A business’s only responsibility is to produce profits. To what extent do you agree or disagree with this statement?
The relationship between business and society is closely connected, one cannot live without another. Society needs to be provided with jobs and to be paid wages and salaries, a fair share of taxes so that government spending can be supported on the things that society needs. To achieve that, business must exist invest, and innovate. On the other hand, business needs consumers to create demand in the market. It needs society to provide essential public assets and infrastructure, such as transportation and legal systems to enable business to take place. There is no doubt that business and society are interdependent, however, it is still not yet to be determined whether a business should take account of its broader social obligations and responsibilities. This essay will discuss the importance of profit and its impact on the business, as well as the arguments of whether businesses should perform social responsibilities or whether it is not the job of a business to be concerned about social issues and problems.
Companies make a profit to survive and remain in the business, profitability and growth are both important and necessary, this will attract investors and analysts to put more money into the business and, more importantly, make stakeholders satisfied and stay in the company. '' The business of business is business.'' Friedman M. (2007). The meaning of the quote is what business knows best, is to innovate, invest and maximize profit. The only responsibility to society is to operate within the law and the ethical customs of the country. Jack Welch, former chairman of General Electric, believes that every company should apply for good citizenship, but all companies should face the reality that before contributing the society with money, businesses need to make a profit. The company and stakeholders significantly affect each other. Stakeholders are the owners of the company, so the firm has a fiduciary duty to put their needs first to increase value for them. For instance, Costco makes sure that its Corporate Social Responsibility tackles the account of stakeholder's concerns (Greenspan, 2017). However, before Costco can take action, making a profit by issuing a policy that anyone who wants to shop at the store must buy a membership for an annual cost of 60 dollars for its lowest level of membership to do so, and still the revenue of membership continues to grow and it takes a significant part to Costco's bottom line. Moreover, Costco's brand, Kirkland Signature, earns a higher profit than other retailers' brands because there are fewer middlemen involved in the production (Greenspan, 2017). This is how Costco could sell at a low price to customers and still make a profit. By earning a profit, Costco can prioritize their employee as the most significant stakeholders, the company provides health care, high salaries of an average of 15 dollars per hour, various kinds of insurance, and even gym membership. The company not only takes care of its employees but also their families get all the health care services. Costco believes that keeping the employees happy can directly influence the performance of the company, as a result, Costco has the lowest employee turnover in retail (Costcobenefits.com, 2019).
Several companies believe that there is no conflict between making profits and acting sustainably will increase the profits in the long term by adopting a rigorous approach to CSR. For instance, Marks and Spencer believe that Corporate Social Responsibility fundamental part of the business, that this is more than just an ethical thing to do but an effective strategic objective that establishes fair workplaces and accomplishes step changes in environmental improvement. M&S has become one of the most sustainable retailers in the world. A few years ago, they launched a CSR initiative called '' Plan A'', the company is, for instance, sourcing sustainable packaging in Sweden. Cooperating with the local fishing suppliers and the conservation of marine habitat, setting up eco-factories in the UK, Turkey, and China, and establishing fair pay standards in countries like Sri Lanka, Cambodia, and Bangladesh (Beavis, 2012). Plan A has seen a fundamental change to M&S, improving the company's image as a consistently highly-rated organization in the Ethical Trading Initiative, meanwhile, the project also delivered 70 million pounds in net benefits (Beavis, 2012).
Businesses cannot decide what is in society's interest, but there is an ethical bottom line to society and the need to operate within the law. However, firms that see making profits as their only goal could collapse. According to Time magazine (Lewis, 2016), Oxy, a local subsidiary of British conglomerate Reckitt Benckiser, produced a toxic disinfectant for humidifiers that was sold in South Korea in 2001, harmed more than 6000 victims, including 1328 people who suffered lung damage and died after contacting the product (Lee, 2018). The victims required $9 million of compensation from the manufacturer of the product, which was mostly families with children, pregnant women, and the elderly using humidifiers in Korea's dry weather (BBC, 2016). 25 percent of the victims are children under 4 who now become ventilator-dependent patients, who need to rely on machines to help them breathe and have to suffer the rest of their lives just because of this company. The product was on the market from 2001 to 2011 and it was later discovered that the product skipped necessary toxicity teats before the product was launched in 2001 (Lewis, 2016). Before the report from the Korean Centre for Disease Control, Oxy insisted that their products were safe to use and had nothing to do with the damage to the lungs.
