Influences on Business: Ethical and Environmental Considerations
Businesses face growing pressure to behave ethically and protect the environment, but doing the right thing often costs money. For AQA GCSE Business 8132 you need to explain what ethical and environmental behaviour looks like, and analyse the trade-off between ethics and profit.
Ethical considerations for businesses
Business ethics means doing what is morally right, not just what is legal. Ethical issues include paying workers fairly, treating suppliers honestly, avoiding misleading advertising, sourcing materials responsibly and refusing to exploit child labour anywhere in the supply chain.
The central idea in the AQA spec is the ethical trade-off: behaving ethically often raises costs. Paying above minimum wage, buying fair trade ingredients or checking every supplier all cost money, which can mean higher prices or lower profit in the short term. The reward is a stronger reputation, loyal customers and motivated staff.
Unethical behaviour carries risks that can dwarf any savings: fines, boycotts, negative publicity spreading on social media and talented employees choosing to work elsewhere. Many customers actively research how brands behave before buying.
Environmental considerations
Businesses affect the environment through pollution, waste, packaging, energy use and transport emissions. Common responses include recycling, cutting packaging, switching to renewable energy, sourcing locally to reduce transport miles and designing products that last longer. Sustainability means meeting today's needs without damaging the ability of future generations to meet theirs.
Pret A Manger gives a clear example of an environmental policy with a real cost attached: Pret offers 50p off hot drinks for customers who bring a reusable cup, one of the largest such discounts on the UK high street. The discount reduces revenue on each drink, but it cuts single-use cup waste, attracts environmentally aware customers and generates positive publicity worth more than paid advertising. Government also plays a part through taxes, charges and rules, such as the plastic bag charge that transformed shopping habits.
Benefits and drawbacks of acting ethically and environmentally
The benefits and drawbacks usually appear together in exam answers:
- Benefits - better brand image, customer loyalty, ability to charge premium prices, easier recruitment of staff who want to work for a responsible employer, and less risk of fines or scandals.
- Drawbacks - higher costs for materials, wages and monitoring, prices that may rise above rivals, and the danger of being accused of greenwashing if claims are exaggerated.
Pressure groups such as Greenpeace campaign against businesses they believe behave badly, and their protests, petitions and media coverage can force change by threatening sales. Whether ethics pays depends on the market: customers of premium brands often reward responsible behaviour, while shoppers focused purely on the lowest price may not pay extra for it.
Key terms
Practice questions
State two ways a business could reduce its impact on the environment. [2 marks]
Model answer guidance: A business could recycle its waste materials. It could also reduce packaging on its products. Switching to renewable energy is another option.
Explain one reason why behaving ethically can increase a business's costs. [3 marks]
Model answer guidance: Ethical behaviour often means paying workers more than the legal minimum or buying from responsible suppliers. These choices cost more than the cheapest alternatives available. As a result total costs rise, which reduces profit unless the business can charge higher prices.
Analyse one benefit to a coffee chain of offering a discount to customers who bring a reusable cup. [6 marks]
Model answer guidance: The discount attracts environmentally aware customers who choose the chain over rivals, increasing sales volume. It also generates positive publicity and social media attention, which builds brand image without expensive advertising. Although the business loses 50p of revenue on each discounted drink, the extra customer loyalty and repeat visits can outweigh this cost over time, as Pret A Manger has found with its reusable cup discount.
Analyse how the actions of a pressure group could affect a large clothing retailer. [9 marks]
Model answer guidance: A pressure group might expose poor conditions in the retailer's overseas factories through protests and media campaigns. The publicity can persuade customers to boycott the brand, cutting revenue quickly, and may attract negative coverage that damages the brand image built up over years. To respond, the retailer may have to audit suppliers, improve wages in its supply chain and publish reports, all of which raise costs, but taking action can rebuild trust and even become a selling point, whereas ignoring the campaign risks lasting damage to sales and recruitment.
Evaluate whether behaving ethically always reduces a business's profit. [12 marks]
Model answer guidance: In the short term, ethical choices usually raise costs: fair wages, responsible sourcing and environmental improvements all cost money, and prices may have to rise. However, ethics can also protect and grow profit, because a strong reputation attracts loyal customers willing to pay more, motivates staff and avoids fines and boycotts that hit unethical firms. The outcome depends on the market and the time frame: premium brands selling to ethically minded customers often gain more than they spend, while businesses competing purely on price may struggle to recover the extra costs. Overall, ethical behaviour does not always reduce profit; handled well, it is an investment that lowers risk and can raise long-term profit, even though it squeezes margins at first.
Examiner tips
- The ethical trade-off is the examiner's favourite idea here: ethics costs money now but can protect revenue later. Build answers around that tension.
- Use a specific example, such as Pret's 50p reusable cup discount, to show a real cost and a real benefit in the same answer.
- Do not claim ethical behaviour guarantees higher profit; strong answers weigh short-term costs against long-term gains and reach a conditional judgement.
In The Business School simulation your students make these exact decisions in a live market against rival firms — every choice mapped to the specification. Free teacher demo, no installs, students join with a PIN.