If you are establishing a small business in the UK or in any other country for that matter, one of your key considerations should be understanding how small business and business ethics can coexist. Traditionally, business was seen as an activity with the sole objective of maximising owners’ profits and wealth.

This approach led to numerous problems such as:

   Exploitation of employees with consequent horrible living conditions for a section of the society and violent protest movements.

   Destruction of the environment with consequent degrading of the quality of life for whole societies

   Marketing of substandard and harmful products and cheating of customers with false claims about quality and safety

   Rise of monopolistic practices that sought to entrench established players and prevent entry of others into the industry.

Once a business adopts unethical practices, it is difficult to change the culture in the organisation. And an environment that disregards business ethics is an ideal one for unscrupulous managers to thrive.

The result would the emergence of a class of managers who seek to maximize their own perks and wealth at the cost of the corporation.

All the other stakeholders – shareholders, lenders, customers, suppliers and the community itself – suffer as a consequence. We saw this happen at corporations like Enron.

Collapses of Enron, WorldCom and Adelphia have made ordinary persons aware of the consequences of bad business ethics and there is an increasing insistence that corporations follow ethical business practices.

What is business ethics?

We can say that ethics is present when a business considers the impact of its policies and actions on all the stakeholders – shareholders, employees, customers, suppliers, lenders, investors and the community.

An ethical business seeks to avoid measures that harm any of these groups. It would thus:

   Produce goods and services that satisfy customer needs, and even their expectations

   Compensate and deal with employees fairly and provide safe and healthy working conditions

   Be aware of protecting the environment and take measures to treat pollutants and minimize wastage through recycling and other actions

   Deal fairly with their suppliers and support them in supplying quality components and survive by earning good profits

   Pay taxes and comply with government regulations so that the corporation would not collapse one day owing to governmental action

If you think that all this is bullshit, just see yourself as a consumer. Would you deal with a corporation that cheats you? And if all consumers decide not to deal with that cheat, would that corporation survive?

Increasing environmental awareness, dissemination of news about corporate activities and public intolerance of unethical activities are making business ethics a very essential input for business success.

Small businesses might not yet be aware of all the ethical issues. As they grow, however, they are likely to come face to face with the practical relevance of these issues. And if an unethical culture has already been established, they might find it extremely difficult to change that culture.

For long term growth and success (and even short-term success in many cases) it is important that they take the time to understand the issues.