Ethics, the environment and business

What are business ethics?

Business ethics refers to the moral principles that guide how a business makes decisions and treats its stakeholders. An ethical business goes beyond simply following the law — it considers what is right rather than just what is legal.

Areas where ethics matters:

• Employment practices: fair pay, safe working conditions, no discrimination, zero-hours contracts.
• Environmental impact: carbon emissions, waste disposal, use of sustainable materials, water usage.
• Supply chain: are suppliers paying workers fairly? Are materials sourced without child labour?
• Marketing: honest advertising, not targeting vulnerable consumers (e.g. gambling ads to problem gamblers).
• Customer relationships: transparent pricing, clear terms, fair after-sales service.

Trade-offs between ethics/environment and profit

Ethical and environmental practices often cost money — creating a tension with the profit motive:

Key Edexcel principle: ethical businesses do NOT automatically sacrifice profit. A business that builds a strong ethical reputation can charge premium prices, attract loyal customers, and reduce employee turnover — all of which ultimately increase long-term profitability.

Influence of pressure groups

Pressure groups are organisations that campaign on a specific issue and try to influence business or government behaviour. Examples: Greenpeace, Amnesty International, Friends of the Earth, Which?, Ethical Consumer.

How pressure groups affect businesses:

• Public campaigns: boycotts, media stories, social media exposure.
• Lobbying: influencing government to introduce regulation.
• Direct action: protests, factory inspections, undercover investigations.

Business response options:

1. Ignore: risky if the campaign gains public traction — reputational damage can be severe.
2. Engage/consult: meet with the pressure group; show willingness to change.
3. Change practices: the pressure group wins; the business adapts to survive.
4. Publicise existing ethical practices: use PR to counter unfair claims.

UK example: In 2021, Iceland Foods pledged to end deforestation in its supply chain following a Greenpeace campaign highlighting palm oil sourcing. The campaign went viral after Iceland's Christmas advert (the Rang-tan animated film) was banned from TV. Iceland chose to engage and change rather than fight the pressure group.

Impact on costs, prices and brand image

• Environmental investment raises costs short-term (renewable energy, sustainable packaging, certification).
• However, brand image improves, potentially enabling premium pricing and attracting ethically conscious consumers — a growing segment.
• ESG credentials (Environmental, Social, Governance) are increasingly required by large investors and corporate clients — unethical suppliers risk losing B2B contracts.
• Regulatory risk: businesses that ignore ethics may face future legislation forcing them to change anyway — proactive ethical behaviour reduces regulatory surprise costs.

The business case for ethics

1. Consumer trends: a growing proportion of UK consumers (especially under-35s) actively prefer ethical brands and are willing to pay a premium.
2. Talent attraction: employees increasingly choose employers based on values — ethical businesses attract better candidates.
3. Investor pressure: ESG funds now represent a major proportion of institutional investment; unethical businesses face higher cost of capital.
4. Risk management: avoiding scandals, fines, and boycotts is cheaper than repairing reputational damage.