The underlying assignment presented detailed discussion forum on the topic name-environmental social governance. The issue of social and environmental performance of the business firms has gained significant attention now-a-days. The reporting initiative termed as environmental social governance (ESG) is introduced in order to keep check on the business firms’ activities and its impact on society and environment. The concerned topic is analysed and discussed in detailed manner in the present work.
Social responsibility of the business firm is perfectly legitimate issue gaining worldwide recognition. The concept of social responsibility has emerged in light of law, ethical standards and international norms. In detailed terms, business firms procure resources in terms of workforce, physical, infrastructure, fuels, etc for conducting business operations and activities. It can be understood in a manner that there is mutual exchange relationship between the business firm and the society (Kerr 1996). The society provides input to the business firm and such inputs are transformed into final product by the business firm and delivered to the society. This mutual exchange relationship in not limited to the input-output phenomenon in present time. It means society provides inputs to the business firms and business firm in turn, provides output to the society (Olowu 2007).
However, in present time, the concept has widened and business firms are under moral obligation to undertake actions and initiatives for social good and welfare. The conversion of input into final product and delivering it to society is not the only concern for the business firm. Rather, it is expected that business firm should initiate and implement action resulting in the betterment of society and people.
In this regard, some theoretical perspectives are discussed signifying the responsibility of business firm towards society. These theoretical perspectives highlight the views and notions hold by scholars and proponents on the concept of environmental social performance. The three theories named- Carroll’s theory, Hall’s theory, and stakeholder theory.
This theory proposed 3-d conceptual model for identifying range of moral duties business firm owe towards society. It can be understood in a manner that business firm is under wide range of obligations expected to perform for according high corporate performance.
(Source: Kimani 2010)
The systematic fulfilment of above showed obligations by a business firm yields positive image, reputation, in the eyes of society people. As a result, society people make the respective business firm as their first choice in purchasing products and services thereby bringing higher returns and profits. As per the model, economic obligations are concerned with fulfilling economic needs of the society people, i.e., giving them employment in the business firm and a chance to earn their livelihood and living sustainable life (Kimani 2010).
Secondly, business firm is expected to comply with legal rules and norms related with taxation and other frameworks. The business operations conducted in the regulated boundaries minimise the risk of legal litigation and at the same time transfers adequate profit share to the government. Thirdly, ethical set of business obligations requires business firm to act in accordance with principles of fairness, transparency, honesty and integrity. Lastly, discretionary set of obligations mandate business firms to contribute some share of profits and earnings to the social and philanthropic activities as employment programs, poverty alleviation programs, care for environment and natural species, and many more (Reinhardt & Stavins 2010).
This theory is refined and improved version of the above discussed one and stated that business activities should be driven by positive environmental and social impacts. These two should be the main notion of conducting business operations as every activity should result in some positive environmental and social result. The performance of business firm is evaluated on this ground and business firm capable of fostering improvement in social and environment condition is considered as powerful and influential and vice-versa (Aguilera & Williams 2006).
The proponents of this theory have outlined the resource based notion stating that business firm procures resources from society. The procurement of these resources is not allowed in free of cost to the business firm. Rather, business firm are expected to do some good and favour for the society and environment in lieu of procurement of resources.
This theory implies that every business firm is under moral obligation of maximising stakeholders’ interest and well being. The stakeholder is a wider term and includes employees, suppliers, government, and even localities. All these constituencies form an implicit contract with the business firm making business firm under the pressure of striking balance between the conflicting claims of various stakeholders (Prakash & Potoski 2006). The stakeholders are having conflicting aims as employees are concerned with profit margins while investors are concerned with growth rate. The business firm is expected to maintain the balance between the conflicting interests in light of corporate legitimacy and stakeholder fiduciary principle. It means interests and benefits of stakeholders as well as growth of business firm needs to be taken into account by the business firm (Winchester 2009).
The above discussed theories prove that business firms are obliged to ‘give something back to the community’ in addition to the product and service. The position taken by Roger Kerr seems appropriate and business firm are in fiduciary duty to protect society and surroundings. It can also be understood in a manner that non-compliance or negligence of societal and environmental interest can also prove dangerous or risky for business firms. Now-a-days, consumers are becoming increasing aware and conscious regarding the business practices and demonstrate higher level of understanding regarding business issues and aspects (Nicolaescu 2012).
This increasing awareness among consumers and other stakeholders mandate business firm to plan, organise, conduct and control business activities in light of social and environment interests. In extreme cases, it has also identified that business firms have faced the risk of prosecution on ignorance of social and environment interests. There are various legal frameworks and regulations introduced in this context complying business firms to precede social welfare and environment good over profit motives and returns. The introduction of ISO 14000, ISO 9000 and many more evidenced the stringency and necessity currently facing by the business firm on social and environment concern (Amokaye 2012).
Aguilera,R. & Williams, C. 2006. Corporate Governance and Social Responsibility: a comparative analysis of the UK and the US. Journal Compilation.14(3), pp.147-158.
Amokaye, O. 2012. Environmental Pollution and Challenges of Environmental Governance in Nigeria. British Journal of Arts and Social Sciences. 10(2), pp.26-41.
Kerr, R. 1996. Discussion Forum Two Environmental Social Governance.
Kimani, N. 2010. Participatory Aspirations of environmental Governance in East Africa. Environment and Development Journal. 6(2), pp.200-215.
Nicolaescu, E. 2012. Business Environment and Corporate Governance in Public Entities. International Journal of Academic research in business and Social Sciences. 2(2), pp.347-352.
Olowu, D. 2007. Environmental Governance Challenges in Kiribati: An Agenda for Legal and Policy Responses. Environment and Development Journal.3 (3), pp.259-269.
Prakash,A. & Potoski, M. 2006. Racing to the Bottom? Trade, Environmental Governance, and ISO 14001. American Journal of Political Science. 50(2), pp.350-364.
Reinhardt,F. & Stavins, R. 2010. Corporate Social Responsibility, Business Strategy, and the Environment. Oxford Review of Economic Policy. 26(2), pp.164-181.
Winchester, N, B. 2009. Emerging global Environmental Governance. Indiana Journal of Global Legal Studies. 16(1), pp. 7-22.