6.2 – Environmental and Ethical Issues Flashcards
Social responsibility
When a business decision benefits stakeholders other than shareholders.
Why businesses want to be environment friendly?
Sense of social responsibility that comes from the fact that their activities are contributing to global warming and pollution
Using up scarce non-renewable resources will raise their prices in the future, so businesses won’t use them now
Consumers are becoming socially-aware and are willing to buy only environment friendly products.
Governments, environmental organisations, even the community could take action against the business if they do serious damage to the environment.
Why businesses don’t want to be environment friendly?
It is expensive to reduce and recycle waste for the business. It means that expensive machinery and skilled labour will be required by the business – reducing profits.
Firms will have to increase prices to compensate for the expensive environment-friendly methods used in production- higher prices mean lower demand.
High prices can make firms less competitive in the market and they could lose sales
Businesses claim that it is the government’s duty to clean up pollution
What are Externalities?
A business’ decisions and actions can have significant effects on its stakeholders.
What are the six types of Externalities?
Private Costs: costs paid for by the business for an activity.
Private Benefits: gains for the business resulting from an activity.
External Costs: costs paid for by the rest of the society (other than the business) as a result of the business’ activity.
External Benefits: gains enjoyed by the rest of the society as a result of a business activity.
Social Costs = Private Costs + External Costs
Social Benefits = Private Benefits + External Benefits
What is Sustainable Development?
Development that does not put at risk the living standards of future generations. It means trying to achieve economic growth in a way that does not harm future generations.
Examples of Sustainable Development?
using renewable energy- so that resources are conserved for the future
recycle waste
use fewer resources
develop new environment-friendly products and processes- reduce health and climatic problems for future generations
What are Pressure Groups?
organisations/groups of people who change business (and government) decisions. If a business is seen to behave in a socially irresponsible way, they can conduct consumer boycotts and take other actions.
Ethical Decisions and their importance.
Ethical decisions are based on a moral code. It means ‘doing the right thing’. Taking ethical/’right’ decisions can make the business’ products popular among customers, encourage the government to favour them in any future disputes/demands and avoid pressure group threats.
