University of California
Type of paper: Thesis/Dissertation Chapter
Environmental protection and the social responsibility of firms: perspectives from law, economics, and business
Responsible businessIntroductionResponsible business concerns itself with allowing and ensuring the application of social and moral principles in business decision making. Through the definitions, the following principles of responsible business can be drawn:
Business for profit: When people engage in business, they are expecting to receive profit. The first principle of responsible business lies in the fact that it is just and in fact expected to make profit and for such profits to increase as more experience is gained in business. As such in the pursuit for responsible business, profits should not be left behind or side stepped, strategies employed by business managers, and even mechanisms used in the business need to be directed towards generating profits. The reward for doing business properly lies in the excess returns received from investments on the business.
Business ethics: the business operates within the concept of society, plays a part in accentuating the lives of the community. Responsible business calls for businesses to be subjected to a code of conduct. Businessmen are not exempted from being moral even as they pursue the profit. As ethics apply to all areas of life, so the same applies in business. Business needs to be done in as much honesty as is possible. If the business environment is to improve then behavior in business also needs to change and improve.
Professional ethics: a responsible business is run under corporate codes. As a business continues to change and the environment within which it operates transforms, it is only responsible for such codes to continually change. Therefore, a business is defined as responsible not just within the code of business ethics but also when it operates through the professional code of ethics governing it. While ethics are general in business, professional ethics are specific and designed for that particular business.
Business almost seems to operate under no particular ethics, rules and responsibilities. In many cases business persons are only concerned with the monetary value and nothing else. Responsible business on the other hand adheres to a code of conduct, set forth not just by law and moral values but also by the profession and industry within which the business operates, (Sanford 2011). Scholars agree that businesses can no longer operate as independent entities, existing separately by society. They need to uphold and be held responsible by the society. They exist as part of and in partnership with society and can therefore not ignore the societal responsibilities.
Drivers of responsible businessThe natural/ ecological environmentResponsibility to the environment consists of the concern for the interaction between human beings and the natural environment as it exists. The responsibility of businesses to the environment developed as a separate factor in responsible business from the 1960’s. At the time, pictures taken from space showed vulnerability in the existence of earth and its ecosystem. Environmentalists began lobbying that animals, plants and the general ecosystem in itself had value in and of itself. As such demands on various businesses to treat these entities responsible began. The general notion of responsibility to the environment is that if businesses continue exploiting and fail to be responsible towards the environment, it will be completely destroyed and in the process the human race will also be destroyed.
In the year 2009, the summit on sustainable development, brought focus to the fact that in another 50 years more than 10 billion people will be existing in the world. This is in addition to the problems currently facing the existence of earth such as rescinding existence of energy, excess carbon and a declining ozone layer (Smith 2010). The summit concluded that there is need for a green revolution to improve the status of the environment. The industrial world, at least a large percentage has failed to uphold its own responsibility towards ensuring a change in the strategies about the use of natural resources, and also the technology used to make use and exploit the natural environment.
Sustainable development as responsible businessToday’s businesses are expected and in fact it is demanded of them that sustainability becomes a part of their strategy. The government and even the clients coming to business are looking for more and more evidence that the business is acting responsibly in the environment. According to smith (2010), Customers want to live in a pollution free environment, so businesses whether manufacturing or even service providing have to change the way they operate. In order to maintain a clean environment, businesses require operating with technologies that are clean and also sources of clean energy such as solar rather than coal and oil. Sustainability can be simply defined the ability of the environment to replenish itself and remain healthy for the next generations. Surprisingly by opting to use more environmentally friendly and energy efficient technologies, businesses are able to save on their overhead costs.
Recycling: this refers to the ability to re-use raw materials over and over again. The advantage of recycling is that it cuts the amount of raw materials required for products and as such allows the environment to replenish itself. Normally businesses produce a lot of waste some which is very difficult to manage such as plastics. Recycling encourages the businesses to come up with processes that make use of their waste. Newton (2005) states that The concern is mainly for ever filling landfill, and therefore responsible businesses calls for either new and better ways to deposit the wastes or better yet new ways to make use of the waste. Landfills are responsible for methane production which is responsible for climate changes and damage to the ozone layer. In many western countries, recycling is not just a business responsibility but in fact a law that could attract stiff penalties.
Competitive advantage: in the past, businesses have made use of Ricardo’s principle which simply encourages cost cutting measures such as cheaper raw materials, labor and even investment of capital. The cost effectiveness produces greater profits for the business. However, Gibson (2005) indicates that recent research and benchmarking with large companies such as Coca Cola and General Motors shows sustainability provides greater advantage. Organizations committed to taking advantage of best practices are also gaining a larger market share.
