I need some on reliable to follow all the steps bellow - Term paper info sheet attached -Use the readings attached as reference -proper apa format -make sure to include the social, financila, and ec
Reading #5:
CONVENTIONAL VS SUSTAINABLE APPROACHES TO FUNCTIONS OF BUSINESS1
Corporate Social and Environmental Responsibility (LEAD 3030)
Sustainable business requires fundamental changes in how people understand and perform the business functions, such as: accounting, marketing, finance, supply chain, and HRM. This reading provides an overview of differences between conventional vs sustainable approaches.
Question: After reading about each of the five functions, choose one (e.g., your major) and reflect deeply on what the reading means for that function. In particular, provide advice to Asper on how it might redesign the courses in your chosen business functional area in order to offer a sustainable approach. Also, describe what you would do if you wanted to become an early adopter of a sustainable approach in your functional area, and what this might mean for your professional career. Reports due Tuesday, October 5.
1. Accounting2
Accountants “count” what “counts” for an organization. At present accountants focus on counting financial wealth (versus counting social and ecological wellth) and focus on what happens inside of organizations (versus counting externalities associated with organizational inputs and outputs). What if accountants started to say that social and ecological wellth also “count”? For example, what if the accountants who make up the International Accounting Standards Committee (IASC) decided to revise the Generally Accepted Accounting Principles (GAAP) so that they emphasized a SET approach? And what if accountants decided that to be a certified Chartered Professional Accountant (CPA) required not only: (a) following the current rules to prepare financial reports, but also required (b) auditing and preparing (at first, simple) reports of the social and ecological performance of a firm3? What if firms were required to publicly report such information? How might this influence investors’ and consumers’ decision-making? What sort of SET information would you like to see required? Here is a table the compares a Conventional vs a Sustainable approach to the Generally Accepted Accounting Principles (GAAP).
Table 1: Two Approaches to Four Basic Assumptions of GAAP
| Four GAAP assumptions | Conventional approach | Sustainable approach |
| Entity: What unit of analysis is being held accountable? | The entity is the organization, defined narrowly as a single unit clearly separated from its owners, members, and society. | The entity is the organization, defined broadly as a multi-faceted entity intimately connected with its owners, members, and society. |
| Unit of measure: What is the organization being held accountable for? | The unit of measure is money (but with very little emphasis on externalities), and the firm is accountable to maximize its financial resources (e.g., its assets minus its liabilities). This can result in commodification, where the relatively simple measure of money replaces other performance criteria that defy easy measurement. | There are multiple units of measure (e.g., money, ecological footprint, providing meaningful work, being a good neighbor), and the firm is accountable to balance multiple forms of well-being for multiple stakeholders. This can lead to complexity and the need for groups of stakeholders to cooperatively discern what an organization should do. |
| Periodic reporting: How often is info presented? | Reporting is according to calendar-time (linear, chronos), serving the interests of short-term investors/traders. | Reporting takes into account the natural rhythms/seasons of organizational life (kairos time), serving the interests of long-term investors and stakeholders. |
| Going concern assumption: What criteria are used to decide whether an entity is viable? | The assessment of whether an organization is a financially viable “going concern:” (i) has a short-term time horizon (one year); (ii) focuses on financial measures; and (iii) is at the level of analysis of the single entity (ignoring long-term, non-financial externalities). | The assessment of whether an organization is a holistically sustainable “going concern:” (i) has a long-term time horizon (e.g., considers effect on future generations); (ii) takes into account multiple forms of well-being; and (iii) considers contributions and drawbacks of the organization in the context of its larger social and ecological systems. |
In sum, conventional accounting: a) fails to consider non-financial performance measures (and thus implicitly encourages managers to downplay the importance of things like meaningful work); b) fails to take externalities into account (in fact, it implicitly encourages firms to make changes so that existing internal costs are moved outside of the firm and paid for by someone else); and c) fails to consider long-term factors (a firm may be a “going concern” for the next year, but not take into account the effects of climate change as little as 5 or 10 years into the future).
