4 Ethical Issues in Business That Will Test Your Leadership (and how to overcome them!)

Published 15 July 2019

4 Ethical Issues in Business That Will Test Your Leadership (and how to overcome them!)

Ethical issues in business can be a tricky minefield to navigate for emerging and even established leaders, but research shows it’s no time to bury your head in the sand.

Australians consumers and investors increasingly want businesses to do the right thing. Nine in ten Australians now expect their investments to be ethical and environmentally responsible. Eight in ten Australian consumers are even willing to pay more for a product if the purchase will help other people or the environment (Fairtrade Australia and New Zealand).

Facing a complex range of environmental, technological and economic issues, business students today need to be able to identify future challenges, lead with integrity and develop and implement sustainable strategies. MBA students at Kaplan Business School are introduced to discussions around these matters through subjects like Governance, Ethics, and Sustainability.

It’s a valuable opportunity to gain a deeper understanding of corporate sustainability, and the obligations leaders have to build ethical organisations that are driven by social considerations, as much as they are by commercial imperatives.

ethical issues in business

Here are the 4 biggest ethical issues in business today that are going to challenge your leadership:

1.Environmental impact

A recent study shows that 90% of Australian consumers care about the future of the environment. What’s more, 80% of Australians hold companies responsible for their environmental impact. If you want to be a successful business leader today, you will need to take your company’s impact as seriously as your consumers do.

Environmental Impact

  • 90% Australian consumers care about the future of environment
  • 80% Australians hold companies responsible for their environmental impact

Environmental leadership in 2019 is as complex as it is necessary. At present, our global economic activity is outstripping the earth’s capacity to sustain it.  We are harvesting resources faster than nature can replace them. Biodiversity loss is accelerating, and despite warnings about climate change, we continue to burn fossil fuels past safe levels.

Overconsumption of resources and climate change are creating an uncertain future for society, and for the economy. Companies that want to thrive in the next century are going to have to plan for a range of different future scenarios and shift towards a ‘green’ business model.

The good news is that what’s good for the environment can also be good for business. With strong leadership, innovation and commitment, your company could become part of the solution instead.

ethical issues in business

If you want to be sure your company is environmentally sustainable, here are some strategies you can implement as a business leader:

  • Understand the issues, the security of your supply chain, and where your products end up, post-consumption.
  • Make an environmental sustainability strategy a core element of your overall business strategy, identifying how you can reduce the impact (with targets!), and ensure that it is regularly evaluated.
  • Where the environmental issue extends across a whole supply chain, work with community groups, government and other businesses to develop solutions together.
  • Make sure your company invests in and supports projects that will genuinely replenish resources and offset your impact

2.The ethics of new technologies: privacy, surveillance and big data

Last year was a big moment in the ethics of new tech and business, and this firestorm is unlikely to calm down any time soon.

On the global stage, we had Google’s announcement that it would go into business with China’s repressive government, by allowing their search results to be censored. Earlier in the year, the Facebook/Cambridge Analytica scandal broke, revealing that data had been harvested from Facebook users and used to push a political agenda.

In each of these cases, company leaders had to make decisions about what they will do with the power they have over literally billions of users.

Government regulators have been playing catch up with privacy law. In 2016, the EU introduced landmark ‘General Data Protection Regulation,’ giving individuals ownership over their data and putting the onus on companies to do their right thing by individual citizens.

ethical issues in business

Digital ethics is now fast becoming a corporate trend. What can you do as a business leader, to make sure you’re ahead of this wave?

  • Establish firm guidelines on privacy and user protection.
  • Make sure if you use or design a new technology, it’s been checked for fairness, potential biases and ethical implementation before it hits the market.
  • Develop internal frameworks and processes that hold employees accountable.
  • Check out this best practice guide, developed by the Australian government, when considering data analytics and privacy.

3.Equality and diversity in the workplace

Savvy business leaders in 2019 realise that making social equality and diversity a central mission of your company is not only good for innovation, it’s essential to attracting and maintaining fresh talent.

The 2017 Deloitte-Westpac ‘Diversity Dividend Report’ found that within 1,000 businesses, only 34% of senior managers were women. Successive governments in Australia have done little to correct these inequalities. With good leadership, there is the potential for businesses to step up, and do better.

Take Energy Australia, for example. Last year, they closed their entire gender pay gap in one day, to worldwide applause. In Australia, this pay gap hasn’t budged in 50 years! One. Single. Day. How?

Company directors simply decided to give all the 350 women (and any man) who were being underpaid a raise, so they were earning the same as their better-paid colleagues. Sure, that cost them $1.2 million in profits immediately, but the initiative also makes them more attractive as an employer and all the positive press they received helps with positive brand positioning.

Source: Inclusion@Work Index 2017-2018

ethical issues in business

So, as a business leader, what can you do make sure your company stays on ‘the right side of history’ and promotes diversity and equality?

  • Set hiring policies aimed at increasing diversity, especially in senior positions.
  • Introduce a feedback system that allows employees all the way down the corporate ladder to get have their grievances heard by upper management.
  • Rigorously enforce anti-discrimination and sexual harassment laws.
  • Investing in businesses courses like an MBA with a specialisation in Women in Leadership can give you the opportunity to learn how to positively transform an organisation’s culture into one that values fairness and equity.

4.Economic sustainability: evolution, resilience and going beyond shareholder returns.

“In my opinion the most urgent ethical dilemma faced by future business leaders is the issue of economic sustainability.

Business models and growth strategies that once offered reasonably predictable outcomes and returns are now far less dependable, in an economic landscape increasingly shaped by technological change and disruptive innovation.

The future business leaders that will thrive will be those that focus on creating value for their customers, rather than on generating returns for their shareholders” – Adam Murphy, Academic Head, Management, HR and Law, Kaplan Business School

Economic sustainability in this day and age means moving on from the old model of creating shareholder value at the expense of society or the environment to the new model of the ‘triple bottom line.’ It means being innovative and seeking out profitability that’s sustainable, long-term.

Take Australian company, Kokonut Pacific, for example. Winners of the 2018 Social Enterprise Awards, they designed and sell a product that allows Pacific Islander communities to process coconut oil locally. This means that coconut profits stay in the community, and they have more money to buy more processing units. Kokonut Pacific’s profitability is tied to positive social outcomes, so everyone wins!

ethical issues in business

How can a business leader ensure the economic sustainability of their company, in 2019?

Businesses have a crucial role to play in ensuring the stability of our economy, society, and our ecology, in the years to come. In business, change comes from the top down. Strong, ethical and brave leadership has never been more important!

Click here to find out about studying a general MBA program at KBS or one of our specialisations in International Leadership or Women in Leadership.

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