6.1 ethical and environmental considerations
Post on 12-Jan-2022
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Influencesonbusiness
6.1Ethicalandenvironmentalconsiderations
Keyelementstothistopic
Ethicalconsiderations
Environmentalconsiderations
Whatisethics?
Wherebusinessesmakedecisionsbasedonwhatismorallyrightratherthanwhatismoreprofitable
Businessesareincreasinglyconcernedabouttheethicsoftheirbusinessbehaviour.Makingmorallycorrect
decisionscanbeasimportanttosomebusinesses,aschoosingthemost
profitableoption.
Ethicalbehaviour
MarksandSpencerMarksandSpencerhaspledgedtoraise£25mformentalhealth,heartandcancercharities,aswellashalvefoodwastefromitsshopsby2025.Italsoaimstofundcommunityprojectsupto£50,000.ThisshowsanincreaseinM&S’scommitmenttoactingandbehavingethically.
AnalysethepossiblereasonsbehindM&S’s
decisions
Benefits• Higherrevenues– customersareincreasinglymakingpurchasingchoicesbasedonethics,withtheactualsellingpricechargedbeinglessimportantintheirdecision-making
• Improvedbrand/businessawarenessandrecognition
• Easiertoattractandrecruitstaff• Increasedemployeemotivationandstaffretention
• Newsourcesoffinancearepossible,forexamplefromethicalinvestors
Possibledrawbacks• Highercosts,forexamplesourcingfromFairtradesuppliersratherthanfromsuppliersofferingthelowestprices
• Higheroverheads,suchastraining&communicationofethicalpolicy
• Adangerofbuildingupfalseexpectationsamongstconsumers
• Badpublicityifbusinessisfoundtobeacting“unethically”
Benefitsanddrawbacksofbehavingethically
Rankthefollowingbusinessactionsfromthemostethicaltotheleastethical
1 2 3
4 5 6
Examplesofpoorethicalbehaviour
Poorethicalbehaviourcanaffectdifferentstakeholdergroups…
Customers– chargingveryhighpriceswhencustomershavenochoice
Suppliers– payingverylowpricesanddelayingpayments
Employees– payingverylowwagesanduseofchildlabour/partofthesupplychainuseschildlabour
Localcommunity– creatingpollutionandinconvenience
Unethicalbusinesspracticecontinued….
Withglobalcommunication,massmediaandthewidespreaduseoftechnology,unethicalproductionislesscommon.Whereexamplesarehighlighted,theytendtorelatetosuppliersindevelopingcountriesmakinggoodsformultinationalcompanies.
Examplesofunethicalpractice…• Employees:verylowwages,overlonghours,
poorlivingconditions,unsafemachinery• Marketing:Exploitingvulnerablegroups
throughadvertising(young,old),highpressureselling,internetscams,falsedescriptions
• Production:Poorhealthandsafety,pollutingtheenvironment,poorquality
REMEMBER:businessbehaviourcanbelegal,butunethical
WatchthevideoclipanddiscusswhetherApple’sbehaviourisillegalorunethical
• Overrecentyears,therehavebeenincreasingconcernsabouttheenvironment.ThenumberofUKlawsonbusinessregardingtheenvironmenthaveincreaseddramatically.
• Areassuchaspollution,disposalofwastelinkedtorecyclingandenergyuseallincreasebusinesscosts,asfirmsmustmeetthesenewstandards.Insomecases,thisincreaseincostscanbepassedontotheconsumerintheformofhigherprices.
• Consumerswillexpecttopayahigherpriceforgoodsandservicesthathavebeenproducedinamoreenvironmentallyfriendlyway,forexamplehigherpricescanbechargedfororganicproducts.
Environmentalconsiderations
Whatispollution?
Examplesofdifferenttypesofpollution:Air– factoriesandtransportmakingaircontaminatedforbreathingNoise – factories,constructiondamagingpeopleshearingLight – factoriesalteringanimalshabitatsWater – factoriesdischargingpoisonsaffectingdrinkingwaterLand – dumpingofindustrialwastecontaminatingagriculturalland
Ifabusinesscausespollutionitisaffectingthenaturalenvironment.Thiscandamagethecondition,health,safetyorwelfareofanimals,humans,plantsorpropertyandreducethequalityoflife.
Mostlargebusinessesandmanysmallbusinessesnowhaveenvironmentalpolicieswhichcoverareassuchasenergyuse,
wastedisposalanddifferenttypesofpollution
Providesgoodpublicityandmeetstherequirementsofenvironmentallaws.
Customersmaybewillingtopayhigherprices.
Environmentalpolicies
Costsincreaseasthebusinesshastopaymoreforwastedisposalandtomeettherequirementsofanti-pollutionlaws.
Notallcountrieswillhavesimilarlaws.
CocaColauserecycledplastic
Explainone reasonwhyCocaColaincreasedtheuseofrecycledplastictomakeitsbottles.
Statetwo costsandtwobenefits ofCocaCola’snewrecyclingpolicy.
Bethe“BusinessAdvisor”…
Trafficcongestion
Recycling
Disposalofwaste
Noiseandairpollution
Suggestonewaythefollowingenvironmentalissuescouldbeimproved…
Possiblebusinesssolutionstoenvironmentalproblems
Retimeworkingdaytoavoidrushhourandencourageuseofpublictransport.Relocatetolesscongestedareas.
Reducepackagingandusematerialsthatcanberecycled.Separatewaste;useandpayforrecyclingservices.
Makemaximumuseofrecycling.Wherethisisnotpossible,usecorrectandlegalwastedisposalarrangements.
