THE 3 LIMITS OF ETHICAL BUSINESS: Planet, Profit, Perfection

"With such a stark split between major corps and ethically-minded SMEs and micro-businesses, what gives? What are the Upper and Lower Limits of Ethical Business?"

As major corporations in 2025 now abandon climate targets and other ethical remits without shame and retreat from 'green' or sustainable stances for fear of politicised perceptions, at the very same time, smaller companies interested in trading ethically face ever-heightening standards regarding what constitutes 'ethical, 'green' or 'sustainable'.

With such a stark split between major corps and ethically-minded SMEs and micro-businesses, what gives? It seems to me there are limit boundaries to what constitutes ethical business (and more broadly 'Good Growth') and that these limits go in two directions.

Limit No 1: Planet (and People)

At the most obvious macro scale, we of course know that there are specific and measurable limits when it comes to climate change. Most of us also realise that these limits are being patently ignored or, at best, deferred beyond points of no return by many. In the face of this retreat and even backlash, where does this leave SMEs with an environmental stance? Frankly, striving to make a miniscule difference at a micro scale, when massive difference is negated at the macro scale, remains virtuous but from a business perspective begins to constitute a tax on ethics. How should Ethical Business absorb this 'tax'?

Of course, 'carbon counting' itself is always more an art than a science and in fact Net Zero experts cannot themselves agree on the right approach (for example, some pro-sustainability experts see Carbon Offset schemes as a good thing, others as a bad thing). If we can’t agree on how to measure things, or the exact figures involved, we can still broadly agree that action on climate is urgent: there are real, actual, physical limits which business 'must' accept.

Perhaps the most memorable modelling of these real-world limits was put forward by the economist Kate Raworth in her book Doughnut Economics, where she discusses these outer planetary boundaries and makes a case that growth itself – measured via GDP – may have limits. In her doughnut model, the outside edge of the 'doughnut' represents these literal natural planetary limits while the inside edge of the doughnut hole (the inner limit) is comprised of limits beyond which business (and economic growth in general) is harmful not to the planet but to people per se – dignity, happiness, rights – therefore covering the less numerically measurable but equally important human-centric UN Sustainability Goals.

Raworth questions the sacrosanct notion of GDP growth as 'the' central economic goal and talks instead about economic systems that are ‘redistributive by design’. Now, I’ve written elsewhere about why I personally feel Raworth is perhaps overly optimistic, and her thinking is far more difficult to apply to Emerging than Mature First World Economies, nonetheless her model is still useful in pointing out that an all-consuming growth agenda must have limits: indeed she is cynical about whether Good Growth is even possible. This will disappoint many (including myself) and of course other economists will have other views. 

But her view (as well as that of many other Net Zero economists, who often go significantly further than the relatively low-key and balanced Raworth) also poses something of a conundrum to almost all ethical business, which is difficult given, increasingly, a majority of companies (at least in the UK and EU) see themselves in these terms. If endless GDP Growth itself is considered problematic, doesn’t that also render much business, regardless of how ethically-minded, problematic in itself? Especially where the business produces or services technically unnecessary product(s)?

As but one glaring example, a fervent proponent of such a view would see an ethical fashion or beauty brand as a contradiction in terms because all but the most essential goods/services would be seen as fundamentally unethical, and circular economies such as recycling the only feasible way forward. Indeed some green economists have even argued for all goods, including food, to be priced to reflect the true carbon price, putting most goods out of the reach of most people, so that most companies (other than those aimed at the wealthiest demographics) would themselves go out of business, in turn creating job losses. This is not a viewpoint Raworth endorses, I must add. Rather, her thinking sets in motions trains of thoughts that are complex, difficult and significantly problematic for most Ethical Businesses.

Limit No 2: Profit (Or, When is a Business not a Business?)

Controversially perhaps, then, there are surely also limits in the other direction: around just how much ‘good’ any given company should be expected to uphold or create and in addition whether there are levels of individual company growth that may be ethically 'unacceptable'.

