Managers vs Employees — managers may want longer working hours; employees want better work-life balance
Exam tip: When asked how businesses manage conflict, say they must prioritise stakeholders — a business usually prioritises those with most power and those most directly affected by the decision.
Corporate Social Responsibility
What is CSR?
Definition
Corporate Social Responsibility (CSR) is a business's commitment to behave ethically and contribute to economic development while improving the quality of life of its workforce, community and society.
CSR Examples
Fair trade sourcing
Reducing carbon emissions
Paying the living wage
Charitable donations
Supporting local suppliers
Ethical marketing practices
Why businesses adopt CSR
Improves brand image and reputation
Attracts ethical consumers
Easier to recruit good employees
Reduces risk of regulation/fines
Long-term sustainability
Evaluation
CSR — Benefits vs Costs
Benefits of CSR
Stronger brand loyalty from ethically-minded consumers
Better employee motivation and retention
Reduced risk of legal penalties
Positive media coverage and PR
May justify a premium price
Costs of CSR
Higher production costs (e.g. fair trade supplies)
Reduces short-term profit
Time spent on reporting and compliance
Risk of "greenwashing" accusations if not genuine
May conflict with shareholder interests
Business Ethics
Acting Ethically
Definition
Business ethics refers to applying moral principles to business decisions — doing what is right, even when not legally required to.
Honest advertising — not making false or misleading claims about products
Fair treatment of workers — beyond legal minimums, e.g. no zero-hours contracts, flexible working
Environmental responsibility — reducing waste and emissions beyond regulatory requirements
Supply chain ethics — no use of child or forced labour in the supply chain
Key distinction: Laws set the minimum. Ethics are about going further than the law requires.
Practice Question 1 of 3
A supermarket chain wants to cut costs by reducing employee wages. Its shareholders support this to increase profit. Which stakeholder group would most directly oppose this decision?
ASuppliers
BEmployees
CGovernment
DCustomers
Correct: B.Employees would most directly oppose wage cuts as it directly reduces their income and living standards. This is a classic stakeholder conflict between shareholders (who want cost cuts to boost profit) and employees (who want fair pay). Customers and suppliers are less directly affected by this internal pay decision.
Practice Question 2 of 3
A coffee company sources all its beans from Fairtrade-certified farms, pays above the legal minimum wage and donates 1% of profits to environmental charities. This is best described as:
AA cost-cutting strategy to reduce supply chain expenses
BCorporate Social Responsibility (CSR)
CCompliance with consumer protection law
DA franchise model
Correct: B. All three actions — Fairtrade sourcing, above-minimum wages, and charitable giving — are examples of CSR. The company is going beyond legal requirements to act ethically and benefit wider stakeholders (farmers, workers, environment). This is not legally required, so it's not mere compliance.
Practice Question 3 of 3
Analyse why a business might face a conflict between the interests of its shareholders and its local community when deciding to build a new factory.
AShareholders want lower costs; the community wants the factory to be built quickly
BShareholders want profit from the factory; the community may oppose noise, traffic and pollution
CShareholders want jobs created; the community wants the building left empty
DShareholders oppose the factory; the community wants the extra employment
Correct: B. Shareholders benefit from the factory increasing output and profit. However, the local community may oppose it due to increased noise, traffic congestion, and pollution. This is a classic stakeholder conflict — the business must weigh commercial gain against its social impact and reputation in the local area.
Key Takeaways
What to Remember
Stakeholders are anyone with an interest in the business — internal (owners, employees) or external (customers, community, government)
Different stakeholders have different and often conflicting interests — businesses must prioritise and balance them
CSR goes beyond legal requirements — it can boost reputation and loyalty but has costs
Ethics means acting morally even when not required by law — it builds long-term trust
In the exam, always apply to context — name specific stakeholders and their specific interests