Social Environment

Lecturer:
Aris Arif Mundayat. Ph.D

Gadjah Mada University

Introduction: Business Social Environment

Social environment of Business is a set of

political, social, cultural forces that are
largely outside the control and influence of
a business.
Those can potentially have both a positive
and a negative impact on the business.

What Is the effect of social

environment toward business?

Social environment as the totality of

conditions might effecting the activity
feature of a human being.
Those conditions possibly will promote or
restrain, the characteristic activities of a
living being.

Why business is vital parts of human society for

many reasons?

Businesses make available goods and services that

people need;
Businesses give people work and income for living;
Businesses provide a space for people to interact with
each other on a daily basis;
People purchase products from individuals and from
other businesses;
Businesses often serve their communities by contributing
money and other resources to various causes that
people care about.

Why social Environment need to be

Studied
Businesses live within society and the
interrelation between businesses and
stakeholders is happening within social
environment.
They interrelate with society on many
levels: owners, customers, suppliers,
employees, government and the
community as stakeholders

Who are the Stakeholders?

Stakeholders in the broad sense: those individuals or
groups whose interest is involved because they undergo
the external effects, positive or negative, of the
transactions performed by the firm, even if they do not
directly participate in the transaction, so that they do not
contribute to, nor directly receive value from the firm.
Stakeholders in specific sense: those are including
competitors, suppliers, employees, customers,
distributors, government policy makers and regulators,
media, local communities, groups of people, etc.

 These different actors are called

stakeholders and can be regrouped in four
main categories (Henriques and Sadorsky
1999):
(a) organizational (e.g., employees,
customers, shareholders, suppliers),
(b) community (e.g., local residents,
special interest groups),
(c) regulatory (e.g., municipalities,
regulatory systems), and
(d) media stakeholders.

Stakeholders Power
When business impacts on specific issues contravene stakeholder
norms, stakeholder communities might make use of their power to
bring about changes in business behavior.
At least three main strategies that are usually used by stakeholder
communities to advocate an issue:
1. With legalistic approaches, stakeholders antagonize business
practices with the letter of the law.
2. With Exit strategies, stakeholders hold back or threaten to
withhold resources if the business fails to address a specific issue.
3. With voice strategies, a stakeholder community tries to motivate
consciousness and action among other powerful stakeholder
communities.
(Cited from Maignan, Isabelle & Ferrell, O. C. Corporate Social Responsibility and Marketing: An Integrative Framework in JOURNAL
OF THE ACADEMY OF MARKETING SCIENCE. INTER 2004)

The Objective of Understanding Social Environment

Learn to analyze the interplay between

organizations and their stakeholders.
To develop approaches that the organization's
managers can use in responding to these
complex and dynamic forces.
To explore the role played by the public policy
process, business social responsibility and
ethical decision making in creating a
sustainable global business system and
natural environment.

What Is the significant of sustainable Business for

social environment ?

Sustainable business is about ensuring a

business that will provide better quality of
life for the business social environment,
now and for the future generations.

Why Sustainable Business is Important?

Business organizations operate in a

complex and dynamic social environment.
The viability and effectiveness of these
organizations depends on their ability to
understand and respond to a host of
stakeholders.
The quality of life in our society, and the
viability and sustainability of our natural
ecosystems are influenced by and
impacted by business organizations.

INDUSTRIAL RELATIONSHIPS FOR SUSTAINABLE BUSINESS

Democratic
Relationships

Business
People

Good and Clean Business

Social
Environment

The Strategic Issues of

Sustainable Business
The
Basic
Capital
of
Sustain
able
Industri
al
Relation
ships

Natural,
economy &
Technological
Resources

Sustainable Business Policies

Economic
Growth &
Distribution

Sustainable Business Strategies

Social &
Cultural
Resources

Political
Resources

Sustainable Business Programs

The Implementation of programs

in Social Environment (CSR)

Human Right
Protection

Business Sustainability

Sustainable
Human
Development

The
Distribution of
Development

The
Needs
of
Social
Environ
ment

Self-Potential
Actualizations

Sustainable Development

SWOT

PEST

SWOT & PEST

Industrial Ecology and Social Environment

Some basic scenarios:

Business recognizing its interdependence on the social
environment and natural ecosystems which supports it.
Material fluxes through local economies should approach
a closed loop.
Extensive implementation of renewable sources and
preserving an equilibrium between rate of consumption
and production of renewable materials.
Maintaining and humanizing the economic feasibility of
industrial systems, whilst minimizing impacts on the
biosphere and social environment through Corporate
Social Responsibility (CSR)

What is Corporate Social Responsibility:

CSR is generally understood to be the way
a company achieves a balance or
integration of economic, environmental, and
social imperatives while at the same time
addressing shareholder and stakeholder
expectations.
CSR is the way businesses engage/involve
the shareholders, employees, customers,
suppliers, governments, non-governmental
organizations, international organizations,
and other stakeholders.

Why Social Responsibility is Important?

