Chapter 21 – Ethical, Social & Environmental Responsibilities in Business – Flashcards

Business ethics refers to the moral rules that guide business decision-making. It helps people in business to decide whether a decision is right or wrong, honest and fair, regardless of whether it is profitable or not.

- Greed: Forms that put maximising profits and growth above everything else are far more likely to make unethical decisions. - Fear: Employees who are working in a fearful atmosphere under threat of punishment such as demotion, pay cuts or job losses may be forced to make unethical business decisions to avoid suffering these actions. - Apathy: The lack of proper leadership and management control of how staff do their jobs can lead to an 'anything goes' attitude where ethical considerations get ignored. - Bad examples set by senior managers are likely to lead to similar behaviour by others throughout the business. - Lack of regulations or weak penalties and enforcement can tempt wrongdoers to justify their actions because, strictly speaking, they may not have been acting illegally.

- Using a code of ethics: A code of ethics contains guidelines for employees when dealing with different stakeholders, e.g. 'staff will never knowingly mislead consumers or members of the public'. - Encouraging employees to report unethical behaviour without fear that their careers will be jeopardised. - Senior managers must lead by example by being seen to act with honesty, fairness and respect for others and encourage all staff to do likewise. - Clear disciplinary procedures and penalties need to be in place for staff who are found to have acted unethically.

A code of ethics is a document setting out guidelines for employees to follow when making decisions.

Whistleblowers are staff whose ethical concerns are ignored within the business and who have the courage to report the wrongdoing to the authorities or the media.

Business social responsibility refers to the obligation of every business to respect the interests of all the stakeholder groups.

Sustainable development is economic development that can continue indefinitely without causing permanent harm to the environment or reducing the quality of life for future generations.

Rising temperatures are predicted to lead to more severe weather events, melting polar ice caps and a resulting rise in sea levels which will affect coastal cities around the world, due to the increasing levels of 'greenhouse gases', such as carbon dioxide from economic activities like the burning of fossil fuels.

- Produce durable goods: Products should be designed to be durable and capable of lasting for the maximum possible lifespan. 'Built-in-obsolescence', or deliberately designing goods to wear out after a short period of time, is irresponsible and unsustainable. - Produce in an ecologically sustainable manner: • Locate production away from ecologically sensitive areas • Become energy efficient and aim to use renewable resources such as wind and solar power instead of non-renewable sources such as fossil fuels • Aim to eliminate pollution and waste from all parts of the production process. Any waste produced should be reused, recycled or composted where possible • Seek the advice of the Environmental Protection Agency (EPA) to ensure compliance with environmental laws or to seek advice on new developments • Goods should be sold without unnecessary and wasteful packaging - Plan for disposal after use: • Goods produced should be easy to reuse, repair or recycle after use. Parts should be interchangeable with those in similar products • If a firm's products cannot be recycled then the should be designed for safe disposal back into the natural environment. This means that, wherever possible, only natural raw materials or ingredients should be used - Conduct regular environmental audits: Environmentally responsible firms conduct regular environmental audits to guide management decision-making.

An Environmental Impact Assessment is a report that looks at the effect that the business can be expected to have on the pollution of land, air and water, wildlife and their habitats, trees and other plant life, noise levels and the health of local people.

An environmental audit is a study of the impact of the business on the environment. It focuses on four basic areas: - what is produced - how it is produced - how it is marketed - how it will be disposed of

- Proper waste management can save money in the long term by reducing the amount of raw materials that are wasted. - Businesses avoid being fined for breaking laws relating to pollution, evading tax or engaging in anti-competitive practices. This also helps to protect the reputation of the business. - Businesses with positive social and environmental reputations attract more loyal customers who are not just influenced by price or fashion. - Businesses with strong ethical and responsible reputations and brand images usually find it much easier to recruit and motivate skilled staff. - Access to business finance can be easier as investors become more concerned about what their money is used for and want to avoid funding harmful or unethical business activities. There are now many investments funds that specialise in only providing finance for ethical and socially responsible businesses. - A genuine commitment to ethics and social responsibility can boost a firm's reputation and assist marketing promotion.

- Paying fair wages to staff and providing good working conditions costs extra. - Providing investors with full and honest financial information may reduce the amount of finance that they can be persuaded to provide. - Providing customers with honest information without any exaggerated advertising claims may mean sales will not be as high as they could be in the short term. - Investing in equipment and production processes that minimise waste and pollution costs money. - Not engaging in unfair anti-competitive practices such as price-fixing reduces the amount of profit that can be made. - Obeying the law and paying the correct amount of taxes can reduce business profitability.