4.4.2 Ethics

• A stakeholder is a party that has an interest in a company and can either affect or be affected by the business
• Social responsibility:

  The firm’s responsibility to its employees, customers, local community and the environment 

  Going beyond legal requirement 
• Social responsibilities/being ethical

  To the employee 

  Fair wages and holidays and good training

  To customers

  Good customer care, support service, allowing returns being good to customers

  To suppliers

  Fairtrade prices, paying bill on time/early 

  Environment 

  Replenishing resources, not exploiting resources, low emissions, avoiding one use plastics

  Local community

  Offer jobs, more bins - clear up any waste around business 
• Stakeholder conflict

  When two stakeholders have different interests in the business 

  For example: shareholders vs employees, shareholders just want higher profits to get higher dividends whereas employees want higher wages but shareholders don't want to pay them higher wages as it will reduce their profits.
• A stakeholder friendly firm will still look to make a profit, but not at all costs and when making decisions it will also take into account other stakeholder groups.

  •  Paying higher wage/better training/better treatment of staff = better motivated workers, more productive, easier recruitment
  • Paying suppliers on time - suppliers become more loyal, get first choice/better supplies
  • Customer loyalty - good customer service builds this
  • Good public image 

  Costs will be higher, but when recruitment is difficult it will give them a competitive advantage in many areas.
• A shareholder friendly firm is a business that is purely focused on maximising profits and hence its dividends for its shareholders.

  • Reduces costs
  • May focus on production methods to reduce costs e.g JIT
  • Production may take place in sweatshops
  • Reducing costs will allow  them to have large profits margins

  Strategy may be most suited to a cost competitive business that is competing on price
• Businesses who pledge to become carbon neutral

  +Competitive advantage

  +Improved business reputation

  +May attract investment

  -Even if they do become carbon neutral many consumers won't recognize/care

  -Higher cost/effort
• Country becoming carbon neutral  

  +Can make agreement with other countries to reduce global carbon emissions

  -setting an agreed reduction is difficult as some countries have lower emissions than others to begin with, harder to reduce further if they already use very little
• Environmental considerations

  Carbon trading scheme 

  All industries have a limit on their carbon emissions, if they exceed this they will have to purchase permits from firms who are below their emissions target.

  Green Taxes

  Designed to help the environment, e.g road tax on polluting vehicles, flights and landfill

  Nuclear/ wind power

  Wind Power is cheaper, however it is unreliable as if there is no wind no power is generated.

  With nuclear power there is the issue of nuclear waste
• Envirnmental considerations

  Carbon Offsetting  

  Compensating for carbon dioxide emissions from industrial or other human activity, by participating in schemes designed to make equivalent reductions of carbon dioxide in the atmosphere.

  Carbon neutral 

  Having a balance between emitting carbon and absorbing carbon from the atmosphere
• Trade off for a business, if we want to be more environmentally friendly, the trade off is that costs will increase, however it may increase profits as being a more environmentally friendly business would give them a better brand image and good reputation, for a well known large business, which may increase sales , could also charge a premium price for environmentally friendly products which would increase profits. A smaller company could try to get a small section of the  market and differentiate , and be known as the environmentally friendly business which would give them a USP.
• Pressure groups 

  A pressure group is a group that tries to influence in the interest of a particular case/tries to challenge for change.

  E.g fairtrade, fighting for fair wages for farmers and making trade fairer etc
• A boycott is when a pressure group stops consumers from buying from a brand to show their disapproval of a product/service
• Lobbying is paying government  members to back your cause
• A single issue pressure group is one that just campaigns on one issue and if it is successful they disband.
• Pressure group influence may be limited as they rely on the public to boycott the brands, if the public don't care about their cause they have no effect. 
• An ethical firm is a firm that will do the right thing, what is morally right, even if it conflicts with profit. 
• Nike paying workers a $2 a day in the philippines to produce high value trainers

  Acceptable

  No one working in these factories are forced to work there, they work for Nike voluntarily. As well as this, all of Nike's competitors such as Adidas and Pumba will be doing the same thing,so they are just doing it to compete in the market. Also they are creating lots of jobs and opportunities in a place where there is high unemployment, so they are gaining jobs.
• Unethical

  Nike is selling premium high end trainers so it could afford to pay its workers, the people making these trainers to sell, more as without them they would have nothing to sell. Nike also pays sponsors huge sums of money, such as football players and sports players making 100m so it is unfair that workers are paid substantially less.
• There is child labour in India due to extreme poverty and traditional way of life

  The conditions in the Indian supply industry are extreme, very hot, old machinery/tools, sat on floor, dirty 

  Problems faced by these communities: extreme poverty, poor housing

  What can multinationals do to help:Refuse to use such companies who operate like this to stop this from happening , invest money to improve factories, check conditions are acceptable
• Uk supermarkets and businesses such as Primark, Tesco and M&S buying garments from these factories that have collapsed ad burt down to to the extreme poor conditions 

  Unfair practices took place such as failure to pay and cancellations 

  Implications for uk businesses as it could create bad publicity if they are found to be using factories that are collapsing due to extremely poor working conditions

  The uk has donated 18m towards safety and skills training

  Programme to help shoppers identify products with best ethical standard
• The trade off between price and ethics is in order to have good ethical standards and good conditions and wages in the supply industry, they will have to increase prices which may lower profit margins.
• Nestle

  Continues to receive criticism for ongoing employment abuses in their supply chain

  Lying to consumers by failing to disclose their ongoing involvement in child labour

  Getting sued in America for it

  Say they can't completely eliminate it but are trying to tackle it
• H&M

  Faced allegations of neglect in regards’ to workers right

  Concern they have been using child labour

  Paying as little as 13p an hour

  Blaise attitude suggests they are unlikely to change their ways anytime soon 

  Sports direct

  Repeatedly come under fire for dubious employment practices

  Produced clothes in factories in Myanmar using child labour