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Define code of ethics - Leaving Cert Business - Question (C) - 2007
Question (C)
Define code of ethics. Outline the effects on a firm’s costs of meeting its ethical and social responsibilities.
Worked Solution & Example Answer:Define code of ethics - Leaving Cert Business - Question (C) - 2007
Step 1
Define code of ethics.
Answer
A code of ethics is a formal written statement that outlines the expected modes of behavior for a business. It serves as a guideline for how the organization should operate in its dealings with employees, customers, and the broader community. This document helps establish a framework for ethical decision-making and provides clarity on the standards expected of all stakeholders.
Step 2
Outline the effects on a firm's costs of meeting its ethical and social responsibilities.
Answer
Meeting ethical and social responsibilities can have various effects on a firm's costs:
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Increased costs due to:
- Higher wages and improved working conditions for employees, which can initially raise operational costs.
- Purchasing raw materials at fair market prices, leading to potentially higher input costs but fostering sustainable business practices.
- Compliance with legislative requirements, which may incur additional costs for legal and administrative measures.
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Reduced costs due to:
- Positive publicity which can lead to increased customer loyalty and potentially lower marketing costs over time due to a strong brand reputation.
- Fewer protests or social issues arising from ethical business practices, which could save costs associated with public relations crises.
- Use of clean technologies and systems, which may lead to lower long-term operational costs and increased efficiency.
- Adoption of renewable energy sources, potentially lowering energy costs in the future and mitigating risks associated with energy price volatility.