BUS1BSY/BUS2SBY Final Take Home Exam
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Part A
Question 1
In today’s business world, company executives are mandated to make sustainability- based decisions in the course of their duties. This is mainly aimed at ensuring that the company can achieve perpetuity. This paper will analyze Rio Tinto’s actions using the business case for sustainability theory. It will look at how their stakeholder engagement and how their decisions improved the company’s environment social and governance performance. The paper will further look at the advantages that the company will reap from these actions.
Rio Tinto decision to include their stakeholder’s needs is vital for their sustainability. As seen from the actions, Rio Tinto faced the backlash because they did not consider the views of the investors and the Aboriginal groups (Butler & Allam, 2020). The stakeholder’s voices were heard in two main stages. In the first instance, the company decided to relieve the CEO and two top officials because of the cries of the local communities and the investors. After their review of the actions, they decided that they would then involve the local communities in their future endeavors. Considering that they would be engaged in the decision-making process, then the stakeholder’s ideas and views would always be included and the company would grow further as they learn from these individuals. From the utterance of the Board, they decided to ensure that they got the green light from the company before they could proceed with any of their plans from then on. Therefore, having stakeholder engagement ensures sustainability because it fosters good relations with the stakeholders and allows the company to constantly meet their needs.
Rio Tinto’s decisions to improve their ESG performance is sustainability-oriented. Their decisions to foster better relations with the local community, their investors and protect the environment are a form of sustainability-based management. On the issue of management, the company has set a good precedent that would help in promoting accountability amongst its executives. Future executives will now have to ensure that they consider the needs of all the stakeholders in their decision-making process. Therefore, this would encourage them to have sustainability at the core of their company’s business strategy. These strategies would allow them to expand their vision for the company and in turn ensure that they can achieve perpetuity.
Rio Tinto’s changes are aimed at mending the broken relationship between the company and the local communities. The decision to destroy the rock shelters which were of cultural-significance to the Puutu Kunti Kurrama and Pinikura community, ended up destroying the company’s image to this community (Butler & Allam, 2020). Therefore, the company’s crisis management measure of deciding to work with the traditional owners would allow them to change this perspective. In their future, the company would be known for the great steps that they have taken to protect the environment and to help the local community, which would then dilute the fact that they had earlier blown up the rock shelters.
In conclusion, Rio Tinto’s executives decided to come up with sustainability-oriented measures to help deal with the crisis that the company was facing. Their actions will be advantageous because it would improve the company’s image and mend the community’s trust in the company.
Question 2
Milton Friedman’s provided that the duty of company executives is to ensure that their companies make profits (New York Times, 2020). This being the core responsibility of the management, they are mandated to make profits with little or no regard to the harm that they may cause in the process. In today’s society, this is an outdated position and current executives have to ensure that their directives are motivated by more than just profits. This paper will try and answer the question, how can businesses change their perceptions of profits as a ‘callous slur’ to achieve sustainability.
A company’s image is an essential determinant of its success. In today’s world, a huge percentage of the society would want to associate themselves with a particular brand. This means that companies have to come up with adequate measures that they would be able to develop their brand to appeal to the market. When coming up with proper brand strategies, then the company would be more concerned with how the strategy would improve their image to the society rather than how much they would gain. In most instances, they would even use more money with little or no expectation of returns in these projects. For instance, the community service programs are an added expense to the company that the company would decide not to incur. However, the company would gain from the good image created.
A good image is a worthy long-term investment. When a company mainly looks at how they can just get profits, then the company’s aim of perpetuity cannot be achieved. This is because the harm that the company would be causing in the process of its growth would end up destroying their image and how the market’s attitude towards their products. Most people would be drawn to purchase goods with a good brand identity. This is the reason why companies try to always come up with proper crisis management strategies in instances when they are faced with negative publicity. Therefore, even though the returns of the brand-improvement strategies may not be felt at the onset, companies would gain later on and for a longer period.
