Business Ethics (Edexcel A Level Business)

Understanding Business Ethics

• Ethics relates to the rights or wrongs of making a strategic decision that are beyond legal requirements and in accordance with a businesses corporate responsibility principles

• Some ethical businesses adopt an ethical code of practice which informs decision-making and may set out how a they

  • behave responsibly with regards to the environment (for example, using recycled materials in packaging)

  • avoids negative impacts on animals (e.g animal testing)

  • adopts fair working practices (e.g. paying a real living wage)

  • implements robust and equitable supply chains (e.g. using sustainably-sourced raw materials in production)

  • takes steps to eliminate corruption (e.g. ensuring appropriate tax is paid in the countries in which the business operates)

  • avoids controversial products or take steps to minimise their impact or access to them (e.g. having strict verification procedures in place prior to cosmetic surgery procedures being carried out)

  • ceases trading with questionable suppliers or customers (e.g. cancelling a supply contract with a supplier that uses child labour)

Trade-offs between profit and ethics

• Businesses will embed their ethical code of practice into every aspect of their operations and ethical priorities will feature heavily in

  • Recruitment documentation and HR procedures

  • Induction and training programmes

  • Performance management cycles and rewards systems

  • Promotional literature and other communications

An extract from Intel's ethical code of conduct

(Source Intel)

• Businesses that choose to adopt ethical principles usually attract long-term loyalty from employees and customers and may find that their approach provides a useful competitive advantage

• Taking an ethical approach costs more and may reduce the overall level of profits if the business is not able to raise their prices to compensate

Ethics in pay and rewards

• Salaries, wages and other forms of financial reward (e.g. performance-related bonuses) play an important role in

  • rewarding and motivating existing staff

  • attracting new employees

  • maximising productivity levels

Current Ethical Concerns with Regard to pay

 Ethics and corporate social responsibility

• Corporate social responsibility involved conducting business activity in an ethical way and balancing the interests of shareholders with those of the wider community

Examples of Socially Responsible Activities 

•  It is now common practice for large companies to publish annual Corporate Responsibility Reports

  • These provide an audit of the steps being taken to meet their commitments to a range of stakeholders alongside annual financial reports

• Extra costs are involved in operating in a socially responsible way and these costs must be passed on to consumers

The Benefits of CSR

• CSR can enhance the business image and reputation

• CSR is attractive to many stakeholders

• CSR can be very profitable as it adds value for many stakeholders

• CSR may improve employee motivation and productivity

• CSR can help recruit strong candidates for jobs advertised

• CSR may help to solve social problems, e.g. resource depletion