GCSE / Level 2 Revision Notes

FExternal Environment: Business Ethics - introduction

What are business ethics?

Ethics are moral guidelines which govern good behaviour
So behaving ethically is doing what is morally right
Behaving ethically in business is widely regarded as good business practice. 

Ethical principles and standards in business:

• Define acceptable conduct in business
• Should underpin how management make decisions

An important distinction to remember is that behaving ethically is not quite the same thing as behaving lawfully:

• Ethics are about what is right and what is wrong
• Law is about what is lawful and what is unlawful

An ethical decision is one that is both legal and meets the shared ethical standards of the community
Businesses face ethical issues and decisions almost every day – in some industries the issues are very significant.  For example:

• Should businesses profit from problem gambling?
• Should supermarkets sell lager cheaper than bottled water?
• Is ethical shopping a luxury we can’t afford?

You will probably note the link between business ethics and corporate social responsibility (CSR).  The two concepts are closely linked:

• A socially responsible firm should be an ethical firm
• An ethical firm should be socially responsible

However there is also a distinction between the two:

• CSR is about responsibility to all stakeholders and not just shareholders
• Ethics is about morally correct behaviour

How do businesses ensure that its directors, managers and employees act ethically?
A common approach is to implement a code of practice. Ethical codes are increasingly popular – particularly with larger businesses and cover areas such as:

• Corporate social responsibility
• Dealings with customers and supply chain
• Environmental policy & actions
• Rules for personal and corporate integrity