How to Create and Implement Ethics & Compliance Policies
Business start-up can be an overwhelming process with many aspects to consider. We need to think of registration, licenses, insurance, accounting systems, management, assets and resources, websites, marketing, and so much more. But once your business is established, there will be time to delve into other topics, such as policies, ethics and compliance guidelines.
If you have hired your first employee or established regular vendors and suppliers, it’s a good idea to introduce a code of ethics and a social responsibility policy – this ensures clarity and consistency within your organization. Empowered employees know in which direction the company is headed, and these policies will help inform and shape their decision-making.
Remember, just like any other written contract, it’s best practice for ethics and compliance to create these policies before you need them!
A Code of Ethics
This is a written collection of the rules, principles, values, and employee expectations that an organization considers significant, which are fundamental to a company’s success. A code of conduct or ethics will serve as a guideline or framework for ethical business standards relating to behaviour and decision-making.
The Code is a communication tool that informs internal and external stakeholders about what is valued by an organization, its employees, and management. Organizational ethics begins at the top, and the leadership and example of strong managers can help instill corporate values in employees. Trust and cooperation between workers and managers must be based on fairness, honesty, openness, and moral integrity. The same applies to relationships among businesses and customer-to-business relations.
Why bother with Ethics policy development?
A business should be managed ethically and work on Ethics policy development for many reasons:
To maintain a good reputation, keep existing customers and attract new ones, avoid lawsuits, reduce employee turnover, avoid government intervention, please customers and employees, and do the right thing.
More and more companies have written codes of conduct. A company code of ethics directs the company’s road map. Although ethics codes vary greatly, they can be classified into two categories: compliance and integrity-based.
Compliance-based ethics codes emphasize the prevention of unlawful behaviour through control or legal compliance procedures. Where compliance ethics codes are based on deterrence, integrity-based ethics codes to find the organization’s guiding values create an environment that supports ethically sound behaviour that can stress shared accountability among employees.
Some people think individuals have ethical principles, or they don’t. Some managers feel they are not responsible for an individual’s misdeeds and that ethics has nothing to do with management, but we think that ethics has everything to do with management, as ethics and integrity in business go hand in hand.
5 simple steps to improve Business Ethics
Here is a step-by-step process that can help improve business ethics.
- Management must adopt and unconditionally support an explicit code of conduct.
- Employees must understand that ethical behaviour begins at the top, and management expects all employees to act accordingly.
- Managers and other leaders must be trained to consider the ethics and application of all business decisions.
- Contractors, distributors, suppliers, vendors, and customers must be told about the ethics program as pressure to put ethical considerations aside often comes from the outside, and it helps employees to resist such pressure when everyone knows what the ethical standards are.
- Ethics code must be enforced promptly if any rules are broken; this is the most purposeful way to communicate to all employees that the code is serious.
What to include in your Code of Ethics
Common sections included these codes include:
- Core values or principals
- Ethical decision making
- Compliance, Laws, and Regulations
- Sustainability or the triple bottom line
- Human rights
- Fair Labor practices and working conditions
- Discrimination and harassment
- Health and Safety
- Fair competition and Business Conduct
- Corruption
- Security, protection, and proper use of company assets
- Confidentiality, information security, and intellectual property
- Bookkeeping, reporting, financial integrity, and transparency
- Fraud
- Conflict of interests
- Privacy and personal data protection
All of these topics are under the umbrella of ethics in business.
Social Responsibility
Social responsibility is the concern businesses have for the welfare of society, not just for their owners. Social responsibility goes well beyond merely being ethical and is based on a commitment to Integrity, fairness, and respect.
It’s not enough for companies to brag about their social responsibility efforts; they must live up to the expectations they raise. Customers prefer to do business with companies they trust, and we can build that trust over time with our actions.
Dimensions of Social Performance
The social performance of a company has several dimensions.
- Corporate philanthropy is charitable donations to non-profit groups.
- Corporate social initiatives this is an enhanced form of corporate philanthropy and social initiatives more directly related to the company’s competencies (such as donating time and expertise).
- Corporate responsibility includes everything from hiring minority workers, making safe products, using energy wisely, and providing a safe work environment.
- Corporate policy refers to the position on social and political issues.
Social responsibility includes our responsibility to customers, such as the right to safety, the right to be informed, the right to choose, and the right to be heard.
Ethical behaviour is good for shareholder wealth; it does not have to subtract from the bottom line but rather adds to it; we call this “doing well by doing good.” Many investors believe that it makes financial and moral sense to invest in companies that plan ahead to create a better environment.
Businesses’ Responsibility within Society
One of the businesses’ responsibilities within society is to create new wealth, which is then dispersed to employees, suppliers, shareholders, and stakeholders. But businesses are also responsible for promoting social justice. Social contributions can include various socially oriented activities, such as cleaning up the environment, sharing technological advances, and supporting low-income individuals.
A commitment to corporate social responsibility implies a commitment to some form of triple bottom line (TBL). TBL does a framework for measuring performance against economic, social, and environmental parameters that best focus on their economic value and the environmental and social value they add and destroy.
Your business can demonstrate social responsibility towards stakeholders by satisfying customers with goods and services of real value, making money for its investors, creating jobs for employees, maintaining job security, ensuring that hard work and talent are fairly rewarded, creating new wealth for society, promoting social justice, and contributing to making its environment a better place.
You are probably already doing several of these, so why not promote those aspects and put them in writing?