MGT 400 Quiz
Voluntary Business Initiatives
Life cycle analysis (LCA) Involves collecting informationon the lifelong environmental impact of a product, from extraction of raw material to manufacturing to its distribution, use, and ultimate disposal. E.g. AUDI's LCA information Industrial ecology Refers to designing factories and distribution systems as if they were self-contained ecosystems. Extended product responsibility Occurs when companies take continuing responsibility for the environmental impact of the products and services, even after they are sold Carbon neutrality An organization or individual produces net zero emission of greenhouse gases; this is usually accomplished by a combination of energy efficiencies and carbon offsets. Technology cooperation Sustainable development through long-term partnerships between companies in developed and developing countries to transfer environmental technologies
Arguments against Corporate Social Responsibility
Lower economics efficiency and profit Imposes unequal costs among competitors Imposes hidden costs passed on to stakeholders Requires skills business may lack Places responsibility on business rather than individuals
Good corporate citizens
Make a concerted effort to balance the needs of all stakeholders Strive to conduct all business dealings in an ethical manner Work to protect the environment all of the above
The process of firms buying and selling the right to pollute is an example of which type of environmental regulator
Market based
One emerging trend is
One emerging trend is the consolidation of corporate citizenship efforts
General Systems Theory (GST)
Organisms do not exist in isolation but can only be understood in relationship to their surroundings. Businesses are embedded in a broader social environment with which they constantly interact.
Stakeholder Engagement:Stages in the Business-Stakeholder Relationship
Over time, the nature of business's relationship with its stakeholders often evolve through a series of stages. Inactive: Companies ignore stakeholder concerns Reactive: Companies act only when forced to do so, and then in a defensive manner Proactive: Companies try to anticipate stakeholder concerns Interactive: Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust
Ownership Purpose
Owner's Needs and Wants Share Value
Failure to understand stakeholder concerns and to respond appropriately will
Permit the performances-expectations gap to grow. The larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity
Positives and Negatives of Corporate Power
Positive More Resources Lower cost production New products Technologies Negatives Disproportionate political system Dominate public course Divide markets Squash competition
Environmental justice is a movement to
Prevent inequitable exposure to risk, such as from hazardous waste
Which of these factors has accelerated the current ecological crisis?
Rapid Expansion
global corporate citizenship
Refers to putting an organization's commitment to social and environmental responsibility into practice worldwide.
Ownership Theory of the Firm
Sees the firm as property of owners (shareholders). Owners' interests take precedence over interests of others. The purpose of the firm is to maximize its long-term market value and money for its shareholders.
A firm subscribing to the ownership theory of the firm would mainly be concerned with providing value for its
Shareholders
Market stakeholders
Shareholders, suppliers, employees, etc. They engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services.
Codes of Environmental Conduct
Some of the leading universal codes include the following: Business Charter for Sustainable Development - developed by the International Chamber of Commerce CERES Principles - developed by the Coalition for Environmentally Responsible Economies ISO 14000 - a series of voluntary standards developed by the ISO, an international group based in Switzerland The Greenhouse Gas Protocol - to help businesses measure and manage their greenhouse gas emissions Many executives are championing the idea that corporations have moral obligations to future generations
Normative
Stakeholder management is the right thing to do
The Benefits of Engagement
Stakeholder organizations bring a number of distinct strengths: Alert companies to emerging issues Give a firm access to information via networking Technical or scientific expertise in specific areas Better result in the eyes of the public Meet the society's expectations and generate good solutions Improve a company's reputation
Stakeholder Purpose
Stakeholders' Needs and Wants
How can human society restore balance between Earth's carrying capacity and society's demands?
Technological innovation: Develop new technologies to produce energy, food, and other necessities of human life more efficiently and with less waste. Changing patters of consumption: Individuals and organizations concerned about environmental impact could decide to consume less or choose less harmful products and services. "Getting the prices right": Some economists have called for public policies that impose taxes on environmentally harmful products or activities
The Earth's Carrying Capacity
The Earth's rapid population growth, people's rising expectations, and the industrialization of developing countries are on a collision course with a fixed barrier: the limited carrying capacity of the Earth's ecosystem. The Earth's resource base is essentially finite, or bounded. If human societies use up resources faster than they can be replenished, and create waste faster than it can be dispersed, environmental devastation will be the inevitable result. Human society is already overshooting the carrying capacity of the Earth's ecosystem
Economic Power
The ability to grant or withhold transactions with the focal company.
Voting Power
The legal right to cast a shareholder vote
Drivers of Stakeholder Engagement
The participation of a business organization and at least one stakeholder organization is necessary. Engagement: both the company and its stakeholders both have: An urgent and important goal The motivation to participate The organizational capacity to engage with one another
Stakeholder engagement is
The process of ongoing relationship building between a business and its stakeholders.