2. Finance4
If businesses are to become more sustainable, some of the basic assumptions associated with the finance business function need to change and catch-up with the trends towards sustainable business. For example, many investors are no longer primarily interested in optimizing their financial returns; a recent study found 85% of investors are interested in sustainable investing, and that 52% have already adopted sustainable investing (67% among Millennials) even though 64% said that sustainable investing compromised their financial returns.5 In short, rather than have a commodified/instrumental view money (e.g., “a dollar is a dollar is a dollar”), an increasing number of investors act according to an expressive view of money (e.g., a dollar spent in a local place-based business is different than a dollar spent in a national retailer; a dollar spent on goods manufactured in a sweatshop is different than a dollar spent on goods manufactured in a factory where everyone earns a living wage). Similarly, in addition to considering financial risk tolerance, it is becoming increasingly relevant to consider a firm’s risks vis a vis social and ecological well-being (e.g., more than 50% of “company earnings could be at risk [due to ecological issues] in an equity portfolio”6). Today about 25% of professionally managed assets are being invested using criteria that go beyond financial profits, called Socially Responsible Investing (SRI),7 with a growing interest in Social Impact Bonds (SIBs).8 Finally, instead of seeking to maximize shareholder wealth maximization, they emphasize the local multiplier effect.
Table 2: Two Approaches to Four Key “Axioms of Finance”
| Axiom | Conventional approach | Sustainable approach |
| The risk-return trade-off | Investors accept additional financial risk if there is a chance for a higher financial pay-off. | Investors will accept additional risk if they expect higher non-financial returns (e.g., if their investment enhances overall wellth) |
| The time value of money | Because money can collect interest over time (e.g., by investing in a “Guaranteed Investment Certificate”), a dollar available today is worth more than a dollar in the future. | Because a dollar spent today on a worth-while cause can enhance overall well-being (e.g., create a job for the marginalized, enhance quality of air and soil), it is more valuable than a dollar spent tomorrow (akin to the adage: “A stitch in time saves nine”). |
| The role of markets | Because of the competitive dynamics inherent in a well-functioning and efficient financial marketplace, earning exceptional financial returns (the conventional goal) can only be accomplished by achieving a sustainable competitive advantage (aka a monopoly). | Because of the cooperative dynamics inherent in a well-functioning and holistic market, any member who makes exceptional financial returns and creates dysfunctional income inequality threatens community well-being. (Recall that the original idea of a “market” was a place where members of a community would gather, visit and arrange to buy and sell goods and services.) |
| The agency challenge (created by managers working as the agents of owners) | Agency as a Problem: Managers are tempted to act in their financial self-interests rather than to maximize the owners’ financial interests (thus, compensation packages should align managers’ financial self-interests with the owners’). | Agency as a Solution: Because managers (unlike most shareholders) have a daily involvement in the firm, managers may thus be more sensitive to and can be more responsive to the needs of employees, suppliers, customers, neighbors, the environment, and so on. |
3. Marketing
Genuinely sustainable marketing is very different from the sort of “greenwashing” that conventional business has come to be known for. Greenwashing is evident when marketers deliberately use misleading information in order to present a false image of ecological responsibility. One study found a 73% increase in “green products” from one year to the next, but that over 95% of all the marketing campaigns were guilty of some form of greenwashing.9 Greenwashing makes consumers skeptical. Part of the problem is that genuinely sustainable marketing is not something that can be bolted onto a conventional approach to marketing on a piecemeal basis. Instead, genuinely sustainable marketing requires a qualitatively different way of relating to customers and of thinking about marketing. Genuinely sustainable marketing is characterized by a more holistic understanding of the firm’s product, price, place and promotion (e.g., Table 3 presents a conventional vs a sustainable approach to the so-called 4 Ps of marketing10).
