The potential impact of shale on natural resource availability in the U.S. and abroad is unknown but potentially a game-changer. Heightened focus on the preservation of global resources for future generations plays a role in the energy debate. As energy resources are explored, and utilized in different ways, companies have to deal with the resulting supply-chain issues. This month’s Action Brief looks at shifting factors in energy supply and demand, and some of the resulting economic effects. 

Business Implications

Greater availability of domestic energy resources has drastically changed the face of gas and oil production in the United States. The “shale revolution” is reshaping the country’s dialogue about energy strengths and weaknesses, especially now with record amounts of propane and other natural gas liquids being exported. Other countries with shale resources are also working to extract gas and tight oil, but access to fresh water reserves used in the process can present a challenge in many parts of the world. Coal plants and other traditional energy operations are closing or laying off massive numbers of workers as they go out of business or restructure to support alternative energy’s processing and delivery.

Companies in the renewable energy sector are also experiencing their own viability issues. Many companies are struggling to stay financially solvent while facing funding issues and other business challenges not unusual for start-ups. Government subsidies are potentially on the chopping block which adds to eroding confidence in many companies. While renewable energy is relatively low-cost, and growing in use, many companies are coming up short with funding to support new and growing infrastructures. 

The boom in natural gas and oil holds many potential benefits, such as less dependence on foreign resources, increased manufacturing, more choices and lower prices for consumers, and maybe even cleaner air. Disadvantages are:

• Potential contamination of water and other natural resource supplies due to fracking and wastewater disposal
• Fracking induced earthquakes
• Loss of jobs and revenue in traditional and new alternative renewable energy source sectors

Much to the dismay of environmentalists, the shale boom may have somewhat slowed a shift toward the use of products that utilize renewable energy sources. As an example, many consumers are passing up hybrid vehicles for conventional gasoline-only models. Surprisingly, even some consumers who had switched to hybrids are going back to fuel-only powered vehicles. Lower gasoline prices mean a longer break-even time for consumers purchasing hybrids. Guessing that the price of gasoline will rise again, automakers are ramping up production of traditional vehicles, but not putting hybrids on the shelf just yet.   

While hybrid car sales may have taken a recent hit, studies show that more than 50 percent of consumers from across the globe are willing to pay more for products from companies committed to making an environmental impact. As consumers become more savvy about sustainability issues, many companies are strengthening their green appeal in the following ways:  

• Incorporating more areas of relevance to customers’ lifestyles
• Encouraging customers to live sustainably beyond that particular product
• Understanding what social and environmental issues their customers are concerned about and continuing to address those concerns in product development
• Demonstrating credible environmental impact (proof) based on product sustainability

How are these companies and others walking the walk? Look for next month’s Action Brief when we explore how companies are working to reduce their carbon footprint and the obstacles they are facing in doing so. 

Classroom Implications

Understanding the different types of energy and basic cost implications of use can be crucial for students as they enter into the energy debate and understand the impacts on business: 

• Help students become energy literate by accessing information and lessons on this website: http://cleanet.org/clean/literacy/energy/index.html 
• Explore energy related issues with students such as:
• How are decisions made regarding energy use—what are the main drivers?
• How do varying energy sources impact the economy and the environment?
• How do energy policies vary in different states/countries?
• How do energy prices and the process of importing/exporting affect our economy?
• How are businesses impacted by fluctuations in energy costs, and what are some of the techniques used in mitigating those variations? 
• Ask students to identify local business efforts to sustain energy. What resistance has been encountered? What support has been provided? Discuss community benefits that have resulted. 

Businesses are striving to provide competitive pay and benefit packages to employees, even as the cost of doing so keeps rising. Employers struggle to pass on these additional costs in the price of their products/services or by reducing profits shared with shareholders and employees. This month’s Action Brief looks at how both businesses and employees are dealing with these challenges.

Workplace Implications

The pressure to bolster wages is increasing as fewer workers with the skills needed for the jobs available are giving workers more wage leverage. Layoffs continue in the energy, computer and retail industries and job creation remains very low. Unemployment remains relatively constant as more workers retire or drop out of the labor market without substantial growth in the number of jobs for those that are entering the labor force for the first time or trying to reenter the workforce. Companies are also trying to balance increasing minimum wages in some states, and the new overtime pay rules scheduled to take effect December 1, 2016. These regulations though costly to all employers, will be particularly hard on the retail, restaurant and non-profit industries who have not been able to afford to pay higher wages because of tight profit margins or trying to hold down costs in order to provide more charitable services. Once again, businesses will likely pass these costs on to consumers via higher prices, reductions in profit sharing, or cuts in charitable services provided.

