copyright © 2008 mcgraw-hill ryerson ltd. 1 chapter fourteen the environment and business...
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Chapter 14 Copyright © 2008 McGraw-Hill Ryerson Ltd. 1
ChapterFourteen
The Environment and Business Responsibilities
Prepared by Mark Schwartz, York University
Canadian Business and Society: Canadian Business and Society: Ethics & ResponsibilitiesEthics & Responsibilities
Chapter 14 Copyright © 2008 McGraw-Hill Ryerson Ltd. 2
Chapter Outline
Defining Environmental Ethic and Sustainable Development Environmental Concerns in Business and Society Government’s Influence Environmental NGO Influence Market-Driven Environmentalism Managing Responses to Environmental Concerns The “Greening” of Business Functions Measuring and Reporting on Environmental Sustainability Dissenting Views on the Environment The Environment: Corporate Opportunities and Threats
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Defining Environmental Ethic and Sustainable Development Environmental ethic: the set of values or
principles that govern a corporation’s practices relating to the environment.
Sustainable development: development ensuring that the use of resources and the impact on the environment today does not damage prospects for the use of resources or the environment by future generations.
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Sustainable Development
For business – sustainable development means – adopting business strategies and activities that will meet the needs of an enterprise and its stakeholders today, while protecting, sustaining and enhancing the human and natural resources that will be needed in the future.
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Theoretical Approach – Eco-Feminism
Expanding the notion of the self.
More ‘caring’ approach to the environment
Instead of polluting the environment, it becomes I am polluting myself.
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The Natural Environment
Concern for the environment has been intensified by environmental disasters but also the deterioration of the natural environment.
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Business, Its Stakeholders and The Natural Environment The concern for the environment is a growing but not
entirely recent phenomenon.
Drucker (1972) – Everybody today is ‘for the environment’. Laws and
agencies designed to protect it multiply at all levels of government. Big corporations take full-colour ads to explain how they’re cleaning up, or at least trying to. Even you as a private citizen probably make some conscientious effort to curb pollution.
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Strategies for The Environment and Sustainable Development The Environmental Ethic
Environmental ethic is evolving from a focus on ecology – essentially a set of values or principles about practices relating to the environment.
Society and many businesspersons now have some sense of obligation or moral responsibility to the environment which is expressed in different ways.
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Values and principles of the environmental ethic (from a business perspective include): New business development needs to take account of the
environment from the design stage through to ultimate disposal.
Environmental management should be the responsibility of staff at all levels as an integral part of their job
Environmental performance should be built into the reward structure of the organization
Product and process responsibility should be from cradle to the grave
Agreed upon values and beliefs should be used as the guiding principles for conducting all business.
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Environmental Concerns in Business and Society Acid rain Air pollution Ecosystems Energy production
and consumption Nature and wildlife
Ozone Pollution Waste management Water quality Climate change/
global warming
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Five R’s
Reduce Reuse Recycle (and for business) Refuse – to use products
or engage in activities harmful to the ecology
Reject – the products that do not respect the environment
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Government’s Influence
Government departments and agencies: Environment Canada Canadian Council of Ministers of Environment National Roundtable of the Environment and the Economy Canadian Environmental Assessment Act Agency
Regulation: Canadian Environmental Protection Act, Canadian
Environmental Assessment Act, Kyoto Protocol
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Environment and Sustainable Development Strategies Fixing Problems Management awareness of the potential effect that
the enterprise’s activities have on the environment and a decision to do something about it.
Resolve environmental problems and implement ‘damage control’ strategies as problems occur.
Problems include – non-compliance with regulations etc.
Would seem to be the most common strategy
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Compliance with Laws and Regulations
More consistent in countries with considerable environmental legislation.
Some companies ignore legislation Establishment of programs and organizational structures to
implement and monitor their compliance with the legislation and regulations.
Progressive companies establish their own environmental policies which may go beyond the requirements imposed by governments.
Compliance done through newsletters, audits, internal communications (policies and manuals).
Cost of not complying may be severe – result in civil liability and criminal prosecution.
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Environmental NGO Influence Environmental non-governmental organizations
(ENGOs): groups that hold shared values or attitudes about the challenges confronting the natural environment and advocate for changes to improve the condition of the environment.