At this micro rather than macro scale, a level of slippage in the direction of ever increasing ethical standards is apparent. Initially, the general idea seemed roughly to be to ‘do no harm’ in the course of business and was embodied in the idea of Sustainable Finance, where businesses who primarily exist to make profits should also not do harm in the course of doing so, roughly equatable to what is now called SF1.0 (1) and also in the notion of actively avoiding 'sin stocks' within investment. Over time, this shifted towards a now increasingly mainstream viewpoint that business should be actively doing good (which comes closer to what is known as SF2.0 or even 3.0). Similarly in the SRI investment arena, a shift from avoiding companies 'doing harm’ to an active ‘impact’ viewpoint is apparent (recent new ‘product labelling’ standards on SRI will also likely clamp down on greenwash here).

The difficulty, especially for ethical SMEs, is that when the focus on actively doing good becomes competitively prominent, the lines between ethical business, social enterprise and charity begin to blur in ways that in practice cause conundrums. Whilst there are many definitions of what a business ‘is’, and we can argue Friedmannian and anti-Friedmannian points, it usually roughly amounts to something along the lines of ‘an entity that makes enough profit to justify the undertaking to those involved’ – quite simply if it does not make a profit, it is not a business, and if it makes a profit and gives it all away, it is a charity.

We then end up dealing with not only ethical but, frankly, political and ideological issues around egalitarianism and also what really constitutes the effort of a founder or founding team. For example, what level of profit would be considered ‘unethical’ for a director or founder of a so-called ethical company if that company were a) doing well, b) doing good c) employees were properly paid and d) the company had significant profit to spare? In reality this sounds rather idyllic but I pose it on purpose to highlight the point at which the line between private ethical enterprise and social enterprise becomes apparent. Whilst of course nobody really works in a vacuum and some maintain founders have contributed no more than employees, it's difficult to argue that founders don’t take on a larger personal and financial risk and emotional strain. We only need watch a couple of episodes of Dragon’s Den to be clear what level of work, risk and emotional capital goes into creating and launching a business. Quite simply, if profit were somehow banned as being ‘unethical’, no new businesses would be created at all (though some social enterprises may still be).

In addition should an ethical company eventually go public it will have further shareholders and these will also have rightful demands as investors – we may hope, in fact, that ethical companies never go public and we may almost want to wish shareholders away – yet at the same time, don’t we want our larger companies to be ethical too? If not, do we Romantically imagine a world comprised solely of feudal microbusinesses? Does this not mean that endeavours that are simply too complex and costly to begin without investor funding (such as infrastructure or major tech) should be left in the hands of openly unethical firms?

The best we can hope for is perhaps a healthy mix of independent business and large but ethical corporates - and this will mean an increasing volume of ethically minded investors.

My point is not to create controversy so much as to simply point out that there are serious limits around just how ‘good’ a business is expected to be (dependent on our viewpoints around what constitutes goodness) before it becomes, in fact, a social or charitable enterprise.

Limit No 3 – Perfectionism (Or, ‘Unreasonable Demands’)

Are the increasingly stringent standards of 'goodness' expected of (ethical) businesses today then realistic? Or moralistic?

Interestingly, when discussing ‘ethical business’ or indeed ‘ethical living’, many proponents assiduously avoid using the words or phrases ‘moral’, 'morals' or ‘moral philosophy’, the latter in fact being identical with the notion of ethics. But also, what ‘ethics actually means’ is often also avoided. Yet in ethics there are key questions and disagreements.

Utilitarianism is a branch of ethics which takes a more relativistic view of ‘what is right’ versus a hardline, unchangeable moral position. For example, the deontological philosopher Kant maintained that all lying was fundamentally wrong - and Kant, in both life and thinking, was scarcely known for his flexible or 'real-world' position! A utilitarian, rather, would make ethical decisions on the basis of thinking along the lines of ‘all things considered, this outcome would be for the greater good’. So, for example, a person approaching the complex question of ‘crime and punishment’ from these two perspectives would on the one hand take an approach that certain crimes are ‘wrong full stop’, or, on the other, consider how far punishing the felon would actively contribute to the greater good (2).

