentimes the most valuable and accessible role you can play is
In other words, you can make a big impact by simply using the operational skills,
communication, and organizational savvy that you would in your daily business conduct to
connect charities, people, or organizations that are already doing good with those you want to
help.
Here are eight ways you can give back while on a startup budget.
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1. Cultivate a culture committed to social change
and flourished, so have stories of “startup culture,” in which people have flexible hours, healthy
catered lunches, permission to bring their dogs to work, and a wide variety of perks that fall
Sure, this has become a bit of a stereotype, but what this does is cultivate a strong
culture where empathy and awareness of social impacts are top of mind. This can be a powerful
tool for building a commitment to other aspects of social responsibility later on down the line.
Sometimes, just figuring out where to even get started can feel overwhelming,
especially when there are endless ways to get involved in social responsibility.
Like we said, it’s impossible to single-handedly change the world. Instead, look for
ways to make your community a better place or look for what your community needs on a
small scale. Then you can start to build momentum and create more long-term plans.
Social responsibility doesn’t need to be jaw dropping in scope. In fact, a little can go a
long way. Maybe you want to put together a charity event to raise money for a local
Get a local venue to donate its space for an event, a local restaurant to contribute food,
local musicians to provide entertainment, and people from your business to help with logistics.
These days, more and more customers are asking questions like: Where does this
product come from? What environmental burden results from the manufacturing of this
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If you’re a product-oriented startup, knowing the ins and outs of your manufacturing
process, understanding the business practices of partners and suppliers, and deciding how to
influence them is extremely important for startups who want to be socially responsible.
Your board and investors might seem like unlikely allies in building socially
responsible initiatives. After all, the individuals holding the purse strings want to understand
However, if you can make a clear case for how giving back benefits your bottom line,
you might just get their blessing — and maybe even a budget.
This is critical to ensuring the longevity of any socially responsible initiative. When
initiating social responsibility programs, give your employees a voice by involving them in the
decision-making process. You might even try creating an internal team to spearhead efforts
and choose a cause that everyone can get behind. Contributing to something your employees
are passionate about goes back to the larger benefit of driving engagement and success.
Being socially responsible doesn’t have to cost money. Instead, you can offer up time.
Just like paid time off, the idea here is to give employees paid days off to provide volunteer
services. Ideally, the organization that the employee is volunteering for is their choice or you
might decide to collectively choose an organization and take a company-wide VTO day.
This can be as simple as creating an office Slack channel dedicated to informing other
employees about volunteer opportunities in your community. Maybe there are people on your
team who’d be interested in attending a weekend beach clean up or a drive to raise food and
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Start the discussion around these kinds of opportunities or put someone in charge of
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Example 1:
Edelman’s Goodpurpose study found that more than half of consumers said that if price
and quality were equal, a brand’s social purpose would be the most important factor when
companies to consider the social and environmental dimensions of their products and
Example 2:
consumers are willing to pay more for sustainable brands. It also found that Millennials were
the most likely demographic to vote with their wallets — 73 percent of global Millennials are
Example 3:
A 2017 Cone Communications study about CSR found that companies must now share
not only what they stand for, but what they stand up for. Some key takeaways from the study
revealed:
63 percent of American consumers were looking to businesses to take the lead on social
76 percent of those surveyed said they would decline to do business with a company if
it held views and supported issues that conflicted with their beliefs.
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What to Avoid When Creating a Socially Responsible Business Model
If done correctly, social responsibility is a great way to set your startup apart from the
masses and practice good business ethics. Unfortunately, there are a lot of companies that have
abused CSR initiatives for their own gain, and while there are still positive outcomes, they’re
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Simply put, if you can’t be authentic about social initiatives, don’t engage in them. One
of the best ways to avoid this ethical dilemma is to weave social responsibility initiatives into
your core values. Core values will always be the North Star that guides your startup.
Here are five things you should avoid at all costs when creating a socially responsible
business model.
A study of Fortune 500 companies found that firms that engage in socially responsible
behavior towards their stakeholders are subsequently more likely to engage in socially
While the majority of companies don’t set out to behave irresponsibly, it does happen.
Don’t be that company that establishes a CSR agenda in an effort to accrue moral credits to
keep the spotlight away from irresponsible behavior later on down the line.
responsible programs in an effort to brush any wrongdoings or bad publicity under the rug.
3. Charitable efforts that aren’t related to your core business focus or ethical standards
profit that your startup believes in or a project in your community that aligns with your core
values.
Early on in the guide, we talked about social responsibility as a way to help build your
brand when getting off the ground. While co-branding and marketing opportunities can be
perks of establishing a CSR program, you should never engage in initiatives for the sole
purpose of marketing.
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More often than not, this will backfire for your business. Instead of employing a one-
Making these types of decisions behind closed doors will leave people (especially your
employees) wondering if there are strings attached to these initiatives and if donations are
Instead, engage your employees, so they feel like they have a voice and be transparent
The bottom line: once you start compromising your values for short-term gains, there
is no turning back, and in today’s climate, a company’s ethics and how a business executes
social responsibility matter more than they did a few decades ago.
Not only do workers place more emphasis on the values of their employers, but if you
want your startup to remain competitive and capable of attracting top talent, startup directors
and officers should spend time defining, perfecting, and promoting your company’s ethical
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