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Importance of Business Ethics in an Organization

11 min read

Business ethics can be denoted as written or unwritten codes of morals, values, and principles that govern actions and decisions in a company. In business, standards are set for determining good and bad behavior and decision-making. As a result, business ethics is a broad topic, covering everything from corporate governance to corporate social responsibility. 

Business ethics is a subjective term. However, it is easy to identify unethical business practices in an organization, such as employing child labor, taking bribes, or illegally using copyrighted materials. 

When ethical guidelines are followed, trust is developed between the employees, management, the public, and the corporation. Thus, business ethics leads to a more productive workplace. 

Characteristics of Business Ethics 

There are many essential characteristics of Business Ethics. The 13 main characteristics are discussed below: 

  1. They are based on the general societal perception of ‘right’ and ‘wrong’ practices. 
  2. It also adheres to social customs, traditions, culture, attitudes, and standards. 
  3. Business ethics assist in evolving business performance by optimizing the processes. 
  4. Business ethics provides guidelines for appropriate business practices. 
  5. Business ethics also serves as a backbone to study basic human behavior and conduct in the workplace. 
  6. It defines the norms of mutual interactions among individuals and a group. 
  7. Business ethics provides the framework for designing a code of conduct in business. 
  8. Business ethics generate from the principles, standards, and ideas defined by the Indian ethos. 
  9. They are a part of both ‘Art’ and ‘Science’. 
  10. Business ethics drive customers’ well-being by promoting values, standards, and norms of professionalism. 
  11. They are closely interlinked with the motive of consistently reassessing goals to align them with the motto of excellent customer service. 
  12. Business ethics visualizes alternative ways to achieve optimum customizable outcomes. 
  13. They stress more on increasing the societal value of the business by directing their efforts towards improving society. 

Need for Ethics in Business 

Incorporating ethical practices in everyday business is necessary for the following reasons: 

  • Maintaining Market Reputation: It’s common for businesses with substantial ethical grounds to possess a positive brand image in the market. A good image helps retain a loyal customer base and gives the company a competitive advantage. 
  • Establishing Trust: Business ethical practices help build trust among internal and external stakeholders, which is an essential component to ensure long-term and sustainable business profitability. 
  • Building a Productive Workforce: Business ethics also help maintain a productive workforce by driving positive culture. An engaging and transparent workplace helps drive employee loyalty and attract the market’s top talent. 
  • Improving Customer Satisfaction: Ethical companies often build a loyal customer base by offering high-quality products, maintaining transparency in business practices and processes, and addressing customer concerns promptly. 
  • Long-term Sustainability: Ethical in business helps increase the longevity of business by taking the environmental, social, economic, and political factors into account. So, they help build business resilience in the dynamic business world. 

Importance Of Business Ethics 

Every company should have its moral principles and guidelines. Following business ethics has more benefits than you think. It will help keep and attract employees, customers, and investors. 

For example, consider that you are an “energy drink” manufacturing company, and you’ve proclaimed on the labels and advertisements that you don’t add preservatives. You should adhere to the claims you’ve made. If you disobey your claims and sell the product by adding preservatives, it is considered unethical business practice. It will deteriorate your brand, and eventually, you will lose customer trust. It also damages the reputation and keeps away the stakeholders. Therefore, following business ethics is very important. 

Reputation is a company’s most important asset and one of the challenging tasks to rebuild once lost. You will start building a good reputation with consistent ethical behavior. Potential investors and shareholders are likely to get attracted to the companies that adhere to their moral guidelines and promises they’ve made; this keeps the company’s share price high. 

To retain a positive reputation and image, businesses must be committed to operating on an ethical foundation related to respecting the surrounding environment, treatment of employees, and good market practices regarding customer treatment and price. 

Employees also feel comfortable and want to stay in business for the long term when working with a company that has strong business ethics. This increases productivity and reduces the labor turnover. They are also bound to follow in the footsteps of the organization. When an employee does his work with integrity and honesty and by following the guidelines, it will eventually benefit the company. 

