Businesses and the Social Environment . PESTLE analysis. POLITICAL. ECONOMIC. SOCIAL. The business cycle Interest rates Exchange rates Inflation Unemployment The EU. ethical issues pressure groups stakeholders lifestyles. Govt economic policies Govt social policies
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PESTLE analysis POLITICAL ECONOMIC SOCIAL • The business cycle • Interest rates • Exchange rates • Inflation • Unemployment • The EU • ethical issues • pressure groups • stakeholders • lifestyles • Govt economic policies • Govt social policies • Govt intervention ENIVIRONMENTAL ISSUES • TECHNOLOGY • new products • new processes • impact of change • cost of change • LEGAL • legislation
Assessing the effects of: changes in the social environment the changing nature of the ethical environment Evaluating responses of businesses to a changing social environment including corporate social responsibility. Changes in the social environment might include demographic factors environmental issues. Candidates should be aware of the actions that businesses can take to demonstrate corporate social responsibility and consider whether these reflect genuine values or are just a form of public relations. Syllabus aims…
Today • Examine the factors arising from changes in the social environment: • Demographic issues • Environmental issues • How might businesses respond to changes in the social environment? • Start research into Corporate Social Responsibility
Demographic issues How has the UK population changed?
UK population to reach 70m Study the population chart opposite What are the main characteristics of the UK population? Compare this to the Government’s description of the chart using the link opposite. What does this mean for UK businesses? What are the changes and How might UK businesses respond to these changes? Population by age and gender mid 2009
Example – Population Size The estimated resident population of the UK was 61.4million in 2008, up by 408,000 on 2007. Children aged under 16 represented around one in five of the total population, around the same proportion as those of retirement age. In mid-2008 the average age of the population was 39 years, up from 37 in 1998. Adapted from Social Trends 2009
Example – Population Structure The population of the UK is ageing. Over the last 25 years the percentage of the population aged 65 and over increased from 15 per cent in 1983 to 16 per cent in 2008, an increase of 1.5 million people in this age group. This trend is projected to continue. By 2033, 23 per cent of the population will be aged 65 and over compared to 18 per cent aged 16 or younger. Adapted from Social Trends 2009
Example – Mortality Rates Mortality rates are declining at all ages. More recently, further decreases have occurred at older ages. During the 1960s and 1970s, the largest declines in mortality rates occurred in the age-group 35-59 years. Since the 1980s, the age-group 60-79 has experienced the largest declines in mortality rates. Adapted from Social Trends 2009
Which businesses might benefit? Population Growing in size Population is ageing Mortality rates are falling
Demographic issues • The estimated resident population of the UK was 61,792,000 in mid-2009, up by 394,000 on the previous year. • Children aged under 16 represented approximately one in five of the total population around the same proportion as those of retirement age. • In mid-2009 the average age of the population was 39.5 years, up from 37.3 in 1999. • At older ages, towards the top of the pyramid, females outnumber males. • Between ages 37 and 50 there is a ‘bulge’ due to the ‘baby boom’ years of the 1960s and early 1970s. • A sharp narrowing of the pyramid for people aged 30 to 34 reflects the low fertility in the late 1970s. A further narrowing of the pyramid appears between the ages of 5 and 10 reflecting the low fertility rates in the early 2000s. • The broadening of the base of the pyramid is due to increasing numbers of births from mid-2002 onwards, reaching just under 790,000 in the year to mid-2009.
Demographic issues:Diversity The major issues in relation to recent demographic change in the UK include: • Increasingly diverse racial and religious distribution of the population • Immigration – e.g. eastern Europe • The ageing population Demographic changes influence two important aspects of business: Employees Markets / Customers • promote diversity – better recruitment and retention • more attractive to potential employees • older staff – experience, low staff turnover, less absenteeism • higher motivation and commitment • more attractive to customers and investors • more varied and diverse ideas and able to access different overseas opportunities
Natural resources…. • The World’s resources are running out • What natural resources do firms use? • Do firms have a duty to limit their use of natural resources? • Is it the Governments responsibility to intervene and protect these natural resources?
