Assessing Changes in the Business Environment The Relationship between Businesses and the Social Environment “We can be richer by being greener.” Tony Blair “A well run business must have high and consistent standards of ethics.” Richard Branson “Customers must trust an organisation and its people.” Tom Farmer “Unless managers are aware of ethical issues…they will fail to institutionalise ethics in corporate life. Ignorance can be as pernicious as malice.” Damian Grace BUSS4.4 Social Environment

In this topic you will learn about Assessing the effects of: changes in the social environment the changing nature of the ethical environment Evaluating responses of businesses to a changing social environment including corporate social responsibility. You tube Ali G - Environment We must respect the environment BUSS4.4 Social Environment

Changes in the Social Environment A Stakeholder is anyone that has an interest in an organisation. This is a very important concept, showing the impact of a firm not only internally, but also on wider society. Stakeholders of a business (Recap BUSS4.1) The Stakeholder concept suggests that whether they accept it or not, firms have a responsibility to their stakeholders. The shareholder concept suggests that their main responsibility is to shareholders. BUSS4.4 Social Environment 3

Changes in the Social Environment The impact of demographic changes. How a firm might respond: An increase in the global population size – an opportunity for UK firms to move into new markets with new or existing products An increase in the average age of UK society – firms will have to change their product range to satisfy the needs of older people Falling EU birth rates – as EU market size falls but the population gets richer UK firms might move into premium product markets BBC Migrants boost UK population The UK population has grown by nearly one million in the past five years, largely because of imm UK population sees steep rise The population of the UK is rising at a faster rate than at any time since the 1960s, according to the Office for National Statistics. Nick Higham reports. UK population breaks 60m The UK's population has broken through 60 million for the first time, with the fastest growth rate for over 40 years. Migrants boost UK population How might UK businesses respond to these changes? UK population sees steep rises UK population breaks 60m BUSS4.4 Social Environment 4

Changes in the Social Environment Demography is the statistical study of human populations and demographic factors are those that influence these populations. Firms will have to take into account population trends. These include: An increase in the global population size An increase in the average age of UK society Falling EU birth rates Study the population chart opposite What are the main characteristics of the UK population? Compare this to the Government’s description of the chart using the link below. What does this mean for UK businesses? http://www.statistics.gov.uk/populationestimates/flash_pyramid/default.htm Source: www.statistics.gov.uk BUSS4.4 Social Environment 5

Changes in the Social Environment The environment encompasses the surroundings in which we live. Firms will have to operate within and take account of environmental issues. This will include how they impact on: The natural environment – the natural resources that firms exploit to produce goods and services The built environment – the man-made surroundings that provide the setting for the production of goods and services BBC World's resources running out The world is consuming so many natural resources that three planets will be needed to keep up with demand. The World’s resources are running out What natural resources do firms use? Do firms have a duty to limit their use of natural resources? Is it the Governments responsibility to intervene and protect these natural resources? BUSS4.4 Social Environment 6

Changes in the Social Environment There has been increasing pressure on firms to operate using environmentally friendly methods – minimal or no negative impact on the environment. The main methods of doing this include: Renewable clean energy sources – wind, solar and hydro power Waste management – recycling and composting rather than landfill Eco-friendly products – green cleaning such as soap powders Organic produce – foods produced using natural pest control BBC M&S boss on plastic bags Marks and Spencer chief executive Stuart Rose on why the store is to begin charging its food shoppers 5p for carrier bags. Plastic bags go out of fashion Designers are tackling the problem of plastic bag pollution, as plans to ban free carriers are considered. Youtube LeeEvans Live at the O2 - supermarkets M&S boss on plastic bags Plastic bags go out of fashion For the eco cynics! (contains swearing) BUSS4.4 Social Environment 7

Changes in the Social Environment “Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic developments while improving the quality of life of the workforce and their families as well as of the local community and society at large”. The World Business Council for Sustainable Development In essence, CSR (also referred to as simply social responsibility) is a firm’s decision to accept responsibility to its stakeholders for its social, environmental and ethical actions. A firm will produce a Corporate Social Report to set targets that will be used to meet its social responsibilities and to assess how far it has met previous targets. http://plana.marksandspencer.com/we-are-doing/waste/progress Business Link Corporate social responsibility Introduction Your business doesn't exist in isolation nor is it simply a way of making money. Your employees depend on your business. Customers, suppliers and the local community are all affected by your business and what you do. Your products, and the way you make them, also have an impact on the environment. http://plana.marksandspencer.com/about Visit the Marks and Spencer website and review its Plan A Read more about CSR Watch the video outlining M&S progress to date Identify the costs and benefits to M&S of its approach to CSR BUSS4.4 Social Environment 8

