The impact of ethical and environmental considerations on

The idea

Ethical and environmental considerations significantly impact how businesses operate, influencing both costs and reputation. Ethical behaviour involves doing what is morally right, such as paying fair wages, avoiding child labour, and ensuring safe working conditions in the supply chain. Environmental considerations focus on minimising negative impacts on the planet, such as reducing carbon emissions, minimising plastic packaging, and safely disposing of waste. While adopting ethical and green practices often increases short-term operational costs, it can lead to long-term benefits. These include enhanced brand loyalty, the ability to charge premium prices, and attracting ethically minded investors and employees.

What earns the marks

• Implementing ethical practices, such as paying the living wage or sourcing Fairtrade materials, often increases a business's variable costs.
• Environmental considerations require businesses to invest in sustainable packaging, renewable energy, or waste reduction strategies.
• A strong ethical and environmental reputation can act as a unique selling point, attracting customers willing to pay a premium price.
• Failing to consider ethical and environmental impacts can lead to negative publicity, consumer boycotts, and a loss of market share.
• Ethical businesses often find it easier to recruit and retain highly motivated staff who share the company's values.

Common mistakes and how to put them right

• Confusing ethical considerations with environmental considerations.

  Put it right: Clearly distinguish between ethics, which is the moral treatment of people and animals, and environmental issues, which is the impact on the natural world.

• Assuming that ethical practices always reduce profits.

  Put it right: Explain that while costs may rise, increased sales from a positive reputation can ultimately increase long-term profitability.

• Stating that businesses only adopt environmental policies to follow the law.

  Put it right: Recognise that many businesses exceed legal requirements to gain a competitive advantage and improve their public image.

Exam tips

• Always define whether a specific action is an ethical issue, such as fair pay, or an environmental issue, such as recycling, to show precise knowledge.
• In evaluation questions, contrast the short-term financial costs of ethical sourcing with the long-term marketing benefits.
• Use the specific context provided in the case study to identify which ethical or environmental issue is most relevant to that business.