COMM 306 - Business for Good

Grand challenges

Significant global problems that are complex and uncertain

Why are grand challenges hard to solve?

Difficult and often impossible to identify a single cause or solution, as elements are highly interconnected in complex & nonlinear ways

Function

The results generated by the system

Systems

an interconnected set of elements that coherently go together to achieve something

Advantages of using systems thinking VS conventional approaches

• Better understand the complexity of challenges

• understand the process (short and long-term)

• identify tipping points

System equation

System = Elements + Interconnections + Function (purpose)

Systems thinking model elements (6)

1. interconnectedness

2. feedback loops

3. self-organization

4. emergence

5. resilience

6. tipping point

interconnectedness

the patterns of relationships among elements forming the pathways that matter, energy, and information flow

feedback loops

the mutual relations of impact & dependence among the parts of the system

self-organization

the process of how a system structures & restructures itself

emergence

system-level patterns that arise from interactions among parts

resilience

the system’s capacity to absorb disturbances, be able to adapt, and reorganize while retaining its identity

tipping point

the system’s limit where it begins to self-organize in a new way because its stabilizing feedbacks can no longer restore itself

externality

a cost/benefit of an activity experienced by a third party;

The external cost/benefit isn’t reflected in the final cost/benefit of a good or service

Brundtland Commission

1983

Organization established to unite countries in finding ways to balance economic development with environmental protection

Rio Conference / Earth Summit

1992

Creation of Agenda 21, which focuses on climate change, biodiversity, and desertification (grand challenges) to gain international cooperation to address these issues

UN Millennium Development Goals

2000-2015

Expansion beyond grand challenges within environment & economic growth to include social issues interconnected with the environment

Sustainable Development Goals

2015-2030

17 interconnected goals with 169 targets

Ways that companies incorporate SDGs

• Embed them within their operations

• Separate ESG activities from operations and do it on the side

economic systems

set of interrelated elements that determine how resources and services & goods are organized, produced, and distributed within a society

positive externality

benefits given to others by a business at no charge

negative externality

costs forced upon others by a business

shareholder theory

1970s

The business’s only social responsibility is to increase its profits → profit maximization as a measure of success

2 main neg externalities: climate degradation, wealth/income inequality

agency theory

Theory assumes that agents (managers) will chase personal gain instead of the principal’s (shareholders) profit due to self-interest

assumptions of Shareholder & Agency theory (5)

1. Solely focuses on maximizing value for shareholders, which can boost stock prices in the short term

2. business is mainly about economics and money

3. the only group that matters are shareholders

4. we live in a limitless world with unlimited physical resources

5. people are mostly self-interested

stakeholder theory

1980 - Edward Freeman

Argues that businesses are embedded in networks of stakeholders and that a firm should create value for ALL stakeholders

stakeholder capitalism

a form of capitalism where companies create long-term value by serving the needs of all stakeholders, rather than focusing solely on maximizing profits for shareholders

stakeholder

a person/entity that has something at risk to gain or lose from a corporate activity

stakeholder analysis

used to help identify the people involved, how your decision affects them, and how they could affect your decisions

types of stakes (FLRMIF)

• financial

• legal

• rights (e.g. human rights)

• moral

• interests

• fairness

other important attributes within stakeholder analysis (5)

• power

• influence

• vulnerability

• position

• affiliation

stakeholder analysis steps

1. identify the stakeholders

2. determine what stakeholder type they are

3. determined other relevant attributes

4. prioritize the stakeholder type