Ecology, Sustainable

Chapter Development, and

10 Global Business

Business
and
Society

POST, LAWRENCE, WEBER

 Ecological challenges
• The global commons
• Sustainable development
• Protecting the environment will require economic development.
• Economic development must be accomplished sustainably.

• Threats to the Earth’s ecosystem

• Water resources
• Fossil fuels
• Arable land

• Forces of change
• The population explosion
• World poverty
• Industrialization

• The limits to growth

• Limits to growth hypothesis and its critics
 Global environmental issues

Ozone depletion

• Chloro-fluorocarbons (CFCs) can react with and destroy ozone layer.

• In 1985, scientists discovered a “hole” in the ozone layer over Antarctica.

• In 1987, a group of nations negotiated the Montreal Protocol, agreeing

to cut CFC production and use. This treaty has been strengthened
several times.

• By 2000, most businesses in the developed world had completed the

transition to CFC substitutes.

• If the regulations continue to be effective, the protective layer will

gradually recover.
 Global environmental issues (continued)
Global warming

• Greenhouse effect occurs when carbon dioxide in the atmosphere

prevents heat from escaping into space.

• The amount of greenhouse gases has increased by as much as 25 percent

since the Industrial Revolution due to the burning of fossil fuels.

• Caused by deforestation, beef production, population growth, and CFCs.

• If global warming continues, the world will experience heat waves, air
pollution crises, and damaging wildfires in the 21st century.

• Kyoto Protocol was ratified as a result of the Earth Summit in 1992

to reduce greenhouse gas emissions.
 Global environmental issues (continued)
Biodiversity

• Refers to the number and variety of species and the range of their
genetic makeup.

• It is estimated that species extinction is now occurring at 100 to 1,000 times

the normal, background rate, due to pollution and habitat destruction.

• The destruction of rain forests is a major reason for the decline.

• Only about half of the original tropical rain forests still stand.

•The pharmaceutical industry develops new medicines each year based on

newly discovered plants from the tropics.
 Causes of global warming
Burning of fossil fuels
This releases carbon dioxide into the atmosphere and is the leading
contributor of global warming.

Deforestation
Trees and plants absorb carbon dioxide and remove it from the
atmosphere. Thus, cutting down trees contributes to global warming.

Beef production
Methane is produced as a by-product of the digestion of some animals.

Population growth
Humans produce carbon dioxide every time they breathe. More people
leads to more greenhouse gases.

CFCs
These gases destroy the ozone and are considered greenhouse gases as
well.
 Response of the international
business community

World Business Council for Sustainable Development

• Called for businesses to manufacture and distribute products more
efficiently, consider their lifelong impact, and recycle components.

Life-cycle analysis
• Involves collecting information on the lifelong environmental impact of
a product, from extraction of raw material to ultimate disposal.

Industrial ecology
• Refers to designing factories and distribution systems as if they were
self-contained ecosystems.

Design for disassembly

• Products are designed so that at the end of their useful life they can be
disassembled and recycled.
 Exhibit 10-D

International codes of environmental conduct

• International Chamber of Commerce (ICC)

• Global Environmental Management Initiative (GEMI)

• Keidanren

• Chemical Manufacturers Association (CMA)

• CERES Principles

• International Organization for Standardization (ISO)

 ISO 14000 and 14001
• ISO 14001
• ISO 14000 • Auditing standards
• Similar to quality
standards (ISO 9000)
• Environmental
management
practices and policies
• Family of related
standards
SA 8000 Standards
• Purpose and scope
– This standard specifies requirements for
social accountability to enable a company
to:
• development, maintain, and enforce policies
and procedures in order to manage those
issues which it can control or influence
• demonstrate to interested parties that policies,
procedures, and practices are in conformity with
the requirements of this standard.
 CERES Principles
• Protection of the biosphere
• Sustainable use of natural
resources
• Reduction and disposal of wastes
• Energy conservation
• Risk reduction
• Safe products and services
• Environmental restoration
• Informing the public
• Management and commitment
• Audits and reports
 Responsible Care:
safety, health, environmental care
around chemicals
• Public input on operations
• Safe chemicals
• Health, safety, environment priorities
• Transparency
• Safe transport of chemicals
• Safe and ecologically sensitive
facilities
• Support education and research
• Responsible laws and regulations
 Figure 11-2a

