Ch2: Purpose & Context of Business: Sustainability

Question 1

What is a organisation’s purpose?

Answer 1

• The fundamental reason for the organisation’s existence
• Most important objective that determines other secondary business objectives
• Secondary objectives then fulfil the purpose

Question 2

What shifts in focus need to happen to become more sustainable?

Answer 2

• Shift from short-term returns perspective, to long-term returns perspective
• Shift from shareholder-profit only perspective to value creation for a broader group of stakeholders

Question 3

What are the 4 types of stakeholders?

Answer 3

• Crowd- low interest & low power (Seen as potential stakeholders not worth management time and effort, just monitor them)
• Subjects- High interest & low power (Can be worth increasing their power or neutralising them depending on whether their view of the company is positive or negative) (e.g: specialised consumer groups)
• Context setters- Low Interest & High Power (Must be managed carefully, ideally their interest should be raised so they become players) (e.g: government regulation body)
• Players: High interest & high power- Deserve constant managerial attention, significant stakeholders (e.g: labour unions)

Question 4

What are socio-ecological risks?

Answer 4

• Risks faced by an organisation due to its changing socio-ecological context.
• Social: By creating shared value for all stakeholders, business improves its reputation, employee morale & productivity, and improves general economic conditions which improves ability to do business with suppliers & customers. Also reduces risk of protests/intentional sabotage by employees
• Ecological: By improving the environment, risk of natural disasters is reduced which improves economic prosperity and thus further reduces social risks and increases profits

Question 5

What are the 3 ways of creating shared value?

Answer 5

• Redefining productivity in the value-chain- looking for ways to make production, transport & logistics more efficient lowers costs as well as reducing environmental impact (e.g: more efficient water & electricity use; less packaging) (Helping suppliers become more efficient/improve quality indirectly benefits your organisation)
• Enabling local cluster development- understand that business operations depend on other efficiently run clusters (such as good transport system) Therefore developing these clusters indirectly benefits your organisation
• Reconceiving products & markets- By catering to new unmet social needs (the poor), innovative new products and business models can be realised, while enabling new potential suppliers, entrepreneurs, customers and business partners from this poor market that the firm can work with in future

Question 6

4 steps to embed context into strategy?

Answer 6

• Step 1: Acknowledge need to operate within certain socio-ecological thresholds (In-order to prevent disastrous climate change!! OMG!!🙄)
• Step 2: Prioritise specific areas within your organisation/operations that can be given specific focus (Depending on which parts of operations have most impact on socio-ecological thresholds)
• Step 3: Set realistic & transparent goals/strategies about how the organisation is going to bridge the gap between current performance and desired performance
• Step 4: Transparently track progress towards goals (Estimate progress trajectory & identify intermediate goals/checkpoints)

Question 7

What are the key principles neccessary in an Integrated Report?

Answer 7

• Strategic focus (Strategic objects and how they relate to firm’s ability to create value over time)
• Connectivity of information (Connectedness between different components of the organisation & what external resources/relationships it depends on (6 capitals))
• Future orientation- firm’s expectations about the future and any uncertainties
• Responsiveness & stakeholder inclusiveness- organsation’s relationships with key stakeholders and how it manages their individual needs/expectations
• Conciseness, reliability & materiality

Question 8

What are the 6 capitals?

Answer 8

• Manufactured capital- any physical objects/assets made by humans, that are used in production/generation of value (e.g: PPE)
• Intellectual Capital- Both tacit knowledge/experience of employees as well as explicit information such as patents/software
• Human Capital- organisation’s access to employees’ competencies, experience and motivation to innovate
• Social/Relationship Capital- valuable relationships with different stakeholders (e.g: good reputation amongst customers and local community)
• Natural Capital- natural resources that the firm uses in its operations
• Financial Capital- cash/finances/access to credit