The International Organization for Standardization (ISO) provides the regulations on how organizations should engage in social responsibility activities which help take care of the society living around the businesses (Epstein & Buhovac, 2014). The main goals of the ISO regulations are creating an environment for sustainable development and enable organizations to take care of the environment, the community, employees, and other stakeholders directly or indirectly related to the firms. For the purpose of this paper, the term stakeholders is taken to mean individuals who are interested in a company like customers, shareholders, the government, suppliers, creditors, amongst others (Moratis & Tatang Widjaja, 2014). The ISO was established in 1947 in Geneva, Switzerland, with an aim of helping countries in the world promote quality and standards in the workplace. Currently, there are more than 160 member countries. Membership is voluntary. The main proponents of the ISO are standardization and protection the interest of consumers, by advocating safe and quality products. The regulations are developed by a committee of experts with expertise in a specific subject. Saudi Arabia is one of the countries in the world whose organizations have incorporated the regulations of the ISO. It has improved the quality of products as well as measures observed by all industries in protecting the environment. The impact of ISO14001 and AA1000 ISO regulations affect the investment decisions of external parties based on their adherence to the ISO regulations in Saudi Arabia.
Impact of ISO Regulations on Stakeholders
ISO regulations help protect customers from exploitation by ensuring that prices they pay for services and products are fair, and that commodities are of the right quality and quantity. Some of the customers' rights include accessibility to quality products and payment of fair prices, free from exploitation. The regulating bodies like the ISO help protect and uphold these rights by stamping organizations which meet the standards. This leads organizations to release products of high quality and engage the stakeholders when making both minor and major decisions (Lu & Abeysekera, 2017). Organizations consider the welfare and interests of the stakeholders when designing products as the consumers need commodities that add value to their lives and those that do not trigger degradation of the environment or cause negative effects on their health. ISO regulations have a direct impact on the welfare of stakeholders as they prevent the exploitation by organizations by releasing sub-standard products to the consumers
The modern customer demands to understand the process products go through in the manufacturing companies before they can reach them (Sealy et al., 2010). This means that organizations need to remain accountable for their actions and answer questions when the customers demand answers. Encouraging businesses to embrace sustainable reporting means that they maintain openness to their operations, and customers will gain confidence in the company as it understands the process undertaken when manufacturing any product (Massa et al., 2015). The regulating bodies exist to enhance the protection of customers and avoid the exploitation that organizations might expose their clients. ISO understands that compromising on the quality or quantity of products and services released to the public is a violation of the rights of customers (Lu & Abeysekera, 2017). Observance of the ISO regulations by organizations means that they prioritize the needs of their stakeholders. The reputation of these companies in the past has been negative, and been rampant in providing substandard products, while overcharging the customers. Gilbert, Rasche, & Waddock, (2011) argues that in a global environment where countries exchange goods and services, there must be an observance of the quality of commodities, which improves the accountability adherence.
ISO 14001 and AA1000 Regulations Protection of Stakeholders
The ISO 14001 and AA1000 Regulations protect the interests of the stakeholders and focus on the management of the environment and the need to be accountable for all business decisions respectively. The ISO 14001 states that an organization is responsible for its actions on the environment. Every organization must protect the surroundings and avoid engaging in activities that produce high levels of harmful gas, as it erodes the ozone layer. The regulation provides a framework that organizations can adopt, so that they can have a system to manage the environment (Sealy et al., 2010). On the other hand, the AA1000 regulation states that organizations should remain accountable for their actions by engaging in sustainable activities (Massa et al., 2015). For instance, the stakeholder engagement standard in ISO AA1000 ensures that an organization designs and implements a communication channel that keeps the stakeholders engaged with the happenings of a firm. Organizations determine the corporate social acts to engage in the community by determining whether the customers or the environment are comfortable (Moratis & Tatang Widjaja, 2014). Countries improve the quality of their products since they know that their external customers expect high valued commodities (Abbott & Snidal, 2010).
Regulations Impact on Investors' Decisions to Invest in Organizations
The ISO 14001 and AA1000 regulations have an impact on how investors see the long-term viability of an organization in which they plan to invest since they check the ability of a firm to follow the rules and protect the interests of stakeholders who use rely on information generated by the entity (Epstein & Buhovac, 2014). An organization that embraces the regulations sends a positive message to the investors on the probability of considering the interests of all parties interested in the financial statements of the firm and making decisions that benefit all stakeholders. An investor becomes confident when an organization follows the ISO regulations since it shows its commitment to work within the specific industry a firm operates within and the integrity of the management team to align its activities with the international r...
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