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Questions and Answers
Which group is directly impacted by the company's performance but does not own shares in the company?
Which group is directly impacted by the company's performance but does not own shares in the company?
Corporate governance only concerns the relationship between shareholders and the management.
Corporate governance only concerns the relationship between shareholders and the management.
False
What is the role of the Board of Directors in corporate governance?
What is the role of the Board of Directors in corporate governance?
To represent the shareholders and oversee the company's management.
The primary executive responsible for managing a company is known as the ______.
The primary executive responsible for managing a company is known as the ______.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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Which of the following is one of Porter's Five Forces?
Which of the following is one of Porter's Five Forces?
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A stable environment is characterized by high complexity and dynamism.
A stable environment is characterized by high complexity and dynamism.
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What does the term 'bargaining power of suppliers' refer to?
What does the term 'bargaining power of suppliers' refer to?
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In a __________ environment, businesses must adapt quickly due to uncertain conditions and high competition.
In a __________ environment, businesses must adapt quickly due to uncertain conditions and high competition.
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Match the following environmental characteristics with their types:
Match the following environmental characteristics with their types:
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What is the primary purpose of Benefit and Common Interest Companies as defined in Law 5/2011?
What is the primary purpose of Benefit and Common Interest Companies as defined in Law 5/2011?
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Social enterprises exclusively focus on generating profit.
Social enterprises exclusively focus on generating profit.
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What are the three types of goals that social enterprises may set?
What are the three types of goals that social enterprises may set?
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Social enterprises are defined as hybrid organisations built on an explicit _____ objective.
Social enterprises are defined as hybrid organisations built on an explicit _____ objective.
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Match the following entities with their definitions:
Match the following entities with their definitions:
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According to Law 18/2022, which of the following is a characteristic of Benefit and Common Interest Companies?
According to Law 18/2022, which of the following is a characteristic of Benefit and Common Interest Companies?
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The social economy encompasses a limited range of legal entities and business types.
The social economy encompasses a limited range of legal entities and business types.
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What does the term 'putting people first' refer to in the context of the social economy?
What does the term 'putting people first' refer to in the context of the social economy?
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What is the main focus of Stakeholder theory?
What is the main focus of Stakeholder theory?
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Stakeholder theory suggests that businesses should exclusively focus on maximizing profits for shareholders.
Stakeholder theory suggests that businesses should exclusively focus on maximizing profits for shareholders.
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Who are considered stakeholders in a company?
Who are considered stakeholders in a company?
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According to Porter & Kramer, companies must create both economic and ________ value to be sustainable.
According to Porter & Kramer, companies must create both economic and ________ value to be sustainable.
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What does CSR stand for?
What does CSR stand for?
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Creating Shared Value is primarily concerned with a company's reputation.
Creating Shared Value is primarily concerned with a company's reputation.
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Match the following concepts to their definitions:
Match the following concepts to their definitions:
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What is the central message of managing for stakeholders in the 21st Century?
What is the central message of managing for stakeholders in the 21st Century?
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What is the primary focus of the Monist Theory or Shareholder view?
What is the primary focus of the Monist Theory or Shareholder view?
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Friedrich von Hayek believed that companies should meet social demands as their primary goal.
Friedrich von Hayek believed that companies should meet social demands as their primary goal.
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Who proposed the idea of the 'invisible hand' in economics?
Who proposed the idea of the 'invisible hand' in economics?
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The movement from a Monistic Model to a Pluralistic Model emphasizes the creation of economic, social, and __________ value for stakeholders.
The movement from a Monistic Model to a Pluralistic Model emphasizes the creation of economic, social, and __________ value for stakeholders.
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Match the following theorists with their main ideas regarding business management:
Match the following theorists with their main ideas regarding business management:
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Which of the following is NOT a characteristic of the Pluralistic Model?
Which of the following is NOT a characteristic of the Pluralistic Model?
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Milton Friedman believed in the concept of corporate social responsibility beyond shareholder profit.
Milton Friedman believed in the concept of corporate social responsibility beyond shareholder profit.
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What is the primary concern of the Monistic Theory regarding the power of companies?
What is the primary concern of the Monistic Theory regarding the power of companies?
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What is the definition of sustainable development according to the Brundtland Report?
What is the definition of sustainable development according to the Brundtland Report?
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The Three Pillars of Sustainability include Environmental, Social, and Governance.
The Three Pillars of Sustainability include Environmental, Social, and Governance.
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Name one of the frameworks used to describe sustainability in business.
Name one of the frameworks used to describe sustainability in business.
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The three dimensions in the Triple Bottom Line are Environmental, __________, and Economic.
The three dimensions in the Triple Bottom Line are Environmental, __________, and Economic.
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Match the following authors with their works related to economic theories:
Match the following authors with their works related to economic theories:
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Which period is associated with the rise of the Stock Exchanges?
Which period is associated with the rise of the Stock Exchanges?
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The Sustainable Development Goals (SDGs) were established by the UN.
The Sustainable Development Goals (SDGs) were established by the UN.
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What economic event happened in 1929?
What economic event happened in 1929?
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Freeman’s approach to business sustainability emphasizes __________ management.
Freeman’s approach to business sustainability emphasizes __________ management.
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Which framework emphasizes governance in addition to environmental and social aspects?
Which framework emphasizes governance in addition to environmental and social aspects?
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Study Notes
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
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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.
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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.
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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.
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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.
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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.
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SMART Model:
- Businesses may set goals that encompass economic, social, and environmental factors.
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Goals vs. Impacts:
- Businesses seek objectives for outputs, which can also result in outcomes (impacts) with societal consequences.
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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.
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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.
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Evolution of Corporate Governance Codes:
- Various codes and reports have evolved over time, addressing issues like ethical guidelines and transparency for company directors & management.
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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.
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Agency Problem: -The potentially conflicting interests between company owners and managers.
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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)
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General environment:
- This environment is shared among all companies in a given geographical area, which includes factors such as economic, political, and social elements.
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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
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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
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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.
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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)
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Sustainable Development Goals:
- The UN's Sustainable Development Goals (SDGs) showcase a global approach to addressing various social and environmental challenges through different dimensions.
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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.
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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.
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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.
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Description
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.
