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 Discussion: Environmental Social Governance

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 Introduction

The underlying assignment presented detailed discussion forum on the topic name-

environmental social governance. The issue of social and environmental performance of the

business firms has gained significant attention now-a-days. The reporting initiative termed as

environmental social governance (ESG) is introduced in order to keep check on the business

firms activities and its impact on society and environment. The concerned topic is analysed and

discussed in detailed manner in the present work.

Discussion

Social responsibility of the business firm is perfectly legitimate issue gaining worldwide

recognition. The concept of social responsibility has emerged in light of law, ethical standards

and international norms. In detailed terms, business firms procure resources in terms of

workforce, physical, infrastructure, fuels, etc for conducting business operations and activities. It

can be understood in a manner that there is mutual exchange relationship between the business

firm and the society (Kerr 1996). The society provides input to the business firm and such inputs

are transformed into final product by the business firm and delivered to the society. This mutual

exchange relationship in not limited to the input-output phenomenon in present time. It means

society provides inputs to the business firms and business firm in turn, provides output to the

society (Olowu 2007).

However, in present time, the concept has widened and business firms are under moral

obligation to undertake actions and initiatives for social good and welfare. The conversion of

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input into final product and delivering it to society is not the only concern for the business firm.

Rather, it is expected that business firm should initiate and implement action resulting in the

betterment of society and people.

In this regard, some theoretical perspectives are discussed signifying the responsibility of

business firm towards society. These theoretical perspectives highlight the views and notions

hold by scholars and proponents on the concept of environmental social performance. The three

theories named- Carrolls theory, Halls theory, and stakeholder theory.

Carrolls theory

This theory proposed 3-d conceptual model for identifying range of moral duties business

firm owe towards society. It can be understood in a manner that business firm is under wide

range of obligations expected to perform for according high corporate performance.

(Source: Kimani 2010)

The systematic fulfilment of above showed obligations by a business firm yields positive

image, reputation, in the eyes of society people. As a result, society people make the respective

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business firm as their first choice in purchasing products and services thereby bringing higher

returns and profits. As per the model, economic obligations are concerned with fulfilling

economic needs of the society people, i.e., giving them employment in the business firm and a

chance to earn their livelihood and living sustainable life (Kimani 2010).

Secondly, business firm is expected to comply with legal rules and norms related with

taxation and other frameworks. The business operations conducted in the regulated boundaries

minimise the risk of legal litigation and at the same time transfers adequate profit share to the

government. Thirdly, ethical set of business obligations requires business firm to act in

accordance with principles of fairness, transparency, honesty and integrity. Lastly, discretionary

set of obligations mandate business firms to contribute some share of profits and earnings to the

social and philanthropic activities as employment programs, poverty alleviation programs, care

for environment and natural species, and many more (Reinhardt & Stavins 2010).

Hall theory

This theory is refined and improved version of the above discussed one and stated that

business activities should be driven by positive environmental and social impacts. These two

should be the main notion of conducting business operations as every activity should result in

some positive environmental and social result. The performance of business firm is evaluated on

this ground and business firm capable of fostering improvement in social and environment

condition is considered as powerful and influential and vice-versa (Aguilera & Williams 2006).

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 The proponents of this theory have outlined the resource based notion stating that

business firm procures resources from society. The procurement of these resources is not allowed

in free of cost to the business firm. Rather, business firm are expected to do some good and

favour for the society and environment in lieu of procurement of resources.

Stakeholder theory

This theory implies that every business firm is under moral obligation of maximising

stakeholders interest and well being. The stakeholder is a wider term and includes employees,

suppliers, government, and even localities. All these constituencies form an implicit contract

with the business firm making business firm under the pressure of striking balance between the

conflicting claims of various stakeholders (Prakash & Potoski 2006). The stakeholders are

having conflicting aims as employees are concerned with profit margins while investors are

concerned with growth rate. The business firm is expected to maintain the balance between the

conflicting interests in light of corporate legitimacy and stakeholder fiduciary principle. It means

interests and benefits of stakeholders as well as growth of business firm needs to be taken into

account by the business firm (Winchester 2009).

Concluding remarks

The above discussed theories prove that business firms are obliged to give something

back to the community in addition to the product and service. The position taken by Roger Kerr

seems appropriate and business firm are in fiduciary duty to protect society and surroundings. It

can also be understood in a manner that non-compliance or negligence of societal and

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environmental interest can also prove dangerous or risky for business firms. Now-a-days,

consumers are becoming increasing aware and conscious regarding the business practices and

demonstrate higher level of understanding regarding business issues and aspects (Nicolaescu

2012).

This increasing awareness among consumers and other stakeholders mandate business

firm to plan, organise, conduct and control business activities in light of social and environment

interests. In extreme cases, it has also identified that business firms have faced the risk of

prosecution on ignorance of social and environment interests. There are various legal

frameworks and regulations introduced in this context complying business firms to precede

social welfare and environment good over profit motives and returns. The introduction of ISO

14000, ISO 9000 and many more evidenced the stringency and necessity currently facing by the

business firm on social and environment concern (Amokaye 2012).

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References

Aguilera,R. & Williams, C. 2006. Corporate Governance and Social Responsibility: a

comparative analysis of the UK and the US. Journal Compilation.14(3), pp.147-158.
Amokaye, O. 2012. Environmental Pollution and Challenges of Environmental Governance in
Nigeria. British Journal of Arts and Social Sciences. 10(2), pp.26-41.
Kerr, R. 1996. Discussion Forum Two Environmental Social Governance.

Kimani, N. 2010. Participatory Aspirations of environmental Governance in East Africa.

Environment and Development Journal. 6(2), pp.200-215.
Nicolaescu, E. 2012. Business Environment and Corporate Governance in Public Entities.
International Journal of Academic research in business and Social Sciences. 2(2),
pp.347-352.

Olowu, D. 2007. Environmental Governance Challenges in Kiribati: An Agenda for Legal and
Policy Responses. Environment and Development Journal.3 (3), pp.259-269.

Prakash,A. & Potoski, M. 2006. Racing to the Bottom? Trade, Environmental Governance, and
ISO 14001. American Journal of Political Science. 50(2), pp.350-364.

Reinhardt,F. & Stavins, R. 2010. Corporate Social Responsibility, Business Strategy, and the
Environment. Oxford Review of Economic Policy. 26(2), pp.164-181.

Winchester, N, B. 2009. Emerging global Environmental Governance. Indiana Journal of Global

Legal Studies. 16(1), pp. 7-22.

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