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O LevelBusinessCambridge (CIE)Business StudiesRevision Notes6. External Influences on Business Activity6.2 Environmental & Ethical IssuesEthical Issues to Consider

Ethical Issues to Consider (Cambridge (CIE) O Level Business Studies)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Business Ethics

  • Ethics relates to the rights or wrongs of making a business decision 

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

 Diagram: ethical codes of practice

Ethical codes of practice provide a framework for decision making
Ethical codes of practice provide a framework for decision making

  • Ethical codes of practice commonly cover how businesses

  • Behave in an environmentally responsible way (for example, using recycled materials in packaging)

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

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

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

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

  • Avoid 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)

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

  • Businesses that choose to adopt ethical principles can 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, especially if the business is not able to raise their prices to compensate

Examples of Current Ethical Concerns

The Gender Pay Gap

Minimum Wages

Responsible Sourcing

  • The gender pay gap in Germany stood at 19% in 2021, which means on average, women earn almost 20% less than men per hour

  • Easyjet and fashion retailer Phase Eight have gender pay gaps of more than 50%

  • BMW AG's gender pay gap was just 1.3% in 2022

  • Many businesses pay workers the legally required minimum wage

  • To supplement earnings, low-paid workers may receive government benefits, which are a significant cost to the economy

  • France's revenu de solidarité active guarantees workers who have a very low income a minimum level of income, leading to accusations that the government subsidises the profits of big businesses

  • Businesses usually aim to minimise costs so as to maximise profit

  • Cheap raw materials and components can cause ecological damage

  • E.g. Palm oil is found in 50% of packaged products, from pizzas to lipstick and its extraction destroys habitats of endangered species, such as the Orangutan

 

Responding to Ethical Issues

  • The positive reputation gained from behaving ethically can increase awareness of a business and may be used in promotional campaigns, which should lead to increased sales

  • Long-term cost savings may be achieved by adopting more ethical practices, though implementing ethical processes can incur high short-term costs

Business Responses to Ethical Issues

 Activity

Example

Sustainable sourcing of raw materials and components

  • Spanish fashion brand El Naturalista make recycled products to match non-recycled fashion items and has developed more than 500 recycled fabrics since its launch in 2009

  • Australian brand Rocc Naturals produces toothpaste in a biodegradable toothpaste tube and takes into consideration the emissions caused during the manufacturing of its products to put minimal stress on the environment.

Responsible marketing

  • Aldi ensures that it never actively directs any marketing communications to children under the age of 12 and does not directly advertise any products high in fat, sugar or salt to children under the age of eighteen

Protecting the environment

  • German cafe chain Markt-Bäckerei offers discount vouchers to customers who bring their own coffee cup, reducing the number of single-use plastic containers it dispenses

Responsible customer service

  • John Lewis's famous 'Never Knowingly Undersold' slogan refers to the company's commitment to checking competitor prices regularly to ensure that the price its customers pay is the lowest available in the local area at that time

Examiner Tips and Tricks

There is rarely a 'right or wrong' answer when answering questions about ethical issues

You should try to weigh up the views of groups with different opinions; considering different stakeholder groups is a useful way to structure this. Your recommendations should focus on the impact of making a particular decision rather than whether it is right or wrong

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    Author
    Reviewer
    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.