Ethical and environmental considerations
Business ethics is the study of what is morally right and wrong in how a business operates, going beyond the legal minimum a business must do.
Method
- Identify whether the issue in the question is primarily ethical (fairness, honesty, treatment of suppliers, workers or animals) or environmental (pollution, waste, carbon emissions, resource use), since answers should use the correct term.
- Identify the specific ethical or environmental action described, e.g. switching to recyclable packaging, paying suppliers a Fairtrade price, or reducing food miles.
- Identify the cost side of the trade-off: what the action costs the business, e.g. a more expensive supplier, new machinery, or lower output.
- Identify the benefit side of the trade-off: how the action could increase revenue or reduce risk, e.g. customers paying a premium, positive publicity, or avoiding a future ban or fine.
- For explain questions, pick one side of the trade-off and link the action to its specific consequence for cost, revenue or reputation.
- For evaluate questions on whether a business should act ethically or sustainably, weigh the cost of acting against the risk and cost of not acting, and reach a judgement using details from the case, such as how price-sensitive the target customers are.
- Remember ethical and environmental issues are things a business chooses to do (or not do) beyond the law; where the same behaviour is a legal requirement, that is legislation (see legislation and its impact) rather than ethics.
Worked example
Coastal Coffee currently uses cheap, imported coffee beans and plastic cups. The owner is considering switching to Fairtrade beans, which cost 30% more, and compostable cups, which cost 10% more than plastic ones. Explain one way this change could benefit Coastal Coffee, despite the higher costs.
- Identify the ethical action: paying a fair price for coffee beans (Fairtrade), and the environmental action: switching from plastic to compostable cups.
- Identify the cost side: both changes raise Coastal Coffee's variable costs per cup sold.
- Identify the possible benefit: customers who care about ethical sourcing and the environment may be willing to pay a higher price, or may choose Coastal Coffee over a competitor that does not make these changes.
- Link cost and benefit into a business outcome: if enough customers switch to Coastal Coffee, or accept a higher price because of its ethical and environmental reputation, the extra revenue can outweigh the extra cost of the beans and cups.
- Write the explained answer: despite the higher unit costs, using Fairtrade beans and compostable cups could attract environmentally and ethically conscious customers, allowing Coastal Coffee to charge a premium price or win custom from competitors who do not offer this, increasing revenue by more than the extra cost.
Practice questions
Try each question, then tap to reveal the answer.
Q1Define business ethics.Show answer
Answer: What is morally right and wrong in the way a business operates, beyond what the law requires.
Q2State one example of an environmental issue a business might cause.Show answer
Answer: For example, carbon emissions from transporting goods, or plastic packaging waste.
Q3Give one reason ethical sourcing can increase a business's costs.Show answer
Answer: Because ethically sourced materials, e.g. Fairtrade or sustainably farmed ingredients, are usually more expensive than the cheapest available alternative.
Q4State one way a business can benefit from being seen as environmentally friendly.Show answer
Answer: For example, attracting customers who prefer to buy from environmentally responsible businesses, or being able to charge a premium price.
Q5Explain why there can be a trade-off between acting ethically and making a profit.Show answer
Answer: Because ethical actions, such as paying suppliers a fairer price, usually raise costs, which reduces profit unless the business can pass the cost on through a higher price or higher sales.
Q6State one example of an unethical business practice.Show answer
Answer: For example, using child labour, misleading advertising, or paying suppliers below a fair price.
Q7Explain one risk to a business of being exposed for unethical behaviour.Show answer
Answer: It can damage the business's reputation, causing customers to boycott it and lose sales/revenue, and can lead to negative media coverage.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain two reasons why a business might choose to reduce its carbon emissions.
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GreenPrint is a printing company that currently uses cheap, non-recycled paper and disposes of chemical ink waste directly, which is currently legal but controversial. A competitor has recently switched to 100% recycled paper and safe ink disposal, and has started winning contracts from environmentally conscious local councils. GreenPrint's costs would rise by an estimated 15% if it made the same switch. Evaluate whether GreenPrint should switch to recycled paper and safe ink disposal.
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See real GCSE Business past-paper questions, with official mark schemes →
Free printable worksheet
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