23-Social Responsibility Flashcards
Social Responsibility
a business’s duty to treat all those it comes in contact with honestly and fairly and in a way that is acceptable to society. The business has a obligation to make a positive contribution to the lives of people and the environment.
Example: Vodafone gives time off to employees to do charity work and making text to speech phones for blind people
SR: Investor
provides the capital to set up the business. Business has a responsibility to its investors to give honest information about financial performance so they can make informed decisions.
Example: Worldcom deliberately falsified its account to present a good picture of the business so people would invest even though the business was doing badly.
SR:Employees
Employee: work for the business and carry out task to the best of their ability. Business has a responsibility to its employees to pay a fair wage, safe working conditions and no discrimination.
Example: Lidl and Aldi pay their employees the living wage €11.70 instead of the minimum wage €9.55 to improve their standard of living
SR:Suppliers
Suppliers: provide the business with stock e.g. raw materials they need for business. Business has a responsibility to its suppliers to pay a fair wage and on time.
Example: Body shop buys ingredients from disadvantaged suppliers from the developing world to help develop their economy.
SR:Customers
Customers: people who buy the goods and services, thus providing profit. Business has a responsibility to its customers to provide good quality products at a reasonable price and advertise to them in an honest way.
Example: Nurofen were found to have charged customer double the price for specific pain relief products e.g. target back pain, migraines, tension headaches compared to its standard pain killer even though same ingredients. €3.5m compensation
SR:Government
Government: provides businesses with grants and improves infrastructure which helps a business succeed. Business has a responsibility to the government to follow laws and pay taxes in full and on time.
Example: National Irish Bank advised customers to set up non-resident bank accounts to encourage them to evade tax
SR:Local Community
Local Community: consists of all those people living in the area around the business. Business has a responsibility to protect the local environment and buying from local suppliers.
Example: IKEA hired people from the local Ballymun community
Advantages of Being Socially Responsible
Increased Sales eg Body Shop
Reduced costs: behave properly now and prevent being sued in future for bad business practices. eg Volkswagen 55bn for installing software to trick testers
Easier to attract and retain employees:reduces recruitment costs and increases productivity. eg Google one of top 50
Easier to raise capital:Investors care where the capital they provide goes. They do not want their money funding illegal or harmful activities. eg.Green Investment Funds
Business ethics
a set of moral principles that guide businesspeople regarding how they should act in business situations. It tells business people what is the right thing to do in a business situation.
Ethical business practice
conducting business according to a set of moral principles. This ensures the business behaves in an honest, fair and legal manner.
Fairtrade
is an organisation that promotes ethical trade with countries in the developing world by ensuring that producers and workers get a fair wage and better conditions
How to improve business ethics
1)Managers lead by example
Set a good example themselves. Disapprove unethical behavior and reward ethical behaviour
Example: Skysports sexism
2)Managers encourage employees to report others
Managers need to be made aware of unethical behaviour and encourage employees to whistleblow if they witness unethical behaviour.
Example: Vodafone whistleblowing mechanism Speak Up.
3)Managers draw up a code of ethics
a formal written document that sets out the rules for employees and managers to follow when making decisions. This ensures they do the right thing. This should be part of staff training.
Example: Employees keep all information confidential and treat customers with respect.
4)Ethical Audits
business assessed by an independent outsider called an ethical auditor. They examine the business and report on how the business is managed, suppliers and treating of employees and consumers.
Example: IKEA were investigated about using prisoners to build furniture
Benefits of a code of ethics
Improved reputation
Employee guidance:standards expected from employees and actions can be held accountable and can be dismissed.
Encourages ethical behaviour leading to less theft and fraud.
Challenges of a code of ethics
Resistance to change: hard to introduce ethics when there is already a business culture established. It may take a while for staff to support it.
Enforcement: must impose sanctions if code is violated. Ensures that it is respected and followed by all staff members. However sanctions could cause industrial relations issues
Training: trained to ensure proper understanding. This will increase business costs.
ER:Climate Change
Climate Change
Businesses using fossil fuels leads to greenhouse gases which lead to global warming (floods/adverse weather). Business should be responsible by using fossil fuels efficiently and switching to renewable resources e.g. wind/solar power.
Example: Microsoft has signed a 15-year power purchase agreement (PPA) to purchase 100 percent of the wind energy from a 37-megawatt wind farm in County Kerry.
