3 Reasons an Ethical Business Leads to Profits

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Anita Roddick, founder of ethical beauty brand The Body Shop, once said, “Being good is good business.” In February 2016, forty years after its start, the company issued a news release announcing its new commitment to become the world’s most ethical and sustainable global business. This ethical focus has helped it open more than three thousand stores in more than sixty countries, according to the release. Discover how other businesses following The Body Shop’s example have learned that focusing on ethics can lead to profits.

Ethical Leaders Have Productive Workers

In their report “Linking Ethical Leadership to Employee Well-Being: The Role of Trust in Supervisor,” published in the Journal of Business Ethics, Aamir Chughtai, Marann Byrne, and Barbara Flood found that employees trust superiors who demonstrate ethical leadership. The study of two hundred and sixteen trainee accountants also found workers who trusted their supervisors are more engaged at work and less emotionally exhausted.

“Engaged workers … have bought into what the organization is about and are trying to make a difference,” explains Dr. Jim Harter, Gallup’s chief scientist of employee engagement and well-being, in a Gallup report “How Employee Engagement Drives Growth.” “This is why they’re usually the most productive workers.”

Programs such as the Executive MBA online degree program at Washington State University can help develop strong ethics along with traditional leadership skills such as problem solving and organizational development.

Ethical Business Practices Can Reduce Costs

The Worldwatch Institute notes the modern business landscape is characterized by an increasing number of “triple-bottom-line companies” that aim to have a positive social and environmental impact in addition to earning a profit. Worldwatch further observes that caring for both the planet and its people are the cornerstones of ethical business practices. More businesses are discovering that these pursuits can help them reduce costs, thus effectively increasing their profits.

Sustainable Brands, an alliance of organizations committed to sustainability, recently reported significant savings for many leading businesses. In 2015, for example, PepsiCo Inc. announced it saved more than $375 million since establishing water, energy, waste-reduction, and green packaging initiatives in 2010. In early 2016, Hilton Worldwide reported its energy, waste, and water-reduction strategies helped it save an estimated $550 million since 2009, according to coverage of PepsiCo’s 2014 Corporate Social Responsibility Report by Sustainable Brands.

Consumers Want to Spend Money With Ethical Organizations

Businesses rely on consumer support for profits. Strong evidence suggests that a company’s ethical practices help generate this consumer support. Nielsen research found that fifty-five percent of global online shoppers in sixty nations are particularly passionate about companies that make a positive social and environmental impact; in fact, these consumers will pay more for related products and services.

“Consumers around the world are saying loud and clear that a brand’s social purpose is among the factors that influence purchase decisions,” says Amy Fenton, Nielsen’s global leader of public development and sustainability.

In addition, research from market intelligence agency Mintel found more than half of U.S. consumers stop buying from companies perceived as unethical. More than one-third will stop buying an unethical company’s products even if no substitute is available. This behavior illustrates that if a business does not perform ethically, consumers can penalize that business in the marketplace.

When Anita Roddick opened her first The Body Shop store, her ethical stance made her a pioneer. Today, more businesses are discovering that this ethical approach can be the key to profits and success. To read more about leadership and business success, visit Washington State University online.

Resources

http://www.12manage.com/quotes_er.html

http://www.prnewswire.com/news-releases/at-forty-the-body-shop-launches-pioneering-new-commitment-in-drive-to-be-the-worlds-most-ethical-and-sustainable-global-business-300218500.html

http://www.abc.net.au/classic/content/2015/03/02/4187719.htm

http://link.springer.com/article/10.1007/s10551-014-2126-7

http://www.gallup.com/businessjournal/163130/employee-engagement-drives-growth.aspx

http://embaonline.wsu.edu/

http://www.worldwatch.org/people-planet-profit-rise-triple-bottom-line-businesses-0

http://www.sustainablebrands.com/news_and_views/waste_not/hannah_furlong/businesscase_sustainability_initiatives_have_saved_pepsico_o

http://www.sustainablebrands.com/news_and_views/organizational_change/sustainable_brands/businesscase_hiltons_global_activation_susta

http://www.nielsen.com/us/en/press-room/2014/global-consumers-are-willing-to-put-their-money-where-their-heart-is.html

56% of Americans stop buying from brands they believe are unethical

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