Tips to Create an Ethical Business Culture

What is an ethical business culture?

A business’s culture is often seen as abstract and difficult to quantify. It goes beyond the employee handbook and the company’s mission statement. Business culture is the method by which the company functions. The business culture can include how employees dress for work, interact with management and engage with customers and clients.

To define an ethical business culture is to create an environment where doing the right thing is easy and doing the wrong thing will get you disciplined or fired. It also means involving employees in regular discussions about workplace ethics and procedures designed to uphold ethical practices. “Businesses that foster empathetic relationships integrate different organizational systems and develop a practice of organizational introspection create healthy cultures,” explained Ann Gregg Skeet, senior director of leadership ethics at Markkula Center for Applied Ethics at Santa Clara University. 

An ethical business culture places a high value on fairness, employee rights and equal pay while discouraging dishonesty, unpaid wages, discrimination and disloyalty to the company, its employees and its customers. “An ethical business culture prioritizes decisions and a decision-making process aligned with its core values — these include principles of customer-first outcomes, transparency, fairness and accountability,” said Gopkiran Rao, head of marketing and solutions, Ikigai Labs. “It’s about fostering an environment where every stakeholder — from employees to customers and partners — feels valued and respected.” [Learn how to create a code of ethics and a code of conduct.]

Tips to create an ethical business culture

Creating an ethical business culture doesn’t happen overnight, but it can improve when employees and leadership put it at the forefront. Here are our tips for building an ethics-driven culture you and your team can be proud of.

Eliminate double standards

To create an ethical business culture, employers should strive to eliminate double standards and cultivate trust among the team by being honest in their communications. This means there shouldn’t be policies managers and supervisors are permitted to ignore that subordinates are required to follow and are even reprimanded for not following. This allows all employees to put the work ahead of their interests, regardless of their ranks or company roles.

Foster a respectful environment

Ethical employers should actively strive to create a positive workplace environment that allows managers and employees to take pride in their work and identify with the values that drive the organization.

To do this, the employer must ensure all employees have the proper resources and authority to fulfill their job responsibilities. In addition, the organization should respect the rights and dignity of all employees. Employees must have a safe place to make mistakes, take risks and ask for help. Maintaining a safe space allows for reflection and, ultimately, growth among your team.

Encourage workers to report illegal or unethical conduct

Employers should encourage workers to report illegal or unethical conduct, such as discrimination and harassment, by ensuring that there are specific procedures employees can follow to inform their employer when these incidents occur. [See the anti-discrimination laws you should know.]

In addition, employees should not be made to feel that they will be reprimanded or retaliated against if they do the right thing by reporting poor behavior. Finally, all workers, including managers and supervisors, should receive employee training on the company’s policies and procedures concerning workplace conduct.

Test for conditions

Executives can test for certain conditions that make it more likely for ethics to be used in an organization, according to Skeet. Investing in these elements is essential to maintaining an ethical culture and include a:

• Sense of responsibility to society: Companies must understand that their actions influence society and are, in turn, influenced by what happens in society. 
• Climate of mutual trust and understanding: Employees should feel comfortable speaking up and bringing issues forward. Decentralized decision-making often fosters this as employees can use well-defined ethical decision-making rubrics to accomplish their goals. 
• Presence of ethical deliberation practices: Sound decision-making is fostered when asking the following questions:
  • Are decisions made using data, rather than gut instinct? 
  • Are people affected by decisions included in the deliberation?
  • Have the downstream effects of the decision been considered?
  • Once decisions are made, is the motivation and rationale behind them shared?

“In addition to developing and supporting these conditions, leaders can consciously build community, tell stories that help illustrate the company’s values in action and ground decisions in the organization’s mission — its purpose—and its values,” added Skeet.

Create a clear path for reward and recognition

Employers should be transparent when outlining how decisions are made regarding performance, pay and promotion. In addition, the criteria for achieving reward and recognition should be defined. Ethical employers make information about ethical and unethical conduct visible to all managers and employees, and they avoid recognizing or promoting employees who violate the company’s values.

