BUS-4500 Exam 2

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Terms in this set (78)
- Freer trade and economic integration creates incentives to weaken or do away with environmental, labor, health and safety regulations.

- Such regulations constitute "barriers to trade" and given competition for economic growth, countries will have strong incentives to be the first to offer multinational corporations less regulations & restrictions.

- Results in negative impacts environmentally through air quality and health effects
Handprints vs Footprints:- Handprints: the good we do as we go about business - Footprints: the damage we do as we go about our businessCorporate Social Responsibility (CSR)- On a voluntary basis, companies integrate social and environmental concerns in their business operations and in their interaction with stakeholdersCSR vs. CR:- CSR: things a firm does to "do good" in society (volunteerism, philanthropy) (T-shirts & Balloons) - CR: An integral part of corporate activity (responsibilities to employees, stakeholders, community)Integrating strategy into CSR:- looks forward focusing on entire value chain - weave purpose into how you run companyStrategic Model vs Economic Model:- Economic model: only responsibility is to maximize profit within the law - Strategic Model: serve social ends by serving shareholders - adopt into core strategyMyths about sustainable investing:- They underperform, are expensive, limited optionsESG- Looks at companies Environmental, Social, Governance practices - practices of an investment that may have a material impact on the performance of it - enhances traditional financial analysis by identifying risks/opportunities beyond technical evaluations - objective is financial performance - goal is to produce optimal results with invested moneySocially Responsible Investing:- Actively removing or choosing investments based on specific ethical guidelines - Uses ESG factors to apply screens on investment universe - making a profit is still important, but myst be balanced against principals - Goal is to generate returns without violating one's social conscienceImpact Investing:- An investment strategy that promotes achieving a financial return but also to having a positive social/environmental outcome - Made with intention to generate positive, measurable social/environmental impact alongside financial return - Financial return is second priority to social impactThe Sustainable Development Goals: (SDG)- UN adopted set of 17 goals: (1)End poverty, (2)End hunger. (3)Ensure healthy lives, (5)Gender equality, (8)Decent work for allThe Giving Pledge:- Bill gates/Warren Buffet founded for billionaires guaranteeing they'll give away half of assets before death - Sarah Blakely of Spanx - first women to sign on and pledged to support womenSDG 1:- End Poverty in all forms everywhere - Extreme Poverty: less than $1.25 per day - 710 Million people today live in extreme poverty - #1 because of its interrelation to othersThe "Developing World"- the more impoverished countries of the world - huge costs, regulatory pressure to continue investment in social programsWhy is poverty relevant to business?- Allow societies trapped in poverty to stand on their own two feet - Can allow them to withstand terrorism and achieve economic developmentPoverty trends:- much opportunity for multinational companies in Africa, India also doing well, be careful of percentages relative to populations$pent:- Scenario played by millions, builds empathy for overdue payment strugglesSDG 8:- Decent work for allHuman Trafficking/Modern Slavery:- Someone forced to work/marry and cannot refuse because of threats etc. - Still very common and profitable for companiesConflict Minerals:- Gold, Tin, Tantalum, Tungsten - fought after in the congo, groups use money to buy weapons and further conflict - Forced labor and human rights abuseChocolate Industry:- Child labor, slavery in western Africa and BrazilNestle Cocoa Plan:- better farming, better lives, better cocoa - help farmers improve practices and incomes, provide women/children access to education, access to safe drinking waterRana Plaza:- 2013 Bangladesh clothing factory collapse - Poor working conditions before hand - Outcome: Created the Bangladesh Accord and Alliance (regulating working conditions)Corporate Philanthropy:- firms can take philanthropy action to help fight social changes - May be made with good intentions, but often give what is not needed (TOMS)L3C:- a low-profit, limited liability company that facilitates investments in socially beneficial, for-profit ventures. is designed to attract private investments and philanthropic capital in ventures designed to provide a social benefit - Charitable, educational, social objectives are primary motive - profit secondary to social goalsSocial Enterprise:- Created to further a social purpose in a financially sustainable way - Sustainable and scalable - Forms: L3C, nonprofit NGO, for-profit, hybridSocial Entrepreneurship:- Harnesses entrepreneurship skills to do social good - Combine social mission with discipline and determination - creativity, innovation mission driven - Clear focus on the needs of those being servedSocial Business Model:- (i)Solve social problems (including poverty) -(ii)Must run sustainably (not lose $) - (iii) Profits reinvested into company rather than distributed to investorsIf everyone lived like Americans, how many earths would we need? Europeans?5, 3Challenges to the economic model:- Market failures: externalities, undervaluing intangiblesExternality:- Side effect of a commercial activity affecting other parties without this being reflected in thee costs of goods or servicesPutting a Cost on Intangibles:- No market exists to create price for social goods - difficult to value - Market value up 84% on S&P 500, it was only 17% in 1975Issues of