The implications for the business and stakeholders of a business operating ethically

For this task I have been asked to write the implications for a certain business and the stake holders of a business which is operating ethically. The business I have chosen to relate to is H&M.

Understand the implications of businesses operating ethically

Every business has a variety of stakeholders for instance H&M will have a number of stakeholders such as store managers, staff, customers and consumers each group will have interests in how the business is run on daily basis. Business owners are the key stakeholders they want and expect good financial performance from their investments in H&M, store managers know that their first priority is to deliver good financial results to keep the H&M owners pleased, their superiors will keep track off progress.

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Shareholders

Shareholders are people who are involved in a business such as customers, consumers, suppliers and staffs all these are people are shareholders as they are involved in the business, an H&M shopper is a stakeholder as they are consuming products from

Employees

Citizen’s benefit from H&M activity during they provide labour force for business leaders to create wealth. When H&M hires employees they will need to follow certain laws that help workers from being exploited and made to work long hours, then be made redundant when they were no longer needed. H&M would have to provide satisfactory working conditions and that all workers will be kept safe from danger, they must also follow minimum wage. H&M have customers around the world over and H&M also struggle for diversity. People of a large number of nationalities work at H&M and they keep growing with new employees around the world. H&M also struggle for equality. In 2011, 79 percent of H&Ms employees were women. Women held 70 percent of the positions of responsibility within the company, such as store managers and country managers.

Customers, Suppliers and Competitors

In H&M they need to build relationships with their customers, suppliers and competitors as it is very important. H&M would need satisfied customers and suppliers which would come and do business with the firm. Decisions made in H&M could affect their competitors so they would need to make relationships with them. The increased purchasing costs also included other buying related costs connected to H&Ms long-term initiatives aimed at building an even stronger H&M. For example, strengthening H&Ms buying organisation and production offices with new employees and IT investments. H&M are doing this in order to give their customers an even bigger offering in the future.

H&M buys and sells products in a large number of countries. International trade plays an important part for the development of countries as it is a source of economic growth and helps lift people and nations out of poverty. H&M contributes to the creation of more than a million jobs for people around the world, a large number of them in Asia.

Citizens

H&M’s activity occurs within a community. So it is important that the local population is considered in major business decisions. H&M have national importance and their activities are very significant to members of communities. H&M is a powerful presence in many communities. It can have a considerable impact on traffic, new buildings, employments and established business. Somewhere else, but If H&M is predicted to do good they will get lots of investors trying to buy shares. H&M also attracts great interest around the world and their strong expansion continued in 2011. It grow by 10–15 percent new stores per year and in 2011 they had opened 266 new stores net, 16 more than planned. China, the US, the UK and Germany were the largest expansion markets. They also had opened stores in five new countries: Romania, Croatia and Singapore, as well as – via franchise – Morocco and Jordan. H&Ms Customer response has been incredibly positive everywhere.

Conflicts of interest between stakeholder groups

H&M today have to balance the aims of a number of stakeholders. This can be difficult because the interests of stakeholder groups can conflict with each other. As some stakeholders, such as shareholders have a financial interest in a business. It is in their interest that the shares in the business increase in value, so that their investments also increase. Other stakeholders in H&M such as environmentalists are people or groups that actively campaign on issues to do with protecting the natural environment. 

Read about H&M Sustainability Competitive Advantage

If H&M would release a new product and it goes well stakeholders will be very pleased that their cash investments looks like returning a healthy profit, however if an environmental group starts a campaign to prevent H&M in using children to make their clothes these two stakeholders would be in conflict. Success for environmentalists may mean a loss for shareholders. That said others may argue that, in the longer term, all business gain by protecting our environment.

Implications

Adapting Business Behaviour

Within our world the connection through each other is now better than it was 50 years ago, meaning the connection to each other is better, giving out messages and keeping each other up to date is now easy, For e.g. H&M will be able to keep to up to date on what is happening in their factories and will be aware of any new within seconds. H&M has factories all the way in Bangladesh, their messages from their will come to H&M employers quick so they will know what is happening over there instead of waiting to know what is happening, so they will be able to come up with solutions if they have any problems. Their behaviour will need to be positive at all times and their actions will need to be positive to keep the business going.

Responding to ethical pressures

The corporate social responsibility of businesses is a response to the growing pressures placed of managements to take account of ethical concerns. Therefore H&M managers have the pressure of ethical pressure as they have to make sure they are doing business ethically and also on the right path. The benefits for H&M when responding ethically are that they are doing business in the correct manner and are following laws and regulations. The drawback for H&M responding ethically is that it will be difficult for them to be on top of ethics.

Implementing ethical practices

Some well known names have begun to implement an ethical stance on issues that affect us all. For example walkers are working with consumer change in their mind as they have made changes to their product. Therefore H&M will have to bear in mind their consumer’s welfare when making products. The benefits for H&M is that they can make products knowing that they are making products for consumer’s needs. The drawback for H&M is that they have to bear in mind what consumers will think of their product and will it benefit them.

Influence of stakeholders and pressure groups

Corporate social responsibility is a response to external stakeholder’s pressure. It is also a response to pressure group campaigns and recognition that public disapproval could lead to commercial disaster. Businesses In pursuit of their primary goals cause damage to the planet. Environmental issues are on the focus in pressure groups which are a voluntary organisation that exists to create that will be listened to by decision makers everywhere. This includes business leaders and politicians. Therefore H&M will have conduct pressure groups to keep on top of environmental issues and the influence of their stakeholders. The benefits of this are they can deal with environmental issues effectively and impress stakeholders. The drawbacks of this are it can get out of hand and become a big concern for the business which they may have to close the business down.

