Business and Sustainability Unit 1 Quiz

Unit 1: Business and Sustainability

• This unit explores the interconnectedness of business and sustainability.

Chapter 1: Business and Sustainability

• An index of topics is provided, covering business and the business environment, and sustainability in business.

1. Business and the Business Environment

• 1.a. Understanding the business concept:

  • A business/organization is a group of people working together to achieve a specific goal. This goal can be for profit or non-profit.
  • Businesses transform resources (tangible and intangible) into goods or services to meet human needs. The aim is to generate benefits for owners.

• 1.b. Understanding the business environment:

  • Resources crucial to businesses include physical and financial resources, intangible resources (like human capital), and a process that transforms them into desired products/services.
  • Inputs for a business contribute to the process in which these goods/services are produced.
  • Outputs (products and services) are produced based on the input.

• Extra mile: Purpose, Mission, Vision, Values:

  • Businesses have a purpose - a reason for being.
  • The business's mission spells out its goals and approach.
  • The vision is the desired future.
  • Core beliefs or values underpin the entire organization.

• Extra mile: Social Economy and Social Enterprises:

  • Spain defines social economy organizations based on the primacy of people and social purpose over capital, application of results to work contribution, promotion of internal and societal solidarity, and independence from public authorities. Relevant law is 5/2011.
  • Benefit and Common Interest companies (Spain) prioritize positive social and environmental impact, transparency, and accountability toward stakeholders. This is detailed in Law 18/2022.

• EU social economy and social enterprises:

  • The EU defines social enterprises as hybrid organizations aiming for both social value and profit using innovative approaches. The regulation (EU) No 1296/2013 details the approach.

• SMART Model:

  • Businesses may set goals that encompass economic, social, and environmental factors.

• Goals vs. Impacts:

  • Businesses seek objectives for outputs, which can also result in outcomes (impacts) with societal consequences.

• Stakeholders:

  • Stakeholders are people, groups, or organizations affected or capable of affecting a company's activity. These include business partners, civil society, consumers, employees, governments, and more. Stakeholders have an interest in the business's performance, including not only financial aspects.

• Corporate Governance:

  • Corporate governance is a set of relationships between management, a company's board, shareholders, and other stakeholders. The goal is to set objectives, determine how to achieve them, and monitor performance. The OECD (2007) has outlined the principles.
  • Corporate governance structure outlines roles, responsibilities, and relationships of the governing body.
  • Key governance roles include ownership (general meeting of shareholders), administrators (board of directors), and the chief executive officer.

• Evolution of Corporate Governance Codes:

  • Various codes and reports have evolved over time, addressing issues like ethical guidelines and transparency for company directors & management.

• Business concepts and how they relate to ownership, management, business people, and entrepreneurs -Ownership pertains to who controls the company, while management executes the company's operations and makes necessary decisions. Business people encompass individuals who directly engage in the company's practical activities. Entrepreneurs set up and manage new ventures, potentially employing novel approaches and ideas.

• Agency Problem: -The potentially conflicting interests between company owners and managers.

• Stakeholders vs. Shareholders: -A critical distinction between stakeholders, who are generally affected by a company's actions, and shareholders, who are investors in the company, are integral to understanding their roles and influence within an organization.

1.b. Understanding the business environment (continued)

• General environment:
  • This environment is shared among all companies in a given geographical area, which includes factors such as economic, political, and social elements.
• Competitive environment:
  • This is more specific and unique to each business and activity, and deals with issues like rivalry factors, potential entrants, substitution of products, and the power of suppliers and customers
• PESTEL analysis:
  • Political, economic, social, technological, ecological, and legal factors that affect a company. These factors must be analyzed for insight into their impact on market trends and business decisions.
  • Understand how PESTEL analysis and Porter's 5 forces analysis can help with assessing a specific company.

2. Sustainability in Business

• 2.a. Sustainability:
  • The need for business to consider the well-being of society and environmental factors alongside profit.
  • UN Global Compact (2000/2003) details its 10 principles related to human rights, labor, environmental issues, and corruption.
  • UN Conference on the Human Environment (1972) emphasized "rights" of people regarding a healthy environment.
  • General Assembly (1983) prompted a global agenda for change, leading to the definition of sustainable development.
• 1987: Definition of Sustainable Development:
  • Sustainable development meets current needs without compromising the ability of future generations to meet their own needs.
  • This is broken down into three key dimensions: environmental, social, and economic.
  • Triple bottom line (TBL), three pillars (triple P) concept encompassing environmental, social, and economic performance (Elkington 1997, UN 2005 concepts)
• Sustainable Development Goals:
  • The UN's Sustainable Development Goals (SDGs) showcase a global approach to addressing various social and environmental challenges through different dimensions.
• Purpose of business:
  • Different perspectives on the purpose of business exist, ranging from a focus on profit maximization (monistic view-shareholder perspective) to considering the multifaceted needs of all stakeholders, resulting in a more holistic and sustainable approach (pluralist view - stakeholder perspective), which also includes ideas on circular economy.
• Evolution of Business Management Theories and their views around Business Goals:
  • Different theories including those from Adam Smith, Milton Friedman, Friedrich Hayek, John Kenneth Galbraith, Edward Freeman, and Michael Porter & Mark Kramer have a range of views of business objectives.
• Stakeholder Perspective:
  • The current business environment emphasizes incorporating stakeholder needs into business objectives. This means considering impacts on customers, suppliers, employees, communities, society, and the environment.

This quiz covers key concepts from Unit 1 on Business and Sustainability, focusing on the relationship between business operations and sustainable practices. It includes topics such as understanding the business concept and the business environment, essential for any aspiring business professional.