Question 1
What makes a business a sustainable one? Discuss the theory and practices associated with sustainability using examples from your own learning during the module.
Sustainable business refers to a business model that has low negative impacts to the environment, society and to the economy at large. A sustainable business is the one that has the ability to meet the triple bottom line (TBL). TBL is an accounting framework that encompasses the social, environmental and financial responsibilities. This termination was coined by John Elkington in his 1994 publications on the triple bottom line. He reflected on the drivers that had helped the organizations achieve the current status, the development from then and the future of the corporations. This publication was based on the results of corporate social responsibilities (CSR) and sustainable development (SD). The term did not emanate in a single instance but rather a continuous effort of observations of the trends in the CSR and SD agendas by various organizations. In the same zeal, the author had also coined other terms that resonated with the business environment including the ‘environmental excellence” and “green consumers.” The first term targeted the business management professionals in an effort to include the environmental concerns in the management discussions. The second term aimed at creating customers that are conscious to the environmental impacts of various business practices.
In answering the question as to what makes a business sustainable, we shall evaluate the ways in which businesses aligns the profit motives with the care for the environment. The environment in this case will include the physical environment, the economic environment and the society that is served by the business. A sustainable business practice is guided by various factors as follow: Cost efficient- implying that a business will use less resources in terms of the raw materials and energy thus reducing the exposures to the volatility that are brought about by the price variations in such products. Customer behaviors- indicate that customers alter their purchasing habits to align to the environmental needs. There are increased regulations by the government in an effort to foster eco-friendly business practices. The sustainability models include the pressures from suppliers for efficiency and more sustainable models. Employment recruitment and retention initiatives are other factors that are considered for a sustainable business model. The business environment and operational practices are ever changing and thus there is an ever increasing need for the businesses to stay competitive through innovation. In spite of all the external pressures, many companies adopt sustainable models owing to their moral obligations.
External factors such as climate changes, depletion of raw materials and other natural resources have forced organizations to adopt sustainable business models. Businesses are resisting profit pressures from the investors and the management in favor of more sustainable business models. We can thus conclude that a sustainable business model is dependent on how the company operates, and the interplay between the flow of the resources between the suppliers, business and the customers. Innovation is also part of the sustainability model and as well A sustainable business is thus able to withstand the financial pressures in the current operations by providing a strong financial returns, improve the environment, and provide social benefits to both the employees and as well the communities on the areas that the business operates in. Thus, profit generations are on long term basis and with minimum environmental degradation. Profits and environmental degradations are thus aligned together. This ensures that there is both ethical and ongoing success in a business environment. Example of such business practice includes a business operation that derives its revenue from the community contribution. In response, they give employment to the people who are deemed unemployable owing to their disabilities. Thus, the community gains from the jobs that have been carried out by those people.
Question 2
‘CSR is more relevant today than ever before because of Globalisation.’ (Chandler and Werther, 2014, p.155). Discuss this statement with reference to CSR theory and illustrate your comments with examples from real life.
Corporate social responsibility is also referred to as corporate citizenship and responsible business that is incorporated in a business model. They are self compliance, and self regulatory measures that ensure that business practices are in compliance with the law, ethical requirements and national/international rules of operations. Some business operations go beyond the legal requirements and beyond the firm’s interest towards the greater good for the communities (McWilliams et al., 2006). The overall aim is to increase the long term business gains through positive public interactions, reduce the business risks that emanates from lack of legal and ethical compliance. CSR also improves the shareholders trust with the management by ensuring that there is compliance and all actions taken by the corporation are for the greater good. Corporate social responsibilities urge the company to make positive contributions to the customers, employees, investors and as well other communities.
There are arguments both in favor of the CSRs and as well criticism in regards to the same. Globalization has brought together various stakeholders in a business together. Unlike in the past, most business today operates across global boundaries and thus, they are under different jurisdictions. The number of stakeholders in that case increases as the suppliers, regulators, employees, share holders amongst other increases. Each stakeholder has got their personal interest and thus the management needs to have a strategic plan that caters for the needs of all the stakeholders.
The proponents of the practice argue that it propels the business into the long term profitable path through positive public relations. On the other hand, the critics argue that the practice distracts the management from concentration on the core business operations (Rosenberg, 2002). In a study that was conducted in an effort to evaluate the impacts of involvement in the corporate social responsibilities to the financial performance, the study concluded that CSR activities have neutral impacts on the financial performance of an organization (McWilliams et al., 2006). This field has captured the attention of numerous scholars who argues that the social movement has transformed into a business risk management practice. However, there are discrepancies in the perceived results by various scholars with some arguing that the program is a benchmark for responsible business practices.
