In this report I aim to talk about how responsible business practices are very much related in today’s society with firms being competitively advantageous. The purpose of this is to show that with constantly changing and evolving market trends, at the forefront of this is responsible business, and as the very basic intention of enterprise and business is to generate profit, then by combining the two concepts of being responsible and competitive, this is an extremely relevant report to businesses in the 21st century.
Responsible business can be defined differently, depending on whom the business is being responsible to; whether it be to its shareholders (Friedman, 1970) or stakeholders (Freeman, 1984). Stakeholders of a business are any party in which has some sort of impact from the actions of that business. Then another issue is what responsibilities involve. Carroll (1999) suggests; economic responsibility to produce, at a profit, goods & services that society wants. Legal responsibility, obligations to fulfil economic mission with the confines of the law. Ethical responsibility, to act in a way that maintains its licence to operate, and finally discretionary responsibility, to act in a way that contributes to societal good . The more common term used today is Corporate Social Responsibility (CSR). For a business to act responsibly, it must be accountable for its own actions and realise the ramifications to the society for each decision it takes. This can be from internal decisions regarding employees and external choices, such as suppliers and how good or services are delivered. The ability for a firm to be responsible is also dependent upon its size as an organisation. It could be argued that small, independent businesses should not have to think as much about external stakeholders than closer stakeholders, such as employees and customers. This is because being a smaller business, there will be less profit to use to actually implement responsible practices. Whereas larger, multinational companies may have a large amount of profit, and only using a small percentage could still be a lot more, monetarily, than many smaller organisations. One example of this is Richard Branson committing to use all profits from his travel firms into renewable energy technologies, such as biofuels . “Corporate social responsibility recognises that the private sector’s wider commercial interests require it to manage its impact on society and the environment in the widest sense. This requires it to establish an appropriate dialogue or partnership with relevant stakeholders, be they employees, customers, investors, suppliers or communities. CSR goes beyond legal obligations, involving voluntary, private sector-led engagement, which reflects the priorities and characteristics of each business, as well as sectoral and local factors.” . This is the UK Government’s definition of CSR. The main, underlying idea of responsible business practices is going above and beyond the legislation in regards to considering the wider impact of a firm’s actions.
Responsible Business and Competitive Advantage
One of the ways in which firms in today’s economic climate and evolving market trends keep a competitive edge over their rivals is by being a responsible business, and engaging in CSR related activities. Being responsible in the 21st century as a business is something that is hard to avoid, with many firms now using their own responsibility as a marketing tool and unique selling point over rivals. There are both benefits and drawbacks of firms retrospectively becoming more responsible, with potentially lowering cost and gaining customers, and then the cost of these initiatives, respectively. One relatively easy way for certain firms to ‘go green’ and be take into account some environmental responsibility is to invest in new ways to