Environmental and Ethical Issues
Social responsibility is when a business decision benefits stakeholders other than shareholders, for example, a decision to protect the environment by reducing pollution by using the latest and greenest technology.
The environment is our natural world including pure air, clean water, and undeveloped countryside.
Global warming is a gradual increase in the overall temperature of the Earth’s atmosphere, generally thought to be caused by increased levels of CO2 CFCs, and other pollutants.
A pressure group is made up of people who want to change business decisions by taking action such as organizing customer boycotts.
Private costs of an activity are the costs paid for by a business or the consumer of the product.
Private benefits of an activity are the gains of a business or the customer of the product.
External costs are costs paid for by the rest of society(third parties), other than the business, as a result of the business activity.
External benefits are gains to the rest of the society other than the business as a result of business activity.
Social costs = external costs + private costs
Social benefits = external benefits + private benefits
Sustainable Development
Sustainable development is development which doesn’t put at risk the living stands of future generations.
For this, a business can:
- Use renewable energy
- Recycle waste
- Use fewer resources
- Develop new environmentally friendly products and production methods.
Pressure groups are groups of people who act together to try to force businesses or governments to adopt certain policies.
A consumer boycott is when consumers decide not to buy products from businesses that do not act in a socially responsible way.
When are pressure groups effective?
| Effective when | Not effective when |
| It has popular public support and receives much media coverage. Consumer boycotts result in reduced sales for the business The group is well organized and financed. | What the firm is doing is unpopular but not illegal Cost of the business of changing its methods is more than the possible cost of poor image and lost sales. The business sells to other businesses |
Role of legal controls over business activities affecting the environment:
- Make it illegal to locate businesses in environmentally sensitive areas
- Make it illegal to dump waste into rivers and seas
- Make it illegal to make products that cannot be easily recycled
Ethical decisions are based on a moral code. Sometimes referred to as ‘doing the right thing’.
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