No matter where one looks for a definition of the term ethical, the same few words and phrases come up; right conduct, good actions, and moral decisions (BBC, 2009; Dictionary.com, 2013). John Maxwell wrote that there is “no such thing as business ethics – there’s only ethics” (Maxwell, 2004) but to what extent is this true?
It seems far too often on the news we see stories of Primark treating the people who make their clothes horrifically (BBC, 2014), or Sports Direct being under investigation for strange accounting practices (BBC, 2016), but consumers still love to spend their hard-earned cash there and thus they are expanding. Primark saw an increase in revenue of 8% between 2014 and 2015 (Associated British Foods, 2015) whilst Sports Direct UK and ROI opened 60 new stores during 2016, taking their total number of locations to 500 (Sports Direct, 2016). Behaving unethically does not always work out though, as the accounting firm Enron found out, after accounting for “off balance sheet vehicles” which led to profits being overstated by $600m between 1997 and the year preceding their demise in 2000 (The Economist, 2002).
Stephen Green once said “Business ethics is now more important than ever” (Worcester, 2007) and despite the fact this was nearly 10 years ago, it is still extremely relevant. A lot of organisations who are ethical do struggle for success sometimes though, and The Body Shop is just one example of this. Their goals, such as powering all stores with renewable or carbon balanced energy by 2020 (The Body Shop, 2016) are ambitious but also consider the bigger issues such as global warming. Although this may not seem like a good thing to do as their sales have declined during the first half of this year compared to the same period last year (L’Oréal, 2016). Hence, perhaps consumers are not as concerned with ethics as once thought. However, being ethical is sometimes a good thing for business. An example is Starbucks, who claim to be thorough in ensuring a fair price is paid to the farmers who grow their coffee beans (Starbucks Corporation, 2013). Their strategy worked and their sales increased, their revenue jumped 12% between 2012 and 2013 (Ritter, 2014) and their success has continued, although it is not without problems along the way. In 2015 they were forced to pay a tax bill of £8.1m after restructuring the way they paid tax in the UK, this payment for a single year matched practically all contributions for the 14 years preceding it (Davies, 2015).
Maybe ethics isn’t that easy.
It is clear to see that although in some instances ethical organisations may appear to be doing well, a lot of the time this is not the case and despite behaving unethically, a lot of companies continue to do well. Hence, proving Maxwell’s argument through examples such as Starbucks who have claimed to be ethical but in reality, this is not the case. In terms of whether it pays to be ethical or not, the best approach appears to be targeting the highly ethical consumer with highly ethical products (Trudel and Cotte, 2008). Thus, this gives us the answer; it depends.
The views in this article are those of the author. This article is part of our ‘Making Work Real’ series