2.14 Ethics, The Environment and Business Flashcards
Ethics:
where businesses make decisions based on what is morally right rather than on what is more profitable
Benefits of behaving ethically for business’s:
- higher revenues - as customers are increasingly making choices based on ethics
- improved brand awareness + recognition
- easier to attract and recruit staff
- increased employee motivation + staff retention
- new sources of finance available from ethical investors
Drawbacks of behaving ethically for business’s:
- higher costs e.g. sourcing from Fairtrade suppliers rather than suppliers offering lowest prices
- high overheads/fixed costs e.g. training and communication of ethical policy
- danger of building up false expectations amongst consumers
- bad publicity + reputation if business found to be acting “unethically”
How can poor ethical behaviour from businesses affect different stakeholder groups?
- customers - charging very high prices when customers have no choice
- suppliers - paying very low prices and delaying payments
- employees - paying very low wages and use of child labour / part of supply chain that uses child labour
- local community - creating pollution + inconvenience
Trade-off:
when something is given up in order to gain or achieve something else
What is the trade-off between profits and ethics?
- businesses must balance the drive for profit with their ethical principles
- paying higher wages and using ethical suppliers is likely to raise costs and lower profits
- however acting ethically can appeal to customers and motivate staff leading to higher productivity and more sales
What environmental impacts can business’s have?
- traffic congestion through transport and deliveries → climate change
- air, noise and water pollution through manufacturing and industry → depletion of land, food and natural resources
How can ethical considerations impact business activity?
- paying a fair wage to workers
- providing good working conditions
- allowing flexible working
- paying fair prices to suppliers
- having reasonable expectations of suppliers
- paying bills on time to suppliers
- ethical sourcing of materials
- investing in the community
- exceeding expectations through putting customers at the heart of everything → this can include offering excellent customer service, quality products or services and making the customer feel valued and appreciated
- only providing what customers need – this means ensuring that the business thinks about the needs of the customer and meets these rather than selling a business extra products or services to meet their own profit targets
- e.g. not selling a customer a mobile phone contract that they will not use
- being honest with customers - giving clear and accurate product and service information to allow customers to make informed decisions
How can environmental considerations impact business activity?
- recycling
- using renewable energy
- replenishing and conserving natural resources
- using biodegradable packaging
- reducing food miles
- partaking in social enterprises
How are there opportunities for business’s in being environmentally friendly?
as consumers are becoming more environmentally aware there is an opportunity for business’s to differentiate their products to meet customer needs and make them more environmentally friendly
Advantages of business’s being environmentally friendly:
- subsidies and grants– the government offers money to businesses willing to invest in environmentally friendly production methods → can help to reduce costs
- lower costs– changes to business activities that lower a business’ impact on the environment can often also lower the business’ costs
- increased sales– concerned customers who are very aware of environmental issues are more likely to buy from businesses that act in an environmentally friendly way
Disadvantages of business’s being environmentally friendly:
- increased costs– producing goods in an environmentally friendly way can often mean spending more money initially, as it can require research and investment in new production methods
- time consuming– becoming environmentally friendly can take up a lot of time, particularly in large businesses
- potential for inaccurate claims– a business that wants to use claims about its environmental efforts must make sure those claims are accurate. Inaccurate claims can cause significant damage to the reputation of a business
Pressure groups:
a pressure group is an organisation with shared aims which seeks to influence government policy, business activity and legislation
Potential impacts of pressure groups on business activity:
- pressure from consumers, critics and pressure groups can sometimes force businesses to alter their marketing mix
- of a business behaves in a manner the pressure group believes is wrong, they may launch a campaign to increase consumer awareness of the issue
- pressure group activity can cause bad publicity for business’s that act unethically → can have a damaging impact on a business’s reputation → if its reputation is damaged it could lead to customers boycotting the business → sales will fall → decline in profitability
Impact of pressure groups on business’s marketing mix:
- product
- use sustainable resources
- ensure that all products are safe
- price
- increase the price paid to small suppliers
- pay suppliers fair prices where there is limited competition for prices
- place
- source local products
- promotion
- obey advertising legislation
- provide accurate information on packaging
