Industry Studies: Consumer Goods Industry

Topic: Sustainable Consumption and Growth Models

Topic Number:6

2

Overview

It has largely been acknowledged that the world is consuming its resources at a much faster pace than is sustainable. It is vital organisations that contribute to this effect play their role in re-defining how products are made and consumed.

In this lecture, we will look to understand what is taking place in this area within the CGI. We will initially look to understand why there is a need for greater social awareness and thereafter evaluate the sustainable growth strategies that are being deployed across the CGI.

We will also understand how organisations in the CGI can create win-win models of consumption that will not only benefit them in terms of decreased costs but society at large as well.

3

Learning Outcomes

• Identify and be able to communicate the key issues creating the need for sustainable growth

• Describe and evaluate the various business models and understand how they create more sustainable growth for all stakeholders

• Determine the future impact and sustainability of the CGI given current and future practises

Importance of Sustainability

Western civilization is a loaded gun pointed at the

head of this planet.

Terence McKenna

Every time you spend money, you’re casting a vote

for the kind of world you want.

Anna Lappe

Why is the 19th August a significant day?

For the rest of 2014, we are “in the red” – effectively

overdrawn on the balance sheet of nature’s goods and services that we require to

survive.

Source: WWF, 2014

Traditional Business Theory: Act in Self-Interest for shareholders

It is not from the benevolence of the

butcher, the brewer or the baker, that we expect our

dinner, but from their regard to their own self

interest. We address ourselves, not to their

humanity but to their self-love, and never talk to

them of our own necessities but of their

advantages.

The sole purpose of a business is to make money

for its shareholders…

(Any business executives who pursued a goal other than making money were, unwitting puppets of the

intellectual forces that have been undermining the basis of a free society these past

decades.)

As we have seen it doesn’t work due to…

Moral Hazard Principle-Agent & Information Asymmetry

Monopolistic CompetitionPublic Interest or Good & Externalities

Lets understand the alternative model for growth

View video: https://www.youtube.com/watch?v=AbDOOVAtvfQ

The Triple Bottom Line

Economic Mission

Natural Environment

Social Welfare

The Economic Model: Shareholder vs Stakeholder

• Maximize the after-tax profits flowing over time to shareholders

• Market products that consumers are willing to buy at a price they are willing to pay

• Pressured by their industry rivals to produce these products while using as few scarce resources

The Economic Model: Shareholder vs Stakeholder

• Firms consider the interests of other stakeholders as well as shareholders

• Primary stakeholders: those individuals directly affected by the practices of the organisation and have an economic stake in its performance

• Secondary stakeholders: Groups that may be affected by corporate decisions but are not directly engaged with the firm

Sustainability and the Natural Environment

Environmental Protection

We will double our revenue and halve our

environmental footprint by 2020.

Paul Polman, CEO, Unilever

Source: Unilever.com

Sustainability and the Natural Environment

Corporate Responsibility

Generate Social Welfare

Create products that need social needs

Supporting Culture

Education Programs

General Social Welfare: A Lifebuoy Example

View video: https://www.youtube.com/watch?v=g4t77d7XBhc

Managing Social Responsibilities Across Borders: Approaches to Social Responsibility

Copyright © 2015 Pearson Education Chapter 5-16

Approaches to Social Responsibility: Obstructionist Stance

• Do as little as possible to address social or environmental problems

• Meet minimum standards

• If ethical or legal lines are crossed they avoid accepting responsibility

Approaches to Social Responsibility: Defensive Stance

• Do everything that is required but nothing more

• Managers insist their job is to generate profit

• Admit mistakes

• Take corrective actions

Approaches to Social Responsibility: Accommodative Stance

• Meets and goes beyond legal and ethical stance

• Voluntarily agree to participate in social programs

Approaches to Social Responsibility: Proactive Stance

• Highest degree of social responsibility

• View themselves as citizens in a society

• Proactively seek opportunities to contribute

• Integral part of their strategy

Managing Social Responsibilities Across Borders: Managing Compliance

Form

al D

imen

sions

Legal Compliance

Ethical Compliance

Philanthropic Compliance

Managing Social Responsibilities Across Borders: Evaluating CSR Efforts

• Ensure efforts are producing desired benefits

• Apply the concept of control to social responsibility

• Evaluate response to instances of questionable legal or ethical conduct

An evaluation by Unilever

View video: https://www.youtube.com/watch?v=utSYAkQi5hY

Difficulties of managing the new model cross borders

• Actors in the policy formulation process– The State– The Market– Civil Society

• Stereotypical behaviors in 3 regions of the world– The Anglo-Saxon Approach– The Asian Approach– The Continental European Approach

Call for greater regulation

• The Foreign Corrupt Practices Act

• The Bribery Act

• The Alien Tort Claims Act

• The Anti-Bribery Convention of the Organization for Economic Cooperation and Development

• The International Labor Organization

Overview of RFID

View video: https://www.youtube.com/watch?v=4Zj7txoDxbE

Advantages of RFID• An RFID smart card-based fare collection system may reduce

operation costs in the long run.

• Public transportation authorities will be able to monitor ridership in real-time and will minimize delays by committing extra resources (buses or trains) to specific congested routes.

• RFID does not require line of sight. The reader can communicate with the tag via radio waves. An individual can potentially be identified and charged the right fare by simply carrying the RFID smart-card in his/her pocket.

• RFID equipment damage occurs much less frequently than is the case with magnetic strips or bar codes present on CharlieTickets.

• The combination of all above mentioned advantages will result in improved convenience and boost public transportation ridership.

Source: RFID Introduction

Disadvantages of RFID

• In the short run, costs of diffusion and implementation for an RFID smart card-based fare collection system can be rather high.

• An RFID-based fare collection system has the potential of seriously invading people's privacy. Check out the Potential Misuses section of the site to obtain specific examples of this threat.

• RFID technology ultimately involves software that allows each user to be identified by a central database. This infrastructure will certainly be under attack by hackers.

• Poor read rate can occur if the reader and receiver are not properly aligned.

• In cases when multiple tags and readers are at work simultaneously, double charges may occur.

Source: RFID Introduction

End of presentation

© Pearson College 2013