Sustainable Business Management Ch 1&2 PDF

SUSTAINABLE BUSINESS MANAGEMENT Introduction: Course description & Methodology Syllabus:  Chapter 01 –Sustainable Business Management  Business, Environmental and Human Development  Rationale and Benefits of Sustainable Business  Global Business Models  Chapter 02 -Sustainable Business Concepts  Natural Capital and Publics Goods  Environmental Externalities  Sustainable Business Trends, Trade, Industry, Jobs, Consumption  Chapter 03 -Planning, Policy and Sustainable Governance  Sustainable Business Strategies  Key Sectors o Policy Assessment  Stakeholders Engagement  Policy and Regulatory Tools  Chapter 04 - International Policies  International Policy Developments  Global Development Framework Sustainable Business Management  Business, Environmental and Human Development What Are the Basics of Business Development? Definition: The ideas, initiatives, and activities that help make a business better. This includes increasing revenues, growth in terms of business expansion, increasing profitability by building strategic partnerships, and making strategic business decisions. “Business Development Executive,” “Manager of Business Development,” and “VP, Business Development” are all impressive job titles often heard in business organizations. Sales, strategic initiatives, business partnerships, market development, business expansion, and marketing—all of these fields are involved in business development but are often mixed up and mistakenly viewed as the sole function of business development. Sustainable Business Management  Business, Environmental and Human Development Understanding the Basics of Business Development Business development activities extend across different departments, including sales, marketing, project management, product management, and vendor management. Networking, negotiations, partnerships, and cost-savings efforts are also involved. All of these different departments and activities are driven by and aligned with the business development goals. For instance, a business has a product or service which is successful in one region, such as the United States. The business development team assesses further expansion potential. After all due diligence, research, and studies, it finds that the product or service can be expanded to a new region, such as Brazil. Sustainable Business Management  Business, Environmental and Human Development What Should a Business Developer Know? Since business development involves high-level decision making, the business developer should remain informed about the following:  The current state of the business in terms of SWOT analysis (strengths, weaknesses, opportunities, and threats).  The current state of the overall industry and growth projections.  Competitor developments.  Primary sources of sales/revenues of current business and dependencies.  The customer profile.  New and unexplored market opportunities.  New domains/products/sectors eligible for business expansion, which may complement the existing business.  The long-term view, especially with regards to the initiatives being proposed.  The cost areas and the possible options for cost-savings. Sustainable Business Management  Business, Environmental and Human Development In essence, business development involves high-level decision-making based on a realistic assessment of all potential changes and their impact. Through new ideas and initiatives, it aims to improve the overall business prospects, which drive the functioning of the different business units. It is not sales; it is not marketing; it is not partnering. Instead, it is the eco-system encompassing the entire business and its various divisions, driving overall growth. Sustainable Business Management  Business, Environmental and Human Development What is Environmental Development 1. Simply it can be put forward as an economic and social development that respects the environment. 2. An economic and social development that respects the environment. The objective of sustainable development is to define viable projects and reconcile the economic, social, and environmental aspects of human activities; It is about making progress in these areas without having to destroy the environment. Sustainable Business Management  Business, Environmental and Human Development 3. Tangible positive changes, advancements and transformations in the overall conditions of the ecosystem especially regarding lesser land, water and air pollution as well as lesser destruction of vegetation and risk to wildlife. Environmental development also involves all positive changes brought about in a particular geographical area through people-centered political, economic, social, cultural and even diplomatic efforts for a better place for all live. Sustainable Business Management  Business, Environmental and Human Development 4.An economic and social development that respects the environment. The objective of sustainable development is to define viable projects and reconcile the economic, social, and environmental aspects of human activities; It is about making progress in these areas without having to destroy the environment. Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development 2015 marks 25 years since the first Human Development Report introduced a new approach for advancing human flourishing. And while the expression “human development” is widely used, it is understood in different ways around the world. So, on the occasion of the 25th anniversary year of human development reporting, we’d like to highlight how the Human Development Report Office (HDRO) presents human development Sustainable Business Management  Business, Environmental and Human Development The human development concept was developed by economist Mahbub ul Haq at the World Bank in the 1970s, and later as minister of finance in his own country, Pakistan. Human development is defined as the process of enlarging people’s freedoms and opportunities and improving their well-being. Human development is about the real freedom ordinary people have to decide who to be, what to do, and how to live. The human development approach focuses on improving the lives people lead rather than assuming that economic growth will lead, automatically, to greater opportunities for all. Income growth is an important means of development, rather than an end in itself. Sustainable Business Management  Business, Environmental and Human Development It has the following aspects: People: Development should keep the man at the center of its concern. Opportunities: The concern of human development is both on enlarging human capabilities and on ensuring full utilization of these capabilities to grab opportunities. Choice: The goal of development is not only income but enlarging choices of all human being. Sustainable Business Management  Business, Environmental and Human Development Human Development Index (HDI): The state of the nation is often expressed through GDP (Gross Domestic Product), daily stock market results, consumer spending levels, and national debt figures. But these numbers provide only a partial view of how people are faring. The Human Development Index was developed as an alternative to simple money metrics. It is easy-to-understand numerical measure made up of what most people believe are the very basic ingredients of human well-being: health, education, and income. The first Human Development Index was presented in 1990. Sustainable Business Management  Business, Environmental and Human Development Human Development Index (HDI): HDI is a very useful means of comparing the level of development of countries. GDP per capita alone is clearly too narrow as an indicator of economic development and fails to indicate other aspects of development, such as enrollment in school and longevity. HDI is a broader and more encompassing indicator of development than GDP, though GDP still provides one-third of the index. HDI has a scale from 0 (no development) to 1 (complete development), where; An index of 0 – 0.49 means low development - for example, Nigeria was 0.42 in 2010. An index of 0.5 – 0.69 means medium development – for example, Indonesia was 0.6 An index of 0.7 to 0.79 means high development – for example, Romania was 0.76 Above 0.8 means very high development – Finland was 0.87 in 2010. Sustainable Business Management  Business, Environmental and Human Development Components of HDI: A long and healthy life: Life expectancy at birth. Education index: Mean years of schooling and Expected years of schooling. A decent standard of living: GNI per capita (PPP US$) Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development Sustainable Business Management  