As a founder member, I have a goal for my company. And I do not want the sole purpose of my business to be making profits. I want my business to be socially responsible and environmentally friendly. For being environment-friendly our business would need to spend some money and that will eat from our profit. Being a CEO I am answerable to my investors who own 75% of the company who wants the business to make at least 15% and not less than that.
Since we are planning for the next 5 years, as a CEO I need to set the mission and vision of the business. And, as CEO and founder, I want the business to remain environmentally friendly. There are many stakeholders of our business that would include, the customers, employees, shareholders, and the society at large, the environment too. If today we do not take care of the environment along with other stakeholders, tomorrow there will be no business to run. Since we need to come up with a 5 years plan we need to consider social accounting, which is beyond stock value or market capitalization of the company or just not about the profit. In this case, we can recognize –
1. The investor concerns
2. Community relations
3. Concerns over ecology
This is an approach to report the firm’s socially acceptable behavior. And measuring performance will include
Consumer surplus
Economic Rent
Environmental Impact
Non-monetary values
Solomons (1974) considered social performance because he thought it drives rational decision-making process and another reason is defensive in nature. We would have to address investor concern, so our primary goal has to be made at least 15% profit. To maintain the community relationship, we need to deliver excellent product and service for a competitive price in a sustainable way. And sustainable does not only mean economical sustainability but ecological sustainability too. And this might mean following all laws and regulations to protect the environment. And at times we will have to be proactive and do the best in order to not too hard the environment or cause any irreparable damage to the environment. I understand that might cost extra. We can try to cut costs on anything else that is not so critical, like cutting back on travel and expenses, arranging training over the web, instead of traveling etc. So cutting down on costs will fund our cost to protect the environment.
We will need to showcase the environmental protective measures we take so that society at large gets information and we increase our brand value. Our competition can do the same, which in result will be good for the environment at large. Our customers will feel better about using our product and services and we might gain customer loyalty.
In case we focus on only profit and not so much on the environment, it will be difficult for us to differentiate ourselves from the competition. In long run, we do not build brand loyalty either. But if we can differentiate ourselves and build brand value and loyalty then in future we will have better pricing power over our competitors and that will help us make more than 15% in profit. Even in the short run if we fail to make 15% profit, in long run gaining more customers and pricing power will help us make generate more profit. Corporate reputation increases in importance in purchase decisions both a brands reputation for making green products and a solid corporate environmental reputation (Hincha, 2013).
References:
Solomons D. (1974); Corporate social performance: a new dimension in accounting report?; in H. Edey & B.S. Yamey (eds), Debits, Credits, Finance and Profits; London; Sweet & Maxwell; pp.131-141
Hincha, M ( July, 2013). Green Consumer are brand loyal. Retrieved from https://www.mnn.com/money/sustainable-business-practices/blogs/green-consumers-are-brand-loyal
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