Table 3: Two Approaches to the Four P’s of Marketing
| Four P’s | Conventional approach | Sustainable approach |
| 1. Product (includes goods and services) | Organizations should provide goods and services that have features that satisfy customer needs or wants. Especially desirable are products that customers want/need but cannot get elsewhere. | Product goes beyond the specific goods/services offered by a firm. Rather, a firm’s “product” includes the relationships and connections formed among organizations and people in the creation, distribution, and usage of the product (e.g., Were employees in the supply chain treated with dignity? Were raw materials harvested in an ecological responsible way?). Especially desirable products nurture community and help the needy. |
| 2. Price | Refers to the financial amount consumers are willing to pay for a product. Especially desir-able are products that are in such great demand that the “mark-up” can be high. | Price refers not only to the “sticker price” that consumers pay for a product or service, but also its “hidden” externalities (i.e., socio-ecological costs and benefits not reflected in the price, such as when workers are not paid a living wage). Products whose sticker prices reflects their true overall costs are especially desirable. |
| 3. Place (location in distribution network) | Refers to the competitive advantage a firm enjoys thanks to its “location” in the distribution network. Locations that are consumer-friendly are especially desirable. | The goal is to offer socio-ecologically sustainable places (e.g., green buildings) and distribution channels (e.g., cradle-to-cradle designs), recognizing that a firm is not a self-contained unit competing with others, but rather a member of a stakeholder network. Networks characterized by trust and mutual benefits are especially desirable. |
| 4. Promotion | Refers to the activities designed to sell products (e.g., advertising, sales). Especially valuable are promotion strategies that are low-cost and high-impact (word of mouth, unsolicited testimonials from trusted sources). | Rather than simply “selling” products and pushing information (in “one-to-many” transactions, or in a “one-to-one” relationship), a sustainable approach intentionally fosters multi-directional listening and collaboration. Especially valuable communication is evident when others in the network play a key role in co-creating products and services. |
Finally, recall that globally more money is spent on marketing than on public education, and that the implicit message in conventional marketing is that happiness comes from having more stuff: in other words, you always need more in order to be happy and you are never good enough (this message is also implicit in social media which ultimately are paid for by and support the marketing message of business).11 Consider the effect that such a messaging has on mental health (compared to the effect on mental health of, say, the message of going to a farmers’ market).
4. Supply chain management12
Because of its opportunity to make transparent the externalities associated with a firm’s operations, supply chain management clearly plays a central role in enabling sustainability. This requires rethinking its core focus. Supply chain management traditionally focuses on inter-organizational logistics, and specifically on ensuring that organizations find optimal ways to acquire the supplies they need from other organizations. This includes (a) strategic purchasing (e.g., supplier selection, evaluation, and development; single versus multiple sourcing) and (b) the management of inter-organizational relationships (e.g., supplier partnerships).13 Table 4 highlights differences between conventional and sustainable approaches.
Table 4: Two Approaches to Key Dimensions of Supply Chain Management
| | Conventional approach | Sustainable approach |
| Focus | Focuses on the buyer’s financial costs of supplies | Focuses on the holistic financial, social and ecological costs/benefits of supplies |
| Strategic purchasing | Choose suppliers who offer the best combination of: - Quality inputs (e.g., they have required features and meet specific standards); - Dependable delivery (e.g., on-time delivery, reliable transportation network); - Financial price (also includes factors like just-in-time delivery). | Choose suppliers who offer the best combination of: - Inputs that have a holistic range of qualities (including consideration of socio-ecological externalities); - Dependable delivery, including sustainable transportation networks; - Low total costs (i.e., including externalities). |
| Relationships between firms | Develop long-term relationships with suppliers nurturing: - Trust (access to supplier knowledge helps to develop products & services); - Supplier confidence to make long-term investments that enhance ability to supply; - Stable and integrated transportation of incoming logistics (lower financial costs). | Develop long-term relationships with suppliers that nurture: - Trust and healthy relationships (serves to facilitate virtue and nurtures community); - Supplier confidence to invest in environmentally-friendly and socially-just technologies; - Development of incoming logistics that take externalities into account. |
5. Human Resource Management (HRM)14
Because of its role in job analysis and design, in selecting who gets hired, in training and developing employees, and in measuring and rewarding employee performance, HRM plays a key role in facilitating sustainable organizing.