Our beliefs A higher quality product will invariably last longer. It will keep on performing as it was designed to for longer before it finally needs replacing. And so over its lifespan it will have consumed less valuable resources than an inferior product that will have been replaced many times. That's why we make the best quality products that we know how. Because ultimately the best thing we can do for the environment is to make our stuff last a real long time. Functionality We believe in making products that serve a purpose and that stand the test of time. We avoid the fashions of the day and just ensure our products are as functional and as simple as possible. Our Purpose Why are we in business? For us it is not as simple to make a profit. Like any company we require a profit to stay in business. But it is not the reason we are in business. The thing that has not changed from day one is the desire to make people think about the world we live in. This is, and always will be, why we are in business. Earth Tax We pledge to give 1% of our turnover or 10% of pre-tax profits (whichever is greater) to grass-root environmental and social projects. To find out more about our donations, please visit the website. It is only a small amount but as our company grows we will be able to give more. Which gives us a nice reason to want to grow. Fun We are trying to get the balance right between work and play. Whenever a real nice day comes along, it'd be a shame to waste it. So if you phone up and no-one answers, don't worry. We are out there doing what we love. So leave a message and we'll get back to you in a while. The rocking chair test Every product we make has passed the 'rocking chair test'. This is something we use to guide us along the path we are taking. So when we are old and grey and sitting in our rocking chairs, we can look back on the company we created with a smile. That's why we go to the trouble of using the best quality materials to make sure our clothing lasts longer. The longer our products last the less impact they will have on the environment, and the bigger our smile will be. Howies Mission Statement
Costs In a market economy firms create external costs that do not directly affect them There is no direct incentive for the firm to minimise these costs Sometimes government has to intervene: Legislation: ban or control Licences: allow a certain level of activity Taxation: e.g. make the polluter pay Fines: penalise undesirable actions Opportunities Marketing: eg. Body Shop, FairTrade Financial: may be easier to raise finance if they have a good track record, e.g. Co-op bank HR: committed, loyal, motivated employees Is it right to make 500 workers redundant because the factory they work in is polluting the environment? Should passengers have to pay for the pollution they generate by flying?
Changes in the Social Environment • There has been increasing pressure on firms to operate using environmentally friendly methods – minimal or no negative impact on the environment. The main methods of doing this include: • Renewable clean energy sources – wind, solar and hydro power • Waste management – recycling and composting rather than landfill • Eco-friendly products – green cleaning such as soap powders • Organic produce – foods produced using natural pest control Plastic bags go out of fashion
Social and Environmental audits What are they?
Environment Audit • An environmental audit is an organisation’s key to environmentally responsible behaviour. It: • Identifies the ways in which the business interacts with the environment • Establishes priorities in tackling environmental issues • Establishes policies and procedures • Identifies responsibilities • Committees the organisation to train staff on environmental matters • Establishes standards of monitoring performance.
Social Audits • Social audits are broader than environmental audits • They attempt to assess the impact of the entire range of a businesses activities on stakeholders and society in general A.K.A. Corporate Social Responsibility Reporting
BUSS4: CSR theme • The research theme for Section A of the BUSS4 exams in June 2011 is Corporate Social Responsibility • The 2011 Research Theme on CSR requires students to consider: • (1) The potential benefits of Corporate Social Responsibility relative to the costs for businessesandstakeholders • (2) The importance of Corporate Social Responsibility relative to other corporate objectives • (3) The influences determining which responsibilities are accepted by a business and which are not • (4) The factors that determine the extent to which a business is socially responsible • (5) The value and limitations to businesses and stakeholders of social reporting • (6) The extent to which governments should influence Corporate Social Responsibility
Changes in the Social Environment “Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic developments while improving the quality of life of the workforce and their families as well as of the local community and society at large”. The World Business Council for Sustainable Development In essence, CSR (also referred to as simply social responsibility) is a firm’s decision to accept responsibility to its stakeholders for its social, environmental and ethical actions. A firm will produce a Corporate Social Report to set targets that will be used to meet its social responsibilities and to assess how far it has met previous targets. http://plana.marksandspencer.com/about Visit the Marks and Spencer website and review its Plan A Read more about CSR Watch the video outlining M&S progress to date Identify the costs and benefits to M&S of its approach to CSR BUSS4.4 Social Environment
ICT ACTIVITY Start now, finish for homework • Choose a business that attracts high profile media attention e.g. Tesco, M&S, Primark, Nike, Gap, Shell, Coca Cola • Carry out some independent research into its approaches towards its social responsibilities and/or its ethics • Produce an article for a business magazine evaluating how they have responded to social and ethical factors (500 words) • Use the slide deck on P Drive together with the CSR them framework issued by the exam board to help you structure your article
Resources for research Link to a pdf with lots of company CSR report links Read more about CSR Research theme bullet points CSR revision presentation Tutor2u business blog on CSR news and companies