Changes in the Social Environment Business Ethics looks at morality in decision-making. This infers doing what is ‘right’. Of course, peoples’ views can differ on what is right or wrong. There will also be conflict between stakeholders. Profits for a firm or higher wages for staff Cheaper production or less pollution Supplier benefits or lower consumer prices Survival of the business versus needs of other stakeholders Whenever a firm makes a decision there will be conflicts between stakeholders. Remember, every decision made has an opportunity cost. How many dots? Follow this link to start a debate on ethics in the classroom. Introduce the theme, show the video and then wait for the discussion! BUSS4.4 Social Environment 9

Changes in the Social Environment Most large firms will produce an ethical code of practice. This will detail the steps that a firm will take to be ethical and to uphold the firm’s social responsibilities. This might include: To take responsibility for the stakeholders of the business To be environmentally friendly wherever possible To promote products with integrity, honesty and accuracy To compete within legal and moral guidelines The Press Complaints Commission have a Code of Practice that all members should adhere to. Do you think that they do? PCC INTRODUCTION The Editors' Code of Practice is published in full below. The Editor's Code is also available to download as a PDF here. Daily Mail Tesco condemned for selling pole dancing toy by COLIN FERNANDEZ Last updated at 23:13 24 October 2006 Comments (51) Add to My Stories Mother of two Karen Gallimore was searching for Christmas gifts for her two daughters, Laura 10, and Sarah, 11, when she came across the 'toy' Tesco has been forced to remove a pole-dancing kit from the toys and games section of its website after it was accused of "destroying children's innocence". Read more: http://www.dailymail.co.uk/news/article-412195/Tesco-condemned-selling-pole-dancing-toy.html#ixzz15p0QZCl2 ACTIVITY The problem with Ethics is that it is subjective. This means that it is based on people’s values – and values are based on different people’s judgements. Read this article. Do you think that TESCO was right to sell this product? BUSS4.4 Social Environment 10

Changes in the Social Environment Is ethical behaviour simply a form of Public Relations (PR)? Why be ethical? There are a number of reasons for a firm to have an ethical business culture. These range from the profit motive to wanting to ‘do the right thing’. Why be ethical? Build loyal customer base through USP Attract best workers who want to work for a company with high standards Lower costs through recycling and less waste Motivation across the company Why not be ethical? More expensive to source raw materials More expensive capital goods to cut pollution Training workers to be ethical costs money Losing custom to unethical practices from more ruthless competitors Providing better facilities for staff costs money Higher costs lead to higher prices and lower revenues IBE Welcome The IBE was established in 1986 to encourage high standards of business behaviour based on ethical values. Our vision To lead the dissemination of knowledge and good practice in business ethics. Visit the Institute of Business Ethics to learn more. They even run a student essay competition BUSS4.4 Social Environment 11

ACTIVITY Chose a business that attracts high profile media attention e.g. Tesco, M&S, Primark, Nike, Gap, Shell Carry out some independent research into its approaches towards its social responsibilities and/or its ethics Produce an article for a business magazine evaluating how they have responded to social and ethical factors BUSS4.4 Social Environment

Read Ben and Jerry’s Social Environmental Assessment Report Essay Ben and Jerry’s, makers of high quality ice cream since 1978, take their commitment to their social environment seriously. They state that “We believe its our duty to use our business to improve social, economic and environmental conditions around us.” With reference to Ben and Jerry’s and/or other businesses you have studied to what extent do you believe that the key to successful business today is social responsibility? Ben & Jerry Welcome to Ben & Jerry’s 2008 Social and Environmental Assessment Report. Here’s a glance at some of our most notable efforts from the past year to make positive change in the world through our business. Read Ben and Jerry’s Social Environmental Assessment Report BUSS4.4 Social Environment