Corporate social responsibilities evaluate the roles that business organizations play in the society. Many organizations engage in corporate social responsibility for the greater good of the communities where they operate. Many organizations have embraced the practice as part of the strategic business operational practice. Many organizations are involved in charity work and contribute huge sums of cash, time and other resources towards the greater good of the societies where they operate. A closer look at the practice reveals more than good will from the corporations. Many companies benefit from positive publicity and thus the programs are used as marketing tools for the organizations. CSR in some instances can be termed as a strategic risk and a cover up for the exploitations by various organizations. The percentage of the resources that goes back to the communities are negligible as compared to the profits that the organizations makes from the operations. Large foreign direct investments in a particular economy do not imply that the communities in those regions benefit. In some cases, there are inefficiencies in the execution and distribution of the resources from CSR programs either due to corruption and bureaucracies. The implication is that the intended beneficiaries who the members of the communities do not reap the benefits of CSR programs in their localities.
A real example of a situation whereby a business organization uses CSR program is Google Inc. Google has been on the fore front in the push towards the renewable energy sources and as well conserving the use of the available energy resources. This effort has been made in a deliberate effort in a CSR program that is duped Google Green. Through this program, the company employs conserving measures such as recycling, use of renewable energy sources and switching off the lights in their operational basis. Through this program, the company has been able to lower its energy consumption by 50 percent. Thus, the program benefit the community through eco friendly energy management and at the same time saves for the company energy expenses. Xerox is another organization that is involved in CSR programs. Employees devote some of their time to community works and so far have managed to work on over 800 projects. Xerox Science Consultant Program motivates young aspiring scientists through public interaction programs. The company lawyers take up pro bono cases and the rest of the employees participate in various charity works. This has enabled the company to build a strong brand that is recognized by many people globally (Xerox, 2014).
Question 3
The businesses most likely to succeed in today’s rapidly evolving global environment will be those best able to balance the conflicting interests of their multiple stakeholders. How might international business use knowledge of stakeholder theory to manage the challenge of balancing conflicting stakeholder interests?
This refers to the organizational management theory that incorporates business ethics that addresses the molar values in a business organization. This theory was first proposed by a scholar R Edward Freeman in his book Strategic Management: A Stakeholder Approach. The model attempted to define the parties that matters in a business management setting (Freeman, 2010). In the traditional settings, only the company owners were regarded highly and thus the management had a duty that to safeguard and prioritize their interests above any other. This new theory proposed that there are other important stakeholders whose interests’ needs to be catered for as well. They include suppliers, employees, financiers, customers, regulatory bodies, trade association, political stakeholders, and trade unions. In some cases, even the competitors are included in the pool of the stakeholders owing to their ability to affect the business operations of a particular organization. There are numerous definitions that attempt to give a concise definition of the stakeholders in a business. Stakeholders thus refer to an individual or a group of individuals that have vested interests in the business operations or a particular project.
A common management issue that arises in dealing with multiple stakeholders is that the task of aligning all their interests is difficult. In some cases, their interest conflicts and the management has to come up with strategies that cater or all their specific needs. For example, for the owners/shareholders, their main interest is profit optimization and increase in the value of their stakes. Employee costs are one of the major determinants of the company profit and the management may be under strict instructions from the shareholders to keep these costs as low as possible. However, this will conflict with the interest of the employees whose objective is to gain as much from the employer as possible. Another example is the company financing policy. The company may have a policy whereby they have longer creditor days as compared to debtor days to allow for efficient of cash flow management. However, this may conflict with the interest of the creditors whose objective is to receive the payments as soon as possible.
In the modern business environment, only business that has the ability to balance the conflicting interests of the multiple stakeholders will thrive. A business operating in the international market will employ the stakeholders’ theory in developing strategies that caters for the needs of each individual. Not all the stakeholders are equal, business management team should be able to rank them in orders of priority and make decisions that best suit the business. This will ensure a good sustainable and profitable enterprise.
A sustainable business model should be able to align the needs of a good business practice with the environmental needs. Thus, a good business operational practice should cater for the social, economic and environmental need of the localities they operates in. CSR are part of the programs that business uses to give back to the communities. However, they also benefit from the positive publicity that the programs generate. In order for a business to thrive, the management should be able to balance the interests of the multiple stakeholders that are involved in the business operations.
References
Elkington, J. (1994). Triple Bottom Line. Encyclopedia of Management Theory. doi:10.4135/9781452276090.n277
Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge [u.a.: Cambridge Univ. Press. Boston
McWilliams, Abagail; Siegel, Donald; Wright, Patrick M. (March 2006). Corporate Social Responsibility: International Perspectives (PDF). Working Papers (0604). Troy, New York: Department of Economics, Rensselaer Polytechnic Institute.
Rosenberg, M. J. (1 April 2002). Review of Misguided Virtue: False Notions of Corporate Social Responsibility. International Affairs.
Xerox. (2014). Xerox Volunteer Programs Rely on Employee Volunteering – Xerox 2014 Citizenship Report. Retrieved from http://www.xerox.com/corporate-citizenship/2014/community-involvement/volunteer-programs/enus.html
