A2 Unit 6 External Influences

Objectives To introduce the new module and its contents Students should understand the concept of social responsibility and the arguments for and against it for a business

Syllabus Section 1 - Social and other opportunities and constraints Social responsibilities Business ethics Environmental pressures and opportunities Political change Pressure group activity Social auditing

Syllabus (contd..) Section 2 - Economic opportunities and constraints Implications for business strategy of macroeconomic variables - interest rates, inflation etc International competitiveness Economic growth The EU and overseas opportunities in emerging markets Section 3 - Government opportunities and constraints Policies affecting business

Social responsibilities Duties of an organisation towards its stakeholders, the environment and society in general. Increasingly known as Corporate social responsibility (CSR).

CSR ‘a company’s positive impact on society and the environment, through its operations, products or services and through its interactions with key stakeholders such as employees, customers, investors, communities and suppliers.’ (Business in the community)

What are socially responsible activities? CSR can be divided into 2 broad categories: 1. One off activities - charity donations, awards to local youth projects, schools etc. These are decided by the company and its shareholders on a project by project basis.

2. Larger issues of policy and strategy CSR plays a major role in the company to ensure awareness of the moral, social and ethical environment within which the company operates. Views of interested groups considered to avoid conflict Companies look to see where their policies conflict with views of outside world. E.g. not paying low wages, looking for renewable energy sources E.g. BP

BP BP is actively attempting to be socially responsible. It is also aiming to make the consumer aware of its efforts to find cleaner and new sources of energy through it internet and television campaigns. BP were the first major energy company to publicly acknowledge the need to take steps against climate change.majorenergy company Their energy efficiency projects have reduced emissions by over 4 million tonnes since 2001.(BP web-site)energy efficiency Why are they doing this? Do they have to do this?

Arguments for accepting social responsibilities Benefits society - pollution, improve quality of life, ‘the right thing to do’ Improved financial performance of the firm and reduced operating costs e.g..reduced waste disposal costs, income from selling recycled materials etc Enhanced brand image and reputation Improved sales and customer loyalty Will avoid pressure group actions Can attract and retain skilled employees Growth of ethical investing means more potential capital Easier to attract investors Improve share prices

Arguments against CSR for businesses CSR policies may be costly to introduce Businesses may not be able to use there resources as efficiently if there are restrictions on how they may produce and where they can locate Difficult to assess what is right and wrong Is CSR just a passing fashion Companies ultimate aim is to make a profit As long as the company complies with legislation they should be able to do what they want

Concerns about CSR Due to public and regulatory scrutiny and changing Snr. management attitudes. UK businesses now have high levels of CSR The greatest concern is now in monitoring employee rights when firms locate in countries such as China and India.

Protests Many companies such as Nike and Gap have experienced negative criticism and protests for their use of sweatshops in less economically developed countries.

Student activity Read the three examples of CSR on page404 to 406 Answer the question: Evaluate the view that social responsibility provides a range of advantages for firms.

Social responsibilities and ethics revision Confectionery giant Cadbury Schweppes has bought organic chocolate maker Green & Black's, L’Oreal has bought ethical cosmetics company Body Shop. These deals have taken place at a time when demand for healthier and ethical products is booming. 1. Define the terms social responsibility, business ethics, public relations and cost- benefit analysis. 2. Explain three ways a firm such as Cadbury may act in a socially responsible manner to customers, employees and the community. 3. Explain why it may be difficult to stay ethical if delegating. How is this problem resolved? 4. Discuss the reasons why integrating with another company does not always result in success. 5. Evaluate the view that an ethical stance is “a valuable marketing tool” (Use the examples described in the information provided when answering questions)