This memorandum informs the U.S. Bankruptcy Court on whether FTX has violated vital Corporate Social Responsibility (CSR) principles regarding Environmental Forces and Sustainability. CSR is a concept that focuses on businesses operating responsibly and ethically while considering the effect of their actions on society and the environment. This memo will analyze the facts alleged in the Guardian article, judging if FTX has broken these principles.
In 2022, Sam Bankman-Fried’s cryptocurrency exchange FTX collapsed, and the value of crypto assets like Maps, Oxygen, Serum, and Bonfida dropped by more than half. Bankman-Fried had been suspected of leveraging his market influence to inflate the price of ‘Samcoins’ alongside FTX’s sister company Alameda Research (Lawson, 2023). He is said to have persuaded developers to launch their tokens on his exchange, and Alameda would then purchase them to increase their rarity and value. At its peak, Maps tokens had a market valuation of $118m. However, Maps and Oxygen tokens have since vastly declined from that all-time high. The collapse of FTX caused a significant decrease in the value of its assets – including FTT, Maps, Oxygen, Serum, and other cryptos that were hard to convert into fiat currency (Lawson, 2023).
CSR Principles
Corporate social responsibility, or CSR, is a concept in management that encourages businesses to incorporate social and environmental considerations into their everyday operations and interactions with stakeholders (Zhu et al., 2022). Some important CSR tenets include the following while making business decisions. The Triple Bottom Line approach highlights the significance of taking social, environmental, and economic considerations. In order to achieve long-term sustainability, businesses should strike a balance between these three variables. Second, CSR mandates that businesses operate ethically and ethically (Zhu et al., 2022). This entails following ethical business standards, refraining from unethical behavior, and upholding the law. In addition, businesses must uphold human rights in their operations and supply chain (Zhu et al., 2022).
The advantages of adopting CSR principles are countless – from improved public image and brand identity, increased loyalty from customers and trustworthiness, heightened recruitment and retention of personnel, to eventual financial success. Additionally, companies have the opportunity to positively affect the world by engaging in sustainable progress and dealing with social and environmental issues. CSR is a crucial phase of modern corporate management that organizations must consider when making decisions. By taking on this responsibility, businesses can benefit themselves and society by embracing socially responsible ideas and measures.
Environmental Forces and Sustainability
Environmental concerns and sustainability have gained significance in recent years as the repercussions of climate change have become increasingly apparent. While making decisions, businesses must now take the environment into account. They must also consider their potential for sustainability in terms of waste management, energy efficiency, renewable energy sources, water consumption and conservation, and air quality. Businesses must try to reduce their carbon footprint and guarantee that their operations are environmentally friendly. In addition to actively lowering their environmental impact, sustainable efforts can be achieved by selecting eco-friendly resources, goods, and technologies. Businesses may significantly impact sustainability and help create a more sustainable future by taking proactive measures to engage with the environment.
Companies are responsible to their shareholders and society and ought to act ethically and ecologically responsibly (Fontaine, 2013). Regarding environmental force and sustainability, CSR principles demand businesses employ sustainable practices to limit environmental harm (Fontaine, 2013). This includes decreasing carbon emissions, exploiting renewable energy sources, and lessening waste.
To decrease carbon emissions, businesses can use energy-saving techs, advocate for sustainable travel and adopt low-carbon energy sources such as solar power, wind power, or hydropower (Fontaine, 2013). Renewable energy is also a crucial part of sustainable practices that businesses should adopt (Fontaine, 2013). By investing in renewable energy sources, businesses can reduce their carbon footprint while helping clean up the environment.
Minimizing waste is another CSR principle linked with environmental forces and sustainability that companies should implement (Moravcikova et al., 2017). This can be achieved by launching recycling programs, decreasing packing waste, and employing less non-renewable resources; this helps preserve resources, reduce pollution, and protect the environment (Moravcikova et al., 2017).
Environmental Forces evaluate natural resources and ecosystems businesses need to function. Companies must be sustainable in their actions and practices to protect the environment. Since FTX is a cryptocurrency exchange, it does not directly affect its surroundings; however, cryptocurrencies have been criticized for their high energy consumption rate and carbon footprint. The Guardian article states that FTX shut down in 2022, with most of its assets being cryptocurrencies such as Maps, Oxygen, Serum, and Bonfida, which are hard to convert into cash and highly volatile. This brings up issues about the sustainability of this industry’s environmental influence. For businesses to adhere to CSR standards, they must operate sustainably without causing harm to the environment; however, cryptocurrencies require an immense amount of energy for mining, thus producing adverse outcomes for nature and financial losses that negatively affect society at large.