Leadership Ethics 

The conduct of the management team sets the tone for how all the employees behave at the workplace. If people at the top follow ethical practices and behavior, others will do the same. Leading by action and example helps employees make better decisions. In turn, it helps the organization do well as a whole. 


It improves the ability to retain and attract top-performing individuals. It even elevates the performance of people that could be doing better at work. 

Employee Ethics 

As we said in the last point, employees follow what they observe around them in the company. If business ethics are set in order, employees make better decisions quickly. It increases productivity.  

Work driven by honesty and passion benefits everyone. Employees that care about integrity take more responsibility. Also, perform at a higher level and don’t require handholding to finish their tasks. 

Here are a few other benefits of business ethics: 

  • Stops malpractices in business 
  • Improves confidence of the customers 
  • Helps in making business a robust one 
  • Protects employees and their interests 
  • Develops good relations among stakeholders 
  • Allows for smooth functioning of operations 
  • Promotes healthy competition among stakeholders 

Role of Business Ethics in the Organization 

Business ethics play a crucial role in various operations of the organization. They are essential to foster a positive culture which helps in sustaining long-term excellence of the organization.  

Ethics in Finance 

Ethical practices in finance help cultivate strong relationships with stakeholders and enhance firm’s long-term viability by preventing financial fraud, manipulation, and misleading information. 

Ethics in Human Resources Development 

Human Resources ethics helps in creating a diverse and inclusive workforce by incorporating ethics in hiring, performance evaluation, training, and development. In addition, it also enhances employee morale, productivity and retention. 

Ethics in Marketing 

Adopting ethical marketing practices helps companies build ever-lasting relationships with their customers and a positive brand reputation. These ethics rest upon honesty, integrity, and responsible advertising practices, avoiding deceptive strategies and false claims. 

Ethics in Production 

Ethics in Production can be ensured by deploying ethical manufacturing practices, like fair labor conditions, safe work environments and green production methods. They help in meeting consumer expectations while minimizing ecological footprint. 

Advantages of Managing Ethics in the Workplace 

Ethical business practices have the following benefits: 

  • Trust and Reputation 

Upholding ethical standards helps organizations ensure transparency, reliability and integrity in their day-to-day operations. It leads to strong bonds with internal and external stakeholders like investors, customers, employees, etc. 

  • Employee Morale and Engagement 

Employees develop a feeling of value, support and loyalty towards their employers when they follow ethical practices and behavior. They lead to increased productivity, reduced turnover rates, and movement towards a sustainable work culture. 

  • Attracting and Retaining Talent 

Business ethics are a strong magnet to attract top talent as they help align individual and organizational objectives. They also help strengthen employee retention strategies as employees are happy and satisfied with their work.  

  • Mitigating Legal Risks 

Business reduces the likelihood of long costly legal battles, hefty fines, and reputation damages by adhering to ethical laws, regulations and guidelines. They also help organizations stay afloat in moral dilemmas. 

  • Enhancing Customer Satisfaction and Loyalty 

Long-term customer loyalty is easier for companies committed to an ethical code of conduct. This also leads to an increase in positive publicity and new business opportunities. 

Create Ethical Culture in Organization 

Define company ethics 

Every company has spoken and unspoken rules on how to act within the environment, which vary across companies. However, they commonly include the norms of ‘right’ and ‘wrong’ behavior towards the stakeholders in the organization.   

Ensure that you have the necessary tools 

HR professionals can use HR software to equip employees with the right tools to ensure their continued ethical behavior within the organization. 

Strengthen the Behavior You Want 

Offering awards and recognition is one of the best ways to encourage the ethical behavior, you want to reinforce in an employee. In addition, an efficient communication system that promotes business ethics helps create ethical organizational culture. 

Focus on building skills 

It is the organization’s duty to build and develop ethical skills among the members rather than just stating the behaviors you encourage and those that you do not.

Table of Contents

    Meet the author

    Anwesha Panja

    Content Writer

    Anwesha Panja is a Content Writer at Keka Technologies. She has a passion for crafting captivating pieces around the latest HR trends. With a love for mysterious and spine-tingling things, she spends her free time exploring haunted locations. She is also a bookworm and an avid Sherlock fan.


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