Ethical Business Practices & Why Ethical Risk Should Be Part Of Your Board Agenda

Poor ethical practices can severely damage a brand, leading directly to customer attrition, reduced engagement, lower financial performance, and difficulties recruiting talent. Additionally, there is growing evidence that employees and consumers increasingly make decisions based on a company’s ethical values.

Last year, People Management magazine reported that employer reputation has become one of the most important factors for UK employees when determining whether to accept a job offer. People are more likely to work for a business whose values align with their personal beliefs. Employees also know that any association with an unethical business could impact on their long-term career prospects.

Employees are now able to obtain greater insight into an organisation, whether that is by way of employee review websites such as Glassdoor, from business researchers such as the Business and Human Rights Centre and Ethical Consumer, gender pay gap data, modern slavery statements, and publicly available information contained within media investigations and statutory reports.

Recent examples of ethical risk

The following examples highlight the importance of good ethical practices.

1. Cambridge Analytica

In the early 2010s, the personal data belonging to a large number of Facebook users was allegedly collected and used by Cambridge Analytica for political advertising purposes, without informed consent. This raised significant ethical concerns regarding privacy and governance and caused the UK Information Commissioner’s Office to intervene in 2017. This scandal triggered the global #DeleteFacebook movement, demonstrating how misuse of personal data can damage trust. Privacy became a major factor in user attitudes.

2. Boohoo

In 2020, allegations emerged regarding worker exploitation and poor conditions within part of fashion retailer Boohoo’s Leicester supply chain. This reportedly led to major reputational and brand damage and a significant reduction in the company’s market value.

3. P&O Ferries

In 2022, P&O Ferries dismissed hundreds of seafarers without prior consultation, prompting significant political, regulatory, trade union and public criticism. The case has become a high-profile example of how workforce decisions can create serious ethical risk, even where an employer argues that commercial pressures require urgent action.

What ethical risk means for employers

The key point for employers is that ethical standards are no longer judged only by what an organisation says in its values statement or annual report. Employees, candidates, customers, investors, regulators and the media are increasingly able to test whether those statements match day-to-day practice. Decisions about workforce treatment, supply chains, environmental impact, executive reward, data use and transparency can all quickly become reputational, legal and commercial risks.

How to commit to ethical business practices

Carrying out an ‘ethics audit’ can help employers understand how they align with ethical standards, demonstrate commitment to ethical practices and act as a useful starting point from which to make improvements. Employers can focus on practical, visible actions across governance, people practices, supply chains and transparency.

Below, we offer advice on how you best reduce ethical risk across the entirety of your business practice:

Governance, compliance and transparency

• Strengthen governance and accountability
  Make ethics a Board-level issue, with clear ownership, regular reporting and meaningful consequences where standards are not met.
• Create and enforce a clear code of ethics
  Set out expected behaviours on issues such as conflicts of interest, bribery, discrimination, harassment, data use, supplier relationships and customer treatment.
• Maintain strong legal and regulatory compliance
  Keep policies, procedures and reporting arrangements under regular review so the organisation complies with employment, health and safety, data protection, equality, environmental and sector-specific regulatory obligations.
• Improve transparency
  Publish clear information on pay gaps, modern slavery risks, sustainability, diversity and inclusion, whistleblowing arrangements and workforce engagement.

Pay, reward and fair work

• Invest in fair pay and secure work
  Review pay structures, contract types, use of casual labour, working hours and progression opportunities to ensure workers are treated fairly.
• Address pay gaps proactively
  Go beyond legal minimum gender pay gap reporting by voluntarily reviewing ethnicity, disability and socio-economic pay gaps where appropriate, supported by action plans.
• Scrutinise executive remuneration
  Review whether senior pay, bonuses and benefits are proportionate, transparent and aligned with the organisation’s stated values, workforce experience and long-term ethical performance. Check whether bonus structures or performance targets encourage short-term, high-risk or unethical behaviour.

People, culture and leadership

• Build inclusive workplaces
  Use lawful positive action where justified, keep recruitment practices under regular review, remove barriers to progression and ensure inclusion training is practical rather than tokenistic.
• Protect employee wellbeing
  Take a preventative approach to stress, workload, burnout, bullying and poor management practices, rather than relying only on reactive support.
• Provide safe whistleblowing channels
  Make it easy for workers to raise concerns confidentially, protect whistleblowers from detriment and act on concerns promptly.
• Engage meaningfully with employees
  Use surveys, forums, employee networks, trade unions or worker representatives to understand concerns and involve employees in decision-making.

• Train managers on ethical leadership
  Equip managers to make fair, lawful and value-led decisions, especially on performance, absence, grievances, recruitment and restructuring.

• Measure culture, not just compliance
  Track indicators such as grievance trends, exit interview themes, sickness absence, staff turnover, engagement scores and whistleblowing reports.

Technology, privacy and data

• Use technology responsibly
  Assess the ethical and legal implications of monitoring tools, AI, people analytics and automated decision-making before implementation.
• Respect privacy and data rights
  Collect only necessary employee and customer data, ensure it is processed lawfully, explain how it is used, and ensure monitoring or profiling is proportionate and lawful.

Supply chains and procurement

• Audit supply chains
  Review suppliers for labour exploitation, modern slavery, health and safety, environmental harm and poor working conditions.
• Embed ethics into procurement and contracts
  Require suppliers and partners to meet minimum standards on labour rights, equality, safety, sustainability and transparency.

Scrutiny, accountability and reporting

• Act consistently when issues arise
  Ethical credibility depends on how quickly and transparently an employer responds to misconduct, complaints, regulatory concerns or public criticism.

• Avoid “ethics washing”
  Ensure public statements on values, sustainability, inclusion or wellbeing are backed up by evidence and action.

• Prepare for greater scrutiny
  Assume employees, candidates, consumers, investors and regulators can access more information than ever before, including review sites, public registers, media investigations and statutory reports.
• Report progress honestly
  Be open about areas for improvement as well as achievements. Credibility often comes from acknowledging challenges and setting measurable next steps.

Ethics as a talent issue

Good ethics are increasingly central to how employers attract, engage and retain talent. Candidates and employees are not only looking at pay, benefits or career progression; they are also assessing whether an organisation’s values are reflected in how it treats people, manages risk and responds when things go wrong.

Employers that can demonstrate fairness, transparency and accountability are more likely to build trust with their workforce, strengthen their employer brand and create the conditions for people to join their organisation and stay.

How can AfterAthena help?

Ethical business practices start with how you manage and support your people. If you need expert guidance on employment law compliance, workplace culture or day-to-day HR challenges, explore AfterAthena’s Employment Law and HR Consultancy services to see how we can support your organisation.