Question

How can companies be socially responsible to two different stakeholder groups?

Answer 1

Stakeholders are the individuals or groups that have an interest in the organization and are affected by its actions. They are the customers, employees, suppliers, board of directors, owners, shareholders, government agencies, Trade unions, political groups, the media, and others. They may have a direct or indirect interest in the business, and may be in contact with the business on a daily basis, or may just occasionally. Within the broad spectrum of stakeholders, stakeholders can be broken into two different groups: primary stakeholders and secondary stakeholders.

Primary stakeholders have a vested interest in how the organization performs and the actions it engages in to conduct business. Examples of these types of stakeholders are customers, employees, suppliers, board of directors, owners, and shareholders. Primary stakeholders benefit from a well-run company but are also harmed by the organization’s mishaps. Primary stakeholders directly affect the success and failure of the company.
Secondary stakeholders can influence, both positively and negatively, the actions of the organization. They indirectly affect the organization by taking actions to make it difficult for the organization to succeed or by supporting the organization’s efforts. Examples of secondary stakeholders are government agencies, regulation agencies, trade unions, labor unions, political groups, social groups, and the media.

The main stakeholders & their interests are:

• Shareholders (not for a sole trader or partnership though) – they will be interested in their dividends and capital growth of their shares.
• Management and employees – they may also be shareholders – they will be interested in their job security, prospects and pay.
• Customers of finished goods and suppliers of raw materials.
• Banks and other financial organisations lending money to the business.
• Government – especially the Inland Revenue and the Customs and Excise who will be collecting tax from them.
• Trade Unions – who will represent the interests of the workers.
• Pressure Groups – who are interested in whether the business is acting appropriately towards their area of interest.

Social responsibility is the duty and obligation of a business to other stakeholders.

An example of social responsibility of bussiness :- In the early 1900s, workers in match-making factories were being poisoned by the toxic ingredients used in the manufacturing process. The Diamond Match Company began making matches without the poisonous ingredient, which it could have charged other companies for access to its patented process. Instead, it made the patent freely available as a way of making match manufacturing safer for everyone. The company was honored by the President of the United States for its social responsibility.
Today's companies, both large and small, are also faced with numerous issues that challenge them to respond to the concerns of their stakeholders to act in a socially responsible manner.
Some of the major areas that the companies are currently focussing on :-

1. Responding to Climate Change - Climate change is a growing concern to all thestakeholders of the business. The co. can take steps to minimize its carbon footprint – that is, reduce its emission of carbon dioxide and other greenhouse gases that contribute to global climate change. One of the key steps the co. can take is to reduce its overall energy use, which not only reduces carbon dioxide emissions, but alo lowers the energy costs and save some money. For example, replacing older incandescent lighting with newer, energy-saving LED bulbs can have a big impact on reducing electricity use. Similarly, using more energy-efficient refrigeration units, machinery and vehicles can mean less emissions from gas and oil use.

2. Operating with an Ethical Supply Chain - Where do the supplies come from & how are they being produced? Stakeholders are increasingly getting aware of life-cycle issues with business supply chains, and are insisting on ethical sourcing of materials. For a jewelry company, this can mean taking steps to insure that they are not purchasing "blood diamonds," which are jewels from mines operated in near slave-like conditions. Large coffee buyers are increasingly sourcing their coffee from farms that have been certified to operate sustainably by paying workers a living wage and avoiding clear-cutting rainforests and other forms of habitat destruction. Some firms even opt to purchase "green" electricity from wind farms rather than from coal-fired power plants.

3. Actively Protecting the Environment - The co. should have a recycling program. The firm may elect to use fewer toxic chemicals for cleaning as a step towards avoiding pollution. Serving organic foods communicates to stakeholders that the firm is supporting farmers who are not using pesticides that can contaminate the environment. Some clients may prefer paper bags to conventional plastic bags as a means of reducing plastic wastes.

4. Responding to Public Policy- The stakeholders may also insist on knowing the co.'s stance on public policy issues. During extended government shutdowns, for example, when federal workers are temporarily out of a job, many businesses in areas with a heavy presence of such workers offer special deals or even free services as a way of easing the burden and sending a positive message to their community.

