Ethical and environmental considerations study guide

The principles that guide a business's decisions about what is right or wrong.

Ethical behaviour refers to actions that are consistent with accepted moral principles, such as honesty, fairness, respect for stakeholders, and responsibility towards society and the environment.

CSR is a business model in which companies integrate social and environmental concerns into their operations and interactions with stakeholders.

The obligation of a business to minimise negative impacts on the environment through sustainable practices.

The cost a business incurs to reduce or prevent environmental damage, including direct financial outlays (e.g., pollution control equipment) and indirect costs such as reputational damage.

A trade‑off is a situation where improving one aspect of performance (e.g., sustainability) requires a compromise in another (e.g., profit).

Exam practice

• A small manufacturer chooses to source cheaper raw materials that are less environmentally friendly. Which of the following best describes the trade‑off?
• A small retailer sells 100 units at £30 each. Variable cost is £8 per unit and fixed cost is £2000. Calculate the profit and explain how the retailer might face a trade‑off between ethics and profit if it considers using cheaper suppliers.
• Which of the following is a potential drawback of a business adopting a highly ethical supply chain?
• Evaluate the benefits and drawbacks of ethical behaviour for a small manufacturer that sources raw materials from overseas suppliers.
• Which of the following best illustrates a business acting ethically in its supply chain?
• Explain how a small manufacturer can demonstrate ethical behaviour towards its employees.
• Which of the following actions is most likely to increase a business's environmental responsibility while also appealing to environmentally conscious consumers?
• Analyse how a small manufacturer can increase its environmental responsibility while maintaining profitability.
• Which of the following is a direct cost associated with adopting a renewable energy source for an online service business?
• Evaluate the costs and benefits of implementing a waste reduction programme for a small manufacturer that produces plastic components.
• A small manufacturer of eco‑friendly kitchenware is considering switching to a new biodegradable packaging material that costs £0.50 per unit, up from the current £0.30. The packaging accounts for 20% of the product’s total cost. Which statement best describes the trade‑off the business faces?
• Analyse the potential impact on profit if an independent retailer decides to source all its clothing from suppliers that pay a higher price for certified sustainable materials.