Competitive Intelligence
The systematic and continuous process of gathering, analyzing, and managing external information about the organization's competitors that can affect the organization's plans, decisions, and operations With the need to comply with all applicable laws, and to follow the professional standards of fairness and honesty
Forces of Change Accelerating Ecological Crisis
Three critical factors have combined to accelerate the ecological crisis facing the world community and to make sustainable development more difficult: Population growth World income inequality Rapid industrialization of many developing nations
By setting a common standard for all firms, government can take the cost of pollution control out of competition
True
Effective environmental management requires an integrated approach that involves all parts of the business organization
True
Social Reporting (CSR Reporting)
When a company decides to publicize information collected in a social audit
Transparency
When companies clearly and openly report their performance—financial, social, and environmental.
Natural Capital
World's stocks of natural assets, including its geology, soil, air, water and all living things For human society to survive over time it must operate sustainably: in a way natural resources are preserved for future generations
In business, systems theory provides
a powerful tool to help managers conceptualize the relationship between their companies and their external environments.
Commons
a shared resource, such as land, air, or water that a group of people use collectively
The eight strategic radar screens represent
a system of interrelated segments, each one connected to and influencing the others
Social audit
a systematic evaluation of an organization's social, ethical, and environmental performance.
Stakeholder coalitions
alliances among a company's stakeholders to pursue a common interest are not static. Groups that are highly involved with a company today may be less involved tomorrow. Issues that are controversial at one time may be uncontroversial later; stakeholders that are dependent on an organization at one time may be less so at another. To make matters more complicated, the process of shifting coali- tions does not occur uniformly in all parts of a large corporation.
Preserving our common ecosystem is
an urgent imperative for governments, business, and society
Internal stakeholders
are employed by the firm Employees Managers work "inside" the firm and contribute their effort and skill to everyday operations.
external stakeholders
are not employed by the firm Suppliers Society Government Creditors Shareholders Customers may have important transactions with the firm, but are not on its payroll.
Stakeholders
are persons or groups that affect, or are affected by, a firm's decisions, policies, and operations.
Stakeholder engagement
at its core, a relationship
Tragedy of Commons
freedom in a commons brings ruin to all
Resource Scarcity: fresh water, Arable Land
fresh water, Arable Land
Paradox of the commons
if all individuals attempt to maximize their own private advantage in the short term, the commons may be destroyed, and all users, present and future, lose. The only solution is restraint, either voluntary or through mutual agreement
A stake is an interest
in-or claim on-a business.
social environment
includes cultural patterns, values, beliefs, trends, and conflicts among the people in the societies where the organization conducts business or might conduct business. Issues of civil or human rights, family values, and the roles of spe- cial interest groups are important elements in acquiring intelligence from the social environment
economic environment
includes information about costs, prices, international trade, and any other features of the economic environment
Competitor environment
includes information on the number and strength of the orga- nization's competitors, whether they are potential or actual allies, patterns of aggressive growth versus static maintenance of market share, and the potential for customers to become competitors if they "insource" products or services previously purchased from the organization
legal environment
includes patents, copyrights, trademarks, and considerations of intellectual property, as well as antitrust considerations and trade protectionism and organizational liability issues
customer environment
includes the demographic factors, such as gender, age, marital status, and other factors, of the organization's customers as well as their social values or preferences, buying preferences, and technology usage
technological environment
includes the development of new technologies and their applications affecting the organization, its customers, and other stakeholder groups
political environment
includes the structure, processes, and actions of all levels of government—local, state, national, and international. Awareness of the stability or instability of governments and their inclination or disinclination to pass laws and reg- ulations is essential environmental intelligence for the organization
Business and society together form an
interactive social system
Inequality
is an environmental problem Countries and people at either extreme of income tend to behave in more environmentally destructive ways than those in the middle
A final source of pressure on the Earth's resource base
is the rapid industrialization of many countries Advantage: Reducing poverty and slowing population growth. Disadvantage: Economic development has also contributed to the growing ecological crisis
But stakeholder analysis involves more than simply identifying stakeholders
it also involves understanding the nature of their interests, power, legitimacy, and links with one another.
The world's income is
not distributed equally In 2015, the income of the average American was 31 times the income of the average Vietnamese and 85 times that of the average Tanzanian
The key to business survival is
often this ability to adapt effectively to changing conditions.
Business
organizations engaged in making a product or providing a service for profit.
