EnglandBusinessSyllabus dot point

Why do businesses act ethically and protect the environment, and what does it cost them?

Ethical and environmental considerations: what is meant by ethical behaviour, examples of ethical and unethical practice, why businesses act ethically, how business activity affects the environment, sustainability, and the impact of both on a business.

A focused answer to OCR GCSE Business J204 topic 6.1, covering ethical and unethical business behaviour, why businesses act ethically, the environmental impact of business activity, sustainability, and the effect of both on costs and reputation.

Generated by Claude Opus 4.811 min answerUpdated 2026-06-02

Reviewed by: AI editorial process; not yet individually human-reviewed

Have a quick question? Jump to the Q&A page

Quick answer

Ethical behaviour means doing what is morally right, going beyond the minimum the law requires: paying staff and suppliers fairly, sourcing materials responsibly, being honest with customers and avoiding harm. Unethical behaviour includes paying poverty wages, using child labour in the supply chain, misleading advertising and polluting to cut costs. Businesses act ethically to attract and keep customers, to protect their reputation, to motivate staff and to avoid scandals, though acting ethically often raises costs. Business activity also affects the environment through pollution, waste, the use of scarce resources and contributions to climate change. Sustainability means meeting present needs without harming the ability of future generations to meet theirs, for example by reducing waste, using renewable energy and recycling. Ethical and environmental choices can raise costs but also win customers, command higher prices and protect the brand, so the impact depends on whether the firm's customers value them.

Jump to a section

What this topic is asking
What ethical behaviour means
Ethical and unethical practice
Why businesses act ethically
How business activity affects the environment
Sustainability
The impact on a business
Try this

What this topic is asking

OCR J204 topic 6.1 wants you to explain what ethical behaviour means, to give examples of ethical and unethical practice, to say why businesses act ethically, to describe how business activity affects the environment, to understand sustainability, and to weigh the impact of both on a business. This is the first of the external influences on Paper 2, and questions usually ask you to judge whether an ethical or green choice is worth its cost.

What ethical behaviour means

Ethics is different from the law: something can be legal but still unethical (paying the lowest legal wage while making large profits, for example). Ethical decisions often involve a trade-off with profit, because the ethical choice is frequently the more expensive one.

Ethical and unethical practice

Why businesses act ethically

The drawback is cost: fair wages, responsible sourcing and ethical materials usually cost more, which can squeeze the profit margin or force a price rise.

How business activity affects the environment

Sustainability

Businesses act more sustainably by reducing waste, recycling, using renewable energy, cutting packaging, and designing products to last. Like ethics, sustainability often raises costs in the short term but can save money (less waste, lower energy bills) and win customers in the longer term.

The impact on a business

So whether an ethical or green decision pays off depends on the target market: if its customers value ethics and sustainability and will pay for them, the benefits can outweigh the cost; if they are highly price-sensitive, the added cost may not be recovered.

Weighing the cost and benefit of an ethical decision

Set out the situation

A coffee shop is deciding whether to switch to fair-trade beans. They cost $2$ more per kilogram, and the shop uses $500$ kg a year. The owner believes the switch could raise sales by $3{,}000$ a year and let her promote the shop as ethical.

The added cost

\text{Extra cost} = 2 \times 500 = 1{,}000 \text{ a year}.

Compare cost with benefit

The fair-trade switch costs $1{,}000$ a year more but is expected to raise sales by $3{,}000$ , a net gain of $2{,}000$ , before counting the harder-to-measure boost to reputation and customer loyalty.

Interpret the result

On these figures the switch is worthwhile: the extra $1{,}000$ in costs is more than covered by the $3{,}000$ rise in sales. The judgement still depends on whether the sales rise actually happens, which in turn depends on the shop's customers genuinely caring about fair trade, exactly the kind of evaluation OCR rewards.

Try this

Q1. State one example of unethical business behaviour. [1 mark]

Cue. Any one of paying poverty wages, using child labour, misleading advertising, polluting to cut costs.

Q2. Fair-trade materials cost $3$ more per unit and a business uses $400$ units a year. Calculate the extra annual cost. [2 marks]

Cue. $3 \times 400 = 1{,}200$ .

Exam-style practice questions

Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

OCR J204/02 20193 marksExplain one way a business could behave more ethically. (Paper 2, Section A)

Show worked answer →

A 3-mark AO1 and AO2 question. One way is to pay suppliers a fair price and on time (fair trade), rather than squeezing them for the lowest possible cost. This treats suppliers fairly and secures reliable, good-quality supplies, and customers who value ethics are more likely to buy. One mark for a valid ethical action, up to two more for developing how it works and how it helps the business. Other valid answers include paying staff a fair wage, not testing on animals, and sourcing materials responsibly. A common error is to give an action that is simply legal rather than ethical, since ethics goes beyond the minimum the law requires.

OCR J204/02 20216 marksA clothing business is deciding whether to switch to more sustainable materials, which would raise its costs. Discuss whether the business should make the switch. (Paper 2, Section B)

Show worked answer →

A 6-mark "discuss" needing both sides and a judgement applied to the clothing business. For the switch: sustainable materials reduce environmental harm and appeal to ethically minded customers, which can raise sales, justify a higher price and improve the brand's reputation, helping it stand out. Against: the materials raise costs, which either squeezes the profit margin or forces a price rise that could lose price-sensitive customers, and the benefit depends on customers actually valuing sustainability. Judgement: the right choice depends on the target market; if its customers care about sustainability and will pay more, the switch is likely worthwhile, otherwise the cost may outweigh the gain. Markers reward a balanced argument applied to the business and a supported conclusion.

Related dot points

Sources & how we know this

OCR GCSE Business (J204) specification — OCR (2017)