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how big businesses work

THEORY

In the same way that plants need water to grow, businesses survive on selling products and making more money – or profit. The need for companies to grow each year encourages them to find ways to make more profit, whether that’s by reducing the costs of workers, using improved technology to replace workers, or by making products more expensive. Because the world of business is so competitive, if they don’t grow and change, if they don’t make enough money, they risk being bought by a bigger company or even closing down. Unfortunately, as so many big companies operate unsustainably, their methods have become normal for other companies trying to keep up with them.

The bigger companies are supported with money from ‘shareholders’. These are people who invest in a percentage of the company. Imagine you are a shareholder. When you buy shares you are ‘lending’ a company money in the hope that the company will make a profit so you can sell your shares for more than you paid.

Most people who buy shares are only interested in buying shares that increase in value. If companies do not grow and make more profit, the value of their shares will fall and shareholders will soon start selling them. If the shares of the company decrease in value, the company will lose power and may be taken over by a bigger company with more capital. Because of this pressure to survive in the competitive world of business, companies are constantly looking for ways to create and sell more products. For example, by selling things in new countries or  using marketing to encourage more customers to buy their products; and by doing it all as cheaply as possible!

Growth and cost-cutting often come at the cost of environmental sustainability. This power of companies to produce more and more goods seems to have grown out of control, driven by shareholders’ demand for profit and by competition amongst companies for both customers and new markets.

THEORY

A sustainable business should make sure that the natural resources it uses to create products come from a sustainable source, i.e. a source that can be replaced and won’t run out. It should make sure that its methods of production do not result in pollution and other environmental damage.

A sustainable business should also consider the wellbeing of all the people who work for it, which includes paying them enough to lead enjoyable lives. A socially responsible company should pay taxes, especially as taxes pay for all the public services necessary for people to sustain a decent standard of living. These are services that companies benefit from greatly, such as systems of transport, systems of waste and disposal, the supply of energy and water, and even basic security. Companies’ priorities should be profit, but also the wellbeing of the community and the environment.

mini research task

TASK 1 - Find three examples of sustainable sources.

TASK 2 - Find the names of four famous companies that have been in the news for not paying taxes.

TASK 3 - Find out what ‘CSR’ stands for and what it means.

TASK 4 - Find out what ‘tax evasion’ means.

TASK 5 - Find out what the ‘triple bottom line’ means.

activity

How all our stuff gets made

VIDEO

comprehension questions