Chapter 3: Business in Society PDF

Chapter 3: Business in Society Sustainable Business Management Business-Society Interaction • Influence of business on society • Decisions will always influence the employees and therefore the households • Externalities will influence communities and environment • Economy is embedded in society...

Chapter 3: Business in Society Sustainable Business Management Business-Society Interaction • Influence of business on society • Decisions will always influence the employees and therefore the households • Externalities will influence communities and environment • Economy is embedded in society • Influence of society on business • Employees will impact companies as well • Trends in society will have an effect on businesses • Many trends work both ways (millennials for example) Sustainable Business Management Social Challenges - Inequality • Inequality is not really a trend, it has always been around • It’s part of humanity as natural selection does not treat everyone equally • Once money and other resources became important, it has only risen • Different types of inequality • • • • • Income inequality Wealth inequality Health inequality Gender inequality … Sustainable Business Management Social Challenges – Income inequality • Relying on GDP alone to determine the wealth of a country will not provide any information on how wealth is distributed • The top 10% has an average income that is 9 times higher than the other 90% of the American citizens Sustainable Business Management Social Challenges – Income inequality • Lorenz Curve – Gini coefficient measures inequality so we can compare inequality in different countries • Gini coefficient measures the level of income inequality in a country, resulting in a value between 0 and 1 • 0 means perfect equality • 1 means perfect inequality Sustainable Business Management Social Challenges – Income inequality • EU countries are generally more equal than US and Russia for example • Explained by 2 factors • Strenght of the democracy • Type of economy • African countries also score lower due to weak democracies and governments not taking their responsibility Sustainable Business Management Social Challenges – Income inequality • Kuznets curve is also relevant when it comes to equality • When a country is developing, the focus is on creating a stable economy and legal foundation • Once a country is developed, there is more time and money to spent on social issues • This theory was tested at the the beginning of the 21st century • Many Asian countries were developing at an increased pace • However, studies showed that there were different evolutions in the Ginicoefficient at the different stages of development • This study was called “The East Asian Miracle” Sustainable Business Management Social Challenges – Wealth inequality • Closely linked to income equality but even more important when assessing the real gap between the rich and the poor • Yearly income gives us an insight in the changes for that year, but wealth is more structural • Wealth inequality gives us an insight in how wealth is distributed • Top 10 billionaires in the US are richer than many countries including Belgium and the Netherlands Sustainable Business Management Social Challenges – Wealth inequality • Wealth inequality has been around since humanity started to define property rights • Wealth measures the accumulation of valuable economic goods over time, where incomeis the amount of money that is earned in a certain period • In 1906, Vilfredo Pareto observed that 80% of Italy’s land was owned by 20% of it’s population • Lead to the famous Pareto’s principle: “80% of the outcomes are driven by 20% of the efforts” • Piketty stated in 2019 that there were 2 types of households • The ones that have access to labour, capital and nature • The ones that only own their own labour • Lot of the wealth is inherited, although in developed countries we notice more and more wealth acquired through technical progress Sustainable Business Management Social Challenges – Health inequality • Differences in health are directly linked to differences in in income and wealth • The higher the Gini coefficient, the lower the life expectancy • Access to medical healthcare is still expensive in mostr countries • Financial difficulties lead to stress and psychological issues • Lower income often leads to less healthy nutrition and lifestyle Sustainable Business Management Social Challenges – Other types of inequality • Even today, inequality is still caused based on gender, race, nationality or religion • Equal pay day still shows us that women often earn less for the same work • The amount of women in high functions (both private and public) is still limited • In the US, most of the wealth is still owned by white people, resulting in limited amount of home owners amongs Black and Latinx communities Sustainable Business Management Social Challenges – The consequences of inequality on society and business • Inequality has a negative influence on employees • Equal societies tend to have a more stable workforce • Companies can also contribute to equality • Inequality has a negative influence on democracy • Campaigning is expensive so wealthy people are more likely to attain political positions • Too much power in the hands of a few will limit the free market • Inequality will also lead to higher ecological degradation • Kuznet’s curve: basic needs need to be taken care of before resources and time can be spend on ecological products and services Sustainable Business Management Social Challenges – VUCA • Volatility: changes are happening all the time • Businesses have to deal with more issues • Long-term mindset with a flexible angle • Clear vision that is agile • Uncertainty: we do not know when things will happen • • • • Clarify the situation, using data and information Experience and knowledge becomes less valuable Data collection and processing becomes more important Ecosystems help to have access to more information Sustainable Business Management Social Challenges – VUCA • Complexity: more variables that influence the situation • • • • More information and more difficult to gather information Globalisation Expanding network of specialists: internally or through ecosystems Specialising and focus • Ambiguity: cause and effect is unclear and risks can no longer be predicted • Businesses have to deal with new problems and opportunities all the time • • The future is no longer an extension of the past • Experiment and learn – agile working Sustainable Business Management Social Challenges – Exclusion • Discrimination is a specific form of inequality: people are treated differently because they are different from others (in terms of race, nationality, looks, sexual preference or disability for example). • People who are different are often excluded from society because they do not fit “the standard” • Discrimination and exclusion can be considered a social challenge as they are undermining the social thinking of sustainability and contribute to inequality Sustainable Business Management Social Challenges – Exclusion • In the definition of sustainable business management, we stated that we want a meaningful life for all human beings, no exceptions • The value of a person is often measured in terms of contribution to society • Today this contribution is usually measured in financial value • In many developed countries, we