Global Business Perspectives
Durga93
GBE4lecture12.pptxThe Global Business Environment
LeCTURE 12
Challenges and responsibilities
Towards a new perspective
Risks, Challenges and responsibilities in the global environment
Summary of contents
The challenges and responsibilities
Sustainability
Governance
Social responsibility
Assessing the risks in the global environment
Who bears responsibilities, and what should they be doing?
Envisaging a new perspective
Social responsibility
Governance
Sustainability
Human needs
Societal goods
Legitimate political institutions
Fair and effective regulation
Anti-corruption
Sustainable business
Climate change
Interlocking challenges and responsibilities
Sustainability
Globalization has led to efficiencies in production, but serving mainly to increase profits, rather than promote sustainable business
The idea of governments making the law and businesses applying it: this is the received view, but is not what happens in practice:
Designing regulation involves both businesses and governments
Risks associated with climate change:
Businesses tend to wait for legislation before acting, but this is short-sighted
Governance
Business interactions with governments can be positive, as in delivering public services…
But can also be negative, if self-serving and corrupt
The spread of market economies has given rise to increased regulation
Regulation does not merely maintain markets, but promotes public goods such as consumer protection
Regulatory dilemmas: What about companies that use litigation to thwart laws designed for public safety?
Social responsibility
Social responsibility consists of meeting human needs and societal goals
Livelihoods, housing, health and education
Governments have the means to provide a secure environment, but…
Businesses are the providers of jobs, goods and services that people need to pursue personal goals
This book has emphasized the human and social dimension of business activities – not just their economic role
Assessing the risks in the global environment
Benefits of globalization through economic growth, but rising risks from effects of climate change
Slowing economic growth and rising indebtedness breed uncertainty and financial instability
Economic growth has been accompanied by rising inequality in most countries, also leading to instabilities in society
Political leaders, in both democratic and authoritarian states, confront challenges of social and political instabilities
Risks in the global environment
Ecology and sustainability
Success of the Paris conference on climate change depends on countries carrying out their commitments, including:
Emissions reductions
Funding to developing countries affected the most by climate change
Risks of continuing damage to human health caused by pollution and deforestation
Agribusinesses promote biotech solutions such as genetically-modified organisms (GMOs) in food production, but these carry risks to the environment
Deforestation and palm oil production
Palm oil is used in 50% of consumer goods, not just food (for example, shampoo)
Deforestation is blamed largely on companies clearing land for palm production, now focusing on Africa
The Roundtable for Sustainable Palm Oil (RSPO) has signed up large consumer products companies, but
Sustainable palm oil accounts for only 20% of total
Sustainable palm oil is not indicated on labels of the global brands
Demand for palm oil is rising, especially in Asian markets – likely to result in more deforestation
Economic risks
Countries that have grown economically from embracing globalization have seen benefits in the form of poverty reduction
32% of people globally lived in absolute poverty in 1990; that percentage was down to 16% in 2010
But there remain worrying levels of poverty in poor developing countries
Most countries saw growing inequality in these two decades
Increasing evidence that inequality brings risks
Inequality: what risks does it bring?
High inequality undermines prospects of sustainable economic growth
Two main aspects of inequality: health and education
If access is determined by money, the individual person is likely to be disadvantaged by poor health, little education and few job prospects
These impacts are damaging to the economy as a whole
Inequality is also a moral issue, devaluing the individual human being
Societies and well-being
Social divisions: wealth, ethnic differences, religion, gender
Divisions leave disadvantaged groups feeling vulnerable
Social instability is on the rise
The movement of migrants from dangerous areas, often civil war
Governments have obligations to provide humanitarian aid
Migrants are welcomed in some countries, but in others, they are not
Political instabilities
Social tensions can lead to political instability
In authoritarian states, social protests are perceived as threatening to political leaders
China is an example – slowing growth has seen rising unemployment
China also grapples with pollution and other risks to health
In democratic systems, political parties are the traditional focal points of political participation, but many citizens are now disenchanted with the political establishment
Who bears responsibilities: Governments
Governments enjoy political legitimacy, lawmaking powers and sovereign authority:
Policy tools to provide social welfare and reduce inequality
They can also introduce regulation to maintain fair markets
They can encourage entrepreneurs and promote access to education for all
They can take the lead in sustainable development goals
SDGs
What responsibilities fall on businesses?
Businesses control huge economic resources in most countries
Their economic power gives them influence over governments, including legislators
They can use this power responsibly, to promote social goals,… or use it for financial gains
When the business shifts its registration to a tax haven, the taxes it would have paid are lost to the governments in countries where it operates
Tax avoidance has affected public finances in most countries, developed and developing
What about consumers?
Apple is highly respected as a company, and its iconic products are prized by consumers
But Apple is a leader in outsourced manufacturing involving human rights violations
And also in tax avoidance
Executives of global companies assert they act within national laws in countries where their products are manufactured, and condemn practices such as child labour, knowing they will not be prosecuted
What do consumers think of Apple’s ethics?
Envisaging a new perspective
The primacy of shareholder value has been accepted as beyond question in business circles
But market failures, growing inequality and poor work environments for ordinary people have led to a questioning of its assumptions
Is there a better way, that builds in social values (such as the environment), human rights, ethical practices, and also generates profits?
What do shareholders think? Most shareholders want to see the business sustainable in the long term
Sustainable businesses: the long term approach
Poor treatment of workers is not confined to developing countries
Regimented conditions and zero-hours contracts are practices in global companies
Changes in policy would include:
Employment contracts with obligations on the employer
Payment of taxes in countries where the firm operates
Improving conditions in outsourced operations by imposing these terms on the companies that run the factories
The sustainable business in the future
These changes just described would eat into profits, but many current practices are both unsustainable and unethical
The enlightened shareholder seeks profits, but not only profits, which is a short-term goal
The shareholder wishes to see a sound business with a good reputation in societies everywhere
The philanthropic activities of large companies make headlines, but increasingly, stakeholders look at how the money was made, and how it will be made in the future
