Do you think “green practices” should be voluntary or mandatory for businesses? Explain your answer.
Green practices falls under the category of corporate social responsibility (CSR). CSR refers to “consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks” (Davis 1973, 312). The issues of CSR are now given major attention due to social and media pressure upon large companies. Peng believes CSR is one of the best ways to integrate “corporate issues of international trade, investment, strategy, supply chain, and human resources” (Peng 2014, 554). It is a balance for the corporation in meeting their core responsibility of safeguarding the shareholder interests (making them a profit) and solving the social issues of the world (Peng 2014, 555). The issue of integrating these interests and responsibilities is a vital role for the manager.
The big picture issue for a stakeholder with a desire for global sustainability is having the ability “to meet the needs of the present without compromising the ability of the future generations to meet their needs” (Bansal 2005, 197). Issues involving not just environment sustainability but economic and social sustainability.
Peng believes (Peng 2014, 556) there are three set of global drivers related to sustainability in the 21st centure. 1) Rising levels of poverty, population, and inequity. 2) Assertive Non-Governmental Organizations (NGO) around the world. 3) Irreversible effects industry has had upon the environment such as global warming, air and water polution, social erosion, deforestation, and overfishing. These complex big picture issues force managers to prioritize like never before in industry. These global drivers have forced companies to ask the most basic question of why does a firm exist? The easy answer has always been “to make money” or as Milton Friedman put it, “the business of business is business” (Peng 2014, 557).
Due to the fact business’ main focus is to build shareholders wealth in a free market economy, green practices should be voluntary. If firms are forced to attempt to attain outside objectives (green practices), they will lose their profit focus and eventually go out of business. Employees will then be out of a job, the economy will be without their capital, and the free market will lose out on what they add to the world economy. It is commendable for companies who seek to balance their stakeholder’s environmental interests with their profit centered priorities. Peng advocates a triple bottom line of having three main priorities: economic, social, and environmental (Peng 2014, 557). Smart stakeholders with a global sustainability passion are wise in seeking to create win/win opportunities for firms to make a profit, fulfill their CSR, and provide a positive media marketing image for the firm (Campbell 2007, 958).
A free market firm receiving pressure from primary and secondary stakeholders will seek to accommodate the demands of the stakeholders as well as win their marketshare. Due to social influence, more managers are seeing CSR as a worthwhile endeavor (Peng 2014, 563).
As culture is putting more and more pressure upon companies to take care of the environment, the corporate responses have changed as companies have viewed their CSR more favorably and profitably. Initially a reactive response moved to a defensive response to an accommodative response. Present day is focused upon companies being wise and having a proactive response to environmental pressures (Peng 2014, 562-563). Bottomline priorities, image making, competition, state regulations, NGO pressure, and vision of the CEO all play a major role in the company’s participation in their industry’s CSR (Campbell 2007, 958). Ultimately, it is up to the corporate managers to decide their level of green practice and not a government mandatory requirement. Otherwise, the free market will be stiffled, incentives will be eliminated, and many business will no longer have the revenue to exist.
Bansal, Pratima. “Evolving Sustainably: A Longitudinal Study Of Corporate Sustainable Development.” Strategic Management Journal 26.3 (2005): 197-218. Business Source Complete. Web. 28 June 2015. http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=15&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104
Campbell, John L. “Why Would Corporations Behave In Socially Responsible Ways? An Institutional Theory Of Corporate Social Responsibility.” Academy Of Management Review 32.3 (2007): 946-967. Business Source Complete. Web. 28 June 2015. http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=32&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104
Davis, Keith. “The Case For And Against Business Assumption Of Social Responsibilities.” Academy Of Management Journal 16.2 (1973): 312-322. Business Source Complete. Web. 28 June 2015. http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=2&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104
Peng, Mike. “Managing Corporate Social Responsibility Globally.” Global Business, 2014. pp553-577.