A series of Q&A questions. (case study) The knowledge of Business and Sustainable Development is required
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Module11MGMT2004SustainabilityStakeholders_TheRoleofConsumers.ppt*
MGMT 2004: Business and Sustainable Development
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The Role of Consumers:
Socially Responsible Investment
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Sustainable Consumption
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At the end of this lecture you will be able to:
- Describe socially responsible investment (SRI) or the ethical investment;
- Critically assess the ethicality of SRI;
- Explore links between sustainable consumption and sustainable development;
- Understand local and global impacts of over-consumption and the need for change.
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Ethical Investment
Sustainable Consumption
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- Paraguay
- Panama
- Guatemala
- Nicaragua
- Ecuador
- Costa Rica
- Colombia
- Denmark
- Honduras
- Venezuela
- El Salvador
- Indonesia
- Philippines
- Thailand
- UAE
- Canada
- New Zealand
- Australia
- Chile
- Argentina
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Most of the working Australians are investors (through our superannuation),
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Business Stakeholders
Stakeholders represent groups or individuals who can be affected or are affected by the functioning of an organisation (Freeman 2010).
NGOs
Local
communities
SMEs
Government
Universities
Consumers
Employees
Corporation
Shareholders
Internal
External
Trade unions
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Business and Consumers
| Actors | Reactive interest | Proactive interest | Influence areas | Issue (Examples) |
| Business | Profit | TBL | Celebrity leaders, political influence, R&D capacity | UN Compact, 4th Gen CSR, SDGs |
| External Stakeholders | ||||
| Government (e.g. local, state, federal) | Tax, economic growth, balance the budget, pollution clean-up | Invest in and support TBL strategies and solutions, pollution prevention | Compliance & enforcement, Eco-efficiency & effectiveness | Carbon pricing, renewable energy subsidy, social enterprise grants |
| NGOs (e.g. International Council on Clean Transportation (ICCT), Sea Shepherd, Bill and Melinda Gates Found. | Anti-corporation, Environmental awareness, Activism | Partner with business/government to foster TBL solutions that reflect ART | Agenda setting, informing public (inc research) mobilizing media, lobbying (inc boycotting) | Watchdog (i.e. Volkswagen), Wildlife conservation, SDGs |
| Consumers e.g. you and me | Accept what is being offered, Interested in maximum returns on investments, Seek best price | Question what is being offered, Conscious investors, Seek best products and services | Lobbying (inc. boycotting), Social media | Activism against GMOs |
- Choosing to invest in companies that operate ethically, provide social benefits, and are sensitive to the environment
- A risk management tool to minimise negative impacts of the investment
- A facility for investors to match their ethical values with their investment decisions based on integrated information (social, economic and environment)
- A.K.A. Ethical Investment
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- In the early 1900s, the Methodist Church began investing in the stock market, consciously avoiding companies involved in alcohol and gambling
- During the twentieth century more charities and individuals began to take account of ethical criteria when making investment decisions
- Interest in SRI grew during the Vietnam war and anti-apartheid protests in 1960’s
- Early 1980s saw the establishment of independent research services for ethical investors and the first ethical investment businesses
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Avoid sin stocks/ Seek moral stocks
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SRI has been the fastest growing investment portfolio over the past ten years in the financial centres of the USA and Europe
Examples:
SRI assets under management in Europe grew from 2.7 trillion in 2007 to € 5 trillion in 2009, representing a growth of 87% (Eurosif 2010)
As of 2010, US$3.07 trillion in assets tied to SRI, representing 12.2% of assets under management (Chava 2011)
The Responsible Investment Association Australia (2017) reported that SRI in Australia and New Zealand have reached over $600B
Global SRI market has grown since 2002 at a rate of 22% per annum (Booz&Co 2009)
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- Screening
Positive: seeking to invest in companies with a commitment to responsible business practices, or that produce positive products and/or services.
Negative: avoidance of investment in targeted companies, industries and countries
- Shareholder activism
Active voting and engagement in companies in which one has invested or has vested interest
- Integration
Environment, society and governance (ESG) are incorporated into investment analyses and decision making
- Community investment
Providing capital to underserviced communities
- Divestment
Withdrawing investor support from companies whose conduct has be drawn into question
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e.g. exclude companies that draw more than 20% of revenues from coal, gambling, tobacco or pornography.
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News about company’s ethical practices can affect their share price for good or ill.
Sustainability performance can be seen as an indicator for management competence
Proactive, responsible management can enhance profitability
More proactive companies may therefore stand to outperform their more reactive competition
Various aspects of sustainability seen as proxy for risk minimization and future profitability
Ethical investments do not yield less returns than mainstream investments
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The Responsible Investment Certification Program
RIAA helps investors find out and learn more about responsible investment products and services available in Australasia. The program provides assurance, independent verification and information
United Nations’ 6 Principles for Responsible Investment
Principles are based on a environmental, social and corporate governance (ESG) framework, which is meant to align investors with broader objectives of society
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- SRI can be deceptive not addressing the root cause of the problem
- Lack of accountability and transparency in portfolio screening
- Despite the rhetoric SRI funds rarely engage in shareholder activism
- Social and environmental screens are loose and vaguely defined, often failing to protect the society or the environment
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Source: Hawken (2004)
- Norway’s State Fund (NSF) (similar to Aus Future Fund) withdraw its investment from the US retailer Wal-Mart because of systematic human rights abuses by the company
- NSF is not an ethical investment portfolio but it is run by ethical managers (Kirby, 2006)
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SRI matters because if more and more of us are willing to invest only in sustainable profit making practices, companies will have no choice but to change for better
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- As income rises, so does the demand from us consumers i.e. we consume our way towards prosperity
- Pervasive sense of material deprivation of people like us i.e. “keeping up with the jones” is an integral part of our identity and culture
- Since World War II living standards in the West have risen to a high level for most of the population
- Access to housing, education, health care and consumer goods are far higher than they were fifty years ago
- BUT ARE WE HAPPY?
