Chapter 25, Environmental and Ethical Issues
Learning Objective: To understand how businesses overcome pressure groups and manage to be profitable yet being sustainable
You now understand that business activity yields both: negative and positive externalities to society and environment, such as:
Positive: job creation, access to health, education, local community development...
Negative: pollution, over use of resources, waste...
You also learned that business perform cost-benefit analysis but conflicting interests among different stakeholders make it hard for fulfilling multiple demands.
Finally, we understand that there has been a great emergence of Sustainable Business practices to try and avoid bad publicity created from unethical activities.
The emergence of Sustainable Businesses in the last few years is due to the risk of bad publicity and in large part to the increasingly importance of pressure groups:
Pressure Groups are groups of people who join together towards a common cause (ethical or environmental). Such groups aim to change how business activity so that negative externalities are minimized.
Pressure groups pursue their aims through the use of:
- Demonstrations: such as public protests;
- Boycotts, when a groups of people refuses to buy from a business and try to influence the public to do the same.
Examples of boycotts around the world: https://www.ethicalconsumer.org/ethicalcampaigns/boycotts
- Petitions: gathering a large number of signatures to make an official complaint to the authorities about an issue;
- Lobbies: when pressure groups try to influence policymakers inside of the government to vote a law which they believe is the best;
- Increase awareness of the issue: pressure groups making online campaigns to increase peoples' awareness about a specific issue a company is related to in order to cause bad publicity to that business.
It's usually a better idea for businesses not to fight back pressure group claims as it can create bad publicity. Following more sustainable and ethical practices are a better way to go:
Avoid waste and reduce pollution;
Recycling;
Fair treatment of stakeholders;
Follow government regulations to avoid fines or even shutdowns.
Some businesses choose to follow a more defensive attitude towards pressure groups through legal actions or even through campaigns to defend their actions/opinions regarding a certain topic and change the public's perception of the company.
Businesses need to protect and improve their reputation to avoid losing customers, workers, and investors.
Is there anything good businesses can take away from pressure group actions?
If you look closely, there are opportunities from pressure group acts to businesses:
Cost Savings: recycling and energy-efficient equipment yield long-term savings;
Tax Credits / Exemptions: governments offer tax benefits to sustainable businesses;
Good Publicity: attracting customers, workers, and investors;
New Business Opportunities: recycling, energy-management, waste-management.
Pressure Groups are not the only ones trying to limit the negative externalities of business activities. Governments also take a number of actions in that direction:
- Penalties, fines, closures, imprisonment when waste/pollution laws are ignored;
- Heavy Taxes on energy consumption to encourage energy-efficient methods;
- Standards / Limits for the usage of natural resources forcing the usage of renewable resources;
- Permissions may be denied to business considered 'unsustainable'.
Usually there is a conflicting relationship between environmental and ethical behavior against profit. That does not mean, however, that business opportunities cannot be created from such trends.
To-Do-List:
Exam Practice Questions (p. 326)
Chapter 25, Environmental and Ethical Issues
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