Business, Environmental and Human Development Find additional graphics online that present ideas and/or data from a justice, human rights, sustainable development perspective etc. Sustainable Business Management  Sustainable Development For the business enterprise, sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future. Originally proposed by the World Commission on Environment and Development. Recognizes that economic development must meet the needs of a business enterprise and its stakeholders. The latter include shareholders, lenders, customers, employees, suppliers and communities who are affected by the organization’s activities. It also highlights business’s dependence on human and natural resources, in addition to physical and financial capital. It emphasizes that economic activity must not irreparably degrade or destroy these natural and human resources. Sustainable Business Management  Sustainable Development Implications for businesses It has become a cliché that environmental problems are substantial, and that economic growth contributes to them. A common response is stricter environmental regulation, which often inhibits growth. However, there are some forms of development that are both environmentally and socially sustainable. Businesses and societies can find approaches that will move towards all three goals - environmental protection, social wellbeing and economic development - at the same time. Sustainable Business Management  Sustainable Development Implications for businesses Sustainable development is good business in itself. It creates opportunities for suppliers of ‘green consumers’, developers of environmentally safer materials and processes, firms that invest in eco- efficiency, and those that engage themselves in social well-being. These enterprises will generally have a competitive advantage. They will earn their local community’s goodwill and see their efforts reflected in the bottom line. Sustainable Business Management  Sustainable Development Practical considerations The role of business in contributing to sustainable development remains indefinite. While all business enterprises can make a contribution towards its attainment, the ability to make a difference varies by sector and organization size. Some executives consider the principal objective of business to be making money. Others recognize a broader social role. There is no consensus among business leaders as to the best balance between narrow self-interest and actions taken for the good of society. Companies continually face the need to trade off what they would ‘like’ to do and what they ‘must’ do in pursuit of financial survival. Sustainable Business Management  Sustainable Development Practical considerations Businesses also face trade-offs when dealing with the transition to sustainable practices. For example, a chemical company whose plant has excessive effluent discharges might decide to replace it with a more effective treatment facility. But should the company close the existing plant during the two or three- year construction period and risk losing market share? Or should it continue to operate the polluting plant despite the cost of fines and adverse public relations? Which is the better course of action in terms of economy, social wellbeing and the environment? Sustainable Business Management  Sustainable Development Practical considerations Moreover, many areas of sustainable development remain technically ambiguous, making it difficult to plan an effective course of action. For example, the forestry industry has had difficulty defining what constitutes sustainable forest management. Some critics believe that simply replacing trees is not enough, because harvesting destroys the biodiversity of the forest. Clearly, more research will be needed to resolve such technical issues Sustainable Business Management  Sustainable Development Practical considerations The concept of sustainable development needs to be incorporated into the policies and processes of a business if it is to follow sustainable development principles. This does not mean that new management methods need to be invented. Rather, it requires a new cultural orientation and extensive refinements to systems, practices and procedures. Links that will provide examples: https://news.nike.com/news/how-nike-is-building-on-diversity-and-inclusion-to-advance- sustainability https://corporate.mcdonalds.com/corpmcd/our-purpose-and-impact/our-planet/sustainable- agriculture.html https://www.conserve-energy-future.com/top-companies-that-are-going-green.php Sustainable Business Management  Rationale and Benefits of Sustainable Business https://www.youtube.com/watch?v=zCRKvDyyHmI Sustainable Business Management  Rationale and Benefits of Sustainable Business From an economic perspective, the best way to support environmentally friendly behavior is by ensuring that the costs paid align with what is “real” If there are other costs that are not accounted for in what one pays (whether a company or an individual or a government), and society picks up the bill, we call this an externality. Sustainable Business Management  Rationale and Benefits of Sustainable Business The goal of interventions is to internalize externalities so that firms pay costs, not society. Sustainable Business Management  Rationale and Benefits of Sustainable Business Sustainable Business Management  Rationale and Benefits of Sustainable Business TWO BROAD APPROACHES Command and control – when a regulator imposes a standard and businesses have to adhere to it or pay a fine considered inefficient, because they treat all firms the same Market-based instruments – Uses economic incentives. More effective, because they can be tailored to firms Sustainable Business Management  Rationale and Benefits of Sustainable Business MARKET-BASED INSTRUMENTS Environmental Taxes Marketable permits – buying the right to pollute Subsidies Sustainable Business Management  Rationale and Benefits of Sustainable Business If the tax is established correctly, it will be at a level where the costs of reducing one more unit of pollution (MAC: marginal abatement costs) equalize the damage imposed to society by that extra unit (MSD: marginal social damage), as shown by point Qe in Figure 3. Sustainable Business Management  Rationale and Benefits of Sustainable Business Sustainable Business Management  Rationale and Benefits of Sustainable Business To assess sustainability, we will need systems thinking. Sustainable Business Management  Rationale and Benefits of Sustainable Business It's official: customers choose sustainable products from sustainable brands.It's official: customers choose sustainable products from sustainable brands. This means that "brands that can strategically connect sustainability to actual behavior are in a good place to capitalize on increased consumer expectation and demand." To grip the trend, more companies today struggle to redo their business paradigm accordingly. A brand's green marketing strategies and turning to sustainable packaging last well into this process. And yet, for a brand to be described as sustainable and maintain a sustainable competitive advantage, it needs to adopt a variety of practices. Sustainable Business Management  Rationale and Benefits of Sustainable Business What is sustainability in business? The concept of sustainability comes with three pillars: economic, social, and environmental (also known as the three Ps: profit, people, and planet). Its focus is to meet the needs of today without blowing future generations' chances to meet their needs tomorrow. By sustainability in business, we mean two categories: its effect on the environment and its effect on society. For a business to become sustainable, it needs to focus on long-term strategies for making a positive impact on those categories. Sustainability is about framing business decisions in terms of years or even decades and considering many more factors than just a financial benefit. Sustainability is about setting reasonable business goals and working towards them right along. https://learn.g2.com/sustainability-in-business Sustainable Business Management  Rationale and Benefits of Sustainable Business The goals can be as follows: Cut emissions Prevent pollution Use sustainable materials Lower energy usage Use green-certified office products Encourage sustainable behavior Network with like-minded organizations And when a business achieves their set goals – cutting emissions by 5%, for example – they can call themselves "sustainable." Sustainable Business Management  Rationale and Benefits of Sustainable Business Why sustainability is important? In addition to saving the planet and