Such groups (e.g., Greenpeace) influence corporations through protests, blockades, boycotts, and annual shareholder meetings.
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Market-Driven Environmentalism Emissions trading: A system whereby
corporations set targets for greenhouse gas reduction; if one corporation cannot meet the target, it purchases credits from those that have met their targets.
Offsets: Credits purchased from other corporations or organizations to mitigate greenhouse gases released into the environment.
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Managing Responses to Environmental Concerns Token response (e.g., ‘greenwashing’) Compliance with laws and regulations Comprehensive environmental management
(gaining a competitive advantage) Sustainable development
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The “Greening” of Business Functions Financial management Marketing (e.g., green marketing) Human resources Production
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The ‘Greening’ of the Business Function
Finance GAAP – balance sheets must state the estimated liability for
restoring capital asses to environmentally sound conditions. future cost of storing hazardous and toxic materials. Problem – estimating pollution costs/requirements of strict
government legislation. Eco-insurance now available – however, high costs,
availability of coverage (i.e. those who need it cannot get it, vice-versa).
availability of capital. screening of investments.
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Organizational Structural Arrangements Key to have top management commitment so
that there are practical principles to guide the firm’s environmental efforts, to integrate environmental affairs with operations, and to encourage environmental professionals to meet mounting environmental requirements.
Hiring of managers responsible for environmental issues – combination of management and technical expertise.
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Corporate Environmental Accountability The environment is a popular and desired topic in
annual reports, giving enterprises and industry associations opportunities to advertise the actions they are taking to protect the environment.
Creation of codes. Create awareness and to signal that the enterprise is active in this area.
Use of environmental audits – any systematic documented, periodic and objective review by a firm (or other regulated entity) of facility operations and practices related to meeting appropriate requirements.
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Corporate Environmental Accountability Government legislation
– environmental assessments.
Awards programs – identify, encourage and promote technology, design and management initiatives which have helped to protect and/or improve the environment.
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The ‘Greening’ of the Business Function
Finance GAAP – balance sheets must state the estimated liability for
restoring capital asses to environmentally sound conditions. future cost of storing hazardous and toxic materials. Problem – estimating pollution costs/requirements of strict
government legislation. Eco-insurance now available – however, high costs, availability
of coverage (i.e. those who need it cannot get it, vice-versa). availability of capital. screening of investments.
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Marketing
Development of marketing slogan ‘Go Organic’ – expresses society’s concern.
Green products on the market
Much debate about the usefulness of green products
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Measuring and Reporting on Environmental Sustainability Type and amount of materials used Source of energy and efficiency of use Source and quality of water Impact on biodiversity Reduction of emissions, effluents, and waste Product design that minimizes impact Compliance with environmental laws Use of efficient transportation
Source: GRI, 2006
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Comprehensive Environmental Management Management seeks to gain a competitive advantage by
taking an active stance on environmental issues. The focus on processes and systems-simple compliance with legislation and regulation is not sufficient. In these companies, everyone becomes involved in environmental management. Environmental issues are integrated into all aspects of corporate management. Environmental objectives are set for key operating activities, they are not left to just the ‘environmental services department’.
Internal and external corporate reporting.
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Measuring and Reporting on Environmental Sustainability Coalition for Environmentally Responsible
Economies (CERES) International Organization for Standardization ISO
14000 International Institute for Sustainable Development
(IISD) Canadian Sustainability Indicators Network (CSIN) Environmental and Sustainable Development
Indicators Initiative (ESDI)
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Dissenting Views on the Environment According to some business journalists:
Concept difficult to define and understand Means stopping or constraining economic
development Implies capitalism is unsustainable Lacks understanding of markets Executives are being misled
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The Environment: Corporate Opportunities Reputations likely enhanced Customers attracted Investors attracted Costs reduced through recycling/conservation More competent staff attracted Better integration with local community New technologies or expertise developed More efficient ways of producing products found
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The Environment: Corporate Threats Corporate image may deteriorate Revenues may suffer if customers are lost Investors may decide not to invest Material and production costs may increase Financial penalties increasing Insurance premiums can increase Potential alienation from local community Government may enact stricter legislation
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Framework for Managing Sustainable Development Stakeholder analysis Policies and Objectives Operational Plans Corporate Culture Measures and Standards of Performance Management Reports Monitoring