2.1.4 Ethics, the environment and business — Edexcel GCSE Business revision notes

Ethical considerations and the trade-off with profit

Ethics means doing what is morally right, as opposed to simply what is legal or profitable. A business can act entirely within the law and still be criticised as unethical.

Ethical considerations that influence business activity include: paying suppliers a fair price rather than the lowest possible; paying employees fairly and providing decent working conditions, including in overseas factories; not using child labour; being honest in advertising; and treating customers fairly when something goes wrong.

The trade-off with profit is what the specification asks for, and it is genuine — this is not a topic where the right answer is simply "be ethical".

Figure: The trade-off between ethics and profit

Acting ethically costs	Acting ethically gains
Paying suppliers fairly raises costs, so profit per unit falls	A reputation that attracts customers willing to pay more
Better wages and conditions raise the wage bill	Easier recruitment, lower staff turnover and better motivation
Refusing the cheapest supplier may mean higher prices than rivals	Avoids the cost and damage of being exposed for poor practice
Ethical sourcing takes time to check and monitor	Loyal customers who return, and free publicity

The costs are immediate and certain; the gains are longer-term and less certain — which is exactly why the trade-off is difficult.

The honest position, and the one that scores well: acting ethically usually raises costs in the short term and may reduce profit. Over the longer term it can increase profit, through reputation, customer loyalty and staff retention. But that depends on customers actually caring enough to pay more — and for some products, in some markets, they do not.

Ethics: doing what is morally right, as opposed to simply what is legal or profitable; a business can act entirely within the law and still be criticised as unethical

Environmental considerations and sustainability

Environmental considerations that influence business activity include: reducing waste and pollution, cutting carbon emissions from production and transport, using recyclable or reduced packaging, sourcing materials sustainably, and using energy efficiently or from renewable sources.

Sustainability means meeting present needs without preventing future generations from meeting theirs — using resources at a rate that can be continued indefinitely.

The trade-off between the environment, sustainability and profit works the same way as the ethical one, but with an important difference: some environmental measures save money.

Figure: The environmental trade-off

Measures that cost money	Measures that save money
Sustainable materials are often more expensive than the cheapest alternative	Using less energy directly cuts the energy bill
Cleaner equipment and renewable energy need investment up front	Reducing packaging cuts material and delivery costs
Recycling and waste separation take time and staff	Cutting waste means buying fewer materials for the same output
Ethical or local sourcing may raise transport or unit costs	Efficient transport routing lowers fuel costs

This is why "green measures always cost money" is a weak answer — several of them reduce costs, which is why businesses adopt them even without pressure.

Environmental action also brings the same reputational benefits as ethical behaviour, and increasingly it is required by legislation, so a business that acts early avoids being forced to act later at greater cost.

Sustainability: meeting present needs without damaging the ability of future generations to meet theirs, through reducing waste, cutting emissions and sourcing materials responsibly

The impact of pressure group activity on the marketing mix

A pressure group is an organisation that campaigns to change a business's behaviour on a particular issue. They have no legal power over a business, but they can change what customers think — and customers do have power.

How they act: publicity and media campaigns, protests, boycotts, petitions, social media pressure, and lobbying government to change the law.

The specification asks specifically about the impact on the marketing mix, so the answer should be organised around the four Ps:

Figure: Pressure group impact on the marketing mix

Element	How pressure group activity changes it
Product	Reformulated or redesigned — removing a criticised ingredient, changing to recyclable packaging, or dropping a product entirely
Price	Ethical or sustainable sourcing raises costs, so prices may rise — or the business absorbs the cost and accepts lower margins
Promotion	Advertising changed to emphasise the improvement made, or spending increased to repair damaged reputation
Place	Retailers may refuse to stock a product being campaigned against, forcing a change of distribution

Worked example

A pressure group campaigns against a drinks company's plastic bottles. Analyse the likely impact on its marketing mix and profit.

Product: the most likely response is switching to recycled or recyclable material, or a different container.
Price: that material probably costs more, so either prices rise or the profit margin falls.
Promotion: the company will advertise the change, both to win back goodwill and to make sure customers know it acted.
Place: some retailers may drop the product while the campaign runs, reducing sales.
Weigh short-term against long-term, since that is the trade-off the specification is testing.

Answer: Product changes to recycled or recyclable packaging, raising costs so price rises or margin falls; promotion shifts to publicise the change; and some retailers may stop stocking it meanwhile. Profit falls in the short term, but the alternative — ignoring the campaign — risks lasting reputational damage and lost customers, which would cost more over time.

Common mistake

Pressure groups have no legal power over a business. Their influence works through customers, media and government — so an answer should explain the route by which they cause change, not simply say they force the business to act.

Pressure group: an organisation that campaigns to change a business's behaviour on a particular issue; it has no legal power over a business, but it can change what customers think

Before you practise

Ethics means doing what is morally right, which is not the same as what is legal or profitable.
Ethical behaviour usually raises costs in the short term but can raise profit long term through reputation and loyalty.
Sustainability means meeting present needs without preventing future generations from meeting theirs.
Some environmental measures cost money; others — energy, waste and packaging reduction — save it.
Pressure groups have no legal power, but influence businesses through customers, media and government.
Their impact on the marketing mix runs across all four Ps: product, price, promotion and place.
The trade-off is genuine: the costs are immediate and certain, the benefits longer-term and less certain.

Ethical considerations and the trade-off with profit

Environmental considerations and sustainability

The impact of pressure group activity on the marketing mix

Before you practise

Now practise it