attracting new customers with social responsibility, sustainability can drive business by far. According to McKinsey, brands with higher ESG ratings (Environmental + Social + Governance metrics) are more financially successful and have more public support. Also, sustainability in business motivates a brand's employees to align with its mission, goals, and values. They are ready to work towards improving a company's reputation and meeting customers' expectations. Sustainable Business Management  Rationale and Benefits of Sustainable Business Within this framework, the benefits of sustainability in business include: Saving money. Eco-friendly techs and lower waste in energy/time can bring significant savings. Attracting investors. A reputation of an earth-friendly business is persuasive enough for savvy investors and new customers to come. Retaining employees. A brand supporting sustainable practices can attract qualified employees who'll perform better and be more satisfied with their workplaces, saving resources for the process of recruitment. Creating new jobs. The focus on sustainability can introduce new job titles such as CVO (Customer Value Officer), wind energy engineers, passive solar building designers, and more. Sustainable Business Management  Rationale and Benefits of Sustainable Business What businesses need to become sustainable Sustainable companies are those proposing and acting for environmental and social concerns. To create a more sustainable strategy, business needs to assess a particular problem and define clear objectives. Only if understanding what sustainability means for its industry and clients, a business can establish its big mission and craft a long-term strategy based on its values. Answers to questions such as… How much waste our organization creates What impact it has on the local community How we outreach to customers How our product helps a certain audience can help to develop a sustainable business strategy. Sustainable Business Management  Rationale and Benefits of Sustainable Business Lastly, to address sustainability in business, a company needs to beware of two critical gaps such as "I know but do nothing" and "I need sustainability for competitive advantage.“ According to a 2017 report by MIT, only 25% of companies incorporated sustainability in their business model though 90% of executives found it to be significant. What’s more, 24% of companies see sustainability as an area of competitive advantage, missing the fact that compliance goes first. To stand out with sustainability, a business should address both gaps and understand all the risks of getting them wrong. Sustainable Business Management  Rationale and Benefits of Sustainable Business Examples of sustainability practices The companies listed below are solid examples of how sustainability can be ingrained in every aspect of a business. They implement sustainable strategies to promote core values and conscious consumption to the world. Christy Dawn This LA-based brand makes dresses out of deadstock fabrics, the stuff manufacturers usually leave behind on sewing tables and, therefore, waste. Launched back in 2013, the company promotes sustainability everywhere they can: create limited edition pieces, reduce the usage of fabric, deliver their product in wooden boxes rather than polyurethane bags, and advocate minimalism to support the overall image of the brand. PepsiCo Sustainable Business Management  Rationale and Benefits of Sustainable Business Examples of sustainability practices PepsiCo PepsiCo presents its sustainability goals and annual reports since 2005. They are about three aspects: human sustainability (the brand promotes healthy food and drinks), talent sustainability (the brand works to attract top talents and create a diverse company culture), and environmental sustainability (the brand works on minimizing their footprint and operates in a manner to protect resources). By 2025, they plan to reduce added sugar and fat in products, design 100% of their packaging to be recyclable, and reduce the waste they generate by 50%. Also, PepsiCo continues to develop a diverse workforce and advance respect for human rights. Sustainable Business Management  Rationale and Benefits of Sustainable Business Examples of sustainability practices Brown-Forman This distributor of wine and spirits demonstrates sustainability by using climate-sensitive and water-intensive ingredients for their products. For Brown-Forman, it's a great way to build consumer relationships and endure their brand. Aimed at protecting natural resources for future generations, they partner with other businesses for sustainability initiatives such as concentrating on reused or recycled materials and organizing joint actions to solve climate change problems. As well as other responsible brands, they care about employee relations and diversity too. Sustainable Business Management  Rationale and Benefits of Sustainable Business WHAT IS SUSTAINABILITY IN BUSINESS? In short, sustainability in business refers to the effect companies have on the environment or society. A sustainable business strategy aims to positively impact one or both of those areas, thereby helping address some of the world’s most pressing problems. Some of the global issues that sustainable business strategies help to address include: Climate change Income inequality Depletion of natural resources Human rights issues Fair working conditions Pollution Racial injustice Gender inequality Although it may sound like it, sustainability in business is not purely altruistic. As Harvard Business School Professor Rebecca Henderson notes in the online course Sustainable Business Strategy, you can't use business to do good in the world if you're not doing well financially. Doing well and doing good are intertwined, and successful business strategies include both. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business Over the past two decades, sustainability has become more than a fad or just a buzz word. Research shows that sustainability has real business benefits when conscientiously integrated into business operations. Six major advantages for practicing sustainability are: 1. Improved brand image and competitive advantage. 2. Increase productivity and reduce costs. 3. Increase business ability to comply with regulation. 4. Attract employees and investors. 5. Reduce waste. 6. Make shareholders happy. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 1. Improved brand image and competitive advantage. Surveying more than 53,000 U.S. consumers, the Natural Marketing Institute discovered that 58 percent of consumers consider a company’s impact on the environment in considering where to purchase goods and services and are more likely to purchase from companies that practice sustainable habits. That translates into a client base of 68 million Americans who are favorably predisposed to companies showing positive track records in personal, social, and environmental values. The Cause Marketing Forum reports that consumers also favor companies that actively support their communities: businesses do well by doing good. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 1. Improved brand image and competitive advantage. The improvement of brand awareness through “doing good” is becoming one of the pillars of advertising campaigns looking at Colgate’s public awareness ads during Super Bowl promoting water conservation. We can live without electricity or paper–people did just that for millennia–but humanity cannot exist without water, especially potable water. Encouragement and practice to conserve resources not only improves brand awareness, but also penetrates at a deeper level to employees, their families, and beyond. The opportunity to enhance brand image is lost if the company doesn’t do as it preaches. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 2. Increase productivity and reduce costs. Detractors of sustainability claim that sustainable business practices eat into corporate profit. Development of sustainable business practices lends itself to efficient operation that streamlines effort and conserves resources, which enhances employee productivity and reduces cost. Reducing cost also encompasses energy conservation strategies that can be as simple as turning off unnecessary lights and insulating walls to more sophisticated efforts such as installation of geothermal heating and cooling systems. Those efforts having greater overall impact will likely be more expensive to implement, but the long- term results justify the investment. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 3. Increase business ability to comply with regulation. With all the discussion regarding climate change, dwindling energy resources, and environmental impact, it’s no surprise that state and federal government agencies are enacting regulations to protect the environment. Integrating sustainability into your business will position it to meet changing regulations in a timely manner. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 4. Attract employees and investors. People like to be associated with the positive, especially younger generations raised on a steady diet of environmental protection messages. They do not want to be linked to companies implicated in ecological disasters and social welfare scandals. Show your company as respectful of the environment and of its employees and it will attract the caliber of people whom you want to employ and the funds your business needs to expand. Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 5. Reduce waste. This is likely the simplest and most obvious way to engage in sustainable practices. Beginning in the 1990s with offices collecting empty cans for recycling, the effort has grown to encompass waste mitigation in paper (conserving trees and forest habitats), value engineering of products (reworking or developing new processes that use less raw materials, waste less material in production of goods), to changing out incandescent lights for LED lights (greater efficiency combined with fewer bulbs used) Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 6. Make shareholders happy. Not only can sustainability be used to lower costs, but it can result in increasing profit. In their 2014 report “Profits with Purpose: How Organizing for Sustainability Can Benefit the Bottom Line,” McKinsey researched 40 companies to understand sustainability challenges and seek practical recommendations “to capture value from sustainability.” They report that a study by Deutsche Bank revealed that companies with high ratings in environmental, social, and governance factors outperformed the market in medium and long range terms. McKinsey reported similar results for studies conducted by the Carbon Disclosure Project. Those assertions are supported by calculations related to share price: “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high-sustainability companies would have grown to $22.60 by the end of 2010, compared to $15.40 for the portfolio of low-sustainability companies.” Sustainable Business Management  Rationale and Benefits of Sustainable Business 6 Benefits of Becoming a Sustainable Business 6. Make shareholders happy. The old truism that anything easy isn’t worthwhile applies to sustainability. It takes dedication, commitment, and follow-through from the C-suite to rank-and-file employees to jump on board the sustainability bandwagon and make it succeed. However, if your business can do it, morale and productivity will improve even as sales increase and costs decrease. It’s the ultimate win-win achievement for the shareholders, the consumers, and the employees. Sustainable Business Management  Rationale and Benefits of Sustainable Business Other Benefits of Becoming a Sustainable Business 1. You’ll Protect Your Brand and Mitigate Risks Ending up on the front page because of a scandal is a CEO’s worst nightmare. Not only do improper practices damage an organization’s reputation and cost it customers, but dealing with a public relations disaster can divert valuable human and financial resources from the core business. You don’t want to become the company that allowed an oil spill or forced employees to work in unsafe conditions. By instituting a sustainable strategy that protects the environment and your workers, you also protect yourself from any damaging incidents. Sustainable Business Management  Rationale and Benefits of Sustainable Business Other Benefits of Becoming a Sustainable Business 2. Being Purpose-Driven Is a Competitive Advantage Sustainability doesn't detract from business goals, and infusing your company with purpose can help attract a motivated, skilled workforce that drives financial success. In a Facebook Live discussion, Henderson noted a recent study showing that 89 percent of executives believe an organization with shared purpose will have greater employee satisfaction. Additionally, 85 percent say they're more likely to recommend a company with strong purpose to others. Making your company an organization that does good in the world—rather than just a place that provides a paycheck—can be a competitive advantage when attracting the best talent. Sustainable Business Management  Rationale and Benefits of Sustainable Business Other Benefits of Becoming a Sustainable Business 3. There's a Growing Market for Sustainable Goods A 2019 study found that 73 percent of global consumers are willing to change their consumption habits to lessen their negative impact on the environment, and sustainable product sales have grown by nearly 20 percent since 2014. Millennials in particular are more willing to pay more for products that contain sustainable ingredients or products that have social responsibility claims. If your organization commits to sustainable products and practices, it could gain market share by converting sustainability-minded customers and increasing sales. Sustainable Business Management  Rationale and Benefits of Sustainable Business Other Benefits of Becoming a Sustainable Business 4. Cooperative Action Can Drive Change As an individual, it can feel overwhelming, isolating, or simply impossible to effect change in a meaningful way. That’s not the case when the most innovative, successful, and powerful companies are collaborating to solve some of the world’s most pressing problems. While governments struggle to address public goods problems, purpose-driven companies working together to address these issues have experienced great success. For example, palm oil is cheap, versatile, and found in about half of all packaged products, including soap, lipstick, and ice cream. But palm oil production (pdf) has resulted in record greenhouse gas emissions and contributed to climate change. In light of this, consumer goods producer Unilever committed to only using palm oil from certified sustainable sources in 2008. The organization cooperated with its competitors—as well as governments, NGOs, and indigenous peoples’ organizations—to lead an industry-wide adoption of sustainable palm oil. As a result, Unilever continues to be a thriving organization, and the world has reaped the environmental benefits of sustainable palm oil harvesting practices. Sustainable Business Management  Rationale and Benefits of Sustainable Business THE VALUE OF SUSTAINABILITY Sustainability doesn’t mean sacrificing profits or putting success on the backburner. Instead, it has become a crucial element to any organization’s successful strategy. A business that doesn't factor in sustainability risks is less successful in several measures, including profitability, growth, and employee retention. By integrating sustainability into your business strategy, you can find success because, rather than in spite, of sustainability. Sustainable Business Management  Global Business Models Irreversibly, current and future businesses will have to be sustainable. In this sense sustainable is attracting the attention of companies, consumers, policy-makers, stakeholders and business agents from around the world. Thus, the number of companies developing and implementing sustainable business strategies is growing. To carry out this challenge successfully companies are recruiting managers prepared in this cross-disciplinary topic. Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Seven business models that companies are using to alter the competitive landscape in the new global era are: cross-border servitization, asset-light market entry, adding value through software, global digital ecosystems, global personalization, multilocal manufacturing, and developing multiple national identities. Sustainable Business Management Global Business Models To understand these new business models and why they are succeeding, it is important to explore the technological, geopolitical, and societal forces that have been fundamentally altering the economics of many global industries over the past decade. The costs of factors such as labor, compliance with government regulations and trade rules, reaching and engaging with consumers, and collaborating with global partners are all changing. Technological, geopolitical, and societal shifts are redefining the economics of global business by fundamentally altering cost structures. (See the exhibit.) International business—and by extension cross-border trade— is influenced by the following cost drivers: Sustainable Business Management Global Business Models Sustainable Business Management Global Business Models Six developments in particular have contributed to the rise of new kinds of business models: Connectivity. The integration of the world’s people and businesses through digital technology is reducing the costs of acquiring data and enabling software features that make it easier to deliver services to customers. This trend will continue to accelerate: the number of people connected to the internet is approaching 4 billion, while the number of connected digital devices is forecast to more than triple, to 21 billion, by 2020. Sustainable Business Management Global Business Models Data Analytics and Artificial Intelligence. Rapid advances in data analytics and AI are enabling companies to gain valuable insight into global markets and customers through cross-border flows of data, which are projected to triple by 2020, while the cost of storing data has fallen. The number of jobs related to data analytics has risen around 20-fold over Sustainable Business Management Global Business Models Digital Platforms. Increasingly powerful global platforms are disrupting virtually every industry and fueling more than 30% compound annual growth in cross-border e- commerce, which is projected to reach $1 trillion by 2020. Through these digital platforms, companies can reach vast, borderless markets of digitally connected consumers. The consolidation of buyers, sellers, and products on these platforms reduces the costs of acquiring customers and fulfilling orders. Sustainable Business Management Global Business Models Industry 4.0. Advanced manufacturing capabilities—such as 3D printing, advanced robotics, real-time collaboration, and digital prototyping—and factory management systems are projected to boost productivity by up to 30% and reduce labor costs in the medium term. Highly flexible manufacturing systems are also making it more practical and cost-effective to make smaller batches of customized products in multiple locations. Sustainable Business Management Global Business Models Protectionism and State Capitalism. Tariffs, new local procurement rules, and other protectionist barriers are increasing the costs of cross-border trade. Companies must navigate a growing number of bilateral trade agreements. China protects domestic automotive manufacturers with 25% import duties and requires foreign companies to transfer technology to domestic manufacturers, for example. Projects funded by the American Recovery and Reinvestment Act of 2009 were required to use only US-made steel, iron, and other materials. Nigeria requires that at least half the value of all information and communication technology hardware purchased in the country be generated domestically. Sustainable Business Management Global Business Models Connected and Mobile Consumers. The world’s consumers are not only increasingly connected digitally—they are also traveling more. There were 1.2 billion international trips in 2016, roughly a 30% increase since 2010, according to the World Tourism Organization. At the same time, the rising popularity of the sharing economy and pay-as-you-go business models for goods such as cars, agricultural equipment, and aircraft engines shows that customers’ behaviors have changed. BCG’s Center for Sensing and Mining the Future estimates that the global sharing economy will be worth $480 billion annually by 2025. In addition, socially aware, digitally connected individuals are interacting in a world in which trends and local zeitgeists disperse rapidly, altering demand patterns globally and setting expectations for the products and Sustainable Business Management Key Terms in this Chapter Development: This term simply refers to advancement, progress, and positive changes in the overall condition of a given phenomenon resulting in observable shifts from a previous state of being to a better one. Social Development: Social development is about improving the well- being of every individual in a society so that they can reach their full potential. Environmental Development: Simply it can be put forward as an economic and social development that respects the environment. Tangible positive changes, advancements and transformations in the overall conditions of the ecosystem especially regarding lesser land, water and air pollution as well as lesser destruction of vegetation and risk to wildlife. Environmental development also involves all positive changes brought about in a particular geographical area through people-centered political, economic, social, cultural and even diplomatic efforts for a better place for all live. Sustainable Business Management Key Terms in this Chapter Sustainable Development: Sustainable development can be defined as an organizing principle for meeting various human development goals while simultaneously sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The objective of sustainable development is to define viable projects and reconcile the economic, social, and environmental aspects of human activities; It is about making progress in these areas without having to destroy the environment. Economic Development: Economic development can be defined as the creation of wealth from which community benefits are realized. Economic development can also be seen as the process whereby simple, low-income national economies are transformed into modern industrial economies. Sustainable Business Management Key Terms in this Chapter Sustainability in Business: In business, sustainability refers to performing business without negatively impacting the environment, community, or society as a whole. Sustainable Organization: A sustainability organization is primarily an organized group of people that aims to advance sustainability and/or those actions of organizing something sustainably. Unlike many other business organizations, sustainability organizations are not limited to implementing sustainability strategies which provide them with economic and cultural benefits attained through environmental responsibility. Sustainable Business Management  Bibliography Allen, W. “Complicated or complex – knowing the difference is important”. Learning for Sustainability. February 3rd, 2016. [retrieved January 25, 2022]. https://learningforsustainability.net/post/complicated- complex/ Allen, W. “Systems thinking”. Learning for Sustainability. February 3rd, 2016. [retrieved 25th January, 2022]. https://learningforsustainability.net/systems-thinking/ Step Change, Culture & Leadership How to develop systems thinking in your organization. 24th November, 2016. [retrieved 25th January, 2022]. https://blog.hellostepchange.com/blog/system-thinking-in-the-workplace Akay, Esin. Peter Senge, The Fifth Discipline: The Art and Practice of the Learning Organization, USA: Currency Doubleday, 1ed, 1994. [retrieved 25th January, 2022]. https://www.linkedin.com/pulse/why-how-should- leaders-practice-systems-thinking-esin-akay Sustainable Business Management  Bibliography Akay, Esin. Peter Senge, The Fifth Discipline: The Art and Practice of the Learning Organization, USA: Currency Doubleday, 1ed, 1994. Online. [retrieved 25th January, 2022]. https://www.linkedin.com/pulse/why-how- should-leaders-practice-systems-thinking-esin-akay Natalie Chladek. „Why you need sustainability in your business strategy” 06th November, 2019. Online [retrieved 25th January, 2022]. https://online.hbs.edu/blog/post/business-sustainability-strategies Michael Rogers. “6 Benefits of Becoming a Sustainable Business”. March 29th, 201. Online. [retrieved 25th January, 2022]. https://www.environmentalleader.com/2016/03/6-benefits-of-becoming-a- sustainable-business/ Sustainable Business Management  Bibliography HDRO Outreach. hdr.undp.org. “What is Human Development?” [online. Retrieved 1st Feb, 2022]. http://hdr.undp.org/en/content/what-human- development www.hamrolibrary.com. ”Concept of Human Development”. May 11th, 2019 [online. Retrieved 1st Feb, 2022]. https://www.hamrolibrary.com/2019/05/concept-of-human- development.html United nations development programme. Human Development Reports. [online. Retrieved 1st Feb, 2022]. http://hdr.undp.org/en/content/latest- human-development-index-ranking Sustainable Business Management  Bibliography IGI Global. www.igi-global.com. 2022, “What is Environmental Development”. [online. Retrieved 3rd Feb, 2022]. https://www.igi- global.com/dictionary/environmental-development/86906 Thrive. Sustainable Business Models. 2021. [online. Retrieved 3rd Feb, 2022]. https://strive2thrive.earth/sustainable-business-models Arindam Bhattacharya, Martin Reeves, Nikolaus Lang, and Rajah Augustinraj BCG Henderson Institute. 