What is Business Ethics?

By Ann Skeet, senior director, leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University.

Business ethics is the application of moral reasoning to matters that arise in corporate life.  Ethics is about the conditions that support human flourishing; business ethics considers how humans flourish both in business settings and as a result of actions that organizations take.

In the study of ethics, context matters.  Ethical business behavior is considered in the context in which companies operate, both within their industries, their countries, and globally.  

Throughout the history of business, various frameworks have arisen to help businesses articulate their ethics.  Globally, companies refer to the United Nations Sustainable Development Goals (SDGs) when seeking some common ground and comparative metrics with companies around the world. Frameworks like ESG (Environment, Social, Governance) and DEI (Diversity, Equity, Inclusion) aid companies in goal setting in ways consistent with the evolving business practices and norms of the day.  Before ESG and DEI there was CSR (Corporate Social Responsibility).  The acronyms are less important than what they are attempting to capture—expectations around current ethical business practice. 

Each of these acronyms acknowledges another important aspect of ethics, namely the stakeholders involved.  Companies consider their customers, employees, shareholders, and the communities, and others they partner with in the execution of business plans when considering ethical business practices.

At the organizational level, a company is responsible for identifying and defining its mission and values, both what and why it is pursuing certain business outcomes and how it wants its business conducted.  These are tools businesses can use when determining which markets to enter, what customers to serve, which technologies to develop and how to deploy them.  Because technology uses significant corporate resources and captures consumer and media attention, principles and values specific to the development of technology have been adopted by many companies across myriad industries, giving rising to an accompanying focus on technology ethics.

Another context that matters in business is the company’s culture. Increasingly, corporate boards and management teams are concerning themselves with corporate culture as the legal and regulatory environment places more emphasis on culture and more resources are being dedicated to the development and management of healthy corporate cultures.