Transcript Chapter 23 – Conflict between Business & Society – Powerpoint

Chap 23…….
Conflict between
business and society
1. What is business social
responsibility?
Business social responsibility:
This refers to the obligation that every
business has to respect the interests of all
its stakeholders.
Business ethics:
This refers to the moral rules that should guide
people working in business. It helps people in
business to decide whether a decision is right
or wrong regardless of whether it is
profitable or not.
2. Why do some firms engage
in an unethical manner?
1. Low ethical standards among
individuals – People with poor attitude
towards business ethics
2. Fear – employees who are working in a
fearful atmosphere and under the
threat of punishment such as
demotion, job losses, pay cuts may go
to desperate lengths to survive in the
workplace.
3. “Anything Goes” attitude – Companies can
have a slack attitude towards pollutions, tax
payments, health and safety procedures etc
in an effort to cut corners and make a
profit.
4. Greed – companies that drive staff members
to achieve high levels of sales output and
profit margins can be guilty of promoting
greed over good business ethics
3. What are the
characteristics of a socially
responsible business?
1. Promoting ethical awareness and sensitivity
among staff
This can be achieved through developing an
ethical code for the firm.
An ethical code “is a document setting out
guidelines for employees when making
decisions”
In some businesses this code forms part of the
employment contract. Breaking the code of
ethics can provide legally acceptable grounds
for a dismissal from a job.
When new staff members join a new company
the code of ethics should clearly be
communicated in the induction process.
Quiet reminders (in newsletters, meetings,
notice boards) is an effective way of
promoting the necessity to adhere to the
standard of practices.
This positive ethical promotion of business
practices can be recognised by top
management through rewards for staff
members.
Examples: bonus pay, promotion
2. Promoting Openness with stakeholders
Social responsibility
Employees
•No discrimination/harassment
•Fair wages & promotion system
•Safe work conditions
Investors
•Open and honest financial information
•No dishonest business practices
•No excessive salaries / perks paid to top
management
(FAS officials 2008)
Society
•
•
Promote local produce to sustain local jobs
Promote green products to protect
environment
Social responsibility
Suppliers
•Pay bills on time
•Honour contracts
•Fair negotiations
Customers • Truthful and accurate advertising
• Products that are safe and reliable
• Complaints must be dealt with speedily
Govt
•
•
•
Pay correct tax measures
Grants given should be used for correct
purpose
Local, national and EU law obeyed
4. What are the important
environmental issues facing business?
1. OZONE DEPLETION – Causing skin cancer and
damage to growth of crops
2. CLIMATE CHANGE – fossil fuels such as oil &
gas are increasing global temperatures. This will
affect weather patterns such as melting of ice
caps, floods, storms & droughts.
NOTE: DEC 2009 severe floods in many regions
JAN 2010 4 Weeks of arctic like conditions
3. AIR POLLUTION – emissions from factories,
vehicles are releasing cancer causing chemicals
into the atmosphere. Acid rain (car exhausts
fumes and the burning of fossil fuels) mixed
with rainwater is killing forests and lakes.
4. WATER POLLUTION – slurry from farmyards and
materials from industries and households are dumped
into rivers, lakes and seas. This can contaminate local
drinking water and cause mass killing of fish.
5. WASTE DISPOSAL – industrial waste dumped on land
or at sea will eventually end up contaminating the soil
and water. Throwaway products are marketed for
convenience with excess packaging which are filling up
our landfill sites. This situation is not sustainable.
6. DESTRUCTION OF NATURAL RESOURCES –
destruction of our natural resources including natural
habitats (forests, bogs, rivers, coast lines). This has
lead to certain plant and animal life being extinct.
7. DWINDLING SUPPLIES OF FOSSIL FUELS – Fossil
fuels such as oil and gas are running out. These will be
exhausted in the future decades unless they are
conserved.
5. What are the characteristics of an
environmentally friendly business
Environmental Audits – is an independent study of
the impact of the business on the environment. It
focuses on what is produced, how it is produced
and how it is marketed.
What is produced?
The goods are supposed to be durable and capable
of lasting. The goods should be easy to re-use,
repair or recycle.
Example:
BMW are now designing their cars so that they are
easily recycled.
How it is produced?
The production of goods should be in suitable
locations, they should be away from environmental
sensitive areas as much as possible. Companies
should be conscious of the use of energy and try to
use renewable sources of energy (wind, water, solar
power).
The SEI (sustainable energy Ireland) offers grant
aid to customers who install a renewable energy
source to there house, business etc. The future
may see the government offer a tax break
incentive for customers WHO implement this
environmentally friendly source rather than use
other traditional methods such as oil, gas etc.
Note: November 2008- Belmullet/Erris Region in north
County Mayo being discussed as potentially the new
headquarters of Sustainable Energy in Ireland (SEI)
Businesses should eliminate pollution and waste as
much as possible. Waste such as paper, glass,
metals, foods etc should recycled or re used.
