IGCSE Business: Business and ethical issues and Pressure groups (Cambridge 0264)

This guide covers sections 6.4 (Business and ethical issues) and 6.5 (Pressure groups) of the Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029. Questions on both papers are based on all the subject content, so this topic can appear in a short answer, a data response or the case study. Use it with the revision notes and the practice questions. The course hub, the printable checklist and the free diagnostics show what to do next.

All businesses, groups and figures below are invented. Money is in dollars, and amounts are written as plain numbers.

What this guide covers

Syllabus point	What you must be able to do
6.4.1 Ethical issues which may affect businesses	Recognise issues such as child labour, paying fair wages to employees, paying fair prices to suppliers and using suppliers who do not damage the environment
6.4.1 How businesses may respond	Describe and explain the actions a business can take
6.4.1 Advantages and disadvantages of a business being ethical	Weigh the benefits against the costs
6.5.1 The role of pressure groups	Explain how pressure groups can influence business decisions

The syllabus gives these as examples, so a case study may present another ethical issue. The method is the same: name the issue, say who is affected, then say how the business could respond and what that would cost and gain.

Related pages: legal controls show where the law ends and ethical choice begins, and business and the international economy covers multinational companies, whose supply chains often raise ethical questions.

6.4.1 Ethical issues

An ethical issue is a situation where a business must choose between what is right and what is cheapest or most profitable. This is a standard way of putting it, not a quotation. An ethical choice goes beyond what the law requires, although in some places the law already forbids the worst practices.

The four examples in the syllabus are:

• Child labour. Children are employed in work that is unsuitable for their age or that stops them going to school. A business may not employ children itself, yet it can still be linked to the practice if one of its suppliers does.
• Paying fair wages to employees. A wage is fair if it reflects the work done and lets the employee live decently. A business can pay the lowest wage it can find, or it can pay more.
• Paying fair prices to suppliers. A large buyer can force a small supplier to accept a price that barely covers the supplier’s costs. A fair price lets the supplier pay its own workers properly and stay in business.
• Using suppliers who do not damage the environment. A business may choose a cheaper supplier whose factory pollutes, or a dearer one that uses cleaner methods. The business is then partly responsible for the damage. The environmental effects of a business’s own activity are covered in section 6.3.

Ethical issues affect different stakeholders. Employees, suppliers, customers, the local community and owners can all gain or lose from the same decision.

Worked example 1: a fair wage

Hallowfen Garments makes 200,000 shirts a year and sells them at 9 each. It currently pays 0.90 in wages per shirt. Other variable costs are 3.10 per shirt. Fixed costs are 400,000 a year. Campaigners say the wage is too low to live on, and the owner considers raising it to 1.20 per shirt.

Step 1: sales revenue = 200,000 × 9 = 1,800,000.

Step 2: current profit = 1,800,000 − (0.90 + 3.10) × 200,000 − 400,000 = 1,800,000 − 800,000 − 400,000 = 600,000.

Step 3: the wage rise is 0.30 per shirt, which is 33.3% more. Extra wage cost = 0.30 × 200,000 = 60,000.

Step 4: new profit = 600,000 − 60,000 = 540,000, a fall of 10%. Profit as a percentage of sales revenue falls from 33.3% to 30.0%.

Step 5: Hallowfen could raise the price by 3% to 9.27. If sales stay at 200,000 shirts, extra revenue is 54,000 and profit is 594,000. The risk is that some customers buy elsewhere at the higher price.

The decision is not just arithmetic. Better-paid machinists may stay longer, so recruitment costs may fall. The owner must weigh a certain cost of 60,000 against benefits that are harder to measure.

How businesses may respond to ethical issues

A business can respond in several ways. The best answer matches the response to the issue in the question.

Response	What it involves	Likely effect
Do the legal minimum only	Obey the law and go no further	Lowest cost, but the business is open to criticism
Adopt a written ethical policy	Set rules on wages, working conditions and sourcing	Gives staff and managers clear guidance
Check suppliers	Inspect suppliers and drop those that break the policy	Cuts the risk of child labour or pollution in the supply chain, but costs time and money
Pay higher wages	Raise pay above the minimum it could get away with	Higher labour cost, better motivation
Pay fair prices to suppliers	Agree prices that cover the supplier’s costs	Higher material cost, more reliable supply
Change to ethical suppliers or materials	Switch to suppliers who meet the policy	May raise costs, may open the way to ethical promotion
Tell customers	Publicise the policy in labels and advertising	Builds reputation, but claims must be true
Respond to complaints	Meet a pressure group, explain, or change practice	Protects reputation

A business can also ignore the issue or deny it. That can save money in the short run. It can also lead to bad publicity, a loss of customers and pressure from groups outside the business.

Worked example 2: a fair price to a supplier

Brindlewick Nuts buys 150 tonnes of cashews a year from a small farming cooperative at 2,000 a tonne. The cooperative says the price does not cover its costs, and Brindlewick agrees to pay 2,300 a tonne. It sells 300,000 packs a year at 4.50 each. Variable cost is 2.70 per pack, including the cashews.