14th November, 2017. New business models for a new global landscape. [online. Retrieved 3rd Feb, 2022]. https://www.bcg.com/publications/2017/globalization-new-business- models-global-landscape Business Vibes February 11, 2015. 4 Paradigms of Global Business Models. [online. Retrieved 3rd Feb, 2022]. https://www.business2community.com/strategy/4-paradigms-global- business-models-01153330 SUSTAINABLE BUSINESS MANAGEMENT Introduction: Course description & Methodology Syllabus:  Chapter 01 –Sustainable Business Management  Business, Environmental and Human Development  Rationale and Benefits of Sustainable Business  Global Business Models  Chapter 02 -Sustainable Business Concepts  Natural Capital and Publics Goods  Environmental Externalities  Sustainable Business Trends, Trade, Industry, Jobs, Consumption  Chapter 03 -Planning, Policy and Sustainable Governance  Sustainable Business Strategies  Key Sectors o Policy Assessment  Stakeholders Engagement  Policy and Regulatory Tools  Chapter 04 - International Policies  International Policy Developments  Global Development Framework Sustainable Business Concepts  Natural Capital and Publics Goods Natural Capital Definition: The Natural Capital includes all the goods of the Earth (soil, air, water, flora and fauna) and their derived Ecosystems Services, which make human life possible. Natural Capital goods and services have a yearly value of billions of dollars and provide foods, materials, water, health, energy, gas regulation, climate security and other essential services. Allocating a value to such services and to the constituent elements of Natural Capital that produce them allows better dimension of the identification of the impacts, its measurement and specially their place in value in the most appropriate way for decision making, using the same metrics as those used by the organizations to decide on the financial capital, the productive capital and the capital assets: Euros. Sustainable Business Concepts  Natural Capital and Publics Goods The conversion into currency of the Capital Natural allows to display in Euros the impacts that the environmental assessment studies of projects traditionally valued with adjectives (compatible, moderate, severe, critical…), accomplishing a reduction of the subjectivity of the valuations and easing the verification of the sustainability of a project. Sustainable Business Concepts  Natural Capital and Publics Goods Objectives It is useful and efficient for any organization that needs to estimate the economic value of its impacts over the natural capital, whether negative or positive, for any of the following OBJECTIVES: 1.Estimate the value of negative impacts on natural capital. 2.Estimate the value of positive impacts on natural capital. 3.Offset negative impacts with positive ones: 1. Over the natural capital as a whole or over certain groups of ecosystem services. 2. At present moment or in the future. Sustainable Business Concepts  Natural Capital and Publics Goods What for? The main purposes of the monetary valuation of the impacts (whether negative or positive) over the natural capital rising from the variation (reduction or increase) of the value of the ecosystem services are: Being more responsible and to project such image to shareholders, clients, investors, partners, financial services, public administrations (public tenders for public contracts), citizenship, etc. Measuring and quantifying the impacts generated over the Natural Capital to be aware of their direct value and, therefore, of the positive or negative effects that the company, organization or project generates through its production and commercial activities, its supply chain as well as its indirect value, which is the basis for the opinions of stakeholders and external groups of interest that influence on the decisions taken by the public administrations and the citizenship. Sustainable Business Concepts  Natural Capital and Publics Goods The main purposes of the monetary valuation of the impacts (whether negative or positive) over the natural capital rising from the variation (reduction or increase) of the value of the ecosystem services are: *Reducing the lack of trust and awareness of some stakeholders and groups of interests who magnify those adjectives commonly used to assess the environmental impacts by providing in exchange their economic valuation. *Contributing with an extra feature the documents to be submitted for the public tenders for works and services contracts, explaining and quantifying the Capital Natural of the activity to be tendered for, in comparison with other alternatives. Sustainable Business Concepts  Natural Capital and Publics Goods Why? The economic valuation of positive impact activities allows for a better decision taking. The Economic Valuation of Natural Capital is an activity inherent to the compliance with the EU Biodiversity Strategy for 2030 “Bringing Nature Back into our Lives”, and the principles adopted by the WBCSD. This information must be considered as complementary (next step) to the rest of the information on sustainability managed by the organization. Sustainable Business Concepts  Natural Capital and Publics Goods Why? Furthermore, the information obtained is fully compatible and in above with the Commonly Used Standards for both: the reporting of the Non Financial Information by the companies (TCFD, GRI,and SASB) and the qualifying of the investments for funds/financial institutions, as being their facilities responsible and/or sustainable with the natural environment. In summary, it is a tool for those institutions aiming to be more responsible and to project such image to the public opinion and the administration, the investors and the financing entities. Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Sustainable Business Concepts  Natural Capital and Publics Goods Environmental development also involves all positive changes brought about in a particular geographical area through people-centered political, economic, social, cultural and even diplomatic efforts for a better place for all live. Sustainable Business Concepts  Natural Capital and Publics Goods Concept: Public goods represent a particularly complex category of environmental resources. In economics, a public good refers to a commodity or service that is made available to all members of a society. Typically, these services are administered by governments and paid for collectively through taxation. A public good is a resource that is non-excludable, non-rivalrous, and open to all in its consumption. “a good or service in which the benefit received by any one party does not diminish the availability of the benefits to others, and where access to the good cannot be restricted” Sustainable Business Concepts  Natural Capital and Publics Goods KEY TAKEAWAYS Public goods are commodities or services that benefit all members of society, and which are often provided for free through public taxation. Public goods are the opposite of private goods, which are inherently scarce and are paid for separately by individuals. Societies will disagree about which goods should be considered public goods; these differences are often reflected in nations’ government spending priorities. Sustainable Business Concepts  Natural Capital and Publics Goods How Public Goods Work The two main criteria that distinguish a public good are that it must be non-rivalrous and non-excludable. Non-rivalrous means that the goods do not dwindle in supply as more people consume them; Non-excludability means that the good is available to all citizens. Sustainable Business Concepts  Natural Capital and Publics Goods How Public Goods Work An important issue that is related to public goods is referred to as the free-rider problem. Since public goods are made available to all people–regardless of whether each person individually pays for them–it is possible for some members of society to use the good despite refusing to pay for it. People who do not pay taxes, for example, are essentially taking a "free ride" on revenues provided by those who do pay them, as do turnstile jumpers on a subway system. Sustainable Business Concepts  Natural Capital and Publics Goods Private Goods vs. Public Goods The opposite of a public good is a private good, which is both excludable and rivalrous. These goods can only be used by one person at a time — for example, a wedding ring. In some cases, they may even be destroyed in the act of using them, such as when a slice of pizza is eaten. Private goods generally cost money, and this amount pays for its private use. Most of the goods and services that we consume or make use of in our everyday lives are private goods. Although