Being responsible to society means that
businesses must be honest and fair in doing
business in general, and particularly to social
environment;
Support social, generous and provides better
environmental condition for their communities.
Making the workplace fair for employees might
mean making uncomfortable changes so that
women and employees from minority races are
hired, paid and treated fairly.

Why some business people hesitate in

implementing Social Responsibility?:

It can be expensive to be a good corporate

citizen.
It costs money to use environment-friendly
processes for making products.
It's expensive to build non-discriminative
infrastructure so that diffable employees
can be hired.

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Some perspectives on CSR

(Cited from Maignan, Isabelle & Ferrell, O. C. Corporate Social Responsibility and
Marketing: An Integrative Framework in
JOURNAL OF THE ACADEMY OF MARKETING SCIENCE. WINTER 2004)

CSR as social obligation

Bowen (1953) defined CSR as the obligation to
pursue those policies, to make those decisions, or
to follow those lines of action which are desirable
in terms of the objectives and values of our
society (p. 6). (This advocated by Carroll 1979, and in contemporary
marketing studies by Brown and Dacin 1997; Sen and Bhattacharya 2001).

Carroll (1979), differentiate types of social

obligations into:
(a) economic obligations (be productive and
economically viable),
(b) legal and ethical obligations (follow the
law and acknowledged values and norms),
and
(c) philanthropic obligations (proactively give
back to society).

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CSR as stakeholder obligation

Clarkson (1995) and other scholars

(e.g., Donaldson and Preston 1995;
Jones 1995; Wood and Jones 1995)
argue that businesses are not
responsible toward society as a whole
but only toward those who directly or
indirectly affect or are affected by the
firms activities.

CSR as ethics driven

The views of CSR as either a social

or a stakeholder obligation imply that
CSR practices are motivated by selfinterest: they enable businesses to
gain legitimacy among their
constituents.

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CSR as managerial processes

Ackerman (1975) outlined three main activities

representative of corporate social
responsiveness:
(a) monitoring and assessing environmental
conditions,
(b) attending to stakeholder demands, and
(c) designing plans and policies aimed at
enhancing the firms positive impacts.

Some Models of CSR

(Cited from Benton, A. et all, Corporate Social Responsibility: Opportunities for
Reproductive Health. Corporate Market Strategies, May 2004)

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Model I: Workplace programs

It is typically refer to health-related
programs carried out by a company
for the well-being of its employees.
The vast majority of workplace
programs focus narrowly on
employee occupational health and
safety.

Model II: The community-based

Companies typically engage in community

projects to build their reputation.
To establish good relationships with
surrounding communities and with
governments.
To invest in the social and economic
development of the communities on which
their business depends and from which
they draw their workforce.

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 Community-based projects are often determined by

stakeholder dialogue and analysis, and guided by the
companys business strategy.
Typical community-based projects include environment,
education, womens empowerment, micro-enterprise
development, and health. Some companies are
expanding CSR programs to target fundamental obstacles
to social development.
Companies often undertake these projects through varied
partnerships with international NGOs, local NGOs, and
international organizations such as the UN agencies.

Model III: Products and Services Model

Projects are usually undertaken in partnership with
public health organizations. Most of the companies
using this approach are pharmaceutical or medical
device and products companies.
Companies employing this model typically do so
for some combination of social responsibility,
image building, and market-development reasons.
This model appears that companies are beginning
to bring more of their core business competencies
to bear on these partnerships going far beyond
product donation in order to make programs
sustainable, create a more powerful impact, and
build local health infrastructures.

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Model IV: Influencing marketing competencies

Companies using this model consider their

engagement to be community-based.
The model is highlight the overall trend in
CSR toward more strategic involvement
based on core competencies and
maximization of impact.
Projects are based on information,
education, and communication, with the
goal of creating behavior change. They
target the companys consumer base.

Model V: Cause-related marketing

The cause-related marketing model seeks to

increase sales of a particular consumer product
by co-branding and marketing a specific
consumer product with a tax-exempt non-profit
organization.
Affiliating a social cause with the product is
intended to increase sales of the product by
enhancing its attractiveness to consumers and
appealing to their social responsibility sensibilities.
As part of the arrangement, the company donates
a portion of the sales to the nonprofit organization.

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Model VI: Market expansion through innovation

Under this model, companies apply their resources

and core competencies to help solve chronic
social problems (i.e. poverty) in ways that add
value to their own businesses.
This model is based on the premise that
companies tackling tough social problems learn to
innovate, which helps them gain an advantage in
new markets.
Donors can fund the NGOs involved in these
partnerships, and help broker relationships
between the companies and partners.

Conclusion
Understanding Social Environment make us as
business people realize that it is the source for:
a) Social Capital that will improve and expand
social relationships to maintain business
sustainability
b) Cultural Capital that will advance stake holders
intellectual capacity, multiculturalism and tolerance
c) Symbolic Capital that will support in creating
brand image
The accumulation of these capitals will gain
economic benefit and political legitimacy.
Socially responsible and strengthening business
legitimacy

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