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The primary purpose of consumption is to satisfy our basic needs, food, shelter, education, etc.
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Maslow, 1954
Happiness
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Law of diminishing returns
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Jebb, A. T., Tay, L., Diener, E., & Oishi, S. (2018). Happiness, income satiation and turning points around the world. Nature Human Behaviour, 2(1), 33.
$159,000,
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- Purpose: liking what you do each day, being motivated to achieve your goals
- Social: having supportive relationships and love in your life
- Financial: managing your economic life to reduce stress, increase security
- Community: liking where you live, feeling safe, having pride in your community
- Physical: having good health and enough energy to get things done daily
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Bangladesh
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Ecological footprint = the amount of resources that we consume per certain area of land to sustain our lifestyle
http://www.footprintnetwork.org/en/index.php/gfn/page/earth_overshoot_day/
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Economic Impacts
Debt has become the Australian way of life. In recent years, the average Australian household has tripled to more than one-third of debt of GDP (Creighton, 2014)
Total household debt in Australia in 2016 amounted to $2 trillion (Soos, 2016)
Credit card debt in Australia is over $31 billion, with $5 billion+ as interest charges, with an average HH debt of $4155 (Canstar 2016)
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Social Impacts:
Overwork and family time: High income aspirations require either high paying jobs or long working days (or both).
In 2010 Australians worked over 2 billion hours of overtime. 46% of all full-time employees worked overtime on a regular basis (Australia Institute 2010)
63% of employed Australians consider themselves highly stressed. Workers compensation claims for stress-related conditions amount to of over $200 million every year (Monash University 2010)
The proportion of children attending formal care increased from 17% in 1999 to 22% in 2008 in part due to the increase in the labour force participation rate of women with young children (ABS, 2010)
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Environmental Impacts
The environmental crisis is a crisis of desire
Consumption impacts on:
Resources
Waste
Australian average of 1.62tonne and 200kg of food per capita
99% of materials bought in the US end up as waste within 6 months after purchase (Leonard 2009)
Pollution
E.g. Australian per capita CO2 emissions
Changes in Consumption
Larger houses
average 206 m2 & 2.6 occupancy rate
More cars (2+)
SUVs, 4WD, sport cars
Larger TV sets
Plasma TV
Electrification
Phones, picture frames, bread cutters, can openers
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“The use of services and related products which respond to basic needs and bring a better quality of life while minimizing the use of natural resources and toxic materials as well as the emissions of waste and pollutants over the life cycle of the service or product so as not to jeopardize the needs of future generations”’
According to the OECD, sustainable consumption is about consuming differently, not necessary less, while maintaining, or possibly even enhancing the well-being and fulfillmenty
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- Consumers say they pay attention to two things: companies that are going above and beyond with CSR efforts and companies that are being called out for poor CSR performance.
- Consumers are willing to make personal sacrifices for the greater good. They are even willing to pay more or reduce how much they buy if it will have a positive impact on social or environmental issues.
- Consumers consistently see social media as an important way to learn, voice their opinions and speak directly to companies around CSR issues
- Changes are only likely if those concerned have
An understanding of the impacts of consumption
One kWh of electricity produced by coal-fired power stations results in 0.43kg of CO2 …is my fridge killing polar bears?
Knowledge about existing and potential alternatives
Where do I buy organic food or avoid GMO?
The motivation and incentives to change e.g. reduce waste
Is it attractive to change? (cost, image, functionality)
The capacity to choose right options
Can I afford to buy differently?
Do I know enough to make the right choices?
Are the right choices facilitated by my surroundings?
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- Insistence on consumer rights for transparent environmental information
e.g. Eco-labeling/ Ethical textiles / Debate on controversial issues (e.g. GM crops)
- Reflection on wasteful/polluting practices
Junk mail / Excessive packaging
Material/energy intensive goods
- Reflection on needs vs. wants
Do I need a … ? Is newer better? What is the true cost of my consumption?
- Political engagement
Change is not a given … it needs to be driven/demanded socially, commercially and politically
Active citizenship
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- Consumers in affluent countries like us need to take an extended sense of responsibility for our consumption patterns, not just for the local impacts but also for the aspirations that they generate elsewhere
- There cant be unlimited growth:
In developed countries, people have been told that ‘more = better’ for the last 60 years
It is now understood that western lifestyles cannot be sustained and replicated in global terms
- Sustainable consumption can be a powerful driver for that ABC
Yet, the task of confronting our culture of over-consumption is difficult for individuals when governments try to sell the delusion that everyone in this planet can and wants to consume like us
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We are affluent but not so happy because we are always told what we have is not enough and what we need is more stuff … social and moral emptiness can’t be compensated by more consumption
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