they are not subject to the free-rider problem, they are also not available to every one, since not everyone can afford to purchase them. Sustainable Business Concepts  Natural Capital and Publics Goods Private Goods vs. Public Goods In some cases, public goods are not fully non-rivalrous and non- excludable. For example, the post office can be seen as a public good, since it is used by a large portion of the population and is financed by taxpayers. However, unlike the air we breathe, using the post office does require some nominal costs, such as paying for postage. Similarly, some goods are described as “quasi-public” goods because, although they are made available to all, their value can diminish as more people use them. For example, a country’s road system may be available to all its citizens, but the value of those roads declines when they become congested during rush hour. Sustainable Business Concepts  Natural Capital and Publics Goods Example of Public Goods Typical examples of public goods include clean air, soil water storage that yields flood control, drinking water, and beautiful views over a landscape. Other examples of public goods include law enforcement, national defense, and the rule of law. Individual countries will reach different decisions as to which goods and services should be considered public goods, and this is often reflected in their national budgets. Sustainable Business Concepts  Natural Capital and Publics Goods Example of Public Goods For example, many argue that national defense is an important public good because the security of the nation benefits all of its citizens. To that end, many countries invest heavily in their militaries, financing army upkeep, weapons purchases, and research and development (R&D) through public taxation. In the United States, for example, the Department of Defense (DOD) has spent $455.89 billion (45.8%) of its total budget for FY 2022. Some countries also treat social services–such as healthcare and public education–as a type of public good. Sustainable Business Concepts  Natural Capital and Publics Goods Example of Public Goods For example, some countries, including Canada, Mexico, the United Kingdom, France, Germany, Italy, Israel, and China, provide taxpayer- funded healthcare to their citizens.2 Similarly, government investments in public education have grown tremendously in recent decades. According to estimates by Our World in Data, world literacy has grown from roughly 56% to over 86% between 1950 and 2016 (the most recently available data). Sustainable Business Concepts  Natural Capital and Publics Goods Example of Public Goods Advocates for this kind of government spending on public goods argue that its economic and social benefits significantly outweigh its costs, pointing to outcomes such as improved workforce participation, higher- skilled domestic industries, and reduced rates of poverty over the medium to long-term. Critics of this kind of spending argue that it can pose a burden on taxpayers and that the goods in question can be more efficiently provided through the private sector. Sustainable Business Concepts  Environmental Externalities Definition An externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer. An externality can be both positive or negative and can stem from either the production or consumption of a good or service. The costs and benefits can be both private—to an individual or an organization—or social, meaning it can affect society as a whole. Externalities by nature are generally environmental, such as natural resources or public health. For example, a negative externality is a business that causes pollution that diminishes the property values or health of people in the surrounding area. A positive externality includes actions that reduce transmission of disease or avoids the use of lawn treatments that runoff to rivers and thus contribute to excess plant growth in lakes. Externalities are different from donations of parkland or open-source software. Sustainable Business Concepts  Environmental Externalities Definition For example, a negative externality is a business that causes pollution that diminishes the property values or health of people in the surrounding area. A positive externality includes actions that reduce transmission of disease or avoids the use of lawn treatments that runoff to rivers and thus contribute to excess plant growth in lakes. Externalities are different from donations of parkland or open-source software. Sustainable Business Concepts  Environmental Externalities Definition Environmental externalities refer to the economic concept of uncompensated environmental effects of production and consumption that affect consumer utility and enterprise cost outside the market mechanism. As a consequence of negative externalities, private costs of production tend to be lower than its “social” cost. It is the aim of the “polluter/user-pays” principle to prompt households and enterprises to internalise externalities in their plans and budgets. www.economicsonline.co.uk. 17/01/2020. [Online. Retrieved 11th Oct, 2022]. Negative externalities. https://www.economicsonline.co.uk/market_failures/externalities.html/uk) Sustainable Business Concepts  Environmental Externalities Definition Externalities occur in an economy when the production or consumption of a specific good or service impacts a third party that is not directly related to the production or consumption of that good or service. A negative externality is a cost that is suffered by a third party as a consequence of an economic transaction. In a transaction, the producer and consumer are the first and second parties, and third parties include any individual, organisation, property owner, or resource that is indirectly affected. Externalities are also referred to as spillover effects, and a negative externality is also referred to as an ‘external cost’. Sustainable Business Concepts  Environmental Externalities Definition Some externalities, like waste, arise from consumption while other externalities, like carbon emissions from factories, arise from production. Externalities commonly arise in situations where property rights over assets or resources have not been allocated, or are uncertain. For example, no one owns the oceans and they are not the private property of anyone, so ships may pollute the sea without fear of being taken to court. The importance of establishing property rights is central to the ideas of influential Peruvian economist, Hernando De Soto, De Soto has widely argued that successful market economies need a widespread allocation of property rights to enable them to fully develop Sustainable Business Concepts  Environmental Externalities Definition Almost all externalities are considered to be technical externalities. Technical externalities have an impact on the consumption and production opportunities of unrelated third parties, but the price of consumption does not include the externalities. This exclusion creates a gap between the gain or loss of private individuals and the aggregate gain or loss of society as a whole. The action of an individual or organization often results in positive private gains but detracts from the overall economy. Many economists consider technical externalities to be market deficiencies, and this is the reason people advocate for government intervention to curb negative externalities through taxation and regulation. Sustainable Business Concepts  Environmental Externalities Definition Externalities were once the responsibility of local governments and those affected by them. So, for instance, municipalities were responsible for paying for the effects of pollution from a factory in the area while the residents were responsible for their healthcare costs as a result of the pollution. After the late 1990s, governments enacted legislation imposing the cost of externalities on the producer. This legislation increased costs, which many corporations passed on to the consumer, making their goods and services more expensive. Sustainable Business Concepts  Environmental Externalities Definition An external cost, such as the cost of pollution from industrial production, makes the marginal social cost (MSC) curve higher than the private marginal cost (MPC). The socially efficient output is where MSC = MSB, at Q1, which is a lower output than the market equilibrium output, at Q. Net welfare loss can exist in two situations. Firstly, it exists when the marginal cost to society of a particular economic activity, such as manufacturing 200,000 computers, is greater than the marginal benefit to society. Secondly, it can exist when the marginal benefit of a given economic