Unit 11: Environmental and Ethical Issues

?What is Corporate Social Responsibility

Machine A  5000 SR  Polluting Machine

Machine B  9000 SR  Anti-polluting Machine

If Sabine Chose Machine A - Sabine is thinking about herself only

If Sabine Chose Machine B - Sabine is thinking about herself and

other stakeholders  Sabine's Business has CSR

Corporate Social Responsibility: is when businesses take decisions

that benefit all stakeholders rather than only shareholders (owner)

Social Enterprise  is a business that has three main objectives

(Triple Bottom Line)

 Economic  Make Profit

 Social  Helping the society (providing jobs, providing variety
of products)
 Environmental  Be Environmentally friendly

Businesses and the Environment:

Businesses pollute the air by releasing smoke and poisonous gases,

pollute water bodies by releasing wastes and chemicals, and damage
the natural beauty by building factories.
Why Businesses WANT to be Environment friendly? (Advantages of
being Environment friendly)

1. Consumer nowadays are becoming socially aware and willing to

buy environmentally friendly products  Sales will be higher thus
higher profit

2. Sense of Responsibility  Believe on global warming and its long

term effects

3. Use recyclable raw material which is cheaper in cost.

4. Governments and other environmental organization (pressure

groups) will support businesses that do not pollute the environment.

5. Governments will give planning permissions if the business in

implementing environment friendly actions

** Pressure Groups: are organizations or groups who affect business

decisions. If businesses are irresponsible towards environment 
Pressure groups can conduct consumer boycott as they have public
support, media coverage and well financed. This will lead to bad
reputation

Why Businesses DO WANT to be Environment friendly?

(Disadvantages of being Environment friendly)

1. it's expensive to buy anti-polluting machinery thus it will reduce

profits.

2. Having Anti-polluting machinery forces the business to increase

prices to cover costs thus the demand will be lower, reducing the
profit. (This means the business will be less competitive)

4. Some businesses believe that it’s the duty of the government to

clean up pollution.
Governments put laws to restrict businesses from damaging the
environment. Usually government gives Pollution Permit which is a
license that government offers to pollute to a certain limit.

COST-BENEFIT ANALYSIS:

Aya wants to open a business in Jeddah

Social COSTS > Social BENEFITS  Rejection

Social BENEFITS > Social COSTS  Acceptance

Social BENEFITS:

 Private Benefit: Gains that the business will get from an

activity. Example: Profit
 External Benefit: the gains enjoyed by the rest of the society
as a result of business activity
Example: Job Creation, Paying Taxes to government,
competition, lower prices

SOCIAL BENEFITS = Private Benefit + External Benefit

Social COSTS:

 Private Costs: costs by the business to start a business

Example: Buying Assets, Expenses, Land
 External Costs: Costs paid (Negative impact) by society as a
result of business activity
Example: Machinery Noise, Air Pollution, Loss of Land, Water
Pollution

SOCIAL COSTS = Private Costs + External Costs

SUSTAINABLE DEVELOPMENT: is development that does not put at
risk the living standards of future generations

Business can develop and grow without harming future generations

by:

 Use Renewable Energy

 Recycle Wastes
 Use fewer resources
 Develop new environment friendly products that reduce
health and climate problems for future generations

Ethics in Business
The Ethical decisions are base on a moral code. It means "doing
the right things".
Sometime businesses can take unethical decisions such as:
 Taking or offering bribes
 Associate with people or organizations that have bad
reputation
 Employment of Children

Taking ethical decisions (Right Decisions) can help the business by:
 Makes the products more popular among customers
(individual or business customers)
 Encourage the government to favor the business in any
future demand or dispute
 Avoid pressure groups threats and unfavorable actions.

Being Ethical can end up being expensive but in the long term
the value of the business will be higher (Customers,
government and pressure groups)