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Are Ethical Business Practices Correlated to Profitability?

What are ethical business practices, why are they important, and how do they help to cultivate more sustainable companies and even help to boost profitability?
Business
2023-06-16T00:00:00.000Z
en-us

As sustainability grows exponentially in importance in the marketplace in order to retain both investor and customer interest, companies are striving to implement more ethical business practices into their companies – but are ethical business practices beneficial for more reasons than just sustainability? 

What are ethical business practices, why are they important, and how do they help to cultivate more sustainable companies and even help to boost profitability?

What are ethical business practices?

Ethical business practices are a set of principles or tactics that can help a company to improve their business operations whilst adhering to more responsible and sustainable values. Often, ethical business practices exceed complying with new laws and regulations, but allow companies to expand themselves as a whole: by attracting new customers, investors, suppliers and employees to the business.

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👉 Often, ethical business practices make a company seem more attractive and increase the chances of gaining investor interest.

Here are a few of the main points to incorporate when trying to implement ethical business practices:

  1. Transparency & Accountability: Transparency is essential for any company looking to become more sustainable, meaning that seeking to be more honest and your company holding itself accountable to its actions is imperative. This can be demonstrated with companies when they seek to implement fair employee policies, avoid corruption or bribery, prevent greenwashing, and publicly report their annual emissions or a sustainability report.
  2. Adhere to Human Rights: People are pivotal for any company: stakeholders, employees, customers, and investors are what keep a business running as a whole. Therefore, it is essential that companies seeking to implement ethical business practices aim to treat their employees and those working across their supply chains with respect. This can be done by ensuring fair wages are paid and that employees are not taken advantage of or exploited.
  3. Respect Employees: In addition to providing basic human rights to curate ethical business practices – it is essential to ensure employees are provided with fair working hours, are compensated for overtime, and have access to any relative benefits. 
  4. Protect the Environment: A huge part of ethical business practices include making sure the company reduces its impact on the environment. This effort can be made by striving to recycle, implement the use of energy efficient resources, making use of clean energy whenever possible, and seeking novel ways to reduce emissions.
  5. Protect Consumers: Similar to employees and investors, people buying the product or service on behalf of the company is also imperative to implementing ethical business practices. This is because much of the business revenue is to come from consumers themselves as opposed to employees or investors – even if they are eligible for special discounts. This can be done by making an effort to accurately label products, specify expiration dates, and risks of using the products. 
  6. Be Socially Responsible: It is important to demonstrate social responsibility. This can be done when companies make an effort to donate proceeds to their surrounding communities, charities, or practice ethical sourcing of materials
  7. Curating a Sustainable Supply Chain: A sustainable supply chain is key to implementing ethical business practices. This can be done by mitigating the use of suppliers who subscribe to unethical business practices such as labor extortion or contribute to deforestation. 
  8. Comply with Laws & Regulations: Any company seeking to implement ethical business practices must first start at the bottom with the bare-minimum requirements and work their way up to the top. Therefore, it’s necessary for companies to keep up-to-date with the environmental regulations relative to their business.
  9. Practice Leadership: Taking charge and seeking ways to take control of the negative impacts of refusing to implement ethical business practices, such as climate change – it is crucial to any company seeking to be more sustainable and ethically responsible. Leadership can be demonstrated by seeking to create a plan to implement ethical business practices and also holding people accountable for how their actions impact the company, the environment, and society. 
  10. Engage with Stakeholders: Stakeholder engagement is an infamous component to curating a more sustainable, ethically responsible company. This can be done by involving stakeholders in decisions and their surrounding communities. 

👉 Ultimately, it is imperative to remember that ethical business practices are likely to differ across various industries. This is because different industries are going to impact the environment in different ways, i.e. – it won’t be as necessary for a car company to be mindful of which fabrics they use.

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Why are ethical business practices important?

There are several reasons why ethical business are beneficial:

For instance, ethical business practices can help to cultivate a greater sense of trust amongst employees – such as by curating better customer loyalty and a better reputation. This is because ethical business practices help to illustrate that a company cares about more than business profit. As a result, more people will be interested in the business as the morals will not be compromised by money or profit.


This shows how ethical business practices can help to develop a better relationship with stakeholders, employees, investors, and customers – resulting in more loyal customers, greater business revenue, and a better reputation.

Repeat business is one of the biggest ways that ethical business practices are correlated to profitability. Think of it this way: if a customer really likes Patagonia and supports their business mission – they are more likely to purchase from them again. It’s the same with a music artist releasing an album – they will be more likely to stream or buy the next artist’s release.
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What are the benefits of ethical business practices besides profitability?

There are several examples as to how ethical business practices may help companies with more than just profitability. 

Ethical business practices are also important as they encourage employees to be more engaged with various business practices. In other words, when employees are treated well – they’re likely to work harder, which can have a positive impact on the company’s brand and also bring in more business revenue. In addition to this, ethical business practices can prevent companies from a high turnover rate – and reduce the need to spend time, money, and effort to hire and retrain new employees. 