activity, such as producing 50,000m computers, is greater than the marginal cost. Sustainable Business Concepts  Environmental Externalities Definition The first situation can occur when the market produces ‘too much’, and the second when it produces ‘too little’. Sustainable Business Concepts  Environmental Externalities Remedies Market Based Solutions Market-based solutions try to manipulate market forces to reduce the externality, by exploiting the price mechanism. One such market-based solution is to extend property rights so that third parties can negotiate with those individuals or organisations that cause the externality. British economist and Nobel Prize winner, Ronald Coase argued that the establishment of property rights would provide an efficient solution to the problem of externalities. As long as one party can establish a property right, there will be a bargaining process leading to an agreement in which externalities are taken into account. Sustainable Business Concepts  Environmental Externalities Remedies Market Based Solutions If property rights cannot be established, such as with the air, sea, or roads, then the only two options are: We learn to live with externalities, or: Government intervenes on our behalf through taxes or direct controls and regulations, such as: 1.Taxing polluters, such as carbon taxes, or taxes on plastic bags. 2.Subsidising households or firms to be non-polluters, such as giving grants for home insulation improvements. 3.Selling permits to pollute, which may become traded by the polluters. 4.Forcing polluters to pay compensation to those who suffer, such as making noise polluting airports pay for double-glazing. Sustainable Business Concepts  Environmental Externalities Remedies Market Based Solutions Government intervenes on our behalf through taxes or direct controls and regulations, such as: 5. Road pricing schemes, such as the Electronic Road Pricing (ERP) system in Singapore, which is a pay-as-you-go, card-based, road-pricing scheme. 6. Providing more information to consumers and producers, such as requiring that tickets to travel on polluting forms of transport, especially air travel, should contain information on how much CO2 pollution will be created from each journey. 7. The adoption of policies emerging from research by behavioural economists – often shortened to ‘nudge’ theory. This type of approach looks at influencing choices individuals make by nudging them towards more effective decison making. Sustainable Business Concepts  Environmental Externalities Positive and Negative Externalities Most externalities are negative. Pollution is a well-known negative externality. A corporation may decide to cut costs and increase profits by implementing new operations that are more harmful to the environment. The corporation realizes costs in the form of expanding operations but also generates returns that are higher than the costs. However, the externality also increases the aggregate cost to the economy and society making it a negative externality. Externalities are negative when the social costs outweigh the private costs. Sustainable Business Concepts  Environmental Externalities Positive and Negative Externalities Negative consumption externalities When certain goods are consumed, such as demerit goods, negative effects can arise on third parties. Common example include cigarette smoking, which can create passive smoking, drinking excessive alcohol, which can spoil a night out for others, and noise pollution. For example, if an individual plays very loud music in their house they are likely to reduce the benefit to their neighbours of owning the house and living in it. Another important example of a negative consumption externality if that of road congestion. As individuals ‘consume’ road-space they reduce available road-space and deny this space to others. Sustainable Business Concepts  Environmental Externalities Positive and Negative Externalities Some externalities are positive. Positive externalities occur when there is a positive gain on both the private level and social level. Research and development (R&D) conducted by a company can be a positive externality. R&D increases the private profits of a company but also has the added benefit of increasing the general level of knowledge within a society. Similarly, the emphasis on education is also a positive externality. Investment in education leads to a smarter and more intelligent workforce. Companies benefit from hiring employees who are educated because they are knowledgeable. This benefits employers because a better-educated workforce requires less investment in employee training and development costs. Sustainable Business Concepts  Environmental Externalities Overcoming Externalities There are solutions that exist to overcome the negative effects of externalities. These can include those from both the public and private sectors. Taxes are one solution to overcoming externalities. To help reduce the negative effects of certain externalities such as pollution, governments can impose a tax on the goods causing the externalities. The tax, called a Pigovian tax —named after economist Arthur C. Pigou, sometimes called a Pigouvian tax—is considered to be equal to the value of the negative externality. This tax is meant to discourage activities that impose a net cost to an unrelated third party. That means that the imposition of this type of tax will reduce the market outcome of the externality to an amount that is considered efficient. Sustainable Business Concepts  Environmental Externalities Overcoming Externalities Subsidies can also overcome negative externalities by encouraging the consumption of a positive externality. One example would be to subsidize orchards that plant fruit trees to provide positive externalities to beekeepers. Sustainable Business Concepts  Environmental Externalities Overcoming Externalities Governments can also implement regulations to offset the effects of externalities. Regulation is considered the most common solution. The public often turns to governments to pass and enact legislation and regulation to curb the negative effects of externalities. Several examples include environmental regulations or health-related legislation. Examples given in class: https://www.startribune.com/in-minnesota-s-farm-country-clean-water-is-costly/360685251 https://committees.parliament.uk/publications/5649/documents/55743/default https://miwaterstewardship.org/michigan-water-issues https://www.michigan.gov/taxes/0,4676,7-238-43535_53197-213103--,00.html Sustainable Business Concepts  Environmental Externalities Pigovian tax A Pigovian (Pigouvian) tax is a tax assessed against private individuals or businesses for engaging in activities that create adverse side effects for society. Adverse side effects are those costs that are not included as a part of the product's market price. These include environmental pollution, strains on public healthcare from the sale of tobacco products, and any other side effects that have an external, negative impact. Pigovian taxes were named after English economist, Arthur Pigou, a significant contributor to early externality theory. Pigouvian Taxes in Economics. Chapter 6: Externalities & Public Goods | Microeconomics. Pigouvian Taxes in Economics – YouTube. [Online. Retrieved 11th Oct, 2022]. https://www.youtube.com/watch?v=GzMcvmNE3z8 Sustainable Business Concepts  Environmental Externalities Pigovian tax A Pigovian tax is intended to tax the producer of goods or services that create adverse side effects for society. Economists argue that the cost of these negative externalities, such as environmental pollution, are borne by society rather than the producer. The purpose of the Pigovian tax is to redistribute the cost back to the producer or user of the negative externality. A carbon emissions tax or a tax on plastic bags are examples of Pigovian taxes. Pigovian taxes are meant to equal the cost of the negative externality but can be difficult to determine and if overestimated can harm society. Sustainable Business Concepts  Environmental Externalities Understanding a Pigovian Tax The Pigovian tax is meant to discourage activities that impose a cost of production onto third parties and society as a whole. According to Pigou, negative externalities prevent a market economy from reaching equilibrium when producers do not take on all costs of production. This adverse effect might be corrected, he suggested, by levying taxes equal to the externalized costs. Ideally, the tax would be equivalent to the external damage caused by the producer and thereby reduce the external costs going forward. Negative externalities are not necessarily “bad.” