Consumer prefer businesses that are aware of their social responsibility
Social responsibility : is when a business decision benefits the stakeholders
eg: a decision to protect the environment by reducing pollution by using the latest and greenest production equipment
Business activity aims to satisfy customer's demand fir goods and services - but it often has an impact on the environment
Environment : is our natural world including pure air, clean water, undeveloped countryside
How business activity can impact on the environment?
air craft jet engine emissions damage the atmosphere
Pollution from factory chimneys reduced air quality
Waste disposal can pollute rivers and seas
Transport of goods by ship and trucks burns fossil fuels such as oil which create carbon emissions and maybe linked to global warming snd climate change
Global warming : is a gradual increase in the overall temperature of the Earth's atmosphere, generally thought to be chased by increased level of carbon dioxide and other pollutants in the atmosphere
Why business should only produce goods and services profitably and not protect the environment ?
Expensive
- Reducing waste , recycling waste and reducing polluting smoke all cost the business lots of money --> reduce profits
Might have to increase price of the product
-As the business have to pay for "environmental friendly" policies , price of the produce have to be raise to meet the profit --> this might reduce the product demand as customer prefer lower price
Make firm uncompetitive
- As the price is higher, firm will lose out to other business that are not environmental friendly
The government should pay to clean it up
There is not enough proof that business activity is doing permanent damage to the environment
Why business have s social responsibility towards the environment and this can benefit them too?
Global warming affects the business too
- By becoming social responsibility business, it help to reduce these problem
Using natural resources and non- renewable resources will ran out for future generations
- Raise price for the same raw materials
Increase competitiveness
- As customer are more socially aware --> prefer product that are environmental friendly --> higher demand for the product --> marketing advantages
Better brand image
- Pressure group will not take action --> better reputation --> increase sale
Pressure group : is a made up of people who want to change business ( or government ) decisions by taking action, such as organising consumer boycott
Externalities
Social cost = external cost + private cost
-Private cost : are costs paid for by a business or the consumer of the product
e.g : cost of land , cost of construction, transport cost of materials , labour cost
-External cost : are cost pay by the rest of the society, other than the business as the result of business activity
e.g Waste products will cause pollution , smoke and fumes may damage the health of resident, Noise from the factory will disturb the local neighbourhood
Social benefit = external benefits + private benefits
-Private benefits : the gains to an business or the customer of the product
e.g : The profit made from the sale of the product
-External benefits : the giant to the rest of the society as the result of the business
e.g: jobs will be recreated, other businesses may move into the area to support the firm develop the area, pay taxes to the gov to increase gov spending
The government will use cost- benefit analysis to determine should the business be working
if total social cost is lower than total social benefit then the project will be accepted
if total social benefit is lower than total social cost then the project will likely to be refuse
Sustainable development : is development which does not put at risk the living standards of future generations
what can businesses do?
use renewable energy : solar panel/wind/tidal power
recycle waste : reusing water
use fewer resources : lean production --> managing product efficiently that minimum quantity of resources is used
develop new " environmental friendly " products and production method : biodegradable packaging --> that will not damage the environment
How and why business might respond to environmental pressures and opportunities ?
Consumers
Bad publicity --> customer will stop being from the brand
More customers are now concern about the environment --> prefer environmental friend product
Pressure group
- consumer boycott : is when consumer decide not to buy products from businesses that do not act in a socially responsible way
- advise to the public about harmful things the business does
- legal action/ law / court order
Pressure group activity is likely to change business actions when :
-is has popular public support and receives much media coverage
-consumer boycott --> reduce in sale
-well organise and financed
Pressure group activity is not likely to change business actions when :
-what the business is doing is not illegal
-cost of business changing method > cost of poor image + lost sale
-business sale to business
Government through legal controls
illegal business activities :
-locating in environmentally sensitive area
-dumping waste products into river or sea
-making products that cannot easily be recycled
2. Pollution merit : are licences to pollute up a to certain level
-Gov sell a permit to a factory that produce pollution ,if they produce more pollution than allow:
they will have to buy more permit from clean business
pay a large fine
3. additional tax
These 3 ways will increase business cost --> encourage business to not pollute
Ethical issues a business might face
take or offer bribes to the gov
employ child worker
buy supply that could lead to damage to the environment
not paying worker
fixing high price with competition
Ethical decision : are based on a moral code. refer to as doing the right thing
Benefits of ethical decision
Consumer may against buying product made by children
good brand image --> free promotion
Long-term profit could increase
worker and investor may want to be link with an ethical business --> easier to recruit and find investor
less risks of legal action against the company
Limitations of ethical decision
Higher cost --> paying for adult cost more than paying for children
Higher price for product because of higher cost
If costumer interested in low price --> sale would fall
short term profit might fall
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