Businesses rely on society to provide them with the materials and skills needed to produce goods and services. In return, they help society by creating employment opportunities and contributing to economic growth.
Governments put in place regulations to ensure that businesses act ethically and uphold consumer rights. Failure to comply can lead to legal repercussions and loss of public support.
Economic Disparities
Businesses play a crucial role in driving economic development within society, creating jobs, encouraging innovation, improving productivity, and generating tax revenues for the public sector to deliver infrastructure development and social programs. How companies conduct their business can either contribute to or detract from societal development, however. Sustainable business practices that prioritize social responsibility can contribute to economic development, while unethical or illegal practices can cause harm and create societal instability.
Inequality is a huge issue that affects all of us, and it’s time for the business community to step up to address it. The Business Commission to Tackle Inequality (BCTI) has released a report that highlights the need for business leaders to act with urgency.
Specifically, business owners must ensure that their employees are paid fair wages, a practice that will help bridge the income gap between lower-income and upper-class communities. They should also adopt standards that support worker rights, reduce pay gaps between CEOs and ordinary workers, and invest in reducing their carbon footprint. Furthermore, they should advocate for a wealth tax on the world’s billionaires and millionaires, which would generate $1.8 trillion a year, according to Oxfam.
In addition, the BCTI’s report reveals that poverty and inequality are direct business risks. Poor people don’t spend money, which leads to slower economic growth and stifles innovation and productivity. In addition, they may delay healthcare treatments and defer the purchase of housing and transportation.
Social Equity
Social equity is the concept of equal opportunities for people based on their needs and interests. It encompasses both formal equality (equal rights and freedoms) and substantive equality (equal outcomes for groups).
Business owners rely on society for the raw materials they need to produce goods, as well as for customers who generate revenue through their purchases. As a result, companies are obligated to contribute back to society through socially responsible practices. This includes promoting and supporting equality in the workplace, providing equal access to products and services, and fostering a positive image in the community.
Prioritizing social equity has numerous benefits for businesses, including improved morale and productivity, better public relations, and a higher profit margin. In addition, it can help to attract a more diverse workforce and foster a more collaborative work environment.
Achieving social equity goals requires a holistic approach to solving problems and overcoming barriers. It involves examining the root causes of inequality and taking steps to address them. For example, providing all individuals with equal access to health resources will improve their quality of life. Similarly, investing in a low-income neighborhood school can ensure that children receive an education that will set them up for success in adulthood. This will ultimately improve everyone’s lives. To accomplish this, businesses must be willing to reexamine their systems and reallocate resources where needed.
Shared Value
A company’s profitability and success are tied to the health of society, a principle embodied by the concept of shared value. In this context, companies strive to reduce the societal harm that their products and services create and take steps to support the development of the communities they serve. For example, tourism companies can’t thrive if a pandemic stops travelers, and food suppliers can’t succeed when natural disasters wipe out harvests.
When Michael Porter and Mark Kramer wrote about shared value in the Harvard Business Review, it accelerated a global debate on corporate responsibility and the alignment of core business strategies with social problems. As the movement gained momentum, researchers and business leaders began embracing the idea in different ways.
As the concept evolved, business leaders realized that creating shared value is not about government or philanthropy but rather about rethinking the role of business in society. This rethinking involves understanding that individuals and communities that were once viewed as philanthropic beneficiaries are now customers. This shift in thinking requires companies to move beyond identifying a need that sounds good and instead conduct market research to understand what those beneficiaries want and will use.
For example, Anheuser Busch InBev created a global initiative to reduce the harm caused by alcohol, focusing on marketing campaigns, creating guidance labels, and developing products that lower the impact of drinking. These efforts have helped to lower the prevalence of harmful drinking behavior, which contributes to high levels of obesity, cardiovascular disease, and a range of other maladies.
Regulatory Environment
The regulatory environment can either foster or impede innovation and economic growth. It’s important to understand that while many regulations provide a standard of safety and protection for consumers, they also may inhibit the ability of businesses to create new products and services. Government regulators must strike a balance between order and standards and economic prosperity.
Many business owners are opposed to laws, regulations, and tax levies that they believe impose unnecessary burdens on their operations. This is a result of the belief that government regulation can have unintended consequences and that the constant introduction of new rules diminishes fresh ideas, slows disruptive innovations, and increases costs.
In addition, business owners are concerned that too much government involvement in the marketplace places a heavy burden on society. They are especially wary of the revolving door between private and public sectors that often results in bad decisions. This concern is exacerbated by the fact that many of the top leaders in government previously served as executives at Goldman Sachs.
The bottom line is that while all businesses need to be profitable, they should also strive to positively impact their local community and wider society. To achieve this, it is important to understand the multifaceted relationship between society and business, so that companies can make responsible choices.