Responsibilities to the Employees
An organization’s first responsibility is to provide a job to employees. Keeping people employed, giving them job security and rewarding them proportionately is the best thing business can do for society.  Employers must also provide a clean, safe working environment that is free from all forms of discrimination. Fair labor laws have legalized a co.'s duties to offer fair, non-discriminatory hiring and employment.
Modern firms are also empowering employees to make decisions on their own and suggest solutions to company problems. Empowerment contributes to an employee’s self-worth, which, in turn, increases productivity and reduces absenteeism.
For example, each year Fortune conducts an extensive employee survey of the best places to work in the United States. For 2017, the top companies included Google, Wegmans Food Markets, Edward Jones, Genentech, Salesforce, Acuity, and Quicken Loans. Some companies offer unusual benefits to their employees. Like, biotech company Genentech offers employee compensation for taking alternative methods of transportation to work at its San Francisco campus. Employees can earn $12 per day for walking or biking to work, and those who drive a carpool or vanpool can earn $8 and $16, respectively. In addition, the company offers free commuter bus service for all employees via 27 routes around the Bay Area.

Responsibilities to customers

To be successful in today’s business environment, a company must satisfy its customers by offering products /services they value. Beyond that, being open, honest and transparent in communication is important. Managers who understand that customers pay the bills are heavily influenced by this stakeholder group and give it primary value in most decisions.
Many consumers, particularly millennials, prefer to do business with companies and brands that communicate socially responsible messages, utilize sustainable manufacturing processes, and practice ethical business standards.

Responsibilities to Suppliers and Partners

The suppliers are no longer just companies that the business buys from. To maintain loyal, trusting relationships the firm needs to operate fairly and honestly with suppliers.This will ensure more efficient distribution processes, which minimize inventory costs and reduce stock outs. Business partners also expect that the firm meets its obligation to do business legally and ethically.

Responsibilities to Investors

Although a company’s economic responsibility to make a profit might seem to be its main obligation to its shareholders, some investors are increasingly putting more emphasis on other aspects of social responsibility. Some investors are limiting their investments to securities (e.g., stocks and bonds) that coincide with their beliefs about ethical and social responsibility. This is called social investing. For example, a social investment fund might eliminate from consideration the securities of all companies that make tobacco products or liquor, manufacture weapons, or have a history of being environmentally irresponsible.
Some ethical mutual funds will not invest in government securities because they help to fund the military, while some people might think otherwise noting that federal funds also support the arts and pay for AIDS research. Today, assets invested using socially responsible strategies worth more than $7 trillion.
Due to the global recession of 2007–2009, over the last several years companies have tried to meet responsibilities to their investors as well as to their other stakeholders. Recent research suggests that now more than ever, CEOs are increasingly being held accountable by boards of directors, investors, governments, media, and even employees when it comes to corporate transparency and ethical behavior. A global study by PwC reveals that over the last several years, there has been a large increase in the number of CEOs being forced out due to some sort of ethical lapse in their organizations.
Strategies to prevent such manipulations should include establishing a culture of integrity to prevent anyone from breaking the rules, making sure company goals and metrics do not create undue pressure on employees to act unethically, and implementing effective processes and controls to minimize the opportunity for unethical behavior.

Responsibility to society

A business provides a community with jobs, goods, and services & also pays taxes that go to support schools, hospitals, and better roads. Some companies have taken an additional step to demonstrate their commitment to stakeholders and society as a whole by becoming Certified Benefit Corporations, or B Corps. B Corps meet the highest standards of social and environmental performance, public transparency, and legal accountability and strive to use the power of business to solve social and environmental problems. There are more than 2,000 companies worldwide that have been certified as B Corps, including Method, W.S. Badger Company, Fishpeople Seafood, Ben & Jerry’s etc.

Companies also display their social responsibility through corporate philanthropy. Corporate philanthropy includes cash contributions, donations of equipment and products, and providing volunteer services of company employees. Recent statistics suggest U.S. corporate philanthropy exceeds more than $19 billion annually.
American Express is a major supporter of the American Red Cross. When Hurricane Katrina hit the Gulf Coast, Bayer sent 45,000 diabetes blood glucose monitors to the relief effort. At the same time Abbott, Alcoa, Dell, Disney, Intel, UPS, Walgreens, Walmart, and others contributed more than $550 million for disaster relief.