A lightbulb moment about how to solve an inefficiency you’ve noticed while simultaneously making the world a better place? Win-win.
What is an Ethical Business?
An Ethical Business is defined by startups.co.uk as one that considers the impact its actions, products and services have on the environment, people and animals. This includes the end product or service, its origins, and how it’s manufactured and distributed.
What could possibly stand in the way? One word – Funding.
One question that Ethical Businesses will face repeatedly when trying to secure funding will be “What is the business case?”.
With most Ethical Businesses the business case is related to the drivers. If the driver is to fix an inefficiency, then if your business idea can fix that it can be argued that there is a natural business case. Amplifying your social impact business case is a good response to this question.
With this definition in mind, the role that businesses play in society at large has to be examined.
Importance and profitability of Ethical Business
Milton Friedman famously stated in the 1970s “”there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
The relevance of Friedman’s statement in today’s world can be questioned as there is now an increased social responsibility down to the individual level in today’s world. It can be argued that we are no longer in a place where businesses should solely care about maximising profits for shareholders. We are moving into a space where businesses are starting to care about addressing key social challenges that they are seeing as a result of their activities. One recent example are the changes businesses are making to reduce their single-use plastic due to pressure from consumers.
A business’s only goal should not be giving back to its shareholders but also considering all other stakeholders involved from end to end. The case for running an Ethical Business is a long term one.
Due to the opportunity costs involved in running an ethical business, unfortunately businesses tend to avoid doing the right thing due to risk. But it is important to note that running an Ethical Business can be advantageous in the long run as it is about the values of the business and it’s perceived an actual impact.
If you have a business idea that needs funding or legal advice regarding setting up the business, contact us here.