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