Business ethics and its impacts

Table of Contents
Introduction...................................................................................................................... 1

Ethics, social responsibility and sustainability in business...............................................1

Impacts of business ethics........................................................................................... 1

Impact of business ethics on leadership of modern organisation.................................3

Conclusion....................................................................................................................... 4

References.......................................................................................................................5

Figures

Figure 1: Impacts of business ethics................................................................................2

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Introduction
This is a new era of business. The business organisations need to adapt to modern
technologies and ideas and make their mission, vision and conduct relevant to them.
The purpose of the business is to profit and wealth maximization. However, it needs to
act ethically in pursuing the profit. Profit maximization by harming the society may
backfire and is not sustainable in the long run of business. Hence, it is important for the
organisation to conduct its business ethically and recognize the social responsibilities of
the company. This assignment discusses the importance of responsible, sustainable,
and ethical business management. It also discusses the influence on the leadership of
the organisation.

Ethics, social responsibility and sustainability in business

Business ethics deals with the moral and ethical issues that may arise in the business
environment (Crane & Matten, 2016). It is an applied branch of ethics. Business ethics
deals with the conduct of the organisations and the individuals who work in the
organisation. Business organisations also perform social responsibilities. It means that
the actions of the individuals and the organisations are in the best interest of society.
Social responsibilities also include ensuring environmental sustainability. Sustainable
business is the business operations that minimize the adverse effect of business on the
environment and society (Boons, et al., 2013). Business organisations in modern time
need to perform in a way that does not harm the environment and protect human rights
both of the employees and the people outside of the organisations. Ethical business
does not only benefits society but also the business itself. The importance of running
the business ethically and responsibly are in details in the following section.

Impacts of business ethics

The moral and ethical values guiding the business performance and actions affect the
environment, society and the economy. Business organisations codify the ethical
behaviour of their employees and the company itself. The ethical actions of the
business affect the organisation and external environment in different dimensions. They
are as follows.
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Customer
loyalty

Privacy Reputation

intellectual
CSR
property

Environment

Figure 1: Impacts of business ethics

Source: smallbusiness.chorn.com, 2019

Building customer loyalty: Ethics helps to build customer loyalty. Customer loyalty
essential for the businesses for building long-term success (Strobel, et al., 2015). A
company can take advantage of a customer by unethical behaviour. The company
might overcharge for the same product. However, the customer will not return to the
company for their unethical behaviour. By ethical business, the company can create a
customer base.

Improving the reputation of the company: Ethical behaviour helps to build a

reputation of the company. The satisfied customer can bring new customers by referrals
(Alwi, et al., 2017). Customers affected by unethical business practice may disseminate
the information by various media like social sites. It will hurt the reputation of the
company.

Impact on intellectual property: Business organisations own patents, copyrights and

other intellectual properties. They also use the intellectual property of others. Ethical
and responsible business organisations respect the intellectual properties of other
companies. They also let others use their patents or copyrights. It helps to create a
balance (Trevino, 2017). Excessive protectionism may hurt the interest of the
customers.
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Impact on the environment: An essential element of business ethics is the protection

of the environment. Reducing emission greenhouse gas, reducing waste, recycling and
reusing of elements reduce the cost of the organisation. These also create efficiency of
the business. The reduction of environmental footprint helps the organisation to build a
positive brand image (Crane & Matten, 2016). Moreover, people become happy with
firms that have actions protecting the environment. The environmental protecting
actions of an organisation also persuade other organisations to take the same kinds of
actions.

Impact on corporate social responsibility: Corporate social responsibility is the

practices and actions of the company that affect the society. Ethical practices of the
organisation help to shape the CSR practices. This integral part of the business ethics
helps the organisation and its employees to act in a way that benefits society and in turn
the organisation.

Customer privacy and ethical use of information: The companies require personal
information of the customers to serve them efficiently. If the companies do not use this
information ethically or use them to take advantage of the customers, the consumers
may fear to provide such information. If the company sells the private information to
third parties, it may face backlash from the customers. Ethical and responsible use of
the information is necessary for the organisation.

Ethical actions increase the profit of the organisation by positive brand image and
bringing new customers. It also reduces the marketing cost of acquiring new customers.

Impact of business ethics on the leadership of the modern organisation

The leadership of the organisation affect its ethical behaviour. Leaders keep the
employees engaged in the work and keep the integrity of the organisation. They
communicate the objectives and strategies of the organisation to the employees. They
influence employees to behave in a particular way. If the leaders behave in an ethical
way and establish the moral and ethical code of behaviour, the employees also get
influenced by them (Strobel, et al., 2015). When the leaders do not abide by the rules
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and behave unethically, then the employees also tend to do so. Leadership and ethical
performance are interrelated in various dimensions such as the following.

Disregarding rules: The autocratic leaders tend to make a decision at their whims with
minimum regard to the rules. Their behaviour may lead to unethical activities and
scrutinizes from the outside forces (Strobel, et al., 2015).

Excessive focus on the work: Transactional leaders want the employees to do the
job. It may lead to having done the job unethically. The pressure from the leaders may
decrease the morale of the employees.

Conclusion
Ethics in the business has a great impact on the internal and external environment.
Ethical and responsible behaviour of the organisation ensures the long-term survival of
the organisation. In this, leaders play a huge part. They need to create a balance
between the achievement of objectives and maintaining ethical behaviour of the
organisation.
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References
Alwi, S. F. S., Ali, S. M. & Nguyen, B., 2017. The Importance of Ethics in Branding:
Mediating Effects of Ethical Branding on Company Reputation and Brand Loyalty.
Business Ethics Quarterly, 27(3), pp. 393-422.

Boons, F., Montalvo, C., Quist, J. & Wagner, M., 2013. Sustainable innovation, business
models and economic performance: an overview. Journal of Cleaner Production,
Volume 45, pp. 1-8.

Crane, A. & Matten, D., 2016. Business Ethics: Managing Corporate Citizenship and
Sustainability in the Age of Globalization. 1st ed. Oxford: Oxford University Press.

Strobel, M., Tumasjan, A. & Welpe, I., 2015. Do Business Ethics Pay Off? The Influence
of Ethical Leadership on Organisational Attractiveness. Journal of Psychology, 28(4),
pp. 213-224.

Trevino, L. K., 2017. Managing Business Ethics: Straight Talk about How to Do It Right.
7th ed. New York: Wiley.