Chapter 23: Social Responsibility Flashcards
What is social responsibility? Give an example.
Is a business’s duty to treat all those it comes in contact with honestly and fairly in a way acceptable to society. The business has an obligation to make a positive contribution to the lives of people and the environment. E.g. Vodafone gives employees time off to do charity work
List the stakeholders a business must be responsible to. (6) What is the responsibility of the business to each of them? Give an example.
Investor-Responsibility to give investors honest information about financial performance so they can make informed decisions. Responsibility to pay dividend. E.g. Worldcom deliberately falsified its account so people would invest.
Employees-Responsibility to its employees to pay a fair wage reflecting qualifications, safe working conditions and no discrimination. E.g. A subcontractor for ESB paid Polish workers less than Irish workers.
Suppliers-Responsibility to pay them in full on time. Not exploit smaller suppliers, pay a fair price. E.g. Body Shop buying fair trade ingredients.
Customers-Responsibility to provide good quality products and services at a reasonable price, advertised honestly. Products should be safe and unlikely to cause harm. E.g. Barclays Bank rigged interest rates so customers pay more.
Government-Responsibility to follow laws and pays taxes in full on time. E.g. National Irish Bank tried to help customers evade tax.
Local Communities-Responsibility to protect the local environment, buy from local suppliers and hire locals. E.g. IKEA hired Ballymun people.
Explain four advantages of being socially responsible.
Increased Sales: Consumers prefer to buy from a fair, honest business who cares about topical issues. E.g. Body Shop enjoys high sales as supports human rights.
Reduced Costs: Save money in long run by avoiding lawsuits or losing public favour. E.g. Consumers boycotted Shell Oil when it illegally dumped oil rig.
Easier to Attract and Retain Employees: Fair wages and good conditions attract employees, increases productivity and reduces recruitment costs. E.g. Google voted top 50 best places to work can attract best employees.
Easier to raise capital: Investors care where capital they provide goes. Don’t want to fund unethical activities. E.g. Green Investment Funds.
What is business ethics/code of ethics?
A set of moral principles/guidelines drawn up by the business that sets out expected moral behaviour. Set of norms that governs relationships within the business and tells you the right thing to do in an honest, fair and legal manner.
What is ethical business practice with two examples?
Conducting business according to moral principles in an honest, fair and legal manner. Means doing the right things in all situations regardless of the effect on profit. E.g. Body shop refuses to test products on animals even though it increases costs. Ben & Jerry’s buy fair trade raw materials which ensure fair wages and better conditions for farmers.
Explain four ways to improve business ethics.
- Managers Lead by Example-Set a good example behave ethically themselves, disapprove unethical behaviour and reward ethical behaviour. E.g. Skysports sacked commentator over sexist remarks.
- Managers Encourage employees to report others-Educate them about unethical behaviour and encourage them to whistleblow if they witness unethical behaviour. E.g. O2 has anonymous helpline.
- Manager draws up code of ethics-formal written document that outlines rules for employees and managers to follow when making decisions. Tells them the right thing to do in business situations and educates them. Should be part of staff training.
- Ethical Audits-Independent outsider called ethics auditor examines how business is managed, how suppliers, customer and employees are treated. Sends report to managers highlighting unethical behaviour so it can be eliminated. E.g. IKEA investigated for using prisoners to build furniture.
Give and briefly explain four examples of environmental responsibilities of a business.
Climate Change: Fossil fuels leads to greenhouse gases which lead to global warming. Business should switch to renewables (e.g. wind) or reduce usage.
Waste Management: Huge amounts of waste end up in landfills. Business should minimise waste. Polluter pays policy motivates them. E.g. Reduce, reuse, recycle.
Pollution: Releasing harmful substances into the environment. Use machines that minimise harmful emissions into the air and water, reducing carbon footprint. E.g. Source raw materials locally to prevent transport pollution.
Sustainable Development: Meets needs of present without compromising the ability of future generations to meet their needs. Protect and preserve the environment and replace what they take from nature. E.g. Velvet Toilet Paper Forest planting
What are the four effects on business?
Increased Sales: Demand for “green” products. E.g. Boeing Dreamliner that uses 20% less fuel
Increased Costs: The “polluter pays” policy means more waste equals increased costs and lower profits.
Damage to Reputation: Damaging environment leads to bad publicity, consumers may boycott and sales lost. E.g. Shell Oil
Increased Regulation: Laws imposed protect the environment and can increase business costs. E.g. fines and penalties incurred.
What are the characteristics of environmentally conscious business?
- Sensitive to the Environment: by minimising waste and pollution through reduce, reuse, recycle. E.g. Cadbury reduced packaging on selection boxes by 30%.
- Open to new ideas: Open to educating themselves on environmental issues. Accept feedback of EPA. E.g. Spar realised 90 % of waste recyclable, started separating waste.
- Sustainable Development-Meets needs of present without compromising the ability of future generations to meet their own needs. Protect and preserve the environment. E.g. Velvet Toilet tissue paper plant three new trees for each they use.
- Consult Others-An environmentally conscious business consults all parties when making decisions. Takes advice on board, considers environmental impact. E.g. Tesco listens to complaints about trolleys ending up in rivers, introduced systems to prevent this.
Explain the four effects of social and environmental decisions on costs.
Increased Wage Bill-Pay a fair wage above minimum wage to meet social responsibilities.
Increase Manufacturing Costs-Must pay for recyclable materials and dispose of old polluting machinery.
Lower Legal Costs-Avoid costly lawsuits and fines.
Lower Energy Bill-Save money in the long run by using renewables.
Explain the three effects of social and environmental decisions on revenue.
Increased Sales: Consumers prefer to buy more from “green” products that treat people honestly and fairly. E.g. Bodyshop enjoys high sales as supports human rights.
Easier to attract Capital: Investors care where capital goes don’t fund unethical activities. E.g. Green Investment Funds.
New Markets: Consumer demand for “green” products and government regulation leads to businesses being developed. E.g. Boeing Dreamliner that uses 20% less fuel.
Benefits of a code of ethics. (2)
Better Reputation and Increased Sales: When business actions are in line with the code, they are fair, honest and legal which creates a positive image among consumers and job seekers.
Encourages Ethical Behaviour: Helps encourage ethical behaviour of senior managements and employees at all levels. Reduces losses due to theft and fraud.
Challenges of a code of ethics. (2)
Culture: Newly implemented codes may not gain respect or support from employees. They may see it as a critique of their personal morals.
Enforcement: Enforcement may not be carried out to the letter of the code. Sanctions given may damage industrial relations climate in the business and reduce moral.
