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24Jan

What Is the Difference Between an Ethical Startup & a Sustainable Startup?

The expectation for businesses to be more ethical and sustainable seems more prevailing than ever. The market and entrepreneurs are starting to take note: being a ‘good’ business is no longer a quirk. It’s a necessity.

Starting a business comes with its challenges, so what about starting an ethical business? Often there’s a balance to be found between profit margins on one hand, and the desire to do good on the other. But investors are taking a greater interest in ethical traders, and on top of that, consumers are demanding more transparency around brands’ ethical practices.

There’s a reason the big boys use overseas manufacturers: ethical and sustainable options are not always the cheapest or easiest. As a startup, you have the opportunity to implement sustainable and ethical business practices from the outset. Don’t underestimate your ability to make a difference. Times are changing.

Ethical vs. sustainable

The terms ‘ethical’ and ‘sustainable’ are often used interchangeably, but it’s important to understand the difference.

When we talk about ethics, we’re talking about principles of morality – what’s right and wrong. Business ethics apply not just to company practices, but to people and their behaviour. These expectations aren’t fixed; they evolve over time.

Sustainability, on the other hand, is more about how your company uses resources and affects the environment. It’s about being in harmony with the world and directing your energy in such a way that your impact is either neutral or positive. Unlike ethics, sustainability is more easily quantified.

‘Ethical’ and ‘sustainable’ can mean different things to different people. Often, the two are interlinked. Say you plan to open an ethical coffee shop. If you truly want your coffee beans to be ethical, then as well as being environmentally friendly, ethics also comes in to play in terms of your working relationship with the farmers.

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How does this look in practice?

Where sustainability requires vision and strategy, ethics is more of a general approach. It’s possible to work on sustainability without being an ethical company, per se. Coca Cola has sustainability goals. This doesn’t make them ‘the good guys’.

To put it another way, if you were a bank robber, having a meticulous approach to recycling doesn’t make you ethical. But it does make you more sustainable. It’s still a good thing. Maybe also don’t rob banks.

What does being an ethical company look like in practice? It might mean knowing where your products come from and who they are made by. It could also mean choosing not to make a profit off the back of sweatshops and suffering. Day-to-day, it could mean fair pricing, fair wages, being honest with customers, and treating your employees with respect.

By contrast, how might a company adopt sustainable practices? You might start by looking at your greenhouse gas emissions. Going paperless. Cutting down on energy usage and sourcing materials from more sustainable suppliers. Check out this online sustainability assessment tool for guidance.

Be open about your ethical and sustainable principles. Not only will you attract more conscious customers, but you’ll encourage other businesses to follow in your footsteps.

Ethical and sustainable sectors

In certain sectors, such as finance and fossil fuels, being genuinely ethical and sustainable presents a real challenge. So what are the best sectors to get involved in if you want to run an ethical and sustainable business?

Food is a big one. Going vegan was the biggest food trend of 2018. In 2019, record numbers of people signed up to Veganuary. Veganism has become big business, with animal agriculture now thought to be the leading cause of species extinction, ocean dead zones, water pollution and habitat destruction, according to Cowspiracy. Fairtrade products have also returned to favour after a period of decline.

Another is ethical fashion. Increasingly, consumers want fashion brands to be more transparent about their policies, with evidence to back up their claims. Slow, ethical and sustainable fashion is the new black. The conscious fashion movement is raising its game – particularly with Millennials.

Entrepreneur has lots of ideas for the sustainable startup scout: tiny houses, healthy fast food, ethical business consulting (hi!), EdTech, subscription boxes… the list goes on. Adopting a conscientious approach to business need not limit you.

woman with a basket of vegetables

How can we be better?

So how to go about establishing ethical and sustainable startup practices? With ethics, it’s about leadership and culture: setting clear expectations and reinforcing them. Holding people accountable and celebrating their successes. Sustainability is more strategic: it’s doing your research, defining your goals, establishing a clear baseline for success, and keeping track of your progress.

Ethical startups:

  • Put their values at the heart of every decision
  • Offer a clear and public ethics statement
  • Have inspiring leaders who model ethical behavior
  • Offer value-driven incentives

Sustainable startups:

  • Consider the full impact their business has on the environment and society
  • Address their use of energy and resources
  • Take steps to reduce waste and pollution
  • Source sustainable materials

Wouldn’t you like to be both?

It’s a good idea to get your employees and stakeholders involved. Your employees, in particular, will have a good understanding of how different activities impact the business. Consider training and incentives to encourage them to support your goals.

It’s important to note that you can’t really count yourself as ethical long-term without adopting a sustainable approach. The two go hand-in-hand – we all want to see a better world. The bigger your company becomes, the harder it is to embed new practices, so doing this at the startup stage is crucial. When social responsibility becomes part of your culture, you’ll reap the rewards not just in reputation, but in higher employee retention, more interest from investors, and the satisfaction that comes with doing something worthwhile.

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