Beyond Profit: The True Currency of Ethical Business

In the expansive realm of modern commerce, ethics often finds itself relegated to the sidelines, viewed as a luxury rather than a necessity. It is a notion encapsulated in phrases like “ethics are for those that can afford it” or “ethics limit growth and financial performance.” This perspective is underscored by the curious fact that two of the most recommended books for corporate reading lists are Sun Tzu’s The Art of War and Niccolo Machiavelli’s The Prince, both of which advocate strategies centred around outmanoeuvring opponents and leveraging unfair advantages. However, beneath the allure of short-term gains lies a deeper truth about the enduring importance of ethical conduct in business.

While there may be victories to be won through unfair play, history reminds us that such triumphs are often fleeting and ultimately pyrrhic. Consider the cautionary tales of historical figures like Napoleon, Hitler, and Stalin, whose ruthless pursuit of power led to their eventual downfall. Similarly, in the corporate arena, companies like Coca-Cola, with its ill-fated New Coke debacle, or Nike, embroiled in controversy over sweatshop labour, serve as stark reminders of the perils of sacrificing ethics for immediate gains.

What, then, is the true essence of a business organisation? Beyond the pursuit of profit, businesses play a vital role in society by providing goods and services that fulfil the needs of various stakeholders. These stakeholders encompass not only shareholders and customers but also employees, suppliers, and the communities in which businesses operate. Without the trust and support of these stakeholders, businesses cannot hope to thrive in the long term.

Psychological research sheds further light on the importance of trust and cooperation in organisational success. Traits like narcissism and Machiavellianism, which undermine trust and foster discord, ultimately lead to organisational decline. In contrast, humans, as social beings, are wired to seek cooperation and mutual benefit, recognising that collaboration is essential for societal functioning.

While competition and the pursuit of status are natural inclinations, they must be tempered by a complementary drive for acceptance and trust within a group. Ethics serve as the bedrock upon which trust is built, fostering open communication, fairness, and a sense of justice. In doing so, ethical business practices enable organisations to cultivate long-lasting relationships with stakeholders, thereby laying the foundation for sustainable success.

However, achieving this delicate balance between “getting ahead” and “getting along” is no small feat. It requires businesses to navigate a complex landscape of competing interests and priorities. On one hand, there is the imperative to pursue profitability and growth, ensuring the organisation’s viability and longevity. On the other hand, there is a need to uphold ethical principles, treating stakeholders with dignity and respect while honouring commitments to fairness and transparency.

Ethical business, then, is not simply a matter of adhering to a set of abstract principles; it is a pragmatic approach to navigating the complexities of the modern marketplace. It involves making strategic decisions that not only drive short-term profits but also foster long-term relationships and trust. By playing what Robert Wright, author of The Moral Animal, describes as “non-zero-sum games” with stakeholders, businesses can create value that transcends mere financial gain. A non-zero-sum game is one where there is no winner or loser, rather it is when the fate of a party is tied to the fate of another. Put another way, you are playing a non-zero-sum game with a tennis doubles partner. If they lose, you lose, if you win, they win and vice versa. This is the landscape the organisation finds itself in. The organisation is playing non-zero-sum games with its internal and external stakeholders, even if some nihilistic corporate leaders think they are playing a zero-sum game where the organisation always wins at the expense of its stakeholders. This perception constitutes a critical misinterpretation of the business landscape.

In essence, ethical business is about more than just maximising profits; it is about creating shared value for all stakeholders involved. It requires businesses to adopt a mindset of stewardship, recognising their responsibility to contribute positively to the communities in which they operate. By embracing ethical principles and practices, businesses can not only enhance their own resilience and longevity but also contribute to the broader social good.

In conclusion, while the allure of short-term gains may tempt businesses to cut corners and compromise on ethics, the true path to sustainable success lies in upholding the highest standards of ethical conduct. By prioritising trust, fairness, and cooperation, businesses can forge enduring relationships with stakeholders, thereby securing their place in a rapidly evolving world. In an era where trust is currency and reputation is everything, ethical behaviour is not just good business – it is essential for survival.

Dr Paul Vorster is a Senior Research Specialist at The Ethics Institute.