“It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that you will do things differently.” (Warren Buffett)

During tough economic times it can be tempting to illegally cut corners, hire staff at lower salaries, or avoid paying taxes you know you should be paying. The unethical approach can be very tempting if you find yourself battling to keep your business going. Taking the low road, would, however, be the wrong choice.

An ethical business is one that’s transparent and honest about everything from its accounting practices, to its treatment of employees, interactions with the public, and the information it shares with shareholders. Truly ethical companies put the wellbeing of their customers and employees on par with profits. Now, backed by repeated studies, the financial experts agree that running a business ethically isn’t just better for a business’ short-term success, it’s also far more profitable in the long run. But why?

Consumers demand ethical management

With climate change at the forefront of every modern consumer’s thinking, the demand for sustainable, and ethical business practices has never been higher. Company business practices are now easier to scrutinise and more consumers are taking an active interest in the ethical aspects of the companies they deal with. In short, customers want to buy from ethical businesses.

A recent study into consumer intent carried out by OpenText found that 88% of global consumers surveyed would rather buy from companies with ethical sourcing structures in place and that 83% of global respondents said they’d be willing to pay more for products they could be sure were ethically sourced.       

The trickle-down effect

Moral and ethical business leadership has also been shown to reduce friction in teams and allow employees to better focus on their jobs. In a recent study, researchers at the University of Lahore revealed that supervisors who act ethically are more trusted by their employees and that this trust translates into boosted productivity from staff who are both more engaged and less emotionally exhausted. According to Gallup, teams which are highly engaged are, on average, 21% more productive and 28% less likely to steal from the company.     

Big Brother is watching

When Volkswagen was ordered to pay back R201-billion to customers in the US who had been sold cars with falsified emissions data in 2015, the writing was on the wall for companies hoping to save money through unethical behaviour. In South Africa, you don’t need to look far for examples of large companies being brought to their knees by the unethical finance decisions of the boards. Steinhoff and Telkom have suffered for their questionable finance decisions and abusing their industry dominance respectively. And a R4.1-billion fine was issued to global software company SAP around bribes paid to South African and Indonesian officials to obtain valuable government business.

The truth is, regulators are looking at companies harder than ever before, and those who think they can slip through the legal cracks are increasingly finding themselves coming up short.   

Being ethical will actually save you money

While many think ethical behaviour may cost more, there are multiple examples where “doing the right thing” has in fact led to a decrease in the cost of production. For instance, both PepsiCo and Hilton Worldwide have reported that their energy and waste-reduction strategies have resulted in billions of dollars in savings.        

Onwards and upwards

Without a doubt, these are powerful incentives, and similar benefits can also be found for your company. Whether you want to install solar power to go greener and save money or ensure you never fall foul of obscure financial regulations, as your accountants, we are always ready to help.