New opportunities for product differentiation: product differentiation offers a chance for businesses to excel beyond their competitors even in the same industry. A product based on sustainability is not only considered a product of high quality but also one that is environmentally friendly and therefore more responsible even for the consumer. The market is gradually shifting from traditional products towards more energy efficient, fuel saving and alternative energy products. Testimony of this lies in the recent increase of interest and growth of the market share for products such as solar panels and energy saving bulbs. Zott (2014) shows that Responsible business in this era therefore translates to product differentiation through:
•Use of raw materials that have been proven to have less damage to the environment
•Companies that are setting benchmarks in terms of going beyond what is environmentally compliant.
•Less and less wastage from the business and more recycling of the same.
•Reduced emission of toxic wastes from the business.
As many environmentalists have shown nature in itself shows the best system of sustainability. Plants for example prosper in sunlight and with sufficient moisture. They are consumed by animals and insects. Through this consumption, the animals produce waste which in turn is used to ensure fertile soils on which more plants are grown. In this same way, human beings and especially businesses are tasked with the responsibility of being eco-friendly that is use, produce, consume and transform waste into something else through recycling.
Role of the government in responsible businessThe World Bank report in 2003 on sustainability emphasized the need for more structured and responsible governments to ensure sustainability. The governments are tasked with the responsibility of creating better policies and institutions through which businesses small and large alike can be held responsible. In the past, weak governments and poorly maintained social institutions have turned out to be quite costly to nature and the environment. Weak governance has brought about income inequality, political unrests and environmental disasters, (Hay et al 2005).
Governments provide the legal framework through which businesses can be held responsible. Constitutions and laws of a country are often used as the back drop to determine the concern and interest of the government in securing its own environment for example. The legal framework provides laws within which every business should operate. The legal frameworks set forth by each country have been changing constantly, becoming more focused to immediate and more tragic causes of environmental degradation. Through the legal framework for example, majority of the mines and timber yards have been closed and shut down for causing damage to the environment.
Governments also put in focus environmental conservation so that the activity is not just being carried out haphazardly. They provide a platform for integrating environmental concerns and responsibility into the economic and social development of the country. Through environmental policies also, there is conservation of critical natural resources. Businesses endangering such resources can face severe penalties through these policies. Governments often partner with businesses to ensure sanctuary of forests, animals that are going extinct among others.
Businesses often ignore the importance of contributing to the community within which they operate. The governments of such countries ensure that majority of the profits generated from the business go back to the community. The foremost principle for all governments is increased economic growth, poverty eradication and bridging the social class gap. All businesses operating within the country need to uphold this principle. . In addition, according to Moon (2001), the government ensures that even as businesses operate they do not meddle with the rights of the nation’s citizens. The government gives power and strength to citizens who may feel powerless to fight the businesses and especially the large entities. This is not to mean that the government only has responsibility to consumers, it also ensures that businesses operate in an environment which allows them to flourish and therefore generate profits.
ConclusionIt is now obvious that companies that are socially responsible and businesses that adhere to a particular code of doing business have better reputations and therefore a larger market share. The bulk of responsibility lies in the business owners ensuring that they have developed moral responsibility as the back bone on which their decision making is based. Managers and employees then have the duty of protecting the welfare of their consumers and other stakeholders which include the communities they operate within. While the main concern for business is an increase in the profit margin, those that have shown an inclination towards more responsible business strategies have attracted not just a large number of consumers but also investors. People are more interested in ensuring the growth and success of a responsible business especially with more and more of the media focusing on errors and embarrassment news featuring businesses that have failed in their responsibility.
Businesses are held up to societal standards and failure to uphold them is frowned upon. Whereas there was a time when businesses could attempt to cut corners in their responsibility, today this is not an option. The government and even citizens are aware that companies and businesses operate with certain expectations and values. Employees and other stakeholders require business to be conducted responsibly. Failure to do so encourages massive labor turnouts as employees seek more sustainable businesses. Responsible business therefore cuts into all corners of conducting business from governing the contracts with clients, to those with suppliers and even the community upholding the business.
Responsible business is not just a mirage of expected rules and regulations. Indeed it operates within a justice system through which governments obtain and have the power of demanding responsible business. Responsible business is part and parcel of strategic management. Each decision in the business must reflect the true responsibility and code of ethics of the business. In some cases this may require special attention being paid to particular areas of responsibility. Today, companies are going far and beyond what is expected of them in running business because they understand the importance of taking responsibility to ensure their survival.
Gibson, K. (2007). Ethics and business: an introduction. Cambridge, Cambridge University Press.
Hay, B. L., Stavins, R. N., & Vietor, R. H. K. (2005). Environmental protection and the social responsibility of firms: perspectives from law, economics, and business. Washington, DC, Resources for the Future
Newton, L. H. (2005). Business ethics and the natural environment. Malden, MA, Blackwell.Sanford, C. (2011). The responsible business reimagining sustainability and success. San Francisco, Jossey-Bass
Smith, N. C. (2010). Global challenges in responsible business. Cambridge, Cambridge University Press.
Zott, L. M. (2014). The environment. Detroit, Greenhaven Press