📖 Why Ethics and Environment Matter
Ethics refers to what a business believes is morally right. Environmental responsibility refers to how a business minimises its impact on the natural world. Both are increasingly important to consumers, employees, investors and regulators.
Business ethics = the moral principles that guide business decisions and behaviour — what a business believes is right or wrong beyond what is legally required.
Environmental responsibility = the commitment of a business to minimise its negative environmental impact through sustainable practices.
📈 Why This Has Grown in Importance
- Consumers increasingly choose brands that align with their values — ethical businesses attract loyal customers
- Social media means unethical behaviour is exposed immediately and can go viral
- Young workers prefer to work for ethical employers — helps attract talent
- Investors (ESG funds) now consider environmental and social performance alongside profits
- Government legislation increasingly requires environmental responsibility (e.g. plastic bag tax, net zero targets)
⚖️ Business Ethics
Ethical behaviour goes beyond obeying the law. It means doing what is right, even when it's not legally required — and even when it costs money.
🤝 Fair Treatment of Workers
Paying fair wages above the minimum, providing safe working conditions, offering good maternity/paternity leave, no discrimination. Example: John Lewis Partnership shares profits with all employees.
🌍 Responsible Sourcing
Only using suppliers who treat workers fairly, pay living wages, and avoid child labour. Example: Fairtrade certification ensures farmers in developing countries receive a fair price for their goods.
🙅 Honest Marketing
Not making misleading claims, not targeting vulnerable consumers (e.g. children or elderly), not using manipulative pricing tactics. The Advertising Standards Authority (ASA) regulates this.
🏘️ Community Responsibility
Supporting local communities, donating to charity, avoiding practices that harm local areas (e.g. aggressive tax avoidance that reduces local services).
✅ Benefits of Acting Ethically
- Better reputation → attracts loyal customers
- Attracts motivated ethical employees
- Reduces risk of negative publicity or boycotts
- Investors increasingly favour ethical businesses
- Long-term brand value and trust
❌ Costs of Acting Ethically
- Paying fair wages costs more than minimum wage
- Ethical suppliers charge more than unethical ones
- Sustainable packaging costs more than cheap plastic
- Short-term profits may be lower
- Can create competitive disadvantage vs less ethical rivals
🌍 Environmental Responsibility
Businesses create environmental impacts: carbon emissions, waste, water usage, deforestation. Increasingly, they are required — and expected — to minimise these impacts.
⚠️ Negative Environmental Impacts
- Carbon emissions from manufacturing and transport
- Plastic waste and single-use packaging
- Water pollution from chemicals and runoff
- Deforestation for raw materials (e.g. palm oil)
- Noise and light pollution from factories
- Energy consumption from data centres and offices
✅ How Businesses Reduce Their Impact
- Using renewable energy (solar, wind)
- Reducing packaging or switching to biodegradable materials
- Carbon offsetting — planting trees to offset emissions
- Sourcing locally to reduce transport emissions
- Recycling programmes and waste reduction targets
- Designing products for longevity and repairability
📋 Government Legislation
- Climate Change Act 2008: UK legally committed to Net Zero by 2050
- Plastic bag charge: 5p then 10p levy reduced plastic bag use by 95%
- Single-use plastics ban: UK banned plates, cutlery and straws from 2023
- Energy efficiency requirements: Buildings and vehicles must meet increasingly strict standards
- Businesses that fail to comply face fines and reputational damage
💡 The Ethics-Profit Trade-off
The key tension: ethical and environmental behaviour often costs money in the short term. The exam loves to test this trade-off.
Acting ethically often increases costs (fair wages, sustainable packaging, ethical suppliers). This can reduce short-term profits. However, it can increase long-term profits through better reputation, customer loyalty and staff retention — and reduce the risk of costly scandals.
⚖️ Greenwashing — A Warning
Greenwashing is when a business falsely claims to be environmentally friendly for marketing purposes without genuinely changing its practices. Examples: claiming products are "natural" or "eco-friendly" without evidence, publishing sustainability reports that don't reflect actual behaviour.
⚠️ Greenwashing is increasingly illegal and can lead to major reputational damage and legal penalties when exposed.
📈 Long-term Business Case for Ethics
- Patagonia's commitment to sustainability has built cult brand loyalty — customers pay premium prices
- Unethical businesses face boycotts, costly lawsuits and reputational collapse
- Ethical businesses attract better talent who stay longer → lower recruitment costs
- ESG investors are a growing source of capital
📉 Short-term Cost Pressures
- Small businesses can't always afford ethical suppliers
- Competitors cutting corners can undercut ethical businesses on price
- Consumer surveys say they care about ethics — actual purchasing behaviour doesn't always match
- Shareholders may prioritise dividends over ethical investment
🏢 Ethics and Environment in Real Business
🧥 Case Study: Patagonia — Ethics as a Business Model
- Patagonia is an outdoor clothing brand that has built its entire identity around environmental responsibility
- Uses recycled materials, repairs customers' old clothing for free, donates 1% of sales to environmental causes
- In 2022, founder Yvon Chouinard transferred ownership of the company (worth ~$3bn) to a trust — all profits go to fighting climate change
- Ran an ad saying "Don't Buy This Jacket" — encouraging customers to buy second-hand rather than new
- Result: enormous brand loyalty, premium pricing, waiting lists for products, global press coverage
💡 Patagonia shows that genuine ethical commitment can become the core competitive advantage of a business.
🛢️ Case Study: BP Deepwater Horizon — The Cost of Unethical Behaviour
- In 2010, BP's Deepwater Horizon oil rig exploded in the Gulf of Mexico — one of the worst environmental disasters in history
- Investigations found cost-cutting decisions had ignored safety warnings
- BP paid over $65 billion in fines, compensation and clean-up costs
- BP's share price fell 55%, wiping billions off market value
- The incident demonstrates the enormous financial AND reputational cost of cutting ethical corners
⚠️ The cost of unethical behaviour often far exceeds any short-term saving from cutting corners.
🧩 Term Match-Up
Match all 6 terms to their definitions!
Terms
Definitions
🎯 Quick-Fire Quiz
✍️ Exam Tips
⚠️ Common Mistakes
- Saying ethics is only about the environment — ethics covers fair pay, honest marketing, community responsibility too
- Only giving one side — always evaluate the costs AND benefits of ethical behaviour
- Forgetting the trade-off: ethical behaviour often increases costs in the short term
- Confusing greenwashing with genuine sustainability
For any ethics question, the best evaluation shows you understand the tension: "While acting ethically may increase short-term costs and reduce competitiveness against less ethical rivals, businesses that build genuine ethical credentials benefit from stronger customer loyalty, better staff retention and protection against costly reputational scandals — making it a sound long-term investment."
📝 Model Answer
"Analyse the impact of acting ethically on a small business." (6 marks)
Acting ethically could allow a small business such as a clothing retailer to improve its reputation among consumers, because customers are increasingly aware of issues like fair pay and sustainable sourcing. This would lead to greater customer loyalty, therefore increasing repeat sales and revenue for the business. However, acting ethically is likely to increase costs — for example, using ethical suppliers and sustainable materials typically costs more than standard alternatives. This would lead to higher expenses for the business, which could therefore reduce profit margins if the business is unable to raise its prices to cover the extra costs.
✅ Applied to case study context ✅ Five connective strands developed ✅ Benefit and drawback both analysed = Full 6 marks!
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