The company's priority indeed is to pursue the interests of shareholders, and social responsibility should be subject to the law and the ethical codes as determined by the culture of the society. What CSR does is to improve the company's image, sales, and profitability, this is often seen as an ethical approach to a company's bottom line, but an ethical code is that it needs to be followed no matter the cost. The main function of the business is to provide service and goods to consumers, however, behaving ethically is the main goal that all the firms should follow.
Reference
- BBC (2016). Reckitt Benckiser says sorry for deaths. [online] BBC News. Available at: https://www.bbc.com/news/world-asia-36185549 [Accessed 22 Feb. 2020].
- Beavis, L. (2012). M&S: doing the right thing leads to change – for the better. [online] The Guardian. Available at: https://www.theguardian.com/sustainable-business/best-practice-exchange/marks-and-spencer-change-better [Accessed 13 Feb. 2020].
- Costcobenefits.com (2019). https://www.costco.com/employee-website.html [Accessed 13 Feb. 2020].
- Friedman M. (2007) The Social Responsibility of Business Is to Increase Its Profits. In: Zimmerli W.C., Holzinger M., Richter K. (eds) Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg [Accessed 13 Feb. 2020].
- GREENSPAN, R. (2017). Costco Wholesale's Stakeholders: A CSR Analysis - Panmore Institute. [online] Panmore Institute. Available at: http://panmore.com/costco-wholesale-stakeholders-csr-analysis [Accessed 15 Feb. 2020].
- Lee, C. (2018). [Newsmaker] Korean victims of toxic disinfectant ask the public to boycott Strepsils. [online] Koreaherald.com. Available at: http://www.koreaherald.com/view.php?ud=20180619000788 [Accessed 22 Feb. 2020].
- Lewis, S. (2016). South Korean Victims of Toxic Disinfectant File Lawsuit. [online] Time. Available at: https://time.com/4338272/oxy-dehumidifier-disinfectant-reckitt-benckiser-korea/ [Accessed 22 Feb. 2020].
- Reference
- BBC (2016). Reckitt Benckiser says sorry for deaths. [online] BBC News. Available at: https://www.bbc.com/news/world-asia-36185549 [Accessed 22 Feb. 2020].
- Beavis, L. (2012). M&S: doing the right thing leads to change – for the better. [online] The Guardian. Available at: https://www.theguardian.com/sustainable-business/best-practice-exchange/marks-and-spencer-change-better [Accessed 13 Feb. 2020].
- Costcobenefits.com (2019). https://www.costco.com/employee-website.html [Accessed 13 Feb. 2020].
- Friedman M. (2007) The Social Responsibility of Business Is to Increase Its Profits. In: Zimmerli W.C., Holzinger M., Richter K. (eds) Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg [Accessed 13 Feb. 2020].
- GREENSPAN, R. (2017). Costco Wholesale’s Stakeholders: A CSR Analysis - Panmore Institute. [online] Panmore Institute. Available at: http://panmore.com/costco-wholesale-stakeholders-csr-analysis [Accessed 15 Feb. 2020].
- Lee, C. (2018). [Newsmaker] Korean victims of toxic disinfectant ask the public to boycott Strepsils. [online] Koreaherald.com. Available at: http://www.koreaherald.com/view.php?ud=20180619000788 [Accessed 22 Feb. 2020].
- Lewis, S. (2016). South Korean Victims of Toxic Disinfectant File Lawsuit. [online] Time. Available at: https://time.com/4338272/oxy-dehumidifier-disinfectant-reckitt-benckiser-korea/ [Accessed 22 Feb. 2020].
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Essay on Costco Corporate Social Responsibility.
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