Ethical Issues (Cambridge (CIE) IGCSE Business): Revision Note

Introduction to ethical issues

• Ethical issues in business are about doing what is morally right and fair—not just what is legal or profitable

  • These issues can relate to how a business treats its employees, customers, suppliers and the environment

• Businesses face ethical decisions in areas such as

  • Paying fair wages

  • Avoiding child labour

  • Treating workers and suppliers fairly

  • Sourcing materials responsibly

Why ethical issues matter

• Reputation and trust

  • Customers are more likely to support businesses that act responsibly

  • Ethical behaviour helps build trust and a positive image

• Customer loyalty

  • Ethical businesses often gain more loyal customers, especially as more people want to buy from companies that share their values

• Employee morale

  • Treating workers fairly can improve motivation, productivity and staff retention

• Avoiding legal trouble

  • Unethical behaviour—even if not illegal—can lead to public backlash, boycotts or changes in the law

Child labour

• Child labour is when children are employed in work that is harmful, prevents them from going to school or involves long hours in poor conditions

• It often happens in low-income countries where families need money and laws are not strongly enforced

  • Nestlé has faced criticism for using cocoa suppliers in West Africa where child labour is common

  • H&M and Zara have been linked to factories in countries like Bangladesh and India, where underage workers have been found

• Child labour is an important ethical issue because

  • It exploits children who should be in education, not working

  • It often involves unsafe working conditions, low pay and long hours

  • It can damage a business’s reputation if exposed by the media or pressure groups

  • Customers, especially in developed countries, may choose to boycott products linked to child labour

How businesses avoid links to child labour

• Carry out supplier checks and audits to prevent child labour

• Work with charities or governments to support education programmes

• Use certified suppliers (e.g. Fairtrade or Rainforest Alliance)

• Be transparent with customers about how and where products are made

Fair wages

• Fair wages mean paying workers an amount that reflects the work they do and allows them to meet their basic needs, such as food, housing and healthcare

• Paying fair wages is an important ethical issue because

  • In many low-income countries, workers are paid very low wages, often not enough to live on

  • Businesses that pay unfair wages may be seen as exploiting cheap labour, even if it's legal

  • Poor pay can lead to low motivation, poor working conditions and high staff turnover

  • Customers and pressure groups may criticise or boycott companies that do not treat workers fairly

Paying fair prices to suppliers

• Paying fair prices means that businesses give suppliers, often farmers or small producers in developing countries, a price that covers the cost of production and provides a reasonable profit

  • This helps them earn a sustainable income and improve their quality of life

• Paying fair prices is an important ethical issue because

  • Many large businesses pay very low prices to suppliers, especially in countries with weak regulations

  • Low prices can lead to poverty, poor working conditions and lack of investment in farms or small businesses

  • Unfair pricing can force suppliers into unsustainable practices, like overusing land or underpaying workers

Choosing environmentally friendly suppliers

• This involves working with businesses that use sustainable materials, produce goods with low environmental impact and follow green practices, such as reducing pollution or waste

• Choosing environmentally friendly suppliers is an important ethical issue because

  • Some suppliers use harmful chemicals, cut down rainforests or produce high carbon emissions

  • Businesses that buy from these suppliers may be seen as supporting environmental damage

  • Customers, pressure groups, and governments increasingly expect businesses to make eco-friendly choices throughout their supply chains

Benefits of choosing green suppliers

• It improves the company’s reputation with environmentally conscious customers

• It helps reduce the overall environmental impact of products and therefore prevent negative media coverage or boycotts

• It may make the business more attractive to investors or retailers with sustainability standards

Advantages and disadvantages of being ethical

• Many businesses today choose to act ethically by treating workers fairly, protecting the environment, and being honest with customers

• While ethical behaviour can bring important benefits, it may also lead to some challenges and higher costs

Evaluating ethical business behaviour