Ch 28 - Env and ethical issues

Question 1

What is social responsibility

Answer 1

when a business decision benefits stakeholders other than shareholders

Question 2

Define global warming

Answer 2

gradual increase in the overall temperature of the Earth’s atmosphere

Question 3

Arguments that support businesses not caring ab the env

Answer 3

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

Question 4

Arguments aggainst businesses not caring ab the env

Answer 4

Global warming affects everyone

Using scarce resources leaves less for the future generations

Pressure grps can take action to harm businesses brand image

Question 5

What are externalities

Answer 5

The impact the consumption and production of a good or service has on a third party.

Question 6

Who is a third party (externality)

Answer 6

An entity not involved with the consumption or production of a good or service.

Question 7

What are the 2 Types of externalities

Answer 7

External benefits

External costs

Question 8

What is external benefit

Answer 8

Benefit the third party.

Question 9

What is external cost

Answer 9

cost incurred by the third party.

Effects them negatively

Question 10

What is private cost

Answer 10

Cost beared by an individual

Question 11

What is social cost

Answer 11

Beared by society

External cost + private cost

Question 12

Examples of external benefits

Answer 12

Eg: Vaccine, or new mall being built increasing the value of your house.

Question 13

Example of external cost

Answer 13

eg: passive smoking

Question 14

What is sustainable development

Answer 14

development which does not put the living standards of future generations at risk

Question 15

What can businesses do to achieve sustainable development

Answer 15

1 Use renewable energy
2 Recycle waste
3 Use fewer resources - lean production (ch 18)
4 Develop new ‘environmentally friendly’ products and production methods

Question 16

How can society make businesses care ab the env

Answer 16

» consumers
» pressure groups
» government, through legal controls

Question 17

How can consumers make businesses care ab env

Answer 17

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

Question 18

What are pressure groups

Answer 18

groups of people who act together to try to force businesses or governments to adopt certain policies.

Question 19

What can pressure groups try to do

Answer 19

organize consumer boycott

Question 20

define consumer boycott

Answer 20

consumers decide not to buy products from businesses that do not act in a socially responsible way.

Question 21

When are pressure groups likely to succeed

Answer 21

» 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.

Question 22

When are pressure groups unlikely to succeed

Answer 22

» 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.

Question 23

How does legal control impact the env

Answer 23

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.

Question 24

Define ethical issues

Answer 24

Decisions based on the moral code

Question 25

2 extreme views of ethical issues

Answer 25

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.

Question 26

potential benefits of ethical decisions

Answer 26

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

Question 27

Potential drawbacks of ethical decisions

Answer 27

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

Question 28

A few ethical dilemmas a business may facr

Answer 28

» 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