Unit 3 Topic 6
Unit 3 Topic 6
Unit 3 Topic 6
Learning outcomes
After studying this topic, you will be able to:
■ explain what the term ‘ethics’ means in the context of business
conduct;
■ explain the impact of ethical and unethical business actions on society;
■ explain the consequences of ethical and unethical conduct on business
revenues.
Introduction
What do the following companies have in common? Take a few moments to
think.
The answer is that, in recent years, these companies have each been
accused of unethical behaviour. They have been accused of business
activities that are allegedly:
■ bad for the environment; or
■ bad for employees; or
■ bad for customers; or
■ bad for local communities; or
■ bad for the wider society.
Everyone can agree, however, that there is a simple principle at the heart
of ethical behaviour: do no harm. If all businesses made sure that none of
their activities or behaviours caused any harm or damage to anyone or
anything, they could all be classed as ethical businesses.
In practice, many businesses (and individuals within them) engage in
unethical behaviours that cause harm. In some cases this may be due to
ignorance or negligence – ie they are not aware of the damage being done
by their activities – but at other times, businesses may be aware that a
particular activity is causing harm but keep doing it anyway, in the hope
that no one will notice.
Discuss
Do you think businesses that have been criticised for paying
their staff low wages should increase the price of the goods
they sell so that they can pay higher wages?
6.2.2 Discrimination
Unfairly discriminating against certain groups of people is unethical and
illegal. For example, employers must not discriminate against women,
ethnic minorities or people with disabilities, by paying them lower wages,
offering fewer employee benefits (such as sick pay or pension
contributions), or limiting their chances of promotion. Ethical employment
practices, by contrast, try to ensure that:
■ every employee is treated fairly and equally;
■ all workers get the same pay for work of equal value; and
■ all employees have the same chance to get promoted.
In the UK, laws passed in the 1970s gave employers a legal obligation to
treat men and women fairly, equally and without discrimination. Other laws
extended this obligation to cover discrimination on the grounds of race or
religion. The Equality Act 2010 is an all-encompassing anti-discrimination
law, which replaced all previous individual laws covering this issue. The
2010 Act made it illegal to discriminate against anyone because of their:
■ gender;
■ age;
■ marital status;
■ being pregnant or having a dependent child;
■ physical or mental disability;
■ race, including colour, nationality, ethnic or national origin;
■ religion, belief, or lack of religious belief;
■ sexual orientation.
6.2.3.1 Fairtrade
Fairtrade is a term used in relation to this area of
ethical behaviour. It refers to business operations that go
a step beyond trading fairly. You may have seen the Fairtrade logo
on a variety of products (for example on tea, coffee or clothes). Businesses
are authorised by the Fairtrade Foundation to display the logo on their
products if they meet certain standards of behaviour. Some of these standards
are shown in Figure 6.1.
Discuss
Some people argue that making companies in developing
countries pay fair wages and offer good working conditions
can put those companies out of business, because they can
no longer make a profit. It can be argued that workers in
those countries are better off having a job – even if pay and
conditions are very poor – than not having a job at all.
What are the arguments for and against this point of view?
Unhealthy food and drink have a wider societal impact, as the National
Health Service (NHS) spends money to treat patients whose illnesses have
been caused by a bad diet or alcohol abuse. A cost to the economy is the
number of working days lost due to health problems caused by obesity or
alcohol abuse.
Discuss
When a big supermarket chain
announces plans to build a new
out-of-town superstore, a local
protest group often launches a
campaign to stop the super-
market from getting planning
permission.
Why do the protesters not want
a new superstore in their area?
Would you join a protest group if a supermarket wanted to
open a new store near you?
system in a way that was not intended. Starbucks, Google and Amazon are
just three high-profile global companies to have been accused of not paying
the tax they should on their UK profits.
Regular Fairtrade
Unit price (per bunch of six bananas) £1.00 £1.50
Number sold (demand) 500 300
Total revenue (number sold x unit price) £500 £450
Unit cost (per bunch) £0.50 £1.00
Total cost (number sold x unit cost) £250 £300
Profit (total revenue – total costs) £250 £150
Discuss
Are you prepared to pay extra for Fairtrade-certified
products? Why or why not?
Summary
Finally, we can recap what we have learned in this topic.
We have learned that:
■ ethics is a set of moral values, which we use to judge whether business
activities are good or bad, right or wrong;
■ both ethical and unethical business actions can have a significant impact
(positive and negative) on people and society;
■ ethical and unethical conduct also has positive and negative
consequences for business revenues and profits.
Key terms
Business ethics – whether businesses make an effort to ‘do no harm’ in
their operations and activities.
Corporate tax avoidance – legal but unethical schemes that reduce a
business’s tax liability.
Ethics – moral values that determine whether we perceive business
activities to be acceptable or unacceptable.
Fairtrade – trading fairly to an agreed set of standards, and helping to
eliminate economic inequality and injustice around the world.
Global warming – the damaging increase in average global temperatures
caused by CO2 emissions.
Multinational company – a business that operates internationally, with
factories and offices, and data processing, online and telephone sales
centres in more than one country. Also known as a ‘transnational’
business.
Pressure group – an independent, not-for-profit organisation that
campaigns to influence government, business and individual behaviour
on specific issues.
Sustainability – the ability of the world economy to continue growing
without using up available natural resources or destroying the
environment.
Sweatshop factory – a factory where workers are made to work up to ten
hours a day in unpleasant and often unsafe conditions, for very low (ie
poverty) wages.
Trading fairly – paying fair prices for produce and products from the
people who grow or make them.
Transparency – making sure customers are fully informed of all the
terms and conditions of sale, and of all the costs they may have to pay,
when purchasing a product or service.
Further information:
Business ethics – www.bbc.co.uk/bitesize/guides/z9r4wmn/revision/1
Corporate tax avoidance –
https://www.bbc.co.uk/news/business-20580545
Discrimination –
www.gov.uk/discrimination-your-rights
Fairtrade – www.fairtrade.org.uk/What-is-Fairtrade
Global warming –
https://www.wwf.org.uk/what-we-do/climate-change-and-energy
International standards for ethical business practices –
www.ilo.org/declaration/lang--en/index.htm and
https://www.unglobalcompact.org/what-is-gc/mission/principles
Pressure groups –
https://www.bbc.com/bitesize/clips/zpfmpv4
https://www.bbc.co.uk/bitesize/clips/zhxpvcw