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Does Your Small Business Need a Code of Ethics?

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By Barbara Beauregard   |    February 25, 2019   |    3:23 PM

Taking a Look at the Role of Ethics Codes for Small Businesses

If you’ve ever been disappointed by an employee’s unethical behavior, your small business could benefit from a code of ethics. In fact, codes of ethics are useful tools for any sized business, even if you only have one employee.

A code of ethics:

  • Defines the company’s culture.
  • Sets standards and outline expectations for employee behavior.
  • Functions as a marketing tool that attracts potential customers and business partners who share similar values. Like corporate social responsibility (CSR), a code of ethics is another helpful way to differentiate your company in the marketplace.

What is the difference between a code of ethics and a code of conduct?

Some businesses create a single code of ethical conduct, but there are key differences between an ethics-based code and a conduct-based code.

A code of ethics offers employees and partners guidance on making the right decisions. It’s meant to help people determine whether their behavior is considered ethical, especially because the line isn’t always black and white. Behavior expectations also vary wildly from one small business to the next.

For example, some businesses are okay with employees using office printers and supplies for personal purposes. Others might consider that to be theft of business property.

Questions to ask while crafting your code of ethics

According to the Ethics & Compliance Initiative (ECI), all successful ethics programs need a “relevant and meaningful plan,” which requires answering questions like:

  • What types of ethical challenges are most common in our industry?
  • What types of ethical risks might our company culture be unknowingly promoting?
  • What values do our employees care about the most?
  • What values are most important to our company?
  • Are there any values that are necessary for success in our particular business or industry?
  • How could our employees be “tempted” to make an unethical decision? (Are there weak business controls? Are employees generally happy?)
  • How can we best support employees and help them make ethical decisions?
  • As we develop a code of ethics, whose input is needed?

Even if you don’t intend to implement a comprehensive ethics program in your small business, you should still answer these foundational questions.

Writing a code of ethics

Now that you have the basics down, it’s time to write the code. Note that codes of ethics vary dramatically from company to company, and there’s no one-size-fits-all ethical code. Your code might include:

  • Confidentiality and privacy policies which require employees to maintain confidentiality in regards to customer data, company secrets, and other sensitive matters.
  • The most important values to the company, including environmentally-friendly practices, dress codes, commitment to quality, and others.
  • Behavior expectations, like trustworthiness, punctuality, respectfulness, fairness, kindness, and more.
  • Information about how to report unethical behavior, because employees want to speak up when they notice something wrong. Make sure you provide a safe, comfortable, and potentially anonymous means of reporting internal issues.
  • Legal issues and industry-specific laws. For example, a company that offers delivery services might state that drivers must obey all applicable traffic and road safety laws.

You should also outline specific ramifications for violating the code of ethics (and make sure any disciplinary actions are fair and reasonable).

Once the code of ethics is in place, you may even notice that employees act more motivated and engaged. This tends to happen when people feel a sense of connection to their workplace inspired by shared values, so don’t wait — get started on your small business’s code of ethics today.

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