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? • Low ethical standards among individuals – People with poor attitude towards business ethics • 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? • 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 rewardsfor staff members. Examples: bonus pay, promotion
4. What are the important environmental issues facing business? • OZONE DEPLETION – Causing skin cancer and damage to growth of crops • CLIMATE CHANGE – fossil fuels such as oil & gas are increasing global temperatures. This will affect weather patterns such as melting of icecaps, 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.
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. • 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. • 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 advertisingcampaignsshould 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 less a firm pollutes The morea firm pollutes
7. The consequences for a firm meeting it social responsibilities
8. Where is pressure for social responsibility in business coming from? • 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: • 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. • 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. • 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
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. • 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?