Business ethics 101

What SMEs need to know

How do “business ethics” apply to Canadian small- and medium-sized enterprises (SMEs)? Why should busy entrepreneurs even worry about ethics? To demonstrate integrity, gain trust and stand out in today’s competitive global marketplace, all companies should work to cultivate an ethical culture.

What are business ethics?

Business ethics are the moral compass of a company. They include the values, principles and standards that guide conduct and decision-making in any given situation. Ethics include honesty, integrity, accountability, respect, fair treatment of customers, transparency and compliance with relevant laws and regulations.

How do ethics apply to your business?

Ethics for SMEs are no different from those of large enterprises. Ethics apply both to the behaviour of your employees and the overall conduct of your company. Complying with the law is an important part of ethical business. But it’s much more than that. It’s about clearly defining what is “right” and what is “wrong,” both in your business practices and for your employees, so they know how to handle ethical dilemmas and apply good values in their day-to-day work.

To promote an ethical culture, all businesses should have standards in place such as a code of conduct or similar document. These standards set the values and culture of the organization, guide behaviour and prevent improper activities such as:

Management and employee misconduct
Financial crime such as fraud, bribery and corruption
Anti-competitive behaviour
Wrongful lobbying
Non-compliance with laws and regulations

Success in business goes way beyond the numbers. It comes down to consistently doing the right thing, for the right reasons

Mairead Lavery — EDC President and CEO

How do ethics affect exporters?

Higher risk exposure

Exporting your company’s goods and services increases your exposure to risks. These include the possible exposure to corrupt business practices and financial crime. It’s important to navigate the ethical landscape of doing business in foreign markets.

Partnering with EDC

EDC expects our customers and suppliers to have ethical business practices. For transactions and businesses we consider supporting, we may ask to review the company’s compliance and ethics policies, procedures and track record. We also have a supplier agreement that sets out the basic ethical principles we expect our business partners to follow.

Increasing global importance

In today’s complex global economy, more organizations are proactively focusing on ethical matters, so they reduce the risks and consequences of misconduct in international trade. Governments, too, are collaborating and taking increased action to promote ethical business practices and prevent illicit activity such as bribery and corruption, money laundering and terrorist financing. According to the Organisation for Economic Co-operation and Development (OECD), for example, 44 countries, including Canada, have signed the Anti-Bribery Convention. Canada’s Corruption of Foreign Public Officials Act and related provisions in the Criminal Code prohibit corruption and bribery in any form.

Keeping corruption out—A trending concern for Canadian exporters

In focus

SMEs today face a complex trade environment and must navigate the possibility of corrupt practices or other financial crime risks, including:

Offering, providing or conspiring to provide a bribe to a foreign public official or concealing such activity in company records
Paying a foreign government official to speed up routine transactions such as permits
Knowingly laundering or conspiring to launder the property and proceeds of bribery

The Canadian government has criminalized acts of corruption committed abroad by Canadian companies and their employees. As a result, companies are strengthening their anti-corruption policies and educating employees about these anti-corruption laws.

The Business Case > Benefits and opportunities for your company

Improves your workplace culture

A workplace guided by clear ethical standards such as a code of conduct will help your employees act lawfully and with integrity in their day-to-day work. They’ll also know how to handle ethical dilemmas, so they’re able to “do the right thing.” Also, good ethics can help you attract and retain good people.

Builds and maintains trust

Running your business ethically sends a powerful message to your customers and other stakeholders about your values. People want to deal with companies that are trustworthy and operate with integrity, and will avoid those that may have questionable ethics. Put simply, good ethics are great for your business.

Reduces your risk

Strong ethical practices reduce business risks, including non-compliance with the law. In today’s hyper-connected, social media-savvy society, any ethical misdeed or blunder—even small missteps—can be broadcast to the world, and ultimately, damage your company’s reputation.

Differentiates your business

Standing out as an ethical business that operates with integrity can differentiate your company in the market—and even give you a competitive edge. Today’s consumers are increasingly driven to buy from companies with a strong purpose and ethical principles.

Image of engineer in front of solar panel

What you can do

Ethics can be a complex area in any business environment, and in the international arena, it’s even more challenging.

That’s why today, it’s more important than ever to have ethical policies and guidelines in place, and to live up to them in every instance. It’s also helpful to have reporting channels to allow people to speak up if they witness unethical conduct.

Understand what ethical issues matter most to your business at home and abroad, then take steps to ensure you and your team carry out your business dealings responsibly.

Questions to consider

What ethical issues does your company face? How about your partners and suppliers?
Does your company have a code of conduct or other form of ethical guidelines?
Have you educated your staff and suppliers on your expectations for ethical behaviour?
Do you have procedures to identify, prevent and report unethical behaviour such as bribery and fraud?

Take action

Use EDC’s Business Ethics Checklist. It lists essential steps SMEs can take to enhance their practices.

For more resources

Check out EDC’s Anti-Corruption Resource Centre to learn how to protect your business.

Also in this series

Looking to continue this series? Check out the links below:

1 of 14: Sustainability 101: Time to embed sustainability into your business?
2 of 14: How to write a policy
3 of 14: Human rights 101 guide
4 of 14: Human rights checklist
5 of 14: Energy efficiency 101 guide
6 of 14: Energy efficiency checklist
7 of 14: Waste management and pollution 101 guide
8 of 14: Waste management and pollution checklist
9 of 14: Health and safety 101 guide
10 of 14: Health and safety checklist
11 of 14: Sustainability management 101 guide
12 of 14: Sustainability management checklist
13 of 14: Business ethics 101 guide (this guide)
14 of 14: Business ethics checklist

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Date modified: 2024-02-15

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