Professional Documents
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Good Governance
Good Governance
Good Governance
Learning Objectives: At the end of the discussion you should be able to:
TOPICS
OVERVIEW
Whenever one thinks about companies, they think of organizations that work to
provide products and make a profit. Some corporations do operate this way purely,
but there has been a growing movement to push for more than just economic growth.
But how exactly can a company do more than just earn a profit? That's where the
concepts of good governance and social responsibility (or corporate social
responsibility, to be exact) come in.
One can achieve social responsibility through either passive or active methods.
Passive Methods - Passive methods involve minimizing the potential harms
that you may have been causing in your daily routine, such as walking to work
as opposed to driving a car to minimize carbon monoxide emissions.
Active Methods - Active methods involve the person going out of their way
to positively impact the environment. This could be done by working for an
environmental nonprofit or signing up for a local clean-up drive.
But individuals aren't the only ones required to maintain social responsibility. Since
the 1970s, there has been a push for companies and businesses to engage in socially
responsible actions. This is known today as corporate social responsibility, and it's
what could potentially solve many of the world's current problems.
Corporate social responsibility states that businesses should not only look to gain
profit but also benefit people and the environment. This essentially creates the triple
bottom line that every company must strive to meet - profit, people, and the planet.
Let's take a deeper look into the two latter concepts, people and the planet.
When a company does business, there are multiple stakeholders involved with every
transaction. From the employees that supply the products or services to the customers
that purchase them, many people are affected by a single company's operations.
And even if they aren't directly involved with the business, they could still be affected
too. For example, the local communities surrounding factories are potential
stakeholders due to them feeling the environmental effects potentially caused by
pollution.
Since companies affect the lives of millions every day, the goal for a socially
responsible one is to bring as much of a positive impact to the people as possible. This
is also known as corporate citizenship. CSR in this manner can be achieved in multiple
ways depending on who the company wishes to prioritize first.
The employees are just as responsible for the success of a company as the board of
directors. Many companies have realized the importance of treating their employees
fairly, and as such have launched CSR programs in line with this. For example, more
and more companies have started to provide healthcare benefits to their employees.
A good example of this is Starbucks, a company that even offers health benefits to
part-time employees.
Small businesses can also improve the lives of employees through simpler means.
Improving employees' working conditions can increase productivity, raise morale, and
give them a safer environment to work in. This could be done by installing fire alarms
or purchasing safer equipment and gear for workers to use.
Valuing the Customer
Customers are the final link in the supply chain and are responsible for the majority
of many companies' profits. Companies can improve the living conditions and provide
benefits to customers in various ways.
The simplest way would be by improving the company's products. The product could
include more features or come at a lower price.
In certain industries, companies could benefit the customer by being more accessible.
For example, pharmaceutical companies could offer a wider array of OTC drugs in
small communities.
It's no secret that large companies emit toxic gases and dump hazardous waste into
our water streams on a daily basis. This not only ruins the living conditions for those
living today but also makes it even more difficult for future generations to adjust
accordingly. As one of the world's biggest social issues to this day, environmental
pollution leads to other potential crises such as climate change.
One of the best ways for a company to minimize its carbon footprint is by using more
renewable sources of energy. Modern technologies allow us to harness the power of
wind and the sun to generate electricity at large scales. Many countries have even
made it their goal to fully run on renewable energy, with countries such as Portugal
and Norway having already achieved it.
Sourcing energy from renewable sources, however, is a heavy investment for many
companies. This is the reason why many companies refuse to transition to this day.
Eventually, however, associations such as the United Nations are hoping for
environmental sustainability through the use of renewable energy, as it is key to any
company's value chain.
Good governance in any company requires that the entity's governing body (usually
the board of directors) is transparent, responsive, sustainable, and can be held
accountable for their actions.
While given the power of decision-making, the board of directors must listen to the
ideas of the members. They must also be able to provide ample information as to how
and why decisions are made.
This is important because, sometimes, governing entities decide to chase a profit
rather than be socially responsible. Resorting to child labor and not prioritizing
employees' human rights are just some examples of the lengths that some companies
go to. This leads us to our next point - accountability.
Accountability
The governing body must be accountable for the decisions that they make.
Implementing decisions come with consequences, and the board must be able to take
responsibility for whatever happens. This means that all business practices should be
ethical and in line with all stakeholders' objectives. Meeting ISO requirements and
understanding environmental responsibility are just a few examples of this concept.
Sustainability
Because many older companies find it difficult to transition towards cleaner energy
and operations, many newer startups have adopted what's known as sustainable
development. This allows the scaling of the business while keeping in mind the
integrity of the environment.
Summary
Corporate social responsibility is a concept that's slowly being integrated into even the
biggest of companies. It aims to benefit both society and the environment while also
offering benefits for the company itself. Whether they're international conglomerates
in New York or small startups across the street, companies could benefit from adopting
this framework.
SOURCE: https://studybay.com/blog/social-responsibility-and-good-governance-
business/