Companies demonstrate their corporate citizenship by
proactively building stakeholder partnerships discovering business opportunities in serving society transforming a concern for financial performance into a vision of integrated financial and social performance
Descriptive
realistic description of how companies really work
geophysical environment
relates to awareness of the physical surroundings of the organization's facilities and operations, whether it is the organization's headquarters or its field offices and distribution centers, and the organization's dependency and impact on natural resources such as minerals, water, land, or air
global commons
resources shared by all nations. Five global problems that will have major consequences for business and society are climate change, ozone depletion, resource scarcity, decline of biodiversity, and threats to the world's oceans
Instrumental
stakeholder consideration key for effective corporate strategy
Stakeholder power
the ability to use resources to make an event happen or to secure a desired outcome. Stakeholders have five different kinds of power: voting power, eco- nomic power, political power, legal power, and informational power.
Environmental Intelligence
the acquisition of information gained from analyzing the multiple environments affecting organizations
Corporate Citizenship
the actions they take to put their commitments to corporate social responsibility into practice.
ecological footprint
the amount of land and water a human population needs to produce the resources it consumes and to absorb its wastes, given prevailing technology
Corporate Power refers to
the capability of corporations to influence government, the economy, and society, based on their organizational resources
interactive social system
the closely intertwined relationships between business and society
An emerging trend in corporate reporting is
the integration of legally required financial information with social and environmental information into a singleintegrated report.
Stakeholder interests
the nature of each stakeholder group, its concerns, and what it wants from its relationship with the firm
Stakeholder is NOT
the same as stockholder (or shareholders).
Business is a part of society Therefore
they cannot ignore social issues. - Businesses have the resources to tackle social issues. - Businesses can create a stable environment for long-term profitability. - It prevents increased government intervention. and society penetrates far and often into business decisions. In a world where global communication is rapidly expanding, the connections are closer than ever before. Throughout this book we discuss examples of organizations and people that are grappling with the challenges of, and helping to shape, business-society relationships.
The purpose of the firm is not simply to make a profit, but
to create value for all its stakeholders - a successful business must meet both its economic and social objectives.
The goal of a global citizenship management system is
to integrate corporate responsibility and citizenship concerns into a company's values, culture, operations and decisions at all organizational levels.
Business and society operate
within constraints of the planet and its resources
Stages of Corporate Citizenship
1. Elementary 2. Engaged 3. Innovative 4. Integrated 5. Transforming
Eight Strategic Radar Screens
1. customer environment 2. competitor environment 3. economic environment 4. technological environment 5. social environment 6. political environment 7. legal environment 8. geophysical environment
Decline of Biodiversity
A leading cause: Destruction of rain forests, particularly in the tropics. (commercial logging, cattle ranching, and conversion of forest to plantations to produce cash crops.
Population Explosion
A major driver of environmental degradation is the exponential growth of the world's population
Environmental Analysis
A method managers use to gather information about external issues and trends to develop an organizational strategy that minimizes threats and takes advantage of new opportunities.
Ecological Footprint
A method to measure the Earth's carrying capacity and how far human society has overshot it It refers to the amount of land and water a human population needs to produce the resources it consumes and to absorb its wastes, given prevailing technology
Stakeholder Expectations
A mixture of people's opinions, attitudes, and beliefs about what constitutes reasonable business behavior
World Income Inequality and Economic Development
A second important cause of environmental degradation is the inequality between rich and poor. Although economic development has raised living standards for many, large numbers of the world's people continue to live in severe poverty. inequality can be measured in two ways, by wealth and income
Corporate Social Responsibility
Act in a way that enhances society and its inhabitants and be held accountable. Acknowledge any harm to people and society and correct it if possible. May forgo some profits if its social impacts hurt its stakeholders or if its funds are usable for a positive social impact.
Which statement is not correct about the business society interdependence Business activities impact other activities in society Business is separated from the rest go society by clear boundaries Actions by governments rarely affect businesses Business is a part of society
Actions by government rarely affect business
Political Power
Actions taken through legislation, regulations, or lawsuits
Stakeholder Materiality
Adaptation of an accounting term to prioritize the relevance of the stakeholders and their issues to the company
The Role of Social Media in Stakeholder Engagement
Address public issues and engage stakeholders. Identify and solve problems faster. Share information better among their employees and partners. Bring customers' ideas for new product designs to market earlier. Platforms to engage with multiple stakeholders, communication has become faster and more effective
In the United States, the federal government regulates which of the following major areas of environmental protections
Air Pollution Water Pollution Land Pollution All of the above
Public Issue
Any issue that is of mutual concern to an organization and one or more of its stakeholders
Sustainable development
Balances economic and environmental considerations
Arguments for Corporate Social Responsibility
Balancing corporate power with responsibility. Discourages government regulations Promotes Long - term profits for business Improve stakeholders relationships Enhance business reputation
Which of the following statements is true about corporate social responsibility
Both A and C, but not B Businesses should monitor and prevent social problems in advance of their becoming major issues Corporations should be accountable for any actions that affect people, their communities and the environment
Stakeholder Dialogue
Business and its Stakeholders come to face-to- face conversations Core interest and concerns, common definition of a problem Understandings and concerns of all parties Invent innovative solutions and implement them
Threats to the Earth's Ecosystem
Businesses now face: Limited supplies of critical resources Unpredictable weather changes But business also have great opportunities: Established firms and innovative entrepreneurs who can figure out how to address environmental challenges can both help society and enjoy great commercial success
Corporate Power
Capability of corporations to influence government, the economy, and society, based on their organizational resources. The tremendous power of the world's leading corporations has both positive and negative effects.
