Chapter 22 -Business and the social environment

Stakeholders are individuals or groups within society who have an interest in an organisations
operation and performance.
Stakeholders include Local
Communities -
shareholders, employees, residents, other
customers, suppliers, creditors businesses,
local coucils
and the local community. The Customers - Suplliers -
interest that stakeholders have in final providing raw
consumers, materials,
a business will vary according to wholesalers, componets,
pressure groups services etc
the nature of the group.
The
Social Responsibility
Business
Social responsibility is a business
philosophy that emphasises that Employees -
Goverment
Agenices -
firms should behave as good individuals ,
customers and
trade unions,
excise, HMRC,
citizens. They should not merely works councils
local councils
operate within the law, but they
Shareholders -
should consider the effects of indviduals,
insitutional
their activities on society as a investors
whole.

Meeting social responsibilities has many implications for business including:

 Taking into account the impact of their activities on the local community.
 Producing in a way that avoid pollution or the reckless use of finite resources
 Treating employees fairly and not simply meeting the demands of employment legislation.
 Considering the likely sources of suppliers and the ways in which suppliers meet their social
responsibilities.

Stakeholder Possible Nature of Stakeholders

Group Interest
Shareholders  Expectation of regular dividends
 Rising share price

Employees  Steady and regular income

 Health and safe working conditions
 Job security
 Promotion and higher incomes
Customers  Certain and reliable supply of goods
 Stable prices
 Safe products
 After-sales service and technical support
Stakeholders Interests
Suppliers  Frequent and regular orders
 A sole supplier agreement
 Fair prices
Creditors  Repayment of money owed at agreed
Business and Social Responsibilities times
 High returns on investments
The importance of social responsibility to
 Minimal risk of failure to repay money
businesses is a matter of considerable debate. The Local Community  Steady employment
Businesses accept the need to make a profit for  Minimal pollution and noise
 provision of facilities (arts centres,
their owners and the need to operate within the scholarships)
law.

In what ways can businesses accept their social responsibilities?

 Using sustainable resources.
 Avoid polluting the environment through the production process.
 Maintaining employment.
 Supporting the local community

Environmental threats and opportunities

Businesses contribute in many ways to the creation of environmental damage:

 The emission of gas through production processes.

 Pollution caused by transportation raw materials and products, particularly using road
vehicles which emit noxious gases.
 The pollution of the sea by businesses using it as a dumping ground.

Implications of environmental control for businesses

 Production: firm face pressure to use less materials and packaging to make these materials
biodegradable or recyclable.
 Purchasing: businesses are encouraged to seek sources of supply that are sustainable and do
not damage the environmental or to use recycled materials.
 Marketing: businesses use their green credentials as an important component of their
marketing strategy. Adverts will make reference to improve the environment.
 Human Resources: new processes and procedures in manufacturing make some jobs and
skills obsolete creating a need for redundancies or retraining.

The changing social environment

At any time there are a number of factors of work which promote change in the social environment
in which businesses work and require socially responsible business to respond certain ways.

The increasing threat of unemployment: the recent unemployment levels have posed a challenge
for businesses’ seeking to act in a socially responsible manner and to protect employment. At a time
when sales are falling along with profit margins, it is increasingly difficult to maintain employment
levels within a business when a real improvement in the economic situation appears to be some way
off.

The increasing importance of the environment: many UK consumers are increasingly aware of, and
concerned by, the threat that the activities of businesses pose to the environment.
Changes in the composition of the UK population: the UK is subject to large migrationary flows.

The UK’s ageing population: the population of the UK is steadily ageing with larger numbers of
people in the older age groups.

The rise in the number of single person households: people in the UK are increasingly living alone
meaning that the country is comprised of more, smaller households. This has significant implications
for business of all types.

Business Ethics
Business ethics can provide moral guideline for decision making by organisations. An ethical decision
means doing what is morally right; it is not a matter of merely calculating the costs and benefits
associated with a decision.

What are ethical decisions?

Ethical behaviour requires businesses to operate within certain moral guidelines and to do the right
thing when taking decision. An ethical decision would take into account the moral dimensions, but
not everyone would agree about what is ethical.

Ethical codes of practice

As a response to consume expectations and, in many cases, competitive pressure businesses have
introduced ethical codes of practise. In 2008 over 58% of the UK’s major businesses operated an
ethical code of practise.

They are intended to improve the behaviour and image of a business. Common themes in ethical
codes of practise may include:

 Promoting products with integrity and honesty

 Minimising possible damage to the environment by using sustainable sources of raw
materials.
 Competing fairly and avoiding collusion or other anti-competitive practises.
 Taking into account the needs of the businesses stakeholders.

An ethical code of practise states how a business believes its employees should respond to
situations that might challenge the values of the business.