H&Ms stakeholders

Shareholders

H&Ms stakeholders are shareholders because they hold the value of H&M. if H&M are doing well their value will rise. Shareholders will benefit from this as the business is prospering. The drawbacks of this are if H&M do not do well their value of their business will drop.

Customers

Customers are stakeholders because they use the service H&M provides. Therefore H&M is meeting customer’s needs and expectations. The benefits of this are if H&M provide a good service customers will return to them often. The drawbacks of this are if H&M does not meet customer’s expectation they will not obtain any customers and make huge losses. H&M also want to surprise their customers, for example by offering special collections and designer collaborations. Another example is that H&M had successful collaboration for autumn 2011, “Versace for H&M”. In February 2013 H&M launched “David Beckham Body wear”, an under wear collection for men. This was H&Ms two-year collaboration and their first collection has been very well received. H&Ms most recent guest designer collection, by the Italian label Marni in March, has also been highly appreciated.

Employees

Employees at H&M are H&Ms stakeholders because they work for the business they help the business run. The benefits of this are that they help H&M and in return they get paid. The drawbacks of this are that if they don’t contribute towards the business the business will not be able to run effectively. Also H&M has previously urged the government of Bangladesh to raise minimum wages for the country’s textile workers, and in 2010 the textiles workers wages were raised. But in order to achieve lasting improvements stability in the labour market is required and therefore H&M launched an initiative to improve the dialogue between the parties. But H&M are working actively to help strengthen workers’ influence over their own situation in order to enable them to themselves improve their conditions in the longer term.

Suppliers

Suppliers are H&Ms stakeholders because they supply goods to H&M. the benefits of this is that supplier help H&M run. The drawbacks of this are that without the supplier H&M will not be able to offer goods to their customers. However H&M do not own or operate factories but struggle for long-term relations with their suppliers in order to achieve lasting improvements. Wages in the supply chain are an important issue for H&M and at the same time a structural challenge for the garment manufacturing sector and other manufacturing industries. Therefore, in order to drive improvement, H&M cooperate with other companies and organisations to influence decision makers. For example, members of the Fair Wage Network, which monitors wage conditions in the garment manufacturing industry on a global basis. One of those countries is Bangladesh, an important buying market for us.

• Impact on competiveness reputation and public image
• This is boosting competiveness in the market by using global ethical concerns.
• H&M will have to consider their energy, product, workplace and service to compete ethically in the marker. To prove they are a better business than others.
• Complying with relevant legislation and codes of practice

H&M are determined to ensure that the objectives of the Code of Ethics are fulfilled. This applies to all H&M’s business dealings and transactions in all the countries in which H&M and their suppliers/ business partners operate. H&M informs, instructs and trains employees as well as suppliers/business partners to secure their compliance with the Code of Ethics.

Businesses must comply with large range of legislative regulations such as those relating to:

• Health and safety
• Employment
• Planning
• Environment and pollution

H&M must comply all of the above points to their business. But H&Ms want maintain pleasant and sustainable working environments throughout their operations. This includes ensuring that you as an employee have a safe workplace. H&M takes preventative measures to ensure the long-term safety and good health of their employees. H&M also encourage their employees to report accidents or unsafe working conditions to their manager

European Union (EU) laws

The European Union is a political and economic union of 27 nation states that encompass more than 490 million people. Ethical issue that affect us all are the subject of EU law. This law also covers issues such as employment and environmental pollution. Employment law is an illustration of EU influence in working conditions.

An EU directive tells a member state that it must implement law in a particular area. The 1993 directive lays down provision for maximum 48 hour working week including overtime, plus rest periods and breaks and a maximum of four weeks paid leave for employees. The UK government accepted the following conditions from the working time directive:

• The worker can agree to do more than 48 hours
• No worker should be disadvantaged by deciding not to opt out
• The employer must keep record of all employees who carry out this work
• Records must be kept available for authorities.

H&M are under the European Union law therefore they will have to accept all the conditions which are put forward to them. H&M should give priorities to their employees such as they can work up to 48 hours if they would like to do so but H&M cannot force employees to do this. If employees at H&M volunteer to do over time it is H&M duty to record this as they will need to show this information to higher authorities.

UN declaration of human rights

The United Nations declaration of human rights 1948 if for creating a better world, based on fairness and justice. The deceleration covers the questions of paid employment.

H&M respect Human rights in all their operations, H&M also are committed to respecting human rights in their operations, their supply chain and in the communities where they operate. H&M seek to avoid any negative human rights impact and H&M use their influence to promote the fulfilment of human rights.

Article 23 of UN Declaration of Human Rights

• Everyone has the right to work, to free choice of employment, to just and favourable conditions of work, and to protect against unemployment. This is a right for all employees at H&M. H&M neither cannot forces any one to work with them. For example if an employee wants to work for H&M, they will have to consider them and see if they are fit for the business or if an employee wants to leave the business they could do so H&M have no right to stop them from leaving the business.
• Everyone without any discrimination has the right to equal pay for equal work. It is H&Ms duty to pay all if they are doing the same type of job. For example if there were two employees who were working as a sales person they both should get paid equally no discrimination should take place.
• Everyone who works has the right to just and favourable pay ensuring for themselves and their families an existence worthy of human dignity and other means of social protection. H&Ms employees have the right to ensure for themselves and their families that they are getting a good pay and they are relieving social protection.

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