Ensurelicensesandpermitshavebeenobtained.Reducepollutionimpactonlocalcommunities.Considerrelocation.
Justaminute…
Youhave60secondstonotedownhow
environmentalpoliciesmayaffectconsumers
Environmentalpoliciesandtheconsumer
• Prices– thesemayrise,asincreasedbusinesscostsarepassedontothecustomer
• Availability – recyclingwillmeanscarceresourceslastlonger,goodsmaybeavailableandcheaperinthelongrun
• Qualityoflife– reducedpollutionandwastewillimprovelivingconditions
• Taxes – ifpollutionisreducedthegovernmentcanspendlessonthisarea,whichmayresultinareductionintaxation
Solutionstoenvironmentalpolicieswillaffectbusinessesdirectly,buttheywillalsoimpactonconsumers.
Ikeawins2017GreenAward
IKEAhasemergedasoneoftheleadingcompanieswinningthebusinessleaders“greenaward”in2017.Aspartofits“PeopleandPlanet”policy,ithasalreadyswitchedfactoriestoLEDlightingandmadeamassiveinvestmentintheuseofrenewableresources.Ithasfocussedoncustomerengagementanditssupplychain,aswellasinvestingincleantechnologies.
OutlineonebenefitandonecosttoIkeaofits“PeopleandPlanet”environmentalpolicy
Environmentalconclusions
1. Morallyrighttodoso(ethicalreasons)2. Opportunitytoincreaseprofit(commercialreasons)3. Governmentinfluence(legalreasons)However,ifbusinessesfaceinternationalcompetitionfromrivalswithlowerenvironmentalstandards,theymightbelesskeentousesuchpolicies,astheymayfinditdifficulttocompeteinthemarketplace.
Therearemanyreasonswhybusinesseswanttobecome“environmentallyfriendly”
Whatissustainability?
• Aswehaveunlimitedwantsandlimitedresourcestherewillalwaysbescarceresources
• Forourworldtobesustainable,wemustreplaceorrenewtheresourcesthatweuseorovertimetheywillrunout…
Sustainabilityistheideathatgoodsandservicesshouldbemadeusingresourcesthatcanbereplaced– thiscouldberawmaterialsorenergyrequirements
Effectsofglobalwarming
• Globalwarmingiscausingnewpressuresonourworldanditsclimate– resourcesarebeingfloodedanddestroyedbyrisingsealevels
• Industries,suchasagriculture,aredirectlyaffectedbychangesintemperaturesanddroughts
• Otherindustriesareallalsoaffected,forexampleinsurance,butsoarepeople,theirconsumptionandtheirsurvivalthroughnaturaldisastersandfamine
• Solutions,includingusingrenewableresourcesandreducingenergyconsumption,areessential
Datadrop…
Arecentsurveyhasestimatedwhenkeyresourceswillrunout.Basedoncurrentuse,someraremetals,usedinsmartphones,willrunoutattheendofthenextdecade.
WritedownTHREE effectsofthesefuturescarcitiesonbusinessesandonconsumers
Mainbarisbasedoncurrentlevelofpopulationgrowth,extendedbarassumesstaticpopulation
Agricultureandglobalwarming
• Agricultureemploys30%oftheworld’spopulation
• AUNstudysaystheeffectsofglobalwarmingwillhelpsomecrops,butdamagefarmore
• Accordingtothisstudy,by2050,foodpricescouldriseby84%
• OnesmallareaofCalifornialostproductionworth$2billioninoneyearduetodrought
Explainwhyitissoimportanttostopglobalwarmingdamaging
foodproduction
Sustainability– thetradeoff
• Businessescanaddvaluetotheirproductsbydemonstratingtheirenvironmentalandsocialbenefits.
• Forexample,UnileversourcesitsteaforLiptonteabagsfromsustainablesources.Theteamaynotcomefromthecheapestsupplier,butUnileverknowthesourceissustainable.
• Itisoftensaidthatbusinesseshavetomakeatrade-offbetweensustainability andprofit, astheextracostsofusingrenewablesourcesreducesprofits.
• Businessescanbesuccessfulandsustainable,butthismaybedifficulttoachieveinacompetitiveenvironment,assomebusinesseswillputprofitsfirstandthereforefocusoncostminimisationresultinginlowerpricesbeingchargedtocustomers.
IncreaseinsalesforUnilever’s“sustainablebrands”
Contextcorner
Unileverisaverylargecompanyproducingmanyproductsandbrands.Growthinsalesforitssustainablebrandsis50%higherin2017thanitsotherproducts
ExplainwhyUnilever’ssustainablebrandssuchasBenandJerry’s,LiptonTeaandSurfwashingpowderhavedonesowell.
Knowledgecheck
Answerthefollowing4questionstocheckyouhaveunderstoodthe
contentofthissection
Businessethicscanbedefinedas:
A Profitmaximisation
B Helpingthepoor
C Makingdecisionsthatarefairandhonest
D Havingagoodreputation
Q1
Adrawbackofethicalbehaviourtoconsumerswouldbe:
A Costswoulddecrease
B Employeesarelesslikelytoleavethefirm
C Pricescouldincrease
D Thebusinesscouldgetapoorreputation
Q2
Whichofthefollowingbusinessactionswouldhaveapositiveeffectontheenvironment?
AAdvertisingthesuccessofafirm’senvironmentalpolicies
B Increasingtheuseofnon-renewableenergysources
C Reducingtheuseofrailtransport
D Allowingemployeestoworkflexiblehours
Q3
Havinganenvironmentalpolicyislikelyto:
A Decreasebusinesscosts
B Increasebusinesscosts
C Increaseglobalwarming
D Maketheeconomylesssustainable
Q4
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