The management’s decisions have to be ethical in nature. Business ethics dictates that companies and their agents have to behave in an ethical manner. This is meant to protect the consumers, the competitors, and the environment. Therefore, the company executives have to ensure that they balance the issue of profitability of the company and the set moral principles and ethics. Executives who contravene these guidelines would be liable for disciplinary actions in their own name and further the company in its own nature.
In conclusion, company executives should not only be profit-oriented in their decision-making process. They should ensure that they take into account the needs of the company’s stakeholders including the surrounding community and act ethically as a way of protecting the company from legal proceedings. All in all, a good image for a company is profitable.
Part B
Environmental risks may be used to measure a company’s investment decisions. One will have to consider the decision’s impact to the environment (Whelan & Fink, 2016). For instance, in Rio Tinto’s case, the decision to destroy the rock shelters in order to mine better iron ore, at the expense of the environment was wrong. Environmental concerns are important since they help in preserving the environment for the future years.
Social risks look at the manner in which the company’s decision affect the company’s relations with the community (Whelan & Fink, 2016). For instance, Rio Tinto’s decision negatively impacted their relationship with the Puutu Kunti Kurrama and Pinikura community (Butler & Allam, 2020). In their assessment, the executives had the knowledge of the importance of the site, but they were more profit-oriented. To mend this broken relationship, they decided to involve them in the protection of their culture in the coming years. This is important since it allows the company to improve its image and relations to the community.
Governance risk is concerned with issues such as executive accountability (Whelan & Fink, 2016). In Rio Tinto’s case, it was an unethical decision on the side of the executives. This is the reason why they were all relieved of their duties. Assessing the governance risk is an important step because it ensures that the company can protect itself from problems with the stakeholders, the government, and other relevant authorities. In addition, poor governance leads to the loss of trust by the company’s investors, which would then result in a reduction in the investments that the company receives.
Question 2
Businesses are a salient part in the journey towards achieving the Sustainable Development Goals (SDGs). Businesses are encouraged to come up with greener ways of carrying out their duties. This is in line with the SDGs of climate action and responsible consumption and production. Therefore, more businesses are currently investing in alternative fuels such as solar, and encouraging their employees to embrace recycling in the office and in their homes.
Businesses are constantly looking for better innovation as they perform their duties. For instance, many businesses have adopted online marketing and the use of robotics to perform their duties. It is in line with the SDG of industry, innovation and infrastructure.
Businesses are a source of employment. Consequently, improving the country’s GDP and the standard of living of the people. This would allow the countries to achieve the SDGs of no poverty and decent work and economic growth (United Nations, 2020).
Businesses are required to always have community development programs as part of their corporate social responsibility. These programs would include the building and rehabilitation of schools, hospitals and social centers. These would help in achieving the SDG of good health and well-being and quality education (United Nations, 2020).
Businesses are in the frontline of ensuring that women are given equal opportunities at the work place. This is through programs such as equal pay, similar promotion opportunities and policies such as maternity leave. By doing this, the businesses are helping in the realization of the SGDs of gender equality and reduced inequality (United Nations, 2020).
References
Butler, B. & Allam, L. W. C., 2020. Rio Tinto CEO and senior executives resign from company after Juukan Gorge debacle. [Online]
Available at: https://www.theguardian.com/business/2020/sep/11/rio-tinto-ceo-senior- executives-resign-juukan-gorge-debacle-caves [Accessed 14 October 2020].
New York Times, 2020. Greed is Good. Except When It’s Bad. [Online]
Available at: https://www.nytimes.com/2020/09/13/business/dealbook/milton-friedman- essay-anniversary.html[28/9/20 [Accessed 14 October 2020].
United Nations, 2020. #Envision2030: 17 goals to transform the world for persons with disabilities. [Online] Available at: https://www.un.org/development/desa/disabilities/envision2030.html [Accessed 14 October 2020].
Whelan, T. & Fink, C., 2016. The Comprehensive Business Case for Sustainability. [Online]
Available at: https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability
[Accessed 14 October 2020].