What Is Business Ethics And Why It Matters In Business

Business ethics is a form of professional or applied ethics that examines the moral and ethical problems that arise in a business environment. The concept of business ethics arose during the 1960s as corporations became aware of consumer concerns regarding the environment, social causes, and corporate responsibility. Business ethics is the study of how a business should act during ethical dilemmas or otherwise controversial situations.

Understanding business ethics

Business ethics determine how a business should behave in a difficult situation, defining the standards for morally right and morally wrong conduct. Some of these situations may be related to corporate governance, discrimination, insider trading, corporate social responsibility, and bribery. While existing legislation in these areas dictates acceptable conduct to some degree, business ethics enhance the law by outlining acceptable behaviors beyond government control.

Corporations establish business ethics for a few very important reasons. For one, they are used to promote integrity amongst employees which has subsequent implications for company culture. Business ethics also help the organization manage conflict and gain trust from key stakeholders such as investors and customers. 

Seven business ethics types

There are many business ethics types, depending on the nature of the organization and the industry it operates in. We have listed seven of the most common below:

Personal responsibility

Every employee in an organization holds certain beliefs around matters such as honesty, the avoidance of criminal acts, and a willingness to perform accepted duties.

Corporate responsibility

Businesses also have responsibilities to their employees, clients, customers, and in some cases, the board of directors. These responsibilities may be contractual or legal in nature, or they may involve the business promising to operate fairly and to treat its people with respect. 


The employee should be loyal to their colleagues, managers, and the organization as a whole by speaking positively in public and addressing contentious issues in private. Conversely, the organization should remain loyal to its customers to ensure a good public reputation.


Respect determines how the business treats its clients, customers, and employees. Respect also determines the way employees treat each other and is characterized by collaboration, mutual understanding, and appropriate conflict resolution.


Essentially, this means employees and businesses do what they say they will do. Trustworthiness is associated with honesty, transparency, and reliability. These traits are particularly important in businesses where money, data, contractual obligations, and other confidential information must be held in trust.

Community and environmental responsibility

These business ethics are top of mind for most modern businesses, who must look for ways to give back to local communities and develop strategies to minimize their environmental impact.


A business that exemplifies fairness applies the same standards to all employees regardless of rank or seniority level. In other words, the CEO of a company and an entry-level janitor are held in the same esteem. The business must also treat its customers with similar fairness by making its goods and services available on fair and equal terms. 

Key takeaways:

  • Business ethics is the study of how a business should act during ethical dilemmas or otherwise controversial situations. The study arose during the 1960s in response to increasing discourse regarding environmental issues, social causes, and corporate responsibility.
  • Business ethics complement existing legislation by providing a framework for acceptable behavior that is beyond governmental influence. 
  • The specific business ethics an organization adopts will depend on its industry and culture to some degree. However, every company should adopt ethics related to personal responsibility, corporate responsibility, loyalty, respect, trustworthiness, fairness, community, and environmental responsibility. 

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