Climate Change:- increased temperature, sea-levels, extreme eventsClimate Change:- change in global/regional climate patterns, increased levels of CO2 from fossil fuelsTypes of Greenhouse Gas:- Methane (most absorptive of heat) - CO2, nitros oxide, chlorofluorocarbonsGreenhouse Effect:- trapping sun warmth in planet's lower atmosphere - methane traps 25x more heat than CO2 - In last 10 years, 6 hottest years were the last 6 - Electricity used to be the worst, now transportationKeeling Curve:- graph plotting CO2 concentration in atmosphere - Increasing slope, variation around slope not linear - Annual sawtooth pattern in CO2 produced browning vegetation that consumes CO2 in spring/summer, releasing in fall/winterCurrent Levels of CO2:- Ice core samples used to measure in Parts per Million - Current: 415 ppm is CO2 - Goal: 350 ppm experts agree this is safe levelShifting Baseline Syndrome:- Each generation accepts their version of nature. • This version gets changed, through exploitation, pollution, or other factors • The next generation accepts this changed, often depleted version as "the new normal"Climate Refugees:- People displaced by environmental changes brought about by climate change, such as rising sea levels, drought, and increased exposure to hurricanes and floodsRisky Business Project:-The bottom line on climate change -Trying to fix the problem now before it gets worst -Climate change is a national problemESG:- Environmental, Social, Governance - central factors in measuring sustainability and ethical impact of an investmentTop Line vs Bottom Line:- Top: sales - customer perception and impact on purchasing decisions - Bottom: cost savings through sustainable practicesMacro risk reduction vs Micro risk reduction:- Macro: focusing on the larger issues of the planet - Micro: benefits firm gets by managing risk associated with sustainabilityNatural Capitalism:- The idea that businesses can both expand their profits and take good care of the environmentWhat can firms do?- Natural capitalism -Eco-efficiency - Renewable Energy - Carbon offsets - Biomicry/Cradle to Cradle - Shift in thinking (goods vs services)Eco-Efficiency:- productivity of natural resources must and can be dramatically increased - redesigning products, encouraging customers to reduce energy, sustainable packagingLEED:- Leadership in Energy and Environmental Design - converting to "green buildings" to reduce energy consumptionRenewable Energy:- investing in energy gathering assets, signing long-term purchase agreements for renewable energyProject Gigaton:- Walmart initiative to remove 1 ggt from supply chain by 2030PPA's:- Power Purchase Agreement - buy from renewable energy providerREC's:- Renewable Energy Certificates - verifies power/parts of power coming from renewable energyCarbon Offsets:- Certificate representing reduction of 1 metric ton of CO2 Emissions - Credits to companies to remove CO2 from atmosphere - projects that compensate for all or part of a company's greenhouse gas emissions by eliminating the CO2 equivalent of those emissions from another source.Biomimicry/Cradle to Cradle/Circular Economy:- byproducts formerly waste eliminated and reintegrated into production process - waste is only waste if you waste it - Keep resources as long as possible, extract maximum value while in use, recover and regenerate productsCycles: Biological/Technical- Biological Cycle: for consumer products, industrial composting to use nutrients for plants - Technical Cycle: for service products, material shredded, sorted, melted for use in new productShift in thinking (goods vs services)- Business Shift from provider of goods to services, reinvest natural capital by using resources at reusable rateGreenwashing:- companies make false or exaggerated claims about how environmentally friendly their products areIntegrating Sustainability into strategic management:- set goals, measure products, report results - creates accountabilityCarbon Reporting/Disclosure:- increasingly, firms are disclosing carbon - Social cost/Price: $51 per ton of carbon - Internal Price on Carbon: corporate use of internal price becoming new normal for companiesInternal Price on Carbon- 75% of companies support mandatory internal price - Growing number of companies factoring in internal carbon price into business plansGreenhouse Gas Protocol:- framework most firms use to measure and report emissions - 3 scopes: (i)Direct GHG emissions, (ii)Electricity indirect GHG emissions, (iii)Other indirect GHGGlobal Reporting Initiative (GRI):- sustainability reporting framework - must report and comply with all standardsDow Jones Sustainability Index- tracks stock performance of worlds leading companies in terms of economic, environmental, social criteria - Benchmark for investors who integrate sustainability into their portfolios - First global sustainability framework in 1999Role of Business in Society:- Old view: "short term thinking" - tradeoff between social/economic performance (more profitable to be harmful) - Now: business can profit from solving these problems - Can't do it alone, businesses need to work with nonprofits and governmentShared Value:- addressing a social challenge with a business model - doing good has indirect benefits for companyUtilitarian/deontological business cases for sustainability:- Utilitarianism: look at all the good things that come out of being sustainable (justify) - Deontology: Doing it because it is the right thing to doHBR video: (4 categories of benefits)- Revenues, intangibles, costs, risks - Intangibles hard to measure/valuePower of the Institution of Business:- legal/political initiatives for equal opportunity still leaves inequalities, businesses are prime resources for addressing these inequalities - Same goes for sustainability and globalizationReprise:- A recurrence, renewal, or resumption of an action