Ethics in Business & Corporate Social Responsibility

Businesses do not operate in isolation — they have a responsibility to society and the environment, not just to their shareholders. This lesson explores business ethics, corporate social responsibility (CSR), and the trade-offs businesses face between profit and social responsibility.

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What Are Business Ethics?

Business ethics are the moral principles that guide how a business behaves. An ethical business considers the impact of its decisions on all stakeholders — not just on profit.

Ethical Issue	Description
Fair trade	Paying fair prices to producers in developing countries
Environmental responsibility	Reducing pollution, waste, and carbon emissions
Honest marketing	Not making false or misleading claims about products
Fair treatment of workers	Paying fair wages, providing safe conditions, respecting rights
Animal welfare	Avoiding animal testing and ensuring humane treatment
Tax responsibility	Paying a fair share of tax rather than using aggressive tax avoidance schemes

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Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) is the idea that businesses have a responsibility to society beyond just making a profit. CSR involves considering the interests of all stakeholders and the impact of business activities on the environment and community.

graph TD
    A[Business CSR] --> B[Employees]
    A --> C[Customers]
    A --> D[Suppliers]
    A --> E[Community]
    A --> F[Environment]
    A --> G[Shareholders]
    B --> B1[Fair pay & conditions]
    C --> C1[Honest marketing & safety]
    D --> D1[Fair trade & prompt payment]
    E --> E1[Local jobs & charity]
    F --> F1[Lower emissions & waste]
    G --> G1[Long-term value]

Examples of CSR in Practice

Company	CSR Activity
Patagonia	Donates 1% of sales to environmental organisations; uses recycled materials
Ben & Jerry's	Campaigns on social justice issues; sources Fairtrade ingredients
Unilever	Sustainable Living Plan — reducing environmental footprint across operations
LEGO	Investing in sustainable materials; aiming for zero waste in factories
Tesco	Reducing food waste; donating surplus food to charities

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The Trade-Off: Profit vs Ethics

Ethical behaviour and CSR can conflict with the pursuit of maximum profit:

Arguments FOR Ethics/CSR	Arguments AGAINST Ethics/CSR
Attracts ethically-minded customers	Can increase costs (e.g. fair trade materials)
Builds brand reputation and loyalty	May reduce short-term profits
Attracts and retains talented employees	Competitors may undercut on price
Reduces risk of negative publicity	Shareholders may prioritise profit over ethics
Can lead to long-term competitive advantage	Difficult to measure the return on CSR investment
May prevent government regulation	Some CSR may be seen as "greenwashing" (insincere)

Example: Primark vs Patagonia

Primark focuses on offering the lowest possible prices, which has raised ethical concerns about working conditions in its supply chain. Patagonia charges premium prices but is widely respected for its environmental and ethical commitments. Both approaches can be commercially successful, but they appeal to different customer values.

Exam Tip: Ethics questions often ask you to evaluate whether a business should act ethically even if it costs more. Present both sides and conclude with a justified argument. Many examiners expect you to recognise that ethical behaviour can be commercially beneficial in the long term.

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Pressure Groups

Pressure groups are organisations that campaign to influence business behaviour or government policy on specific issues.

Pressure Group	Focus
Greenpeace	Environmental protection, climate change
Friends of the Earth	Environmental sustainability
Amnesty International	Human rights
Fair Trade Foundation	Fair prices for producers in developing countries
Which?	Consumer rights and product safety

Pressure groups influence businesses through:

• Media campaigns — raising public awareness of unethical practices.
• Boycotts — encouraging consumers not to buy from a particular business.
• Protests and petitions — public demonstrations to attract attention.
• Social media — amplifying campaigns and reaching a global audience.
• Lobbying — trying to influence government policy and legislation.

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Summary

• Business ethics are the moral principles guiding business behaviour.
• CSR is the idea that businesses should consider their impact on society and the environment.
• Ethical behaviour can increase costs but also builds reputation, loyalty, and long-term competitive advantage.
• Pressure groups campaign to influence business behaviour on environmental, social, and ethical issues.
• The trade-off between profit and ethics is a key evaluation topic in GCSE Business Studies.

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UK Case Study: Fairtrade at Cadbury and the Cost of Ethics

In 2009, Cadbury, then a British-owned FTSE-100 company, announced that its flagship Dairy Milk chocolate bar would carry the Fairtrade mark. This meant paying a guaranteed minimum price to cocoa farmers in Ghana, plus an additional "Fairtrade premium" for community projects such as schools and clean water. It was a high-profile move — Dairy Milk is one of the UK's best-selling chocolate brands, and the switch affected around 15,000 cocoa farmers overnight.

The commercial logic. Kraft (which acquired Cadbury in 2010) and later Mondelēz argued the ethics investment paid off: surveys showed UK consumers were more likely to buy Fairtrade chocolate, the brand built a reputation for responsibility, and the Fairtrade premium helped secure the long-term supply of quality cocoa in a politically-unstable region.

The twist. In 2016, Mondelēz dropped the Fairtrade logo in favour of its own in-house sustainability scheme, Cocoa Life. The company argued Cocoa Life reached more farmers and had more flexibility. Critics, including the Fairtrade Foundation and UK pressure groups, argued Mondelēz had weaker independent oversight and lower minimum-price protections. The change generated significant negative publicity and accusations of "greenwashing" — using vague claims of sustainability while removing a trusted, independent certification.

The lesson. The case shows the genuine complexity of ethical business. Fairtrade certification delivers clear, independently-verified benefits to farmers, but it also costs more and restricts supply-chain flexibility. In-house schemes may reach more farmers but lack the credibility of third-party certification. Customers are often confused — many could not tell the difference between the two logos.