HOW it is marketed?
Unnecessary packaging should be promoted.
Plastic carrier bags should be re used for future
customer use.
Example: The BODY SHOP encourage customers
to provide their own bags.
Any advertising campaigns should be promoting
goods & services that are not be harmful to the
environment.
6. What are the effects on a firm’s costs
of acting in a socially responsible?
Private costs – these are incurred by a firm when
producing a good, such as raw materials, wages,
advertising.
Social costs – these are costs borne by society as a
result of a firms activities, such as pollution,
medical bills, illness.
In recent years governments from around the world
have tried to implement various green taxes. This
should prevent further irresponsible behaviour
from firms that are excessive, wasteful and
polluting the environment.
How green taxes work:
The more a firm
pollutes
1. Higher green
2. Higher costs
taxes imposed
4. Fall in sales
& profits
3. Less
competitive
prices
The less a firm
pollutes
1. Lower green
taxes imposed
2. Lower costs
4. Rise in sales
& profits
3. More
competitive
prices
7. The consequences for a firm
meeting it social responsibilities
Positives Consequences
Production
Business will offer fair prices to customers,
suppliers. This will help customers become
remain loyal and as a result in increase levels of
productions for the company. Raw materials,
energy use and waste can help firms reduce
production costs.
Marketing
Ethical firms can successfully market their
goods by emphasising their reputation and
quality rather than fancy packaging or flashy
advertising. Throughout the years 2000-2010
environmentally based businesses and products
became a major growth sector.
The mindset of the customers was of good
practices so they followed the business of similar
beliefs. They became more loyal as a result.
Human
Responsible firms find it easier to employ high
resources quality staff. This can benefit the business
Management
hugely a these staff who are respected, treated
well and proud of their company. They will repay
the company through hard work, good ideas etc.
The risk of industrial unrest or strike will be
minimised.
Environmental audits can reveal that huge savings
can be made for businesses that responsible. They
are more likely to receive finance from banks,
govt grants etc.
Ethical investors may see this as a company to be
financially connected with.
Negative consequences
Price of raw material can rise. Installing and
operating new equipment to reduce pollution can
be expensive.
Marketing As a result of the above will lead to the increases
in the price of goods to rise. This can initially
lead to poor sales and a drop in profit levels.
Human
Treating employees with such good practices can
resources take time and add to labour costs.
Example: Proper training, pay and conditions.
Production
Management
Management must devote time to auditing the
firms social and environmental performance
8. Where is pressure for social
responsibility in business coming from?
1. EMPLOYEES - Trade unions activities, the govt and EU
legislation protecting worker rights and standards of
education among staff has lead to the increased
responsibility of businesses towards their employees. High
quality staff prefer to work for more responsible
employees.
Examples of employees legislation:
2. INVESTORS – many banks and other financial
institutions have special green investment funds only
available for lending to and investing in green companies.
Firms that do not treat their shareholders fairly will find
if difficult to seek further investment. Their reputation
will be tarnished as a result.
3. SUPPLIERS – business organisations such as IBEC and
ISME have drawn up voluntary codes of conduct unethical
firms for when dealing with suppliers. It details issues
such as payment on time. These actions are supported by
govt rules protecting the supplier.
4. PRESSURE GROUPS – example of this would be CAI –
CONSUMER ASSOCIATION OF IRELAND. They
campaign for higher standards of green products for our
customers. The CAI pressure the govt to put in place laws
that aim to protect customers from exploitation.
A consumer boycott is a refusal by potential customers to
buy a firm’s products and services in protest at some
issue.
5. COMPETITORS – firms that are irresponsible can face
commercial pressure from competitors who can use their
superior reputation for honesty to win sales. EXAMPLE –
VOLVO car safety
6. SOCIETY – local people can voice their concern over
any damage that may be done to natural environment
through pollution. This may persuade poor practicing
companies to change the business habits.
Example: US Chemical Firm locating in Golden Vale in Co.
Cork.
7. GOVERNMENT – NEW environmental legislation is
being pushed through to force Irish businesses become
more responsible. Firms breaking these laws can be
suffer large fines.
Example: Farmers in IRELAND that are seen to polluting
the local rivers, lakes etc have been heavily fined.
Firms that do not improve their environmental
performance will find themselves forced to change by
law.
Key definitions
•
•
•
•
•
Whistleblower
Consumer boycott
Transparency
Social audit
Sustainable development
LC Exam Question
2008 – Q2 – (B)
20 MARKS
“As global warming becomes a reality for the
world, there is an increasing concern for the
protection of the environment”
Illustrate how businesses in Ireland today
could become more environmentally
responsible.
LC Exam Question
2000 – Q2 – (b)
15 MARKS
Illustrate how environmental issues can
have an impact on business?