Table 5: Two Approaches to Four Key Element of Human Resource Management
| Four elements | Conventional approach | Sustainable approach |
| 1. Job analysis and design Identify tasks that need to be done | - use input from HR staff and current jobholders - focus on individual jobs - emphasize efficiency | - use input from multiple internal and external stakeholders - focus on the work of a group/team - emphasize meaningful work |
| 2. Staffing Get the right people to join the organization | - recruit from traditional applicant pools (only the “best & brightest”) - selection tests based on fit with individual jobs - use input of managers | - recruit from chronically under-employed pools when practicable - selection based on fit with team job requirements - use input of managers & co-workers |
| 3. Training and develop- ment Prepare and improve the abilities of members | - maximize the organization’s financial benefits of training and minimize its costs - emphasize the development of those individuals most likely to enhance the organization’s future financial well-being | - provide training as a long-term investment to promote community overall well-being - emphasize group-focused training and development, with an emphasis on enhancing socio-ecological well-being |
| 4. Performance management Measure performance and provide rewards for people | - use administrative appraisals to reward employees - top-down emphasis - recognize individual performance, and reinforce independence via individual rewards - focus on financial rewards | - use developmental appraisals to provide constructive feedback - bottom-up emphasis - recognize collective performance, and reinforce community via group-based rewards - address income inequality, value non-financial rewards |
1 This reading draws from and builds upon Dyck, B., Caza, A. & Starke, F. (2018). Management: Financial, social, and ecological well-being. Winnipeg: Sapajo Publishing.
2 Table 1 and discussion draw heavily from Christie, N., Dyck, B., Morrill, J., & Stewart, R. (2013). CSR and accounting: Drawing on Weber and Aristotle to rethink Generally Accepted Accounting Principles. Business and Society Review, 118 (3): 383-411.
3 For example, phase in something similar to what is occurring in Europe, where businesses with over 500 employees are required to publish information about environmental and social matters: https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
4 Some content drawn verbatim from Dyck et al. (2018). Conventional axioms are drawn from: Keown, A.J., Martin, J.D., Petty, J.W., & Scott, D.F, (1998). Foundations of finance (2nd ed). Upper Saddle River, NJ: Prentice Hall.
5 https://www.morganstanley.com/ideas/sustainable-investing-growing-interest-and-adoption.html
6 Mattison, R., Trevitt, M., & van Ast, L. (2010). Universal ownership: Why environmental externalities matter to institutional investors. London and Geneva: UNEP Finance Initiative/Principles for Responsible Investment Assocn.
7 SRI account for about $23 trillion. For more on SRI see Trinks, P. J., & Scholtens, B. (2017). The opportunity cost of negative screening in socially responsible investing. Journal of Business Ethics, 140 (2): 193-208.
8 For an example of a SIB, imagine a $1.25 million investment to enable firms like BUILD to hire and train 50 ex-convicts to work in construction, with the understanding that: (i) if this halves the recidivism rate of the 50 employees (so that 25 fewer than would otherwise be expected return to prison within 3 years, thereby saving the government $2.25 million in prison and legal costs), (ii) then the government will pay out $1.75 million (so the government saves $.5 million), the original investors paid $1.5 million for their initial $1.25 million investment, and BUILD earns $.25 million to continue and grow its programming. See also Toby Eccles’ TedTalk at https://www.ted.com/talks/toby_eccles_invest_in_social_change
9 TerraChoice (2010). Greenwashing report 2010. http://sinsofgreenwashing.com/findings/greenwashing-report-2010/index.html
10 See also Dyck, B., & Manchanda, R. (2021). Sustainable marketing based on virtue ethics: Addressing socio-ecological challenges facing humankind. Academy of Marketing Science Review, 11: 115-132. .
11 Walsh, D. (1994). Selling out America's children: How America puts profits before values and what parents can do. Minneapolis, MN: Fairview Press. Taken from Batstone, D. (2005, July 20). Mass media are sucking out your kids’ brains. SojoMail. Batstone present two additional key values that Walsh identifies: (5) Violence is entertaining; and (6) Always seek pleasure and avoid boredom.
12 Much of this section is drawn verbatim from Dyck et al., (2018).
13 Larson, P.D., & Halldorsson, A. (2004). Logistics versus Supply Chain Management: An international survey. International Journal of Logistics: Research and Applications, 7 (1): 17-31.
14 Much of this section is drawn verbatim from Dyck et al., (2018).
