Ch 28 - Env and ethical issues Flashcards
What is social responsibility
when a business decision benefits stakeholders other than shareholders
Define global warming
gradual increase in the overall temperature of the Earth’s atmosphere
Arguments that support businesses not caring ab the env
Its expensive
Would have to increase product’s price - making it uncompetitive, losing sales, etc
If pollution is a problem govts shld clean it up
“not enough proof” that business activvity causes permanent damage to the env
Arguments aggainst businesses not caring ab the env
Global warming affects everyone
Using scarce resources leaves less for the future generations
Pressure grps can take action to harm businesses brand image
What are externalities
The impact the consumption and production of a good or service has on a third party.
Who is a third party (externality)
An entity not involved with the consumption or production of a good or service.
What are the 2 Types of externalities
External benefits
External costs
What is external benefit
Benefit the third party.
What is external cost
cost incurred by the third party.
Effects them negatively
What is private cost
Cost beared by an individual
What is social cost
Beared by society
External cost + private cost
Examples of external benefits
Eg: Vaccine, or new mall being built increasing the value of your house.
Example of external cost
eg: passive smoking
What is sustainable development
development which does not put the living standards of future generations at risk
What can businesses do to achieve sustainable development
1 Use renewable energy
2 Recycle waste
3 Use fewer resources - lean production (ch 18)
4 Develop new ‘environmentally friendly’ products and production methods
How can society make businesses care ab the env
» consumers
» pressure groups
» government, through legal controls
How can consumers make businesses care ab env
Consumers can stop buying products of a business that doesnt care ab the env
When the businesses starts losing sales then theyd take action (changing product or production methods) in order to stop the bleeding
What are pressure groups
groups of people who act together to try to force businesses or governments to adopt certain policies.
What can pressure groups try to do
organize consumer boycott
define consumer boycott
consumers decide not to buy products from businesses that do not act in a socially responsible way.
When are pressure groups likely to succeed
» it has popular public support and receives much media coverage
» consumer boycotts result in much reduced sales for the business
» the group is well organised and financed.
When are pressure groups unlikely to succeed
» what the firm is doing is unpopular but not illegal, such as testing drugs on animals
» the cost to the business of changing its methods is more than the possible cost of poor image and lost sales
» the business sells to other businesses rather than to consumers – public pressure will be less effective.
How does legal control impact the env
Govts can make certain things illegal eg:
» locating in environmentally sensitive areas such as national parks
» dumping waste products into rivers or the sea – though it is sometimes difficult to prove which business is responsible for this
» making products that cannot easily be recycled.
> impose financial penalties such as pollution permits. If they cross the permit then theyd have to pay a fine. Businesses want to make as much profit as they can so this discourages them from doing so.
Define ethical issues
Decisions based on the moral code
2 extreme views of ethical issues
1 ‘As long as a business does not deliberately break the law then any decision it makes is acceptable. Businesses want to make profits, after all.’
2 ‘Even if certain activities are not illegal, it is unethical and therefore wrong to do them despite any increase in profits that might occur.
potential benefits of ethical decisions
Good for brand image - helps increase sales
Long term profit could increase
Some workers and businesses waanted to be linked with “ethical businesses” - Would be easy for them to hire and raise funds
Less risk of legal action against the company
Potential drawbacks of ethical decisions
Could face higher costs - eg hiring an adult vs a child worker
The company’s prices could be set higher than competitors as a result of the ethical decision
Consumers may only be interest in low prices and not care about how products are made - sales would fall
Short term profits may fall
A few ethical dilemmas a business may facr
» take or offer bribes to government officials or people working for other businesses, for example, to gain secret information
» employ child workers, even though it might not be illegal in some countries
» buy in supplies that have led to damage to the environment, for example, wood obtained from cutting down rainforests
» agree to ‘fix high prices’ with competitors
» pay directors large bonuses and owners of businesses large profit payouts at the same time as reducing the workforce