Sustainability looks at the long-term operations of companies that would affect future generations. Companies must think carefully about how their decisions might impact others down the line; FTX’s collapse raises questions about cryptocurrency’s impact on the economy and how sustainable it is over time. This leads me to believe that FTX has broken fundamental CSR principles regarding Environmental Forces and Sustainability due to its significant reliance on challenging-to-convert cryptocurrencies with a high energy consumption rate linked with eventual economic losses within society.
Additionally, the cryptocurrency industry has been criticized for its high energy consumption and environmental effect. Mining cryptocurrencies consumes a significant amount of energy, which is detrimental (Goodkind et al., 2020). Companies must abide by Corporate Social Responsibility (CSR) principles, which require them to act sustainably and not harm the environment. FTX’s reliance on cryptocurrencies, which are difficult to turn into cash and have high energy consumption, suggests that they have not considered their actions’ impact on the environment. Additionally, the volatility of these currencies leads to potential financial losses that could affect society negatively.
Furthermore, it has been alleged that FTX’s cryptocurrency exchange platform enables illegal activities, like money laundering and fraud, for which they have received criticism for not taking enough action to prevent them (Lawson, 2023) . Also, FTX has been accused of engaging in market manipulation and insider trading on its trading platform, as well as failing to be transparent and accountable. Additionally, customers have complained of FTX being unresponsive and slow to address their grievances. Finally, FTX is criticized for not engaging with local communities or NGOs in the locations where they operate.
Additionally, the lack of transparency and accountability surrounding FTX has caused much concern. Without disclosure of its ownership structure, executive compensation, and trading volumes, it is difficult for stakeholders to gauge their financial health and ethical practices, leading to a collapse of trust and damage to their reputation. Furthermore, FTX has reportedly failed to consider local people’s and organizations’ needs in the places it operates, which could worsen social and political tensions. This situation raises issues about the future of cryptocurrency; At the same time, it is hailed as a revolutionary technology with the potential to disrupt existing finance systems, its unregulated nature and associated speculation invite illicit activity that puts its sustainability into question.
Following CSR principles mean considering the repercussions of one’s actions for future generations and being sustainable in the long run. The downfall of FTX, a company heavily reliant on cryptocurrencies, raises questions about whether or not this industry is sustainable and its influence on the economy, society, and the environment. Thus, I believe FTX disregarded some critical Environmental Forces and Sustainability CSR principles. The collapse of FTX raises doubts about the sustainability of this industry as a whole and its implications for our economy, society, and environment. CSR is about creating value for everyone involved, including the company, its employees, customers, local communities, and the environment. By embracing these principles, companies can build a positive image, draw in and keep top talent, and ultimately help create a more equitable and sustainable world.
References
Fontaine, M. (2013). Corporate social responsibility and sustainability: the new bottom line? International Journal of Business and Social Science, 4(4).
Goodkind, A. L., Jones, B. A., & Berrens, R. P. (2020). Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining. Energy Research & Social Science, 59, 101281. https://doi.org/10.1016/j.erss.2019.101281
Lawson, A. (2023, March 26). Caught in the FTX storm: how a crypto high-flyer fell to Earth. The Guardian; The Guardian. https://www.theguardian.com/technology/2023/mar/26/caught-in-the-ftx-storm-how-a-crypto-high-flyer-fell-to-earth
Moravcikova, D., Krizanova, A., Kliestikova, J., & Rypakova, M. (2017). Green Marketing as the Source of the Competitive Advantage of the Business. Sustainability, 9(12), 2218. https://doi.org/10.3390/su9122218
Slaper, T. F., & Hall, T. J. (2011). The triple bottom line: What is it, and how does it work? Indiana business review, 86(1), 4-8.
Zhu, C., Du, J., Shahzad, F., & Wattoo, M. U. (2022). Environment Sustainability is a corporate social responsibility: measuring the nexus between sustainable supply chain management, big data analytics capabilities, and organizational performance. Sustainability, 14(6), 3379. https://doi.org/10.3390/su14063379
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