rely on the government to take care of excluded people • Creates a level of apathy • Makes society more exclusive Sustainable Business Management Social Challenges – Inclusion • We do not focus on differences but organise society in a way that all people can participate. • Accessibility in buildings • Flexible curricula in schools • Payable energy costs for all • An inclusive society would open our eyes to diversity, make us able to learn from each other, and create a world where we focus on what makes us human instead of on what makes us different. • Increase social thinking Sustainable Business Management Social Challenges – Social individualism • Sustainable behaviour relies on the belief that individuals make decisions keeping the greater good in mind • In modern developed society, this is not the common mindset • As a consequence of industrialisation, urbanisation and the rise of capitalism, individualism became the norm • According to Hofstede (1980) individualism is defined as a focus on rights above duties, a concern for oneself and immediate family, an emphasis on personal autonomy and self-fulfilment, and the establishment of one’s identity on one’s personal accomplishments. Sustainable Business Management Social Challenges – Social individualism • A study (2017) showed that individualism has increased globally due to • • • • A shift from agricultural jobs to white-collar jobs More jobs with high prestige Higher education and income More urbanisation • Disasters and climate stress often leads to more individualism in developed countries as well • The opposite movement of what we need in sustainability Sustainable Business Management Social Challenges – Social individualism • Individualism leads to • More room for diversity – uniqueness is valued • More creativity and innovation – thinking outside the box • • • • More resistance to change – numbers are required to change More stress – pressure to achieve and freedom of choice Less support and prosocial behaviour – people are less helpful Higher ecological footprints – rely on the government to solve problems Sustainable Business Management Social Challenges – Social media • Social media has a different impact on different generations • Mental health • Gen Y feels a lot of pressure by norms and expectations • Fuelled by comparison with others (social equity theory) • Lot more people to compare to • Not all is realistic • Social media has become a stage for self-promotion • No longer a tool to stay in touch • No longer needed to leave the house to be “social” • Promote an express the individual self Sustainable Business Management Social Challenges – Social media • Biased access to information • Leads to a narrower view on society • Algorithms make you see what they want you to see to keep you on the platform as long as possible • More polarisation as strong opinions are more excited • Social media is owned by companies who have a commercial motive • Only a few companies own all social media • Our information is structured and presented by these companies • Social media addiction Sustainable Business Management Social Challenges – Privacy • Rising pressure on data privacy that comes with digitalisation • Data used to be stored on paper files or on local servers • Now data is everywhere thanks to the internet, smartphones, GPS,… Sustainable Business Management Social Challenges – Privacy • GDPR was a first attempt to regulate the use of data • Sharing data has replaced payment for services • You can read the newspaper online if you leave your contact data • You are allowed to use Google’s services for “free” if they are allowed access to your data • These companies use your data for their own use or sell it to the highest bidder • GDPR protects you BUT how often do you click “agree” in a pop-up without reading what it says? • Data is becoming the most valuable resource • To deal with the VUCA world • But: skilled profiles and technology needed to transform data into information Sustainable Business Management Sustainable HRM - Definition • HRM is responsible for the employee management in a company, therefor directly influencing society from within the company • HRM used to be designed to support the economic performance of a company by optimising selection, appraisal, reward and development of employees • The last 10-20 years, a more softer HRM approach became popular, where employee performance was enhanced through trust, cooperation, well-being and relationship management • More sustainable HRM as the outcome of people’s performance is no longer only measured in terms of profit Sustainable Business Management Sustainable HRM - Characteristics • Sustainable HRM acknowledges the fact that there is a tension between financial value and other types of value • Allow employees to divert from the companies’ strategy • Sustainable HRM ensures that needed capabilities will be available both to maintain current level of business as well to address future needs • Also build human capabilities outside the organisation • Sustainable HRM takes into account that HRM decision can have a negative impact on employees outside the company • Equal distribution of salary, training and education Sustainable Business Management Sustainable HRM - Characteristics • Sustainable HRM requires an HRM strategy that is fully aligned with other functional areas in the company • HRM should be part of the company’s strategic decision making process • Sustainable HRM takes into account sustainable values such as these in the SDG framework • These values reflect in each decision and contract, not only for employees but for all actors in the value chain • Sustainable HRM demonstrates the outcomes in the form of reporting Sustainable Business Management Sustainable HRM - Types 1. Socially Responsible HRM • • • • • Linked with company's CSR activities Aims to give back to society or compensate for harm Focus on minimizing negative impacts on business HRM considers impact on employees and communities Creates some social value, but not fully integrated with company strategy 2. Green HRM • • • • • Develops employees' ecological awareness and behaviour Reduces organization's carbon footprint and contributes to green credentials Actively involves employees to achieve environmental goals Still serves an economic purpose, cutting costs and avoiding fines Primarily addresses ecological sustainability, less emphasis on social value Sustainable Business Management Sustainable HRM - Types 3. Triple Bottom Line HRM • • • • Focuses on economic, environmental, and social goals Balances maximizing economic profit with sustainability goals Close to sustainable HRM but focuses on company's economical strategy Emphasizes building capabilities outside the company 4. Common Good HRM • • • • Takes a broader, outside-in approach Addresses major societal challenges Supports employees and stakeholders in finding solutions Requires organisations to integrate sustainability in its strategy and processes Sustainable Business Management Case: WK Qatar (p.99-100) 1. Do you see other social (or ecological) impacts of the organisation of the World Cup in Qatar? 2. Do you believe that the organisation of a huge event like the World Cup is still justifiable in current times? 3. Given that the World Cup was organised in Qatar, what other measures could have been taken to improve the impact of its organisation? Sustainable Business Management