Transparency is the key to consistent job performance, from initial job roles to hiring, said Marissa Andrada, a kindness catalyst and culture master who works with C-Suite executives to create better company environments. She recommended maintaining ethical organizational practices, such as: 

• Performance management: Ensure managers and employees are meeting regularly to align and communicate progress on goals so that they know exactly how they are doing, where they stand and how they can continue to grow and progress.
• Hiring and promotions: Define specific experience and qualifications needed across all open roles. This level of transparency is required for equitable decision-making.
• Compensation framework: Establish salary levels and create pay practices for each role in the organization. Develop guidelines that support gender and race parity in pay hiring and promotional practices.
• Pathways to development: Communicate pathways for promotions and development that provide employees with the tools to grow.
• Measures outcomes: Review data from across hiring, pay, promotion and turnover practices to identify inequities and follow up with leaders to correct them.

Focus on social responsibility

Your business owes its success to its employees and customers. To celebrate your achievements, consider giving back to those who have contributed to your longevity. Companies should provide opportunities for employees to volunteer and improve their community. By focusing on service, you can demonstrate how to be socially responsible and still make a profit.

Jeff Szur, founder and chief operating officer of Altitude Water, said businesses should take ethics to the next level by giving back to those in need. “An ethical business culture requires all team members to make sacrifices to create a stronger community,” he explained. “That while you have a responsibility to get your product to market but also keep an eye on making a better world. It’s difficult enough to make a product but you have to be committed to doing a little more.”

Respect technology

Technology can be a significant business booster, but it comes with its own set of ethical challenges. “For example, when it comes to artificial intelligence (AI), this means that humans need not just oversight or insight, but also practical enablement on what it means to incorporate and use AI,” said Rao. “Business practices must be grounded in ethical values, integrating them into every decision — human and machine-driven.”

Some of Rao’s tips for maintaining an ethical tech and business culture include:

• Knowledge builds trust: People need to understand how decisions are made — whether by humans or AI. For example, if an AI tool is forecasting demand for a product or a service, it should show both the factors considered, such as seasonal trends or customer sensitivity, as well as the range of possibility so that people making decisions about resources can act on the information confidently.
• Treat data with respect: Data is not just a resource. It’s a reflection of people’s lives. Collect only what’s necessary, protect it and ensure it’s used fairly. 
• Value diversity: An ethical business culture is one that values diverse perspectives in its decision-making process. 
• Be accountable: Mistakes happen — but an ethical culture acts on them quickly. Review AI implementations regularly for outcomes as well as fairness and accuracy.

Invest in consistent ethics training

Providing an employee or leader with ethics training only during the onboarding process or annually is not enough. Ethics learning should be a regular occurrence and conducted as issues arise. Don’t assume your employees will always do the right thing in a difficult situation. Everyone is susceptible to making the wrong choice. Consistent ethics training and communication about ethics violations can help steer employees in the right direction.

Advice for creating an ethical business culture

While this is not a comprehensive list of the actions employers should take to create an ethical business culture, it should provide enough information to help you identify whether your workplace prioritizes ethical business practices. Are you already engaging in any of the above best practices, or do you need to adjust how your team operates?

“By periodically conducting a culture self-assessment, organizations can learn basic things about ethics in their enterprise,” said Skeet. “Are leaders modeling the company’s values? To what extent are employees held fully accountable for their behavior towards others? What two or three key values characterize the company’s organizational culture? How are ethical norms (both inside and outside of the code of ethics) communicated and reinforced? These are just some examples of the types of questions that can be asked of employees to get a sense of an organization’s ethical culture over time and how it changes.”

As you reform your company’s culture, ask team members for feedback. Solicit opinions on what it’s like to work for your organization and take the time to study customer views of your enterprise. Workplace productivity, employee turnover and general sentiment toward a business are all impacted by the culture your business creates. Create an ethical business culture and reap the long-term awards by building a sustainable company that employees are happy to work for and shoppers are glad to patronize.

Julie Thompson contributed to this article.