To return to our point about the slippage in ethical business (and sustainable finance) from a stance of ‘do no harm’ to what at times begins to feel like a 'goodness' competition, we must consider what these increasingly stringent and strident goals are ultimately, overall, achieving. For example it no longer seems to be ‘enough’ to be carbon neutral, we have businesses now promoting a carbon positive status.

I am certainly not claiming that this is a Bad Thing, per se!

But it also raises questions: has the purpose of the company now slipped from business to social enterprise? To some, this seems like going beyond the call of duty (although cynically looked at it may create profitability purely from a branding perspective). Also, does such a move have negative effects on competitors who quite simply cannot afford the same level of 'goodness' (it's notable that the companies most promoting such levels of 'goodness' are also themselves on the verge of IPO's, that is to say, they are very far from now being SME's).

What, then, happens to all the other businesses that would rather simply ‘do no harm’ or ‘do a little good’ but still put the majority of their effort into the actual business itself? And how are their reputations affected by funding-pumped entities promoting abnormally high ethical standards purely because they can - via funding rounds - afford them?

Here we return to questions of (true) ethics: from a utilitarian perspective putting this much pressure on small business may overall achieve nothing more than increasing numbers of companies refusing to play ball with ethics at all beyond the bare minimum, or else choosing not to go into business full stop. It is simply too much of a burden. On this note, recent reports of a backlash against 'ethics' and sustainability amongst younger demographics on grounds of 'futility and overwhelm' are frankly depressing, and yet pertinent, as are the potential ripple-effects extending from the current situation in the US. So when we want to stand proud of this decline yet at the same time don't see ourselves as a charity, where do we draw the line between genuinely ethical conduct and unreasonable and judgmental demands?

The pressures on Supply Chain monitoring are a case in point. For a major global household name, Supply Chains are, let's face it, fair game. But how can an SME or start-up be expected realistically to monitor almost infinite supply chain webs? And, ethically, should they be? Are sole traders, microcompanies and even SMEs seriously expected to monitor each and every purchase for green credentials, not to mention navigating contradictions (I handwrote my notes for this post in a notebook whose provenance I honestly don’t know and with a plastic pen, both bought from my cornershop - because it’s good to support local, right?).

When pressure grows this strong it becomes what Simon Blackburn in his book Being Good calls an Unreasonable Demand – levels of idealistic goodness that are simply not ‘realistic’ for a typical person. The retail guru Mary Portas also points to this when she broaches the fact of the impossibility of doing everything right and instead just doing something in her book The Kindness Economy. Of course such viewpoints can be considered ‘cop outs’ and it’s impossible to deny that there are very many companies (including very famous brands) who either draw upon and exaggerate the most minimal efforts as major ‘greenwash’ or else whose products directly contradict their supposed ethical stance.

However from a utilitarian perspective lowering the bar (or at least not raising it ever upwards) makes perfect sense – to make ‘being ethical’ feel unreasonable for business will surely only do more harm than good. When demands for ethical perfection become too 'hair-shirt' and insistent it may seem easier not to bother at all. Indeed, we could equally argue that such unrealistic expectations also contribute to greenwash by forcing companies who would really rather just aim at 'doing no harm' and 'minding their own business' to needlessly invent supposed ethical missions that in fact do not exist.

What then are the Limits of 'Good' Growth?

We have on the one hand real-world, actual, urgent and planetary limits that business must respect – I think we all know how close we are to permanently transgressing these. Yet at the micro level and especially for SMEs and their founding teams, there are also real-world limits to what, really, ought to be expected of ethical business: there is certainly such a thing as an ethically dubious 'unrealistic demand'. Pointing this out is not a moral cop-out; on the contrary it’s a specific and pragmatic real-world ethical stance.

Notes

1. From A Framework for Sustainable Finance, Rotterdam School of Management, Erasmus University

2. Hume offered a supposed midway view of 'indirect' utilitarianism.

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