Step 1: old cashew cost = 150 × 2,000 = 300,000, which is 1.00 per pack.

Step 2: new cashew cost = 150 × 2,300 = 345,000, which is 1.15 per pack. The extra cost is 45,000, a rise of 15%.

Step 3: contribution per pack falls from 4.50 − 2.70 = 1.80 to 1.65.

Step 4: total contribution was 300,000 × 1.80 = 540,000. To earn the same, Brindlewick needs 540,000 ÷ 1.65 = 327,273 packs. That is about 9.1% more sales.

Brindlewick could try to win these sales by telling customers its cashews are bought at fair prices. If customers do not respond, profit falls by 45,000. A fair price may also make supply more reliable, because the cooperative is more likely to keep trading.

Advantages and disadvantages of being ethical

Advantages	Disadvantages
Better reputation, which may increase sales	Higher costs, such as wages and supplier prices
Customers who care about ethics may be more loyal	Higher prices may lose price-sensitive customers
Employees may be more motivated and stay longer	Lower profit, at least in the short run
Easier to recruit good staff	Time and cost of checking suppliers
Less risk of bad publicity and of campaigns against the business	Less ethical rivals may keep their costs and prices lower
Suppliers may be more reliable and co-operative	Benefits may be slow or hard to prove
Possibly a higher price for an ethical product	A claim that turns out to be untrue can damage reputation

Which side wins depends on the business. A well-known clothing label has more to lose from a scandal. A business selling a basic product to customers who only look at price may find the costs of being ethical hard to recover. For a “justify” or “consider” question, state the effect, say how large it could be, and reach a judgement.

6.5.1 The role of pressure groups

A pressure group is an organised group of people who campaign to influence the decisions of businesses or governments. This is the usual definition and not a quotation from the syllabus. The groups may campaign for the environment, workers’ rights, consumers or a local community. Their members are usually not owners or employees of the business they target.

A pressure group can influence a business by:

• publicising its concerns through newspapers, television and social media, so that the public hears about the issue
• asking customers to stop buying from the business (a boycott), or to choose a rival
• organising petitions and protests, which draw attention and can be filmed and shared
• lobbying the government to change the law, which then changes what every business in the market must do (see legal controls for how law shapes decisions)
• meeting managers to negotiate changes, and then recognising the business when it improves

Pressure groups do not only attack. A group may praise a business which improves its practice, and that praise can be used in promotion.

How much influence a group has depends on:

• how much support it has from the public and the media
• how much the business depends on its reputation, since a well-known brand has more to lose
• whether customers can easily switch to a rival
• whether the demands are affordable and clear
• whether the group can cause a loss of sales or a change in the law

A pressure group has no power to force a business to change. It works by affecting the things that matter to the business: sales, reputation and the law.

Worked example 3: a campaign against a dye works

Riverbank Watch is a local group. It says that Vessarine Dyeworks, which makes fabric dye, is pouring waste into a river. It begins a social media campaign and asks people to boycott fabrics made with Vessarine dyes.

Vessarine has sales revenue of 2,500,000 a year and earns a contribution of 40% on each sale. It expects the boycott to cut sales by 12%.

Step 1: lost revenue = 12% × 2,500,000 = 300,000.

Step 2: lost contribution = 40% × 300,000 = 120,000 a year.

Step 3: a filter system would cost 90,000 and last five years, which is 18,000 a year, plus 5,000 a year in running costs. The yearly cost is 23,000.

The cost of responding (23,000 a year) is much smaller than the lost contribution (120,000 a year) if the boycott lasts. The business also avoids the risk that the group asks the government to tighten the law. Against this, the boycott might fade, or the campaign may not reach Vessarine’s customers. A sensible judgement is that Vessarine should respond, and should tell people what it has done.

Common errors

• Saying a business must be ethical because the law says so. Ethics goes beyond the law.
• Writing only that being ethical is “good for the image”. Say why: more customers, more loyalty, fewer campaigns.
• Giving only advantages. For a “justify” question, weigh costs as well.
• Saying a pressure group can close a business down or force it to act. It can only influence.
• Forgetting the stimulus. Use the product, country and figures in the case study.

Next steps

Test yourself with the practice questions, then recheck the facts in the revision notes. The free diagnostics show which other topics need work.

Frequently asked questions

What ethical issues are named in the IGCSE Business 0264 syllabus? The syllabus gives four examples: child labour, paying fair wages to employees, paying fair prices to suppliers, and using suppliers who do not damage the environment. A case study may present another ethical issue.

What are the advantages and disadvantages of being ethical? Being ethical can improve reputation, raise sales and build customer loyalty. It can also raise costs, such as wages and supplier prices, and higher prices may lose price-sensitive customers.

What is a pressure group? A pressure group is an organized group of people who campaign to influence the decisions of businesses or government. Groups can also praise businesses that improve their practices.

What is a boycott? A boycott is when a pressure group asks customers to stop buying from a business, or to choose a rival instead, in order to pressure it into changing.

Official syllabus

Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029, published by Cambridge International, sections 6.4 and 6.5.