The new overtime regulations will directly affect 4.2 million workers and will cost employers about $1.5 billion a year which equals about 0.03% of total pay in the U.S. Small businesses, likely to feel the most financially burdened if the order does go into effect, are struggling with how to comply in the most cost-effective ways. Some options include:

• Tight restrictions and close monitoring of overtime hours
• Hiring additional staff to relieve overtime burden
• Increasing salaries above the threshold for overtime pay

A main concern of the revision is the potential curbing of opportunities for employees to show extra dedication to their work by putting in extra hours. It may also be troublesome for workers who have earned the exemption status in the past and may now go back to non-exempt status and be required to clock in and out to track their time again.

The passage of the Affordable Care Act brought the possibility of healthcare coverage to millions of Americans where there previously was none. But the cost of insurance premiums has continued to rise substantially, placing a strain on both businesses and employees. Some insurance companies are electing not to provide medical insurance through the government exchanges in some states. Many companies have moved to the provision of high-deductible healthcare plans or eliminated spousal and family coverage to be able to incur the increasing medical costs to provide coverage for their workers. Some companies are providing Consumer Driven Health Plans that give employees more information about the cost and quality of services for each particular provider. This allows greater flexibility in choosing providers and facilities from which to receive services along with more specific information about costs.

Companies have also begun incentivizing employees towards better health as a way of controlling spiraling costs. Financial incentives, other rewards, or lowered insurance premiums are offered to employees in some companies who: 

• Complete personal health-risk surveys
• Take action to improve their health, such as participating in diabetes management or fitness programs
• Provide documentation of improved health biometrics (e.g., lower blood pressure or cholesterol levels)

Some companies use penalties rather than rewards to motivate workers. In Houston, city employees are required to complete a personal health assessment in order to avoid a $25 a month surcharge on medical contributions. Some employers are not hiring, or they are charging more to provide medical coverage to employees and family members who are smokers or users of tobacco.

Programs such as this have advantages and disadvantages. Pros may include healthier, more productive employees, and lower healthcare costs. Cons may include a lack of employee motivation for further improvement beyond the reward, taxes on incentives and rewards, and penalties that can damage employee morale. Some see the programs as potentially discriminatory with rewards or penalties or having to spend time participating in alternative programs based on an individual’s weight or other physical indicators that may not be within their own control.

Employees continue to want the three core benefits of medical coverage, retirement plan contributions and vacation/paid time off. Some businesses are using other creative solutions as they work to provide stronger benefit packages including:

• Onsite fitness facilities, or memberships to offsite fitness clubs
• Paid volunteer opportunities
• Pet-friendly work environments
• Financial counseling

Classroom Implications

Helping students understand costs related to benefits will begin to aid their understanding of some of the tough choices employers face as they design benefit packages. 

Benefits frequently take a backseat to pay when a job offer is considered. Ask students to consider what benefits will be most important to them as they enter the workforce. Challenge them to think about and list reasons why they should evaluate benefits just as carefully as pay. The following article can help students consider the many aspects of benefits and their overall worth as part of a compensation package: https://collegegrad.com/jobsearch/successful-job-offer-negotiation/evaluating-your-benefits-package.

Have students research various company benefit plans. Ask them to compare the advantages and disadvantages of each. 

It’s no secret that political, social, and economic polarizations are growing at home and abroad. This month’s Action Brief highlights how polarization helps to define and shape the business world.

Business Implications

Individuals holding all conservative or all liberal political views have doubled in the last decade. Political polarization in the U.S. is increased by the loss of middle-wage jobs to foreign countries. In areas hit hard by these job losses, political views swing to the right or to the left depending on the reason for the job losses. In addition, growing minority and socially concerned populations help sway the election of politicians representing the far left or the far right based on the issue. Increasing partisan legislators can result in a slow-down of the legislative activity needed for businesses to operate and thrive. 

As job and economic polarization increase and the middle class shrinks, sales of goods are affected. While high-end retailers are seeing sales surge, many retailers geared toward the middle class are struggling to stay open. Retail establishments with actual stores are also closing because of the trend to buy items on-line. The same trend is playing out in the restaurant industry with higher end restaurants thriving, while foot traffic at mid-tier establishments has decreased. Businesses in every retail sector are reevaluating their markets based on economic polarization.

Political and economic polarizations in other countries also affect American business operations overseas. Risks can include potential take-over by a hostile government, financial and economic insecurity of consumers, potential repatriation of earnings, security of workers and consumers and even obstruction of normal day-to-day business operations.

Americans are also more polarized around social issues. Businesses are increasingly willing to take a stand on these topics even at the risk of alienating some customers. LGBTQ issues are currently front and center. Target announced last month that it would allow staff and customers to choose restrooms and fitting rooms consistent with their gender identities. While this move increased the notion of Target as a partner in social justice for some people, others used the stance as a reason to boycott Target.

Before taking positions that may disaffect some customers, companies should consider what-if scenarios to lessen the unanticipated fallout to their brand and bottom line. Social media can escalate polarizing issues in a matter of hours. So, businesses should pay attention to feedback, but not react too quickly as sentiments on social media can quickly shift.

