Ethics for Entrepreneurs: Building a Responsible Business

By Dr. Cynthia Silvia and Dr. Karolina Kopczyński  |  09/29/2025

Starting your own business is not just about launching a product or service. The startup lifecycle involves multiple steps, such as:

• Creating a business plan based on an idea
• Obtaining the necessary funding from investors
• Learning startup laws and regulations
• Tracking down reliable suppliers all over the world
• Finding a physical site for the business
• Conducting market research
• Acquiring business partners
• Hiring employees

However, business ethics and ethical practices are also a vital part of entrepreneurship. Entrepreneurs who prioritize business ethics and act responsibly create a company that:

• Earns trust due to its reputation
• Avoids controversy and scandal
• Averts damaging lawsuits

Business Ethics and Corporate Social Responsibility

Business ethics refers to the use of moral principles such as fairness and transparency in commercial settings. These values build trust with:

• Employees
• Vendors
• Customers
• Stakeholders

Over time, however, business leaders and employees will inevitably be faced with ethical dilemmas that conflict with their business ethics. For example, imagine that one of a startup's leaders wants to hire an unqualified family member as an independent contractor.

Should that family member be hired, which could possibly cause resentment from other, more qualified employees? The other option is for the CEO of the startup to invoke ethical principles and refuse to hire the family member.

Another ethical dilemma involves sustainable practices. Many customers prefer to shop from “green” organizations that:

• Practice environmental sustainability
• Demonstrate clear corporate social responsibility in their internal culture

However, suppose that a vendor engages in non-ethical behavior, such as forcing employees to work under sweatshop conditions and neglecting to dispose of hazardous materials properly. One of the startup's employees discovers the behavior and alerts the startup founders.

Should the organization’s founders ignore the supplier’s working conditions for fear of the problems associated with finding a new vendor and a loss of profit? The alternate solution is to have those founders act as whistleblowers and call out the vendor for the non-ethical behavior.

A third ethical dilemma could involve product capabilities. Suppose that new employees were exaggerating product capabilities and making claims that were later proven to be factually incorrect, damaging the company’s reputation.

How should company leaders treat these employees? Should they be retrained or simply terminated?

Startups often experience rapid growth and sustainability problems in today’s society. As a result, everyone involved in a startup operates under intense pressure, which makes ethical decision-making difficult but vital.

Maintaining Ethical Leadership

Successful entrepreneurs shape an organization’s culture by demonstrating the company’s commitment to integrity, even when a decision isn’t easy. Aaron Feuerstein, the CEO of Malden Mills, is an example of a highly ethical leader. In 1995, his textile factory – which made the weather-resistant fabric Polartec® – burned down.

Feuerstein could have closed the company and laid off the workers. Instead, he chose to put his employees first and demonstrated integrity. Feuerstein spent millions of dollars to rebuild the factory and kept the employees on the payroll for several months for their well-being. Feuerstein received national attention for adhering to his own values and his fair treatment of his employees.

Startup founders who embed ethical principles into their day-to-day operations attract top-tier talent and maintain regulatory compliance.

Establishing Ethical Principles and Building Trust

In today’s call-out society aided by active users of multiple social networks, transparency is essential. Any company without proper corporate governance inevitably attracts unwanted public attention, and the business can suffer as a result.

Honesty, fairness, accountability, and integrity are crucial operational tools for any business founders. They help ethical leaders to manage chaos, earn loyalty, and build a resilient brand and culture.  

From the beginning, entrepreneurs need to consider the ethical concerns of the business. It might be necessary to require employees to undergo ethics training. Later, it may also be essential to appoint an ethics officer as the business grows to make sure everyone abides by legal standards.

Want values such as honesty, fairness, accountability, and integrity to become second nature? They should be incorporated into every part of the company, including:

• Mission statements
• Ethics programs
• Performance reviews

Artificial Intelligence and Ethical Considerations

Artificial intelligence (AI) is being used for a variety of businesses to either replace employees or to aid employees in their everyday tasks. AI brings efficiency to the workplace, but it can also become biased or invasive.

Consequently, it is up to business owners to use AI responsibly and avoid ethical issues such as the invasion of privacy. The Future of Life Institute has even called for a temporary pause on advanced AI systems development due to the risks to humanity.

Entrepreneurs need to embed ethical standards into every technology decision they make, from transparency in the algorithms they use for AI training to legal compliance and environmental consciousness. Business ethics are not optional; they are crucial to making a business succeed.

Ethics Are the Foundation of Good Business

In the high-stakes world of entrepreneurship, business ethics play a crucial role. From shaping company culture to steering AI innovation, ethical considerations guide the decisions that help entrepreneurs to build trust, resilience, and long-term success.

The B.A. in Entrepreneurship at APU

For interested adult learners who want to learn more about how to become an entrepreneur, American Public University (APU) offers an online Bachelor of Arts in Entrepreneurship. In this degree program, students will take courses in strategic growth, technological innovation, and innovative marketing. Other courses include social entrepreneurship, financing a new venture, entrepreneurs as leaders and business plan foundations. The entrepreneurs as leaders course may be of particular interest to students who want to navigate ethical issues with greater ease, create strong business ethics, and make ethical decisions with respect to social responsibility.

This B.A. in entrepreneurship has received specialty accreditation from the Accreditation Council for Business Schools and Programs (ACBSP®). This accreditation demonstrates that this degree program has met high academic standards.

For more information about this program, visit APU’s business and management degree program page.

Polartec is a registered trademark of MMI-IPCO, LLC.

ACBSP is a registered trademark of the Accreditation Council for Business Schools and Programs.