Advantages and disadvantages of alternative

policy approaches to reducing pollution
Policy Approach Advantages Disadvantages
Environmental • Enforceable in the courts • Across-the-board standards not
Standards • Compliance mandatory equally relevant to all businesses
• Requires large regulatory apparatus
• Older, less efficient plants may be
forced to close
Market-based • Gives businesses more • Gives businesses a license to pollute
mechanisms flexibility • Allowances are hard to set
Tradable • Achieves goals at lower • May cause regional imbalances in
allowances overall cost pollution levels
• Saves jobs by allowing • Enforcement is difficult
some less efficient plants
to stay open
• Permits the government
and private organizations
to buy allowances to take
them off the market
 Figure 11-2b

Advantages and disadvantages of alternative

policy approaches to reducing pollution
Policy Approach Advantages Disadvantages
Market-based • Taxes bad behavior • Fees are hard to set
mechanisms (pollution) rather than • Taxes may be too low to curb
Emissions fees good behavior (profits) pollution
and taxes
Government • Rewards • Incentives may not be strong
incentives environmentally enough to curb pollution
responsible behavior
• Encourages companies to
exceed minimum
standards
Information • Government spends little • Does not motivate all companies
disclosure on enforcement
• Companies able to
reduce pollution in the
most effective way
 Figure 11-3
The cost of pollution control
in the United States
 Figure 11-4
Costs and benefits of
environmental regulation
Costs
• $160 billion a year spent by
business and individuals in the
United States by 2000.
• Job loss in some particularly
polluting industries.
• improved health; natural beauty
Competitiveness of some
capital-intensive, “dirty”
industries impaired.
Benefits
• Emissions of nearly all
pollutants have dropped since
1970.
• Air and water quality improved,
some toxic waste sites cleaned;
preserved or enhanced.
• Growth of other industries,
such as environmental products
and services, tourism, and
fishing.
 Stages of Environmental
Awareness in Corporate Citizens
• Stage One: Focus on
Prevention based on a
“command and control” setting
• Stage Two: Product
Stewardship, minimize pollution
and all other sources of
environmental impacts
• Stage Three: “Clean
technology” ; develop
technology that is built to last
using fewer resources
 Figure 11-5a
A five-stage model of
corporate environmental responsibility
Developmental General mindset Resource Support and
stage of corporate commitment involvement of
managers top management
Beginner Environmental Minimal No involvement
management is resource
unnecessary commitment
Firefighter Environmental Budgets for Piecemeal
issues should be problems as involvement
addressed only as they occur
necessary
Concerned Environmental Consistent, Commitment in
citizen management is a yet minimal theory
worthwhile function budget
Pragmatist Environmental Generally Aware and
management is an sufficient moderately
important business funding involved
function
Proactivist Environmental Open-ended Actively involved
management is funding
priority item

Source: Adapted from Christopher B. Hunt and ellen R. Auster, “Proactive Environmental Management:
Avoiding the Toxic Trap,” Sloan Management Review Winter 1990, pp. 7-18.
 Elements of effective
environmental management
• Top managers with environmental responsibilities

• Dialogue with stakeholders

• Line manager involvement

• Codes of environmental conduct

• Cross-functional teams

• Rewards and incentives

• Environmental audits

• Interorganizational alliances

• Environmental partnerships
 Environmental management as a
competitive advantage

• Cost savings

• Product differentiation

• Technological innovation

• Strategic planning
 Environmental Management
Systems

• Waste minimization • Prevent vs control; materials

substitution, process modification,
and prevention recycle, reuse
• Demand-side • Understand customer needs
management
• Design for • Produce for dissasembly,
Environment upgradability, recyclability
• Care in design, manufacturing,
• Product Stewardship
distribution, use and disposal
• Full-cost Accounting • Identify, quantify, and allocate
direct and indirect environmental
costs of operation