Ozone Depletion
Causes: chlorofluorocarbons (CFCs), manufactured chemicals formerly widely used as refrigerants, insulation, solvents, and propellants in spray cans.
climate change
Changes in the Earth's climate caused by increasing concentrations of carbon dioxide and other pollutants produced by human activity. global warming
Six dynamic forces powerfully shape the business and society relationship
Changing societal expectations Growing emphasis on ethical reasoning and actions Globalization Evolving government regulations and business response Dynamic natural environment Explosion of new technology and innovation
Which pattern of consumption is recommended to reduce humanity's global footprint?
Choosing less harmful products
Life Cycle Analysis involves
Collecting information regarding the lifelong environmental impact of a product, from extraction to disposal
A shared resource, such as land, air, or water, that a group of people uses collectively is a(n)
Commons
Nonmarket stakeholders
Community, government, business support groups, etc. People or groups who—although they do not engage in direct economic exchange with the firm—are affected by or can affect its actions.
When working well, the issue management process
Continuously cycles back to the beginning and repeats.
Phases of Corporate Social Responsibility
Corporate Social Stewardship (1950 - 1960s) Corporate Social Responsiveness (1960s - 1970s) Corporate/ Business Ethics (1980s - 1990s) Corporate/ Global Citizenship (1990s - 2000s)
Stakeholder Theory of the Firm
Corporations serve a broad public purpose: to create value for society. Profit is necessary for survival, but is not the only purpose of the firm. Corporations have multiple obligations and need to consider all stakeholders.
Citizenship as an opportunity to
Create value for their organization Gain a competitive advantage Help address some of the world's biggest challenges
Sustainable Development
Development that "meets the needs of the present without compromising the ability of future generations to meet their own needs." Sustainable development requires that human society use natural resources at a rate that can be continued over an indefinite period. Two core ideas: Protecting the environment will require economic development that alleviates poverty but does so while conserving and regenerating the Earth's resources for future generations Sustainable development is about fairness
Which of the following is an argument in favor of corporate social responsibility
Discourages government regulation
Being able to continue their activities indefinitely, without altering the carrying capacity of the earth's ecosystem, is a characteristic of
Ecologically sustainable organizations
Stakeholder groups can include
Environmental activists, shareholders, business support groups
Threats to Marine Ecosystems
Exploitation of fish populations / Decline of coral reefs / Coastal development in ecologically fragile areas / Ocean acidification
A public issue exists when there is agreement between the stakeholders' expectations of what a business firm should do and the actual performance of the business firm
False
Stakeholders(s) Stakeholder engagement
Goal: To change corporate behavior on an issue of concern Motivation: Governmental campaigns, protest perceived as inadequate to change corporate behavior Organizational capacity: Experienced staff; core group of activists committed to dialogue with business
Company Stakeholder engagement
Goal: To improve corporate reputation; to earn a license to operate; to win approval of society Motivation: Needs stakeholder involvement because of their expertise or control of critical resources Organizational capacity: Top leaders committed to engagement; well-funded department of external (stakeholder) affairs
Informational Power
Having access to valuable data, facts, or details
6 Benefit of Social audits by Simon Zadek
Help businesses know what is happening within their firm Understand what stakeholders think about and want from the business Tell stakeholders what the business has achieved Strengthen the loyalty and commitment of stakeholders Enhance the organization's decision making Improve the business's overall performance
Society
Human beings and the social structures they collectively create.
The Issue Management Process
Identify Issue: Anticipating emerging concerns, or "horizon" issues Analyze Issue: Organizations must understand how the issue is likely to evolve, and how it is likely to affect them Generate Options: Requires complex judgments that incorporate ethical considerations like the company's reputation Take Action: Once an option is chosen, the organization must design and implement a plan of action Evaluate Results: Must assess results of the program and make adjustments if necessary
The Origins of Corporate Social Responsibility
In the United States, the idea of corporate social responsibility appeared around the start of the 20th century. Corporations under attack for being too big, too powerful, and guilty of antisocial and anticompetitive practices. To use their power and influence voluntarily for broad social purposes rather than for profits alone. → Example: Steelmaker Andrew Carnegie, Henry Ford
Legal Power
Lawsuits filed against the focal company for harm caused by the firm