Lee Newham of Designed by Good People offered some thoughts:

"If I was financially secure, and if I felt strongly about it, no, I wouldn't take the client. If I wasn't busy and needed the money, I would think about it... within reason.

"I don't think the design of a cigarette pack encourages people to smoke. It only encourages people who already smoke to buy different brands. Over 50% of the front of cigarette packaging says this product will kill you. If someone doesn't get that message, quite frankly, they're beyond help.

"Alcohol causes many more problems than cigarettes, and I've designed lots of alcohol packaging. Where do you draw the line?"

Where indeed? When starting out as a graphic designer, is it necessary to put ethics to one side in order to build a portfolio?

I believe in how the fashion industry twists reality and contributes toward eating disorders in many young women, but I’d be happy to create an identity for a fashion model. Is that hypocritical?

If, at the beginning of design self-employment, you feel bad for working with a cause you don't support, you can always balance the scales by providing a service to local non-profits and giving a little back to the community.

How much do ethics affect your design practices?

If you didn't believe in what a client was offering, would you simply rule out a working relationship? Would you think about it first or does it all depend on your current income? How responsible is your graphic design?

---
Update:
Don't shoot the messenger, on davidthedesigner.com
"The Coca-Cola Conspiracy" and ethical design
Ethics in design (and who you won't work with)