Ethical and environmental considerations - OCREthical considerations and impact on businesses

Ethics relate to principles, standards of behaviour and ‘doing the right thing’. An ethical business will act in a socially responsible way, doing what is right, even if it is not required to do so by legislation or in order to maximise profit.

Most business activity involves workers, suppliers and customers. The way that a business treats these three groups of stakeholders is a good sign of how ethical it is.

Treating workers ethically

Examples include:

• paying a fair wage
• providing good working conditions
• allowing flexible working

Treating suppliers ethically

• paying fair prices
• having reasonable expectations
• paying bills on time

Treating customers ethically

Examples include:

• Exceeding customers’ expectations - this can include offering excellent customer service, quality products or services, and making the customer feel valued and appreciated.
• Only providing what customers want – ensuring that the business meets the needs of the customer rather than selling extra products or services just to meet profit targets. For example, not selling a customer a mobile phone contract that they will not use.
• Giving clear and accurate product and service information to allow customers to make informed decisions.

Sourcing of materials

Sourcing supplies ethically usually involves ensuring that suppliers and their workers are treated fairly, and paid a reasonable price for the work that they do. Ethically sourced supplies are often more expensive, so buying them is usually a deliberate business decision because it could make a business less competitive, leading to lower sales and reduced profit margins. In addition, businesses will usually need to put in place checks to ensure that their suppliers are themselves acting ethically. This will also incur additional costs.

Marketing decisions

Businesses that behave ethically can benefit from good publicity, which is likely to attract customers and increase sales. For example, businesses that have signed up to the Ethical Trading Initiative can show that they have taken steps to address the use of child labour in the production of the goods they sell.

Those businesses that do not behave in an ethical way are more likely to receive bad publicity and get a poor reputation. For example, retailers that buy from suppliers that use child labour to produce goods may be targeted by negative articles in the media, undoing much of their own marketing activity.