Implications for Students

Students can learn about different types of polarization by studying issues and case examples that affect businesses today such as  climate change, trade agreements, political leaning of press and media,healthcare reform, and same-sex marriage. Studying how and why these issues can be divisive and how they impact businesses differently will help students see that the outcomes of polarization are hard to predict up front. A good case example is found in this article about Old Navy’s recent advertisement featuring an interracial couple: http://www.cbsnews.com/news/lovewins-how-twitter-rescued-old-navys-interracial-ad/

Helping students make the connection between common behaviors that can create polarization on a personal level (e.g., viewing opposing opinions as threats) and a system-wide level, can be beneficial. Asking them to identify social media posts made by themselves or others that are or could be polarizing is a good way to emphasize the power of one person to be either a builder of bridges or walls.  Students should be reminded that regardless of their views on a particular issue, they can still treat those with differing views with respect and dignity. They can foster understanding by communicating rationally and debating or protesting the issues without violence.

This month’s Action Brief explores massive growth in emerging markets that provides businesses with opportunities, while challenging the United States’ superpower status. The continued growth may change how U.S. companies need to operate in those markets. This growth is also leading to increasing income inequality in some emerging economies and provides a potential role for businesses to make contributions that may narrow these gaps. 

Business Implications

Doing business in countries with emerging and, at times, untapped markets can be financially rewarding, enabling businesses to increase production and sales while potentially decreasing overall manufacturing costs. It also allows them to expand their global brand recognition. Emerging markets are typically identified as countries whose economies are growing, have some economic and governmental stability, have an expanding infrastructure and are becoming increasingly global. Examples of these countries include China, Brazil, India, Argentina, and South Africa. 

On the other hand, it poses risks due to cultural differences, political unrest, and fewer sanctions governing business-related transactions. Bribery is at the top of the list of executives’ concerns, followed by violations of sanctions, money laundering, organized crime, potential terrorist financing, and personal security. Property ownership rights vary from one country to the next, making it imperative for businesses to thoroughly understand their protection and support of intellectual-property rights as well as any facilities and equipment in the country.

Over the past 15 years, Brazil’s economy has changed from one that wasn’t noteworthy to the world’s seventh biggest economy. It offers ample business opportunities, especially in conjunction with tourism and the upcoming 2016 Summer Olympics. But, its growing economy and strengthened military presence are accompanied by political unrest, interest rates at a nine-year high, and an emerging trend of wealthy Brazilians’ buying luxury goods abroad instead of at home. The country has the highest per capita income of any of the BRICS countries, Brazil, Russia, India, China and South Africa. Businesses are facing rapidly changing political and economic conditions that will potentially impact their Brazilian business operations. This underscores the need for a deep knowledge of the local business climate.

While being classified as a country with an emerging market can be a sign of financial health, many of the countries with this designation find themselves in environments with growing income disparities. Countries such as China, India, and the Russian Federation, have seen disparities widen with respect to income, education, and career progression. Reducing income inequality can help promote economic growth and is a key factor to sustaining a healthy economy. Access to education, training, healthcare, and well-designed redistributive policies can help countries narrow income gaps.

Exercising corporate social responsibility in emerging markets is one way that businesses can potentially help countries with emerging economies grow in a way that brings the majority of citizens along to greater prosperity. As the prosperity grows, so do business markets and financial returns on investments . For instance, the Coca-Cola company developed partnerships with healthcare management organizations, pharmaceutical companies, and medical treatment providers in Africa to help respond to the HIV/AIDS crisis there. Such initiatives help make the world a better place to live. They also build brand recognition, generally leading to greater use of those companies’ products and services as the economies grow.

Classroom Implications

Teachers can have students take an example of a business and evaluate how it would grow or prosper given varying conditions in different countries. The exercise should involve evaluating risks and economic factors, comparing size of workforces, developing potential production plans, and trouble-shooting around quality issues. 

Since the world is watching Brazil right now, have students monitor the current and emerging conditions there, especially with the 2016 Summer Olympics on the horizon. This would provide an interesting case study on emerging markets for students. Students can also discuss the mosquito-borne Zika virus’ impact on travel to the games due to attendee and participant concerns about the risk of the global spread of disease. Help students understand that the Zika concerns may limit Brazil’s economic benefits of the games.

Students should become familiar with income inequalities both in the U.S. and in other countries. It is important for them to learn about other indicators that stack-up to differentiate the “haves” from the “have-nots.” Looking at examples of corporate social responsibility both at home and abroad will get students thinking about their role in addressing inequality across the globe.

Monopoly is a game sometimes used to teach students about inequality and social stratification in society. Use the following link to access a description of how the game is played and a set of revised Monopoly rules for this purpose: https://www.socialpsychology.org/action/pdf/2011monopoly-rules.pdf