Chapter 28-environmental And Ethical Issues Flashcards
Define social responsibility
When a business decision benefits stakeholders other than shareholders e.g a decision to protect the environment
Define environment
It is our natural world including for e.g pure air, clean water and undeveloped countryside
What are some examples of how business activity impacts on the environment
-pollution from factory chimneys reduces air quality
-waste disposal can pollute rivers and seas
-Aircraft jet engine emissions damage the atmosphere
-Transport of goods by ship and trucks burns fossil fuels such as oils, which create carbon emissions and may be linked to global warming and climate change
Define pressure group
Is made up of people who want to change business or government decisions by taking action e.g consumer boycotts
Define private costs and private benefits
Private costs-costs paid for by a business or the consumer of a product
Private benefits-gains to a business or the consumer of a product
Define external costs and external benefits
External costs-costs paid for by the rest of society, other than the business
External benefits-gains to the rest of society, other than the businesses
What are the equations for social costs and social benefits
Social cost=External costs+Private costs
Social benefit=external benefits+Private benefits
define sustainable development
Development which does not put at risk the living standards of future generations
Businesses can be sustainable by:
-Use renewable energy by fitting solar panels or buying energy that uses renewable sources such as wind or tidal power
-recycle waste by re-using water and other products
-use fewer resources lean production is about managing production efficiency
-develop new environmentally friendly products and production methods for example, replacing drink cars and bottles with biodegradable packaging that will not damage the environment
What are the main reasons why businesses respond to environmental pressure and explain them
consumers
-bad publicity can cause them not to buy, if consumers think the products harm the environment, they will stop buying resulting in the business changing the product or production method
pressure groups
-can take actions towards the business like consumer boycotts. The impact of the actions depends on:
-public support and media coverage of the pressure group
-influence and power of the consumer boycotts which can lead to a decrease in sale
-the group is well organized and financed
-whether the action done by the firm is unpopular but not illegal for e.g animal testing
-if a business sells to another business-public pressure will be less effective
-the cost to the business of changing its methods is more than the costs of poor image and lost sales
Government through legal contracts
-By making certain activities illegal such as:
-Locating in an environmentally sensitive area
-Producing non-recyclable products
-Dumping waste in nearby rivers/seas
-Pollution permits-licences that allow businesses to pollute to a certain level. If the business exceeds the account, it must buy from a ‘cleaner’ Company or pay large fines.
-Additional taxes on goods or factories resulting in pollution
Define ethical decisions
Based on a moral code of conduct sometimes referred to as ‘doing the right thing’
Benefits of ethical decisions
-customers may be more inclined to buy products not made by child labour
-good publicity about ethical decisions provides ‘free promotion’
-some workers and investors may want to link an ‘ethical business’, making recruiting and raising capital easier
-Less risk of legal actions being taken against the company
-long-term profit increases
Limitations of ethical decisions
-Short-term profit may fall
-Prices may be set higher due to higher costs-reduction in potential and existing customers
-if consumers are not interested in how it’s made and care for price-then profits fall
-higher costs-adult workers will be paid more than child workers and good working conditions add to business costs as well
-it could be argued that, in some countries, if children are not employed the incomes of their families will fall to very low levels as they may be the only source of income for the family
What are the arguments against being mindful of the environment
-It can be expensive and reduce profits
-increase prices to pay for ‘environmentally friendly’ policies
-it can make firms unproductive, reduce salaries and relocate to places without such policies
-consumers buy less if the price is high
-the government should clean up
-owners can claim there isn’t proof that the activity is causing damage
Arguments with being mindful of the environment
-pollution and global warming affect all, so social responsibility helps reduce this problem
-using non-renewable resources leaves less for the future and raises prices
-scientists and environmentalists believe that business activity can do permanent damage
-consumers are becoming more socially aware, so environmentally friendly products have become a market advantage
-pressure groups can take action to harm the business’s reputation and sales
