Part A – SOCIAL & CULTURAL SUSTAINABILITY AS (3.2): Demonstrate understanding of strategic response to external factors by a business that operates in a global context

Businesses generally work in the interests of their owners. However, societal expectations, the law and the market force them to recognise responsibilities to their other stakeholders such as their workers, customers, suppliers and the communities in which they operate.

Sustainability is defined as the capacity to endure. It is about meeting the needs of today without adversely impacting on the needs of tomorrow.

Social sustainability is about people’s quality of life, now and in the future. It describes the extent to which a business supports individual and collective well-being. Cultural sustainability is aimed at raising and recognising the significance of the culture within local, national and global businesses.

Social responsibility and business ethics More and more consumers are demanding goods and services are produced in sustainable ways, which care for the environment, employees and society. Operating in a responsible way may also improve a firm’s reputation, working conditions and staff retention, while reducing risks and waste.

There is a direct trade-off between the interests of different stakeholders. As an example, Generosity Ltd donates $1m per year to the Starship Foundation. The opportunity cost of this is $1m not paid to shareholders as dividends, or to employees in higher wages. The best case scenario for a socially responsible business is to choose a course of action that benefits all stakeholders.

In contrast, Fantastic Fizzes Ltd sponsors children’s swimming programmes. If this sponsorship leads to an increase in fizzy drink sales, shareholders and employees can benefit through higher dividends and more jobs. Families in the community benefit from free swimming lessons for children. But there are disadvantages of this sponsorship. It could encourage customers to drink more of the unhealthy fizzy drinks. Some people might also accuse the company of sponsoring swimming lessons only as a slick public relations exercise.

Corporate Social Responsibility The phrase CSR is now commonly used to describe an organisation's commitment to operating in an ethical way, taking into account profit, people and the planet.

A business can demonstrate CSR by actions such as: O Treating workers fairly, including workers in foreign countries. O Using environmentally sound practices in energy consumption, waste and recycling. O Operating in an open, accountable and transparent way and showing concern for employees and the communities and societies in which the firm operates

O Complying with local laws and regulations and avoiding corrupt practices such as giving or receiving bribes. O Living up to commitments. This would start with supplying quality goods and services that meet or exceed the claims made about them. O Demonstrating good business practice, for example, paying bills on time, delivering what was promised, exceeding expectations.

In an effort to become a better “corporate citizen” a business might carry out a social audit. This is a way of measuring and reporting on the firm’s social and ethical performance. A social audit moves away from the traditional way of measuring a company’s success ~ revenue, profit and dividends ~ towards looking at the firm’s impact on the environment, its workforce, suppliers and wider community.

Developing a sustainable business Start with a strategy (a carefully written plan or an informal set of values). The strategy must reflect the firm’s commitment to economic, environmental, social and cultural ideals.

O Place people at the centre of the business. Family-friendly employment policies, flexible working conditions and access to training will help to make workers feel valued and content. O Ensure there is sufficient capital to invest in the sustainability model. The investment is likely to be rewarded by savings from efficiencies and increased profits from the improved business image.

Cultural Sustainability The challenge for many businesses, especially Maori businesses, is how to balance cultural enrichment, e.g. retaining strong elements of traditional culture, with more modern elements of advancement such as growth and economic development.

You will be shown a case study of Landcare Research, a Canterbury-based crown research institute embeds cultural sustainability in all aspects of the organisation and its day-to-day work.