Business ethics — Edexcel A-Level Business
Test yourself on Business ethics with PEARSON EDEXCEL A-Level practice questions.
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Business ethics explained
An ethical choice is one the directors judge to be right rather than merely legal, and the marks here sit in the trade-off rather than the definition.
Read the full explanation
Behaving well usually costs money first: paying suppliers a fair price, refusing the cheapest contract manufacturer, recalling stock before a regulator asks, each of which squeezes operating margin. The return is slower and less certain, arriving as brand equity, more inelastic demand, easier recruitment and a smaller chance of the fine and share price collapse that followed Volkswagen's emissions cheating in 2015. A strong answer weighs how far this firm's buyers actually pay for ethics, how visible the conduct is, and how patient its owners are, because a cost leader serving indifferent customers gains far less than a business differentiating on provenance.
b) Pay and rewards
Pay is where a firm's ethics become measurable, because every stakeholder can see the numbers: the gap between the chief executive's package and the median employee, whether the rate paid is the legal minimum or the higher voluntary real Living Wage, whether hours are guaranteed, and whether the same standards reach the supply chain. The business case for paying more is that labour turnover, absenteeism and recruitment costs fall while productivity rises, so labour cost per unit need not rise at all; the case against is an immediate increase in fixed costs a low margin retailer may not absorb. Herzberg is the model to reach for, since pay is a hygiene factor that removes dissatisfaction without motivating, which is why bonus schemes rarely buy the discretionary effort managers expect.
c) Corporate Social Responsibility (CSR)
The idea here is that a firm answers to employees, customers, suppliers, communities and the environment as well as to its shareholders, and it is usually contrasted with the shareholder view that the only duty is to increase profit within the law. Useful structure comes from the triple bottom line of profit, people and planet, and from asking whether the activity is genuinely strategic or simply public relations. The commercial argument is differentiation, risk reduction and staff loyalty; the counterargument is cost, distraction from the core business, and the charge of greenwashing when claims outrun the audit. Unilever's sustainability programme and Patagonia's repair scheme are worth naming briefly, but the evaluation is whether the spending changed behaviour or only the annual report.
Your focus
- a) Ethics of strategic decisions: trade-offs between profit and ethics
- b) Pay and rewards
- c) Corporate Social Responsibility (CSR)
Business ethics exam tips
Marking Points
- Naming the specific cost of the ethical option for the business in the extract, such as a higher unit cost from a certified supplier, and then naming the specific benefit, such as retaining a contract with an ethically screened retailer.
- Separating legal compliance from ethical choice, so the answer shows the firm is deciding something the law does not require rather than simply obeying a regulation.
- Using the time horizon as the pivot of the judgement, arguing that profit falls in the short run and may rise in the long run through repeat custom, and saying which matters more to these owners.
- Linking the decision to the firm's competitive strategy, so ethics is treated as a source of differentiation for one business and as pure cost for a cost leader chasing volume.
- Supporting the judgement with figures from the case, for example the margin lost against the proportion of revenue coming from ethically motivated customers.
- Distinguishing the legal wage floor from a voluntarily higher rate, and explaining that only the second is an ethical choice the business could have avoided.
- Showing the cost effect precisely, for example an hourly rise multiplied by hours worked, and then setting it against lower recruitment and training spend from reduced labour turnover.
- Applying a motivation theorist by name, using Herzberg to argue pay removes dissatisfaction rather than motivating, or Taylor to argue piece rates lift output where work is repetitive.
- Considering pay ethics beyond the firm's own payroll, such as the rates paid by overseas suppliers, since that is where reputational damage usually originates.
- Reaching a judgement that depends on the business, noting that a professional service firm competing for scarce skills faces a different calculation from a high volume fast food chain.
- Setting the stakeholder view against the shareholder view explicitly, so the answer shows there is a genuine disagreement about whose interests the directors serve.
- Applying the triple bottom line by giving a people measure and a planet measure the named business could actually report, not just the phrase itself.
- Explaining a transmission mechanism from responsible activity to profit, such as reduced packaging cutting material cost, or accreditation opening a retail listing.
- Testing whether the initiative is strategic, by asking if it is connected to the firm's own operations and supply chain rather than an unrelated donation.
- Raising greenwashing as the evaluative counterweight, noting that unaudited self reported claims carry reputational risk if a journalist or campaigner tests them.
Examiner Tips
- 💡This appears most often as a twelve or twenty mark assess or evaluate question on a business facing a cheap supply option, so plan one developed argument each way plus a supported decision.
- 💡Quote a number from the extract, such as the saving per unit or the share of sales from one ethical retailer, because applied evaluation scores above generic argument.
- 💡End with a conditional judgement, saying what would change your answer, such as whether customers can verify the claim or whether a rival has already moved first.
- 💡Expect this inside a wider ethics or human resources question rather than on its own, so bring it in as evidence that the firm's stated values match its payroll.
- 💡If the case gives wage rates and employee numbers, calculate the annual cost of the proposed rise and use that figure as the anchor of your evaluation.
- 💡Reward yourself marks by naming a motivation theorist and saying what the theory does not explain, because the limitation is where higher level credit sits.
- 💡The common question shape is whether a stated commitment is worth the cost, so structure the answer as benefit, cost, and a judgement about which dominates for this firm.
- 💡Use the extract's own evidence of customer values or investor pressure rather than importing generalisations about consumers caring more than they used to.
- 💡A quick reference to one real company keeps the answer concrete, but keep it to a clause and spend the words on application to the case.
Common Mistakes
- Asserting that ethical behaviour always pays in the long run, with no mechanism and no evidence, which reads as opinion and earns no evaluation credit.
- Confusing ethics with the law, so the answer argues the firm must act because otherwise it would be prosecuted, which removes the trade-off the question is built on.
- Treating profit and ethics as a straight either or choice, when many decisions raise costs modestly and reduce risk substantially, and the interesting judgement is about scale.
- Listing famous scandals as a substitute for applying the argument to the named business in the case study.
- Writing that paying staff more automatically raises motivation, which ignores Herzberg entirely and misses the marks for theoretical application.
- Ignoring the offsetting savings, so the answer treats a wage rise as pure cost when lower turnover and absenteeism may recover much of it.
- Confusing the national minimum rates set by government with the voluntary rate campaigned for by the Living Wage Foundation, which weakens the ethical argument.
- Discussing executive pay as a moral complaint without linking it to a business consequence such as employee resentment, investor unease or media attention.
- Treating this as a list of good deeds such as recycling and charity days, with no connection to costs, revenue or risk for the business in the case.
- Assuming every customer will pay a premium for responsible behaviour, when price sensitivity in many markets means demand is highly price elastic.
- Confusing this with business ethics generally, so the answer never distinguishes a public commitment to stakeholders from a private moral decision.
- Forgetting the opportunity cost, since money spent here is money not spent on capacity, research or dividends.