Question

Q3. What is social exchange theory? How companies and employees can balance the exchange between them?                          

Q4. What is ethical sourcing? How the unethical sourcing can bring serious concerns for the famous companies like ‘Nespresso’?   (Answer with reference to ethical sourcing article).                                                                                    

Answer 1

Social exchange theory is a model based on psychological and social aspects of human behavior which explains the processes how people make relationships and maintain them.People evaluate their relationships by analyzing ton the basis of cost and reward, where cost is the negative consequence and reward is the positive one. Generally people make decisions about their relationships in their lives by comparing alternatives. The choices are based on rational decisions.

The ways in which employees or organisation can balance social exchange is by-
1. Recognizing the efforts of the employees who really work hard.
2. Paying the employees well and as per their performance
3. Having great working environment which is healthy for all and everyone is respected and treated well
4.Employees working in coordination where everyone is putting equal efforts, Employees who are lazy or delay work are a burden and thus should be removed from the company
5. Following the social exchange theory with customers as well helps in having better relationships between management and employees.

Ethical sourcing is the process of confirming that the products being sourced are obtained with responsibility and sustainability . The workers involved in making or production of goods are safe and they are treated fairly. Also the environmental concerns and social impacts are carefully considered during the sourcing process. It also means the procurement process respects international standards which are against criminal conduct and human rights abuses. Also if there are any issues then they are responded immediately.

Unethical sourcing is a serious concern. It not only damages the reputation of the firm but also leads to huge penalty from the government. Public starts hating the company and then huge amount of costs are incurred in the long run to cover up the tarnished image. Also there are losses and can lead to wiping out the company from the market. Failing to follow to ethical practices results into immoral and illegal practices such as bribery, favoritism, illegal sourcing and the idea of unsatisfactory procurement ethics leads to damaging for public relations.
Nespresso the part of Nestle is one of the most hated companies in the world as it follows child labor, unethical promotion, manipulating the uneducated or illiterate mothers, pollution of the environment, price fixing and mislabeling of goods and wastage of resources. They are accused of using capsules which are non-biodegradable and creates a lot of wastage in the environment.