Business Ethics
An ethical dilemma is not a simple choice between right and wrong. In business, this conflict is often between the duty to maximise profit and the duty to act ethically towards stakeholders.
L7: Ethical Dilemmas in Decision Making
Revision and practice on the ethical dilemmas that can exist in business decision making.
Key vocabulary: Ethics, Profit Maximisation, Stakeholders, Trade-off
Key Concepts
Profit Vs Ethics
At the heart of most business ethical dilemmas is the tension between two main views of a business's purpose.
The Shareholder View (Profit-focused): The business operates for its owners. Its primary legal and moral duty is to maximise profits for its owners, the shareholders. Any action that reduces profit (like paying higher wages than necessary) is seen as a failure of that duty.
The Stakeholder View (Ethics-focused): The business is a social entity with a wider responsibility to all its stakeholders (employees, suppliers, customers, community). A business should aim to make a "fair" profit, but not at the expense of its ethical responsibilities.
Profit Vs Ethics: Examples
Sourcing from Low-Cost Suppliers: Profit — sourcing from the cheapest factory in a low-wage country maximises margins. Ethics — that factory may have poor working conditions or pay workers unfairly; an ethical stance would be to use a more expensive supplier with better standards, but this would reduce profit (e.g. the fast fashion industry).
Using Cheaper, Less Sustainable Materials: Profit — plastic packaging is often cheaper and more durable than sustainable alternatives. Ethics — an ethical stance would be to invest in more expensive, environmentally friendly packaging, but this would increase costs and reduce profit.
Redundancies to Cut Costs: Profit — making staff redundant is often a quick way to cut costs and improve profitability. Ethics — a business has a moral responsibility to its long-serving employees; an ethical stance might be to retrain or redeploy staff instead, even if it is more expensive in the short term.
Why Might a Business Choose Ethics Over Profits?
While prioritising ethics might reduce short-term profit, some argue it can lead to higher long-term profitability.
- Enhanced Brand Reputation: A strong ethical reputation can be a powerful USP, attracting customers and justifying a premium price (e.g. Lush, Patagonia).
- Increased Customer Loyalty: Customers increasingly choose brands whose values they share.
- Attracting & Retaining Talent: The best employees are often drawn to businesses with a strong ethical reputation.
- Risk Management: An ethical approach can help a business avoid damaging and costly scandals (e.g. the Boohoo Leicester factory scandal).
Real-World Case Studies
Patagonia — choosing mission over conventional profit distribution
In September 2022, Patagonia founder Yvon Chouinard transferred 100% of the company's ownership into two new entities: the Patagonia Purpose Trust (which holds voting control) and the Holdfast Collective, a non-profit that receives the company's profits to fund environmental causes. Chouinard stated "Earth is now our only shareholder." This is one of the clearest real examples of a business structurally choosing an ethical/environmental mission over maximising returns to individual owners.
Source: verified via search, September 2026 — CNN, AP and Patagonia's own press release.
The fast fashion supply chain dilemma — Boohoo's Leicester factory scandal
In 2020, an investigation found some UK factories supplying fast fashion retailer Boohoo, based in Leicester, were paying workers well below the minimum wage during COVID-19 lockdowns. This became one of the most cited UK examples of the "sourcing from low-cost suppliers" ethical dilemma covered in this lesson — the pursuit of low-cost, fast production directly clashing with fair treatment of workers, and causing real reputational and financial damage to the business.
Source: widely reported UK press coverage of the 2020 Boohoo/Leicester factory investigation, referenced in the original lesson slides.
Quick Quiz
Pick an answer for instant feedback. Your score is just for you — it isn't saved anywhere.
1. What is the "shareholder view" of a business?
2. True or False: in September 2022, Patagonia's founder sold the company to a rival brand.
3. What caused reputational damage to Boohoo in the case study?
4. True or False: according to the lesson, "guaranteed government tax breaks" is one of the reasons a business might choose ethics over profit.
Score: 0 / 0
Quick Knowledge Check
Short, snappy recall questions — tap to reveal the answer.
What is the shareholder view of a business's purpose? (1 mark)
That its primary duty is to maximise profit for its owners.
What is the stakeholder view of a business's purpose? (1 mark)
That a business has a wider responsibility to everyone affected by it, not just shareholders.
State one reason a business might prioritise ethics over profit. (1 mark)
Any one of: enhanced brand reputation, increased customer loyalty.
Matching Activity
Tap a term, then tap its matching definition.
0 of 4 matched
Sort It: Profit vs Ethics
From the lesson's own Profit vs Ethics examples — tap a choice below, then tap the bucket it belongs in.
💰 Profit-focused
🌱 Ethics-focused
0 of 6 sorted
Key Term Flashcards
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Tap a card to flip it, then rate yourself.
Ethics
The moral principles that guide how a business behaves.
Shareholder view
The idea that a business's primary duty is to maximise profit for its owners.
Stakeholder view
The idea that a business has responsibilities to all groups affected by it, not just shareholders.
Trade-off
Sacrificing one goal (e.g. profit) to achieve another (e.g. ethical standards).
A*/A Stretch
Synoptic link
Connecting to strategy (3.3): Patagonia's ownership restructure is also a strategic decision, not just an ethical one — strong students should be able to discuss it from both angles: as an ethical statement, and as a legal/strategic mechanism to protect the company's mission from being overruled by future owners with different priorities.
Examiner's eye
A common weaker answer treats "being ethical" as automatically good for profit ("it improves reputation so profit goes up"), without acknowledging genuine trade-offs. A Level 3 evaluative answer accepts that ethics can sometimes genuinely cost a business money in the short term, and reasons about whether that cost is worth it given the specific context — rather than assuming ethics and profit always align.
Try This With AI
Before using this: AI tools can get facts or mark scheme details wrong, and quality varies by tool. Always check anything factual against your notes or ask your teacher.
Present me with an ethical dilemma facing a fictional UK retailer choosing between two suppliers. Ask me to argue the case for BOTH the profit-focused and the ethics-focused decision, then ask me to give a final justified recommendation.