Being ethical is better for business

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How important is it to have an ethical approach to business?

Very, when you take into account how consumers make their decisions as to who to shop from.

According to new research from AAT, 70% of consumers have said that their purchasing decisions are influenced by a company’s ethical behaviour. No doubt, this has been fuelled by recent high profile tax avoidance cases and other unethical practices (including the BP oil spill disaster) which have made an impact on the public’s conscience. But our findings are not just confined to those largest of multinational corporations; consumers tell us this affects their decisions across all businesses in all industries.

A strong ethical approach, led by all employees, therefore needs to be at the heart of business practice given how businesses are dependent on their good reputation to survive in the world. Workers should be made well aware of their own employer’s behaviours and approach to ethics, for example through their approaches to paying suppliers on time, sourcing goods, and how they treat their staff.

Tax avoidance was the biggest area that can put consumers off engaging with a business, with 43% of respondents citing this as a concern. Other ethical factors which ranked highly for consumers included maximum transparency with regards to company accounts (36%); a strict ethical code about their supply chain (39%) and being careful with sensitive client data (43%). All of these indicate how demonstrating strong ethical behaviour makes excellent commercial sense, and can also give workers more of a sense of pride in the place they work for.

The Government, along with the wider public, is keen to clamp down on the tax gap – defined as the difference between the amount of taxes collected by HMRC and the amount of taxes owed. This is currently believed to stand at between £33 and £34 billion, a figure that has changed little since 2009-10, according to our research.

Tax revenue helps fund much of what society needs, and most people will want and expect that our businesses play their part in helping bridge the gap. With consumers keen to demonstrate that they want to engage only with those companies who are good corporate citizens, we can only hope that more businesses promote their commitment to fair tax. This can act as a powerful tool to attract brand loyalty as well as retaining staff.

AAT’s full white paper, ‘Accounting for Good’, looks in more detail about how businesses can do more with regards to the importance of ethical practices. In addition, websites such as Informi offer practical tips and support for smaller businesses as to how they can stay on the right path to success.

A version of this blog posting was first published on the Huffington Post website.

Olivia Hill is AAT's Chief HR Officer.

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