Ethics as a Competitive Business Strategy

By Joseph Willmott, Board Chair of the World Ethics Organization

In the years I have built and managed businesses, I have given little thought to ethics or considered ethics a business strategy. Of course, I understood that honesty and integrity were necessary, and businesses that did not operate with those qualities almost always did not survive over the long term.

When I took over operational leadership of the World Referral Network, I was introduced to Richard Messing, who operates Kotel Group LLC, a consulting firm specializing in ethics-based solutions to chronic problems that resist conventional interventions. He has also founded the World Ethics Organization, which is dedicated to unifying the world through the power of ethics and bridging the conversation about ethics into mainstream discourse. 

Richard opened my eyes to ethics as a foundation of business strategy. Looking back on my career, I see that being dedicated to the principles of integrity, service, excellence, justice, and harmony can profoundly affect a business's operations and success.

Integrating ethics into the core of a small business's strategy can significantly enhance its competitive advantage.

Ethical practices, such as honesty and transparency, build trust with customers, employees, shareholders, and other stakeholders. Customers who perceive a company as honest and responsible are more likely to remain loyal and become brand ambassadors.

Ethical businesses will help attract and retain better employees who appreciate a principled work environment.  Employees working for a company that aligns with their values can enhance their motivation and productivity.

Since suppliers and partners may prefer to work with ethical businesses, fostering stable, long-term relationships is not a far-fetched idea. Ethical sourcing and supply chain management practices often lead to better product quality.

A moral stance helps ensure adherence to laws and regulations, thereby mitigating legal risks. Operating ethically minimizes the risk of reputational damage from scandals or negative publicity.

A reputation for ethical behavior will distinguish your business in a crowded market. Sometimes, consumers are willing to pay a premium for products or services from companies that engage in ethical practices.

A focus on ethical business practices often translates into positive social impact. Some customers specifically seek out businesses that demonstrate corporate social responsibility.

An ethical orientation can also help drive innovation in products and processes by considering sustainability and social impact. By being attuned to ethical considerations, a business is more likely to identify evolving consumer needs and demands.

Ethically-operated businesses can attract investors who prioritize environmental, social, and governance (ESG) factors. It has been my experience that some government and non-government organizations offer financial assistance or priority consideration to businesses that operate ethically and sustainably.

Consumers value ethically produced goods and services in some international markets, particularly in the EU. Ethical reputation might facilitate partnerships with global businesses and organizations.

Setting up a plan to train employees to understand and implement ethical practices is critical to building a culture of ethical behavior.  Leadership's dedication to ethical practices is crucial for developing a sustainable culture for a small to medium-sized business. Being transparent about business practices, sourcing, and production processes is an excellent place to start.

Transforming your organization's implementation of ethical practices can be relatively inexpensive. An ideal place to start is to bring employees and management together to discuss and agree on a set of core values that apply to all stakeholders, including employees, shareholders, suppliers, and, most certainly, customers. Once established, constant monitoring and improvement will imbed your company’s core values and practices, which will not diminish as the company scales.

For ethics to be an effective competitive strategy, you must sincerely integrate ethical practices into a company's core operations and values, rather than simply using them as a marketing tool or meaningless platitudes. A genuine commitment to ethical practices can resonate with stakeholders, creating a positive cycle of value for customers, employees, and the broader community, thereby enhancing the small business's competitive position in the market.

Tags: #Business Ethics, #Business Strategy, #Richard Messing, #Managment, #WEO, #ESG