Ethical, environmental and economic influences

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Ethics

Ethics concerns fair and honest treatment of workers, customers and other stakeholders, including sourcing and advertising. Stakeholders may disagree; legality and ethics overlap but are not identical.
Improved conditions and reliable checks may require spending, while trust, waste reduction or lower risk may help the business. No approach guarantees greater loyalty or lower profit. Fair trade broadly seeks better trading terms; specific certification systems have their own applicable rules.

Explain an ethical trade-off

Environmental influences

Sustainability connects present needs with future generations’ ability to meet theirs, including scarce resources and social and environmental effects. Consider pollution, congestion, noise, waste and greenhouse gases rather than treating the environment as carbon alone.
Carbon footprints express greenhouse gases as CO2e over stated scope and time. Prevention, reuse, recycling and energy changes have lifecycle trade-offs and costs. Green claims should be clear, supported and limited to what the evidence establishes; an improvement in one measure is not proof of zero impact.

Evaluate environmental action

Pressure groups

Pressure groups organise to influence decisions on issues, using research, dialogue, petitions, publicity or boycotts. Their evidence and support can affect stakeholder views, regulation or business choices, but impact is not guaranteed.
A business can investigate concerns and improve or explain its conduct rather than treating every campaign only as a publicity threat. Credible engagement may be constructive; unsupported claims or superficial responses can damage trust.

Economic climate

Higher contractual variable rates can increase interest, while fixed agreements may not change immediately. Saving returns and borrowing costs can restrain spending overall, but effects differ across borrowers and savers. Inflation is a general price-level rise, not a requirement that every firm’s input costs increase equally.
Employment, real income and confidence affect spending and recruitment. Unemployment requires being without work and seeking and available for it, subject to statistical rules. Recession concerns contracting real activity; two consecutive quarterly real-GDP falls are a common technical convention, not proof every firm loses sales.
With price and currency assumptions stated, appreciation raises the foreign cost of a sterling-priced export and reduces the sterling cost of a foreign-priced import. Fictional £1 = $1.25 → $1.50 makes a £100 export $125 → $150 and a $150 import £120 → £100, excluding fees and hedging. Sales and net profit are not determined by conversion alone.

Economic channels are conditional

Business responses

Businesses can review pricing, capacity, sourcing, costs, finance and investment as conditions change. Price cuts may support demand but reduce contribution; delaying investment preserves cash but may sacrifice future capacity or efficiency. Explain the case-specific consequence.
Fictional environmental equipment: £4,000 upfront, £1,200 avoided annual waste cost less £200 running cost = £1,000 net annual saving, with four-year simple payback on constant assumptions. Consider finance, reliability, environmental impacts and obligations as well as the estimate; no current quotation or guaranteed saving is implied.

A fictional waste-reduction project

Corporate social responsibility

CSR concerns responsibility for the business’s social and environmental effects, supported by operational action and credible evidence. Charitable publicity alone does not establish fair treatment, low impacts or honest claims.
Measure both totals and intensity: fictional 1,000 units × 4 kg CO2e = 4,000 kg; 2,000 × 3 kg = 6,000 kg. Per-unit emissions fall 25% while the total rises 50%. State the boundary and time and avoid implying that a favourable ratio proves all impacts improved.

Intensity and total emissions differ

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Practice questions

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1.What are business ethics?
Easy
- Amoral principles guiding behaviour
- Btax rules
- Cwage scales
- Dstock lists
2.What is sustainability?
Easy
- Ausing all resources quickly
- Bignoring the environment
- Craising prices
- Dmeeting present needs while preserving future generations’ ability to meet theirs
3.What is a carbon footprint?
Easy
- Athe number of staff
- Bthe price
- Cgreenhouse gas emissions within a defined scope, expressed as CO2e
- Dthe firm's profit
4.What is a pressure group?
Easy
- Aa list of product prices only
- Ban organised group seeking to influence decisions on an issue
- Ca table listing stock quantities
- Da calculation of wages only
5.What is interest rate?
Easy
- Athe cost of borrowing or reward for saving
- Ba tax
- Ca wage
- Da price
6.What is an exchange rate?
Easy
- Athe price of oil
- Bthe cost of labour
- Ca tax
- Dthe price of one currency in another
7.What is inflation?
Easy
- Aa rise in wages only
- Ba fall in output
- Ca general rise in prices
- Da fall in prices
8.What is unemployment?
Easy
- Apeople studying
- Bpeople without work who are seeking and available for work
- Cpeople in jobs
- Dpeople retired

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