what is the purpose of a code of ethics 
business ethics refers to how ethical principles guide a business s operations common issues that fall under the umbrella of business ethics include employer employee relations discrimination environmental issues bribery insider trading and social responsibility although many laws establish basic ethical standards for businesses it s primarily up to business leaders to develop a comprehensive code of ethics ethical conduct has been shown to benefit an organization and society in the long term it aligns with the triple bottom line theory of profit people and planet and meets the growing expectations of socially responsible customers employees and investors 2businesses and trade organizations usually have a code of ethics that employees or members must follow violating this code can lead to termination or dismissal a code of ethics is crucial because it clearly defines the rules for behavior and offers a basis for preemptive warnings while a code of ethics is often not required many firms and organizations adopt one to identify and characterize their business to stakeholders this can build trust ensure accountability and demonstrate a commitment to ethical behavior all of which can improve a company s reputation and contribute to its success given the importance of climate change and the significant impact of human behavior many companies now include climate factors in their code of ethics these principles outline the company s dedication to operating sustainably or their plans to shift toward sustainable practices although this commitment to sustainability can increase costs it often proves worthwhile as consumers increasingly prefer to engage with environmentally responsible businesses enhancing the company s public image regardless of size businesses count on their management staff to set ethical conduct standards for other employees when leaders adhere to the code of ethics universal compliance is expected with no exceptions types of codes of ethicsa code of ethics can take various forms still its general goal is to ensure that a business and its employees follow state and federal laws conduct themselves according to exemplary standards and benefit all stakeholders here are two types of codes of ethics commonly found in business for all businesses laws regulate issues such as hiring and safety standards compliance based codes of ethics set guidelines for conduct and determine penalties for violations specific laws govern business conduct in industries like banking leading these sectors to adopt compliance based codes of ethics to enforce regulations employees typically undergo formal training to understand these rules noncompliance can create legal issues for the company and individual employees may face penalties for failing to follow guidelines some companies appoint a compliance officer to ensure adherence to the code of ethics this individual stays updated on regulatory changes and monitors employee conduct to encourage conformity this type of code of ethics is based on clear cut rules and defined consequences rather than personal behavior monitoring while it ensures legal compliance it may not always promote a climate of moral responsibility within a company a value based code of ethics addresses a company s core value system setting standards of responsible conduct that benefit the larger public and the environment these ethical codes often require more self regulation than compliance based codes some codes of conduct contain language that addresses both compliance and values for example a grocery store chain might create a code prioritizing health and safety regulations over financial gain additionally the code might include a commitment to avoiding suppliers that use hormones in livestock or raise animals in inhumane conditions code of ethics in different professionscertain professions such as those in finance or health have specific laws that mandate codes of ethics and conduct certified public accountants cpas who are not typically considered fiduciaries to their clients still are expected to follow similar ethical standards such as integrity objectivity truthfulness and avoidance of conflicts of interest according to the american institute of certified public accountants aicpa 3financial advisers registered with the securities and exchange commission sec or a state regulator are bound by a code of ethics known as a fiduciary duty a legal and ethical obligation requiring them to act in the best interest of their clients 4code of ethics vs code of conducta code of ethics and a code of conduct both set professional standards to guide behavior of an organization s members however there are some subtle differences having both a code of ethics and a code of conduct helps ensure that an organization operates with integrity and maintains professionalism with its employees 