AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Ethical and environmental considerations
Master the delicate balance between ethical responsibility, environmental sustainability, and profit maximization. This study guide breaks down exactly how examiners want you to analyse the costs and benefits of doing the 'right thing' in business.
- 5 min read
- 3 worked examples
- 5 practice questions
- 6 key terms
Check what you remember
Read the wording for your board, then hide it and explain Ethical Behaviour in your own words. Rough notes are fine. This is a self-check, with no mark or grade.
Reference: AQA
Acting in ways that stakeholders consider to be fair and honest.
Study Notes
Overview
In modern business, making a profit is no longer the only objective. Businesses face increasing pressure from stakeholders to act ethically and minimise their environmental impact. However, doing the 'right thing' often comes with increased costs. This topic explores the fundamental tension between ethics, sustainability, and profit. Examiners consistently test your ability to evaluate this trade-off. They don't just want you to describe environmental problems; they want you to analyse how responding to these problems impacts a business's bottom line and long-term success.
Ethical Behaviour in Business
Definition: Acting in ways that stakeholders consider to be fair and honest.
The Ethics-Profit Trade-Off
Behaving ethically involves a constant trade-off with profit. While ethical decisions often reduce short-term profit due to higher costs, they can lead to long-term financial benefits.
Costs of Ethical Behaviour:
- Higher production costs: Sourcing fair trade materials or paying above minimum wage increases expenses.
- Lower short-term profit: Increased costs reduce the profit margin on each item sold.
- Reduced competitiveness: If competitors do not act ethically, they may be able to offer lower prices.
Benefits of Ethical Behaviour:
- Better reputation: Enhances brand image and attracts positive PR.
- Customer loyalty: Consumers are increasingly willing to pay a premium for ethical products.
- Attract ethical investors: Many investors actively seek out socially responsible companies.
- Motivated staff: Employees often prefer working for companies that align with their personal values, reducing staff turnover.
Ethical Responsibilities to Stakeholders
Businesses must consider various stakeholder groups when making ethical decisions:
- Customers: Honest advertising, fair pricing, and safe products.
- Employees: Fair wages, safe working conditions, and equal opportunities.
- Suppliers: Prompt payment and fair contract terms.
- Local Community: Minimising disruption, providing local employment, and supporting community initiatives.
Environmental Impacts of Business Activity
Business operations inevitably affect the natural environment. Candidates must be able to identify specific impacts and explain how businesses can mitigate them.
Key Environmental Issues
- Traffic Congestion: Delivery vehicles and employee commutes increase traffic, causing delays and frustration for local communities.
- Air and Noise Pollution: Manufacturing processes and transport emit harmful gases (e.g., CO2) and generate noise that disturbs residents.
- Waste Disposal: Businesses generate significant waste, much of which ends up in landfill, creating environmental hazards.
- Recycling: There is increasing pressure to use recyclable materials and implement effective recycling processes within the business.
- Global Warming: The emission of greenhouse gases contributes to long-term climate change.
- Use of Scarce Resources: Over-reliance on non-renewable resources (like fossil fuels) depletes global reserves.
Sustainability
Definition: Meeting the needs of the present without compromising the ability of future generations to meet their own needs.
The Sustainability-Profit Trade-Off
Similar to ethics, sustainability involves a trade-off. Transitioning to sustainable practices (e.g., installing solar panels, using biodegradable packaging) requires significant capital investment and often increases ongoing operational costs.
However, both businesses and consumers are increasingly accepting greater environmental responsibility. A business that ignores sustainability risks damaging its reputation, losing customers to 'greener' competitors, and facing potential government fines or regulations in the future.
Listen to our revision podcast for a deep dive into these concepts and how to apply them in the exam:
Visual Resources
3 diagrams and illustrations
Interactive Diagrams
1 interactive diagram to visualise key concepts
Conceptual Flow Outline
The chain of impacts from an ethical decision.
Worked Examples
3 worked examples — open one to explore the question and available guidance.
Practice Questions
Try the question, then reveal an answer plan or example response
State two environmental impacts of business activity. (2 marks)
Hint: Think about what comes out of factory chimneys or delivery lorries.
Explain how acting ethically can affect a business's ability to recruit staff. (3 marks)
Hint: Think about why you would want to work for a 'good' company.
A fast-fashion retailer is facing criticism for the amount of waste its clothing creates in landfill. It is considering introducing a recycling scheme where customers can return old clothes for a discount. Analyse the impact of introducing this scheme on the retailer. (6 marks)
Hint: Provide one positive impact (reputation/sales) and one negative impact (costs/logistics).
Evaluate whether the government should introduce stricter environmental regulations on manufacturing businesses. (9 marks)
Hint: Consider the impact on the environment/society versus the impact on business competitiveness and survival.
A supermarket chain wants to improve its ethical image. It is deciding between two options: Option 1: Guaranteeing all suppliers are paid a fair trade price. Option 2: Donating 5% of its annual profits to local community charities. Recommend which option the supermarket should choose. Justify your answer. (12 marks)
Hint: Analyse the pros and cons of both options, then make a clear choice and explain *why* it is better than the alternative.
Exam technique
How to turn what you know into marks
How to approach the question
Always look for the specific business context in the question. Underline the type of business and any data provided (e.g., '15% cost increase').
How to structure your answer
- Analyse questions
- Provide a balanced view (one positive, one negative). Trace the chain of reasoning all the way to the impact on profit, revenue, or market share.
- Explain questions
- BLT: Because, Leading to, Therefore. State your point, explain *because*..., which *leads to*..., *therefore* the impact on the business is...
- Evaluate questions
- Point for -> Point against -> Judgement. Your judgement MUST answer the specific question asked and introduce a new deciding factor (e.g., short-term vs long-term).
Timing
Approximately 1 minute per mark. Spend 2-3 minutes planning 9 or 12 mark questions.
Common pitfalls
- Describing an environmental problem (like global warming) without explaining how it affects the *business*.
- Stating that ethical behaviour 'loses money' without clarifying that this is usually a *short-term* effect due to higher costs.
- Failing to make a clear decision in the conclusion of an evaluation question.
What the command words want
- Analyse
- Examine the causes and effects in detail, usually looking at both sides. (6 marks)
- Explain
- Make a point and develop it with a linked consequence. (3 marks)
- State/Identify
- Give a simple fact or term. No explanation needed. (1 mark)
- Evaluate/Recommend
- Weigh up the arguments and provide a justified conclusion based on the context. (9-12 marks)
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