Ethical business practices also can help to motivate companies to implement ESG values in their company, comply with ongoing and future environmental regulations, and encourage long-term success in sustainability. This is because incorporating ethical business practices can often lead to a shift in values and more permanent changes, those of which help companies keep up-to-date in a world where climate is constantly changing the way businesses need to operate. 

More specifically, ethical business practices can help companies to avoid fines, legal risks, and other reputational damage. The long-term sustainability implemented with the help of ethical business practices can also help companies to help the economy, society, and promote environmental sustainability.

earth on grass

Society benefits from ethical business practices, too. This is because considering how business operations may impact society (something as simple as pedestrians, nearby business operations or the actual people buying the product or service) can help to demonstrate the importance of equality and safety – similar to DEI practices. 

Lastly, ethical business practices can help improve the expectations of investors – as companies that implement ethical business practices are more likely to be lucrative in the long-term in the midst of climate change as more companies strive to be more sustainable.

👉 Ethical business practices can help companies to increase their revenue of profitability, but also ultimately helps to cultivate a more sustainable that will remain viable for future generations as climate change evolves.

Are ethical business practices directly related to profit?

Given ethical business practices have an impact on sustainability, which often draws in more customers and investors – ethical business practices are most certainly correlated to profitability. This is because ethical business practices can help to improve the relationship between customers and investors – which has a direct impact on the potential revenue of the company. However, in order for these ethical business practices to prove financially lucrative – companies will have to invest their time to implement the tactics successfully, which can also result in additional costs. 

👉 While ethical business practices require time, effort, and money in the beginning  they can prove financially beneficial later for the company. 

There are several more ways in which ethical business practices are shown to correlate to profitability:

Increased Customer Loyalty & Sales: 

Companies that demonstrate ethical business practices are often to intrigue the interests of customers and investors, meaning that ethical business practices often result in higher business revenue. 

💡Think about it: aren’t you more likely to return to a restaurant you really enjoyed with friends and family than to go try a new one alone?

restaurant with people together

Better Brand Recognition:

Ethical business practices can lead to better brand reputation, which in turn attracts new customers, employees, and investors to the company – ultimately leading to increased profitability.

Improved Risk Management 

Risk management is one of the most infamous tactics to implement sustainability, which helps to prevent companies from failing to comply with environmental regulations and various laws. In short, risk management helps to improve brand reputation and customer loyalty – both of which already improve profitability.

Employee Satisfaction

Employees are often likely to work better when they are treated well within the workplace: such as being paid for overtime, access to medical care benefits, or going on reasonable vacations. 

👉 How does this relate to ethical business practices being correlated to profitability? 

Because the more productive employees are, the more likely customers are to be satisfied with the company’s product or service. Also, retaining employees prevents the need to recruit new talent or conduct new onboarding or training sessions – also leading to greater profitability.

Energy & Material Efficiency

Ethical business practices often make use of overall energy and resource efficiency, mitigating waste, and seeking to cultivate a more sustainable supply chain – all of which can help to reduce business costs and ultimately allow for profitability.

At the end of the day, implementing ethical business practices may require extra time, money, and effort – but can make a business more attractive for customers, stakeholders, and investors: and ultimately allow the company access to a higher profit.

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How can your company implement ethical business practices?

Implemented ethical business practices doesn’t have to be something done at full speed ahead: companies can start slow and work their way up.

Some of the easiest ways to start implementing ethical business practices include:

  • Developing a code of conduct which explains that company’s values and morals to ensure there is a company-wide standard for behavior;
  • Set examples for high quality ethical business standards → starting with high expectations could help companies to meet their lesser-tier goals later on;
  • Training employees to be aware of the importance of ethical business practices;
  • Seek to perform consistent performance evaluations to allow for improvement;
  • Aim to work with sustainable suppliers who care about ethical business practices;
  • Engage with stakeholders to ensure their opinions are heard and tactics are implemented to adhere to their advice;
  • Implement sustainable practices wherever possible such as by reducing consumption, greenhouse gas emissions, or overall waste;
  • Remember that transparency is pivotal for any business seeking to be more sustainable or implement ethical business practices
  • Transparent Communication: Foster open and transparent communication channels within the organization. Communicate your company's commitment to ethical practices both internally and externally. Provide channels for employees and stakeholders to express concerns, ask questions, and provide feedback on ethical matters.

💡 It’s key to realize that different ways of implementing ethical business practices into a company are likely to differ in success depending in the sector trying to become more ethically sustainable. However, the trial-and-effort will be worthwhile as ethical business practices won’t only benefit the environment or society – but a company’s profitability, too.

What about Greenly? 

If reading this article about if ethical business practices are correlated to profitability has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!

It can be hard to align your business values with sustainability and to make a seamless ecological transition, but don’t worry – Greenly is here to help. Book a demo with one of our specialists to learn more. 

Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.

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