BusinessWeb

What does it mean to run an ethical online business?

business ethics
2.89Kviews

As COVID-19 forces people to stay home and employees to work remotely, some parts of the world have seen a 50 percent increase in internet usage.

More and more people are turning to online shopping, gaming, streaming, and learning in attempts to stay entertained and productive.

However, the sudden boom has come with its drawbacks.

Online businesses like Amazon and eBay have been accused of allowing sellers on their marketplaces from charging extortionate prices during the pandemic.

Reports found that prices for items like antibacterial gel had increased tenfold from the original value. The high volumes of online activity combined with widespread uncertainty, has meant people are vulnerable to being overcharged, deceived, or even fraudulently attacked.

Now, more than ever, running an ethical online business is important for customers and society as a whole. In fact, six in 10 young people say they consider a business’ ethics before buying its products.

And, in an age of technology, a company’s history, press statements, partnerships, and current staff is all public – meaning consumers can easily use this information to decide whether or not to make a purchase.

Being sustainable, donating revenue, promoting diversity, and supporting worthy causes are some of the main traits of being considered an ethical business.

Beyond being transparent and protecting people online, business ethics can also help retain loyal consumers, establish a trusted brand image, and have a positive impact during difficult times.

Here are some of the core features to operate as an ethical business online:

Tax compliance

Tax avoidance is a growing concern among e-commerce businesses. Retailers are finding themselves undercut by overseas merchants who don’t pay VAT and offer cheaper prices. The problem is that many marketplace providers are not legally accountable for tax avoided by individual sellers. That said, these marketplaces do have a responsibility to ensure diligence is built into their business models and they clearly advocate paying tax.

Tax avoidance is not solely an issue for smaller companies who may be unaware of tax rules for online businesses. Google notoriously routed profits through Ireland and The Netherlands to reduce its tax bill for years.

When it comes to tax, online services and products can easily exploit regimes that weren’t designed with internet-based trading in mind. However, digital companies (such as software as  a service) have to make conscious decisions to recognise basic tax responsibilities, the same as every other business.

It’s not just about complying with the letter of the law, the sign of a well-organised, ethical business is those who seek to align with the spirit of tax legislation.

Schemes exist to help online businesses demonstrate their commitment to paying tax. For example, the Fair Tax Mark is a UK-based non-profit that recognises organisations with responsible tax practices.

To achieve the mark, businesses have to publish their taxation policy, disclose the amount of corporation tax paid, and declare to not use offshore tax havens, disclosable avoidance schemes or transactions set up for the purpose of avoiding tax.

Ownership

A website can easily mislead customers or overstate a brand online. Generic stock images and bold claims don’t have the same accountability as an in-person experience.

Social media likes and engagement can be bought with a small amount of money and give the impression of a well loved and reputable brand.

The reality though, is that the rapid rise of online businesses has meant consumers are savvier and competition is more fierce. Trust can be broken much faster in the current climate, especially if customers sense that a company is not being authentic.

Genuine content is necessary to present businesses in an honest and realistic light.

Many businesses include an ‘About’ section on their website, listing employees and offering a human element to their workings. Some even include details like employees’ favourite songs or life motto, to reinforce that the company is people-focused.

Similarly, mission and value statements are commonplace to express commitments to diversity and equal opportunities within the team – and more importantly, how businesses integrate these beliefs.

Elsewhere, intellectual property violations for things like photos, videos, logos, and content raise ethical concerns and can have serious consequences. For every image used without consent, photographers and photo agencies lose around $446.

A simple fix is to invest in fully-licensed images from the likes of Shutterstock to ensure that content-creators are paid and acknowledged for their work.

At the same time, online businesses have a duty to train employees on how to search, request, and cite property from other websites or individuals.

Sustainability

The internet uses more than 10 percent of the entire world’s electricity, and yet, online businesses can easily underestimate their impact on the planet.

Handling manufacturing, logistics, and customers over a screen means CO2 emissions, use of natural resources, fair pay, and waste products can go overlooked. Still, online companies have to address the footprint of all their processes to be considered ethical.

Environmentally and socially-responsible businesses are on the rise. Consumers are increasingly conscious of where and what they buy, whether online or in a store – so much so, that a recent survey found 88 percent of shoppers want brands to help them live more sustainably.

Investing in renewable energy sources, ensuring good working conditions across the supply chain, and using green packaging and shipping methods are basic ethical expectations.

Donating profits to good causes (e.g. 1% for the planet), getting involved in charitable projects or community initiatives, adopting a circular economy, and pledging to be carbon neutral are other emerging ethical actions.

The important thing to note with sustainability is that it should not be merely a buzzword adopted by online businesses to appeal to a young generation. Instead, sustainability works best as a culture beyond the website and through the company as a whole.

Ethical evaluations

Running an ethical business does not mean having to compromise on profits or success. ‘Doing good’ and ‘doing well’ can complement one another if applied in the right way.

Ethical practices demonstrate that online companies have a moral compass and are not removed from the realities of the physical world. This awareness has real potential to draw loyal customers, who value brands that are honest and fair.

More and more often, consumers want to be reassured that businesses abide by the same rules as everyday people. Being online does not mean being exempt from tax, ownership or sustainability.

As internet businesses continue to thrive for the foreseeable future, the responsibility to operate ethically is also set to grow.

Disclosure: This story is brought to you through an ESPACIO portfolio company.

What the devil is angel tax and how is it building economies?

2 Comments

Leave a Response

Gary Bury
Gary Bury is a thought leader in employee leave policy and the CEO of Timetastic, a software solution optimised for businesses to keep track of paid holidays.