Unit 37
P2 – Explain the implications for the business and stakeholders of a business operating ethically
Stakeholders are an essential part of business which helps to overall fund and evolve a company. A stakeholders is
someone who has a interest or/and are effected by an organisation/business. The types of stakeholders are either
internal or external. Internal Stakeholders are involved within the business wiliest External Stakeholders are
involved outside the business. An example of this are employees who are internal Stakeholders, and customers
who are external Stakeholders. Examples of stakeholders within L’Oreal includes: Customers, Employees, The
community, Students, Management, Shareholders, Competitors, The Government, Suppliers and Welfare Groups
Stakeholders are interested in many different topics regarding a business.
Customers are interested in the quality of the brand and/or product.
Employees are interested in the welfare of the staff.
Management is interested in the amount of profit the organisation is producing.
The government is interested in the organisation following all the rules and regulations set.
The list continues, but to summarise stakeholders have many influences over an organisation and how they
present themselves.
Conflicts of interest
Each stakeholder associated within a company has different interests regarding a company, and often these
interests will clash. For example customers of L’Oreal will desire a product of great quality but reasonably priced.
However this will be expensive to produce, meaning it will have an effect on the available profit margin. This will
produce a conflict of interest between the shareholders of the company due to the fact the return on their
investment will be reduced.
L’Oreal as a company has demonstrated many conflicts of interests within their stakeholders in the past. It has
been found that L’Oreal, within the UK, always pays its employees above minim wage, an example of this is shown
by L’Oreal’s ownership of The Body Shop at which all of their customer consultants are paid £8.00 instead of £6.80
(the minim wage). This concludes that the employees as stakeholders are able to be satisfied with this proposition
of the company due to the fact it means that there is more investment being made into the HR sector. However,
where the conflict of interest lies with regards to this situation, is within the customers. To compensate for this
extra expense, the prices of products will have to increase, overall causing the customers to be unsatisfied. An
example of an occurrence of this is within The Body Shop, at which a signature item associated with the brand,
known as White Musk oil, has increased in price by £3.00.
Another conflict of interest that is found within L’Oreal includes the shareholders and environmental pressure
groups. The shareholders of this company have a sole interest of gaining a return on their investment. Their aim is
purely financial based, and there are a reduced amount of factors that affect this. To maintain a good relationship
with this specific stakeholder of the company, L’Oreal sources many of its products ingredients abroad due to the
low price point. The company has been discovered to be using child Labour within India for the production of their
mineral makeup. Though this method of production is cheap, and will keep the shareholders of the company
happy, it overall reflects badly on the company and interferes with ethical pressure groups interests and values
surrounding L’Oreal, causing a conflict if interest between both of these stakeholders.
Adapting business behavior/Responding to ethical pressure
This specific topic of ethical issues refers to the adaptation of a company’s values, policies and ways of business life
through the pressure of specific individuals/events.
Due to ethical pressure L’Oreal as a company has specifically pledged to remove forest destruction from its
products by 2020. With this action taken place by such a well-known company, Greenpeace experts are assuming
P2 – Explain the implications for the business and stakeholders of a business operating ethically
Stakeholders are an essential part of business which helps to overall fund and evolve a company. A stakeholders is
someone who has a interest or/and are effected by an organisation/business. The types of stakeholders are either
internal or external. Internal Stakeholders are involved within the business wiliest External Stakeholders are
involved outside the business. An example of this are employees who are internal Stakeholders, and customers
who are external Stakeholders. Examples of stakeholders within L’Oreal includes: Customers, Employees, The
community, Students, Management, Shareholders, Competitors, The Government, Suppliers and Welfare Groups
Stakeholders are interested in many different topics regarding a business.
Customers are interested in the quality of the brand and/or product.
Employees are interested in the welfare of the staff.
Management is interested in the amount of profit the organisation is producing.
The government is interested in the organisation following all the rules and regulations set.
The list continues, but to summarise stakeholders have many influences over an organisation and how they
present themselves.
Conflicts of interest
Each stakeholder associated within a company has different interests regarding a company, and often these
interests will clash. For example customers of L’Oreal will desire a product of great quality but reasonably priced.
However this will be expensive to produce, meaning it will have an effect on the available profit margin. This will
produce a conflict of interest between the shareholders of the company due to the fact the return on their
investment will be reduced.
L’Oreal as a company has demonstrated many conflicts of interests within their stakeholders in the past. It has
been found that L’Oreal, within the UK, always pays its employees above minim wage, an example of this is shown
by L’Oreal’s ownership of The Body Shop at which all of their customer consultants are paid £8.00 instead of £6.80
(the minim wage). This concludes that the employees as stakeholders are able to be satisfied with this proposition
of the company due to the fact it means that there is more investment being made into the HR sector. However,
where the conflict of interest lies with regards to this situation, is within the customers. To compensate for this
extra expense, the prices of products will have to increase, overall causing the customers to be unsatisfied. An
example of an occurrence of this is within The Body Shop, at which a signature item associated with the brand,
known as White Musk oil, has increased in price by £3.00.
Another conflict of interest that is found within L’Oreal includes the shareholders and environmental pressure
groups. The shareholders of this company have a sole interest of gaining a return on their investment. Their aim is
purely financial based, and there are a reduced amount of factors that affect this. To maintain a good relationship
with this specific stakeholder of the company, L’Oreal sources many of its products ingredients abroad due to the
low price point. The company has been discovered to be using child Labour within India for the production of their
mineral makeup. Though this method of production is cheap, and will keep the shareholders of the company
happy, it overall reflects badly on the company and interferes with ethical pressure groups interests and values
surrounding L’Oreal, causing a conflict if interest between both of these stakeholders.
Adapting business behavior/Responding to ethical pressure
This specific topic of ethical issues refers to the adaptation of a company’s values, policies and ways of business life
through the pressure of specific individuals/events.
Due to ethical pressure L’Oreal as a company has specifically pledged to remove forest destruction from its
products by 2020. With this action taken place by such a well-known company, Greenpeace experts are assuming
