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Five things that make an ethical company

Over the last 30 years we’ve rated and ranked thousands of companies. Over this period we’ve developed a sophisticated ranking system to help us find those that really are ethical. 

Below we outline some of the things we look out for when investigating which companies are ethical.

1. Creating positive change

Everyday we analyse in detail the ethical policies and actions of companies with respect to animals, environment, people, and politics.

The most ethical companies have solid principles that make them clearly stand out from the rest.

For example some companies only produce innovative environmental alternatives, such as solar panels or organic fruit and veg.  

Other examples include non-profit companies, cooperatives, certified B-Corps, completely vegan companies, or companies that only sell Fairtrade.

These all tend to be mission focused and put ethics above their bottom line.

One example of such a company is Fairphone, a Best Buy company in our guide to mobile phones. Fairphone stands out as a company that is committed to creating positive change.

It is a certified B Corp which shows that the company has made a commitment to ethical behaviour. It also creates modular phones that can be taken apart so different pieces can be replaced. This is virtually unheard of in the mobile phone industry, which is riddled by problems of e-waste.

2. Doing more for the environment

In 2020 we launched a new Climate Change rating which scrutinises what companies are doing to reduce greenhouse gas emissions.

The most ethical companies:

  • report on their carbon emissions
  • have reduction goals in line with international agreements like the Paris Accords
  • aren’t involved in damaging industries like fossil fuels or aviation
  • understand their role in causing climate change and don’t shy away from reporting on it.

Environmentally-conscious companies have high quality environmental reports that are regularly updated. These show that the company understands the ways in which its activities affect the environment, and actively try to minimise damage.

They also have clear targets to improve behaviour, for example “to source 95% organic cotton by 2023”, making it more possible to distinguish between companies that say they’re trying and companies that are actively trying. If external organisations have verified their environmental report, even better.

Toxic chemicals is another issue ethical companies pay attention to. Some chemicals - like PVC - have a heavy toll on the environment not just when they're being produced, but during their lifetime and then later on, when they're disposed of. Ethical companies have clear statements saying they don’t use toxic chemicals or show a solid commitment to phasing them out.

The best companies show they value habitats and resources by being transparent about sourcing of products like timber and palm oil. Responsible and sustainable resource extraction helps protect endangered species, ecosystems and rainforests.

For example, Marks & Spencer’s received our best ratings for its Climate Change policies and Environmental Reporting. It clearly showed how its emissions were being reduced year on year, and had future targets that would enable the company to meet international climate targets. It had targets addressing other environmental issues too, such as food waste.

3. Putting people first

When a company puts effort into demystifying their supply chain it’s a promising sign that it might be ethical.

image: lady in sari with sign stating i made your clothes

The most ethical companies come up with unique ways to map every step of their products’ production, including the sourcing of materials used to make it. A great example is clothes company Where Does It Come From? Everything is fully traceable using a code printed on the label, and can be linked as far back to the cotton growing in the field.

Large companies should have clear policies relating to supply chain management that apply to employees, suppliers, suppliers of suppliers… and so on.

Unfortunately the existence of a good code doesn't mean it is actually being adhered to. We can sometimes find huge contradictions. Companies with the best policies sometimes receive the most criticisms for workers rights abuses. It’s therefore important to look at a company’s policies but also search for evidence that backs this up (or not), for example by searching to see if it’s received any criticism in the news lately.

Human rights

Some unethical practises are so common that when you find a company that isn’t doing that then it’s probably pretty good.

For example, large multinational corporations almost always have some operations in countries we call ‘oppressive regimes’. These countries have known links to human rights abuses, such as Myanmar, China, Saudi Arabia, Israel and Sudan. If a big company isn’t sourcing from any oppressive regimes, that’s a good sign.

Companies that score well in our Human Rights category aren’t involved with the military, whether this means developing weapons or supplying civilian goods. They also avoid potentially problematic approaches to selling their products, such as promoting specific body types or underage drinking.

A good example is John Lewis. They score our best rating for Supply Chain Management and its Timber Sourcing Policy. As a mutual company it’s also an employee-owned business.

4. Championing animal rights

We award a positive Company Ethos mark to companies that say they are vegan.

Usually it’s food companies that promote the fact they are vegan. However, drinks, clothes and even electricity companies are increasingly saying they are vegan now (it’s Ecotricity, in case you were wondering.)

As anyone who is vegan will know, animal products and exploitation have ways of emerging in unexpected places. Therefore, if a company says it’s vegan you have some extra reassurance that you’re not accidentally supporting a company that exploits animals. You can also look out for the Vegan Society's Vegan Trademark logo on products to help with this.

Animal testing

We also rate companies on their approach to animal testing. If they operate in industries that don’t commonly use animal testing, or provide a Fixed Cut-off Date (a date after which none of the ingredients in its products has been tested on animals) then it gets a best rating. Leaping Bunny certification is a sign that it meets this requirement (although certified products may still contain animal ingredients).

For example, Lush has a fixed cut-off date of 1st June 2007. As animal testing is common in the cosmetics industry Lush is considered to be setting a great standard.

We also research involvement or links to factory farming.

Companies rarely say they are involved in factory farming. If however they sell meat or dairy products and don’t promote the fact that it is free range or organic then we can assume this comes from factory farmed animals. On our score tables companies don’t lose marks for Factory Farming if they are certified organic or free range. Triangle Wholefoods for example says “Where eggs are an ingredient, they must be free-range” so while it was marked down for Animal Rights it wasn’t marked down for Factory Farming.

There are several other animal rights issues we rate companies on depending on what they sell. For example, if it sells merino wool we look for a policy against the cruel practice ‘mulesing’. If it sells feathers or down we look for a policy that guarantees that parent farms are audited, because many down auditing schemes are known to be inadequate. We expect policies in place for many other animal products too, such as leather, silk and honey.

5. Taking a strong political stance

Corporations can have higher annual revenues than countries. This revenue can be spent in ways that shape the political sphere.

Politically sound companies would commit to paying the right amount of tax. They won’t have subsidiaries in jurisdictions that are considered to be tax havens, such as the Cayman Isles or Jersey. Signing up to the Fair Tax Mark is a great way to demonstrate this commitment. The Co-op, Timpsons and United Utilities are some companies that have got the Fair Tax Mark. There are currently around 60 listed on the Fair Tax Mark website.

A key way to assess a company’s politics is to see if they lobby governments for policy changes, or donate to political parties. The Open Secrets website is a great tool for finding out the political affiliations of a company and its staff. We mark companies down on our score tables if they donate high amounts to any political parties (even left wing ones we might agree with). You might want to support companies that are involved in lobbying if their views align with your own.

If a company is involved in industries where use of controversial technologies is common then transparency is a clear marker of ethical behaviour. For example, food companies will clearly state whether they use GMOs.

The Co-Operative Group (otherwise known as the Co-op) is considered to have a good approach to politics. As well as having the Fair Tax Mark, it also received a positive Company Ethos mark for having a mutual structure as it is a cooperative and it has a policy against sourcing from illegal Israeli settlements.

Keeping an eye on company ownership

It’s always worth double checking who the company is owned by. Sometimes a company might look super ethical - only to find out it’s owned by another company that doesn’t match your ethics at all.

For example SunPower UK claims to “lead the fight against climate change” with its solar products according to its website. It is however owned by French multinational Total SE which is involved in oil and aviation.

The most ethical companies will have no skeletons in their corporate family tree. For example, the UK company GB-Sol is owned by GB Renewables Investments Ltd, which has two other subsidiaries that both specialise in green energy.