Enterprise (0454) | Ethical considerations

Ethical Considerations in Enterprise (0454)

Hello future entrepreneurs! This chapter is all about doing the right thing. When you run an enterprise, your actions affect many people, not just your customers. Ethics are the moral rules and principles that guide whether your business decisions are considered right or wrong.

It’s important to study ethics because IGCSE Enterprise requires you to understand how moral values influence business operations and how an enterprise impacts the world around it (Section 4.4 of the syllabus).

What Are Ethical Considerations?

Imagine you are starting a business. You have to decide if you will follow just the law (your legal obligations) or if you will go further and follow your moral values and beliefs (your ethical considerations).

Ethics vs. Law:
Law is about what you must do (rules and regulations).
Ethics is about what you should do (moral choices).

Key Takeaway

Ethical considerations involve choosing to run an enterprise based on moral values and beliefs, even if it costs more or is more difficult than simply following the law.

1. The Impact of Enterprise on Communities and Society

Every enterprise leaves a footprint, whether small or large. We need to look at both the good things and the bad things an enterprise might do to the local community and wider society.

1.1 Positive Impact on Society

Enterprises can actively improve the lives of people around them. These actions are often ethical choices made by the business owner.

• Supporting community activities: Sponsoring a local school sports team or providing free meeting spaces for local clubs.
• Creating local jobs: Hiring people from the community boosts the local economy.
• Improving infrastructure: A business might fund better roads or public parks near its location.

Did you know? When an enterprise supports a local charity run, they are performing an ethical action that positively impacts the community’s well-being and reputation.

1.2 Negative Impact on Society

Sometimes, enterprise operations can harm the community or the environment. These are negative social impacts that an ethical entrepreneur tries to avoid or minimize.

• Creating pollution: A factory dumping waste into a river or releasing harmful gases into the air. (This is a major syllabus example).
• Noise pollution: Construction work or loud machinery disturbing residents nearby.
• Increased traffic: Large lorries delivering goods can congest local roads.

Analogy: The Ripple Effect

Think of the enterprise as a stone thrown into a pond. The ripples spread out and affect everything nearby. If the stone is good (ethical), the ripples are helpful (supporting the community). If the stone is bad (unethical, like creating pollution), the ripples cause damage.

2. Ethical Choices and Moral Values in Enterprise

Ethical considerations involve adopting specific practices that reflect the moral values of the entrepreneur. The syllabus highlights three key examples of how businesses apply moral values:

2.1 Fair Trade

Definition: Fair Trade is a movement that aims to help producers in developing countries achieve better trading conditions. This often means paying a higher, more stable price for their goods.

The Moral Value: Fairness and equality. An enterprise chooses Fair Trade because they believe the original farmers or producers deserve a better standard of living for their work, even though buying cheaper, non-Fair Trade materials might boost the enterprise's profit.

2.2 Organic Farming

Definition: Organic farming involves producing food without the use of synthetic chemicals, pesticides, or genetically modified organisms (GMOs).

The Moral Value: Environmental stewardship and health protection. An enterprise that chooses organic ingredients is prioritizing the health of consumers and the long-term sustainability of the environment over potentially higher yields and lower costs associated with conventional farming.

2.3 Donating Profits to Charity

Definition: This involves an enterprise giving a fixed percentage (or all) of its profits to a non-profit organisation or charitable cause.

The Moral Value: Compassion and social responsibility. By donating profits, the enterprise shows it values societal welfare alongside financial success. For example, a shoe company might promise to donate one pair of shoes to a child in need for every pair sold.

Memory Trick: FEC

Remember the three main ethical practices using the mnemonic FEC:
F - Fair Trade
E - Environment (Organic farming protects the environment)
C - Charity (Donating profits)

3. The Impact of Ethical Considerations on Enterprise Operation

Making ethical choices is rarely the cheapest or easiest option. These choices directly affect how an enterprise runs its daily operations.

3.1 Financial Impact

• Increased Costs: Ethical materials (like Fair Trade coffee or organic cotton) are usually more expensive than non-ethical alternatives. This increases the cost of goods sold.
• Lower Profits (potentially): If costs are higher, the entrepreneur must decide whether to absorb those costs (lowering profit) or charge customers more (risking lower sales).
• Grants and Subsidies: Governments sometimes offer grants and subsidies to businesses that follow environmentally friendly practices, which can offset some costs.

3.2 Reputation and Marketing Impact

• Better Brand Image: Ethical behaviour builds a strong, positive reputation. Customers often trust and prefer businesses they view as responsible.
• Attracting Customers: Many consumers (especially younger generations) prefer to buy from ethical businesses. This gives the enterprise a competitive advantage.
• Marketing Focus: The enterprise can use its ethical commitments (like being organic) as a key selling point in its marketing communications.

3.3 Human Resource and Production Impact

• Motivated Employees: Staff often feel proud to work for a company with strong moral values, leading to better motivation and productivity.
• Changing Production Methods: If an enterprise stops polluting, it might need to invest in expensive new equipment or change its manufacturing processes entirely.

Common Mistake to Avoid:
Don't confuse legal obligations (like following safety laws) with ethical considerations (like choosing to go above and beyond safety laws, or ensuring all suppliers pay above the legal minimum wage). Ethics are voluntary moral standards.

Key Takeaway

While ethical choices often increase costs and complexity (making operation harder), they are vital for building a good reputation and attracting customers who value social responsibility. This long-term trust can lead to greater success than focusing only on short-term profits.