Becoming more ethical can improve your bottom line

Previous blog posts have focused on how and why businesses have begun to recognise that millennials want to work for ethical companies. In this post, we’ll discuss how these millennials also like to spend their cash with ethical businesses. We will explore how to go about becoming a more ethical employer, and what it might mean for your bottom line.

Examples of ethical business logic

If we use examples such as Virgin, Tesla or Unilever, these guys are taking a lead on positioning themselves as being ethical businesses. This simply means doing the right thing; they scrutinise their supply chain or logistics network in terms of risks to the environment, risks to staff such as health and safety, and understand their true waste costs.

They are inclusive in who they employ, both on the management team as well as the workforce as a whole, they pay a reasonable level of wages, and support a good work-life balance. They pay their taxes (in order to support the old, young and disadvantaged and fix the roads etc.), and their internal and external marketing messages promote a fun working environment where employees are empowered to look for disruptive technologies and new solutions.

You might think, however, that this doesn’t really stack up because we also know that these organisations are heavily driven by profitability, so why are they really doing it?

Well if we look at the three dimensions of sustainability, (the environment, society and economics) while these organisations might have you believe they’re chasing the ethical path because of the environment, or for the good of society, you can bet it’s mainly because of the potential financial gains that come with becoming more ethical.

The research behind it all

Research being conducted by Cambridge Institute for Sustainable Leadership (CISL) who believe that Sustainability will be the next revolution following the digital revolution, explores the financial gains of becoming more ethical and they outline the main savings as being;

1. Recruitment costs
2. Higher retention rate
3. Increased productivity
4. Savings in manufacturing costs
5. Site operating costs
6. Increased revenue and resulting profit
7. Expense reduction from reduced risks

They go as far as to state that an organisation can increase its profitability by 38% by becoming more ethical – which would mean a win/win for the financial bottom line and for the planet.

The impact it’s having on governance

Let’s now add to this argument that the UK Government has set itself challenging targets to reduce C02 in line with all other countries that have signed up to the Paris Agreement. It has to start making radical changes; banning diesel cars etc. Now add to that, The World Bank recently saying that it is dis-incentivising investments in fossil fuel organisations. This will see the financial markets such as pension funds moving away from traditional investments into new sustainable businesses (so if you’re in the coal, gas or oil business consider yourself on the hit list!)

Governments will be forced to make more of these radical changes; both in banning or taxing polluters, and in offering grants and subsidies in order to stimulate business growth in ethical products and services (there are already a lot of grant funds out there to be had).

Any forward-thinking business should be aware of this huge shift in the market and invest in developing a range of goods, processes and services that target these new millennial consumers who will be looking to work, spend and invest ethically. By positioning your organisation early, you will be in a strong position to take market share when this new sustainability revolution really kicks in.