Ethics — Edexcel A-Level Business
Test yourself on Ethics with PEARSON EDEXCEL A-Level practice questions.
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Ethics explained
Every ethical decision in a global business has somebody paying for it, and the exam wants that trade-off named.
Read the full explanation
Shareholders want returns and a low cost base, workers in a supplier factory want safe conditions and a wage they can live on, customers want low prices and say they want ethical sourcing, governments want tax, and residents want the plant without the pollution. The tension is normally profit now against reputation later, and the honest answer is that the two pull apart in the short run and can align over time if consumers actually reward the behaviour. Boohoo's Leicester supplier scandal in 2020 and the Rana Plaza collapse in Bangladesh in 2013 both show a cost saving that turned into a far larger reputational and legal bill. Strong evaluation asks which group holds the power.
b) Pay and working conditions
Cheap labour is often the reason production moved in the first place, so this is where a multinational's ethics and its cost base collide. Two terms have to be used precisely: the legal minimum set by the host government, and a living wage calculated from the local cost of living, which is usually higher, so a supplier can be entirely lawful and still pay too little to live on. Supply chains stretch the problem, because the first tier factory may be audited while its subcontractors are not, which is what the Rana Plaza collapse in Bangladesh exposed in 2013. Paying more raises labour cost per unit and can push it above rivals, though it also cuts turnover and recruitment spend, and the Modern Slavery Act of 2015 obliges large firms to publish what they are doing about conditions.
c) Environmental considerations: emissions; waste disposal
Pollution and rubbish are costs a business can push onto society rather than onto its own accounts, so the ethical question is always whether the firm goes beyond what the law forces it to do. Carbon output, air quality, effluent, packaging and the fate of electrical goods at the end of their life all sit here, and each carries a cash trade off: cleaner plant, filtration and recycled inputs raise the cost per unit now, against a reputation, a licence to operate and a customer base that repay slowly. Volkswagen's defeat devices, exposed in 2015, cost the group tens of billions in fines, recalls and lost market value, which is the strongest evidence that the cheap route is not the low cost route. Expect a case study firm choosing between the legal minimum and a stricter voluntary standard.
d) Supply chain considerations: exploitation of labour; child labour
Cheap labour is the reason much production moved offshore, and the ethical problem is structural: the brand at the top of the chain sets the price, while a factory several tiers down decides the wages, the hours and the age of the people who meet it. Auditing suppliers, paying above the local minimum and refusing the lowest tender all raise the cost per unit, and what they buy is protection for a brand built over decades. The Rana Plaza collapse in Bangladesh in 2013 killed more than a thousand garment workers and pushed Western retailers into a binding safety accord; cocoa sourcing in West Africa still carries the same charge. Marks come from weighing that extra sourcing cost against the risk for the named business.
e) Marketing considerations: misleading product labelling; inappropriate promotional activities
Packaging and promotion are where a business speaks to its customer, so the fault line is the gap between what is claimed and what is true. Vague health or green claims, small print that hides sugar content or the real cost of credit, a pack that quietly shrinks, and advertising aimed at children or at vulnerable buyers all lift sales in the short run while spending down the trust the brand runs on. In Britain the Advertising Standards Authority rules on complaints and consumer protection law bans misleading practice, but reputation punishes faster than any regulator: an influencer post that fails to declare it was paid for is shared thousands of times long before a ruling appears. The judgement wanted is short run revenue set against long run brand equity.
Your focus
- a) Stakeholder conflicts
- b) Pay and working conditions
- c) Environmental considerations: emissions; waste disposal
Show all 5 objectives
- d) Supply chain considerations: exploitation of labour; child labour
- e) Marketing considerations: misleading product labelling; inappropriate promotional activities
Ethics exam tips
Marking Points
- Identifying the two groups actually in conflict in the extract and stating what each wants, instead of listing every stakeholder the textbook names.
- Explaining the mechanism of the conflict, such as a supplier price low enough to protect the margin but too low to fund safe conditions.
- Separating short run and long run outcomes, since reputational damage, recruitment difficulty and lost contracts arrive after the saving.
- Weighing the power of each group, because an influential investor or a mass customer boycott changes what the business will actually do.
- Distinguishing the legal minimum wage from a living wage and saying which the business in the extract is actually paying.
- Costing the decision, so a pay rise lifts labour cost per unit while lower labour turnover, which is staff leaving divided by the average number employed and then multiplied by one hundred, cuts recruitment and training spend.
- Following responsibility down the supply chain to subcontractors the firm does not own but is still judged on.
- Reaching a judgement with a condition attached, for example that better pay is affordable where labour is a small share of total cost.
- Separating what the law requires from what ethics require, then saying which the named business is choosing and why that choice suits its market and its customers.
- Costing the decision in the firm's own figures, since spending on filtration, waste contracts or recycled material raises variable cost per unit and squeezes the operating profit margin, which is operating profit divided by revenue x 100.
- Naming the stakeholders who gain and lose, so local residents, regulators, employees, pressure groups and shareholders, and using the triple bottom line of profit, people and planet rather than profit alone.
- Evaluating against time frame and customer type, arguing the spend is justified where buyers are loyal and demand is price inelastic, and harder to justify where the business competes on cost and buyers will not pay a premium.
- Explaining why the abuse arises, so cost driven outsourcing, weak local enforcement and a chain the buyer does not own, rather than simply calling a supplier unethical.
- Putting a figure on the choice, since a higher price paid to suppliers raises variable cost per unit and cuts contribution per unit, which is selling price minus variable cost per unit, unless the business passes it on.
- Naming a control the business could use, such as a supplier code of conduct, independent audits, Fairtrade certification or bringing production back in house, and judging whether it would reach beyond the first tier of suppliers.
- Reaching a judgement anchored in the case, for example the brand's exposure to social media campaigns or the share of its customers who buy on ethics rather than price.
- Separating ordinary persuasion, which every buyer expects, from a claim that would mislead a reasonable customer, and applying that line to the specific label or campaign in the extract.
- Tracing the commercial effect, so a sales spike now against falling repeat purchase, weaker customer loyalty, lost shelf space in the supermarkets and the cost of a recall or a rebrand.
- Naming the constraint, for example the Advertising Standards Authority, consumer protection regulation or a retailer's own labelling rules, and saying honestly what it can and cannot reach.
- Concluding with a condition, arguing the risk is greatest where the product is bought repeatedly and where the target market lives on social media.
Examiner Tips
- 💡Stakeholder conflict is the standard frame for ethics questions, so learn one structure: who gains, who loses, who has power, and what happens over time.
- 💡Evaluate questions expect a position you are willing to defend, so commit and then state what would change your mind.
- 💡Keep the example short and accurate, because two lines of real evidence beat a paragraph of retold story.
- 💡Expect a question asking you to assess whether a business should improve pay and conditions overseas, so plan a cost argument, a reputation argument and a conditional judgement.
- 💡Use any wage rate, labour cost or turnover figure in the extract in a calculation, since quantified evaluation is what separates the top level.
- 💡Bring in motivation theory briefly where it helps, because Maslow's lower needs and Herzberg's hygiene factors explain why poor conditions drive turnover while good ones alone do not guarantee effort.
- 💡This is usually set as an extended answer weighted towards evaluation, often as whether the business should invest in cleaner technology, so plan two arguments each way and a supported judgement.
- 💡Use the evidence in the extract, because a quoted fine, a recycling rate or a disposal cost per tonne is printed there to be used, and an answer that quotes it moves from generic to applied.
- 💡Where the extract gives investment figures, link the ethics to a number the specification already asks for, such as the effect on the profit margin or on the payback period of new plant.
- 💡Commonly asked as whether the business should change supplier or reshore production, so weigh cost, quality, lead time and reputation together rather than arguing ethics alone.
- 💡Link it to the global competitiveness material in the same unit, because examiners reward an answer that connects ethical sourcing to competitive advantage and to brand positioning.
- 💡A shorter question may ask for one impact on one stakeholder group, so build a single developed chain of reasoning rather than four thin ones.
- 💡Often set as a heavily weighted evaluate question on whether a promotional campaign should go ahead, so build both sides from the extract and finish with a supported decision.
- 💡Tie the answer to the marketing mix and to brand positioning instead of treating ethics as a separate topic bolted on at the end.
- 💡If the extract gives sales or market share before and after a campaign, work out the percentage change and use it as evidence inside the argument.
Common Mistakes
- Assuming ethical behaviour always costs profit, when ethical sourcing can be a point of differentiation that supports a higher price.
- Treating shareholders as one uniform group, when pension funds under environmental and social pressure may push the same way as campaigners.
- Describing the conflict and stopping, with no judgement about which side the business should take and why.
- Saying higher pay is simply unaffordable without checking labour as a share of total cost, which in fast fashion is often only a few percent of the retail price.
- Confusing legal compliance with ethical behaviour, so a firm that obeys local law is called ethical with no further argument.
- Blaming conditions entirely on the host country's regulation while ignoring that the firm chose those suppliers and set those prices.
- Treating legal and ethical as the same thing, so the answer concludes the firm behaved ethically simply because it stayed inside the statutory limit on emissions.
- Listing green measures with no cost attached; the marker rewards the effect on unit costs, margins and cash flow, not a list of good deeds.
- Assuming every consumer will pay more for a greener product, when there is a well documented gap between what shoppers say and what they actually buy.
- Writing that the business simply did not know, when the credit is for discussing how costly and difficult it is to monitor a long chain, not for excusing the firm.
- Confusing cheap labour with exploitation; a wage that is low by British standards may sit above the local legal minimum, and a strong answer states the line it is using.
- Treating ethical sourcing as free good publicity, ignoring that unit costs rise and a price sensitive segment may simply leave.
- Judging the advertising as personally distasteful rather than analysing its effect on sales, costs and reputation, which is where the marks actually sit.
- Assuming the regulator will stop it, when most rulings land after the campaign has finished and the penalty is small next to the revenue earned.
- Ignoring the segment, so an answer attacks promotion aimed at children when the named business sells only to adult buyers.