6.4. Business and ethical issues
- Syllabus
- 0264–2027–2028
- Topic
- 6.4
- Level
- —
Learning objectives
Making ethical business decisions
An ethical business uses moral judgements when deciding how it operates and treats stakeholders. Ethical action goes beyond a claim or slogan: the business changes employment, purchasing or production decisions to reduce avoidable harm and improve fairness.
| Ethical issue | Practical business response |
|---|---|
| child labour | do not employ children or buy from producers that use child labour; check supplier practices |
| fair treatment of employees | pay fair wages and provide fair working conditions rather than relying only on the lowest legal cost |
| fair treatment of suppliers | pay a fair price and pay on time so suppliers can maintain reliable production and standards |
| environmental harm in the supply chain | choose suppliers and materials that avoid environmental damage; reduce waste, recycle or source responsibly |
| Possible advantage | Possible disadvantage |
|---|---|
| stronger reputation and customer loyalty can raise demand, revenue or the price customers accept | fairer wages and materials may raise labour or variable costs and reduce short-term margin |
| ethical treatment can help recruit, motivate and retain employees | checking and changing suppliers takes time and may delay production |
| fair payment can improve supplier relations and supply reliability | fewer acceptable suppliers or materials can restrict output and choice |
| investors and pressure groups may respond more positively | higher costs may lead to higher prices and lower demand if customers will not pay more |
Suppose a computer producer stops buying from a low-cost supplier that uses child labour and instead pays a verified supplier more. Material cost rises, but supply relationships, reputation and customer trust may improve. Profit rises only if the revenue or operating gains outweigh the extra cost and disruption.
Being ethical does not automatically raise or lower profit. The result depends on the size of extra costs, customer willingness to reward the change, employee and supplier responses, and how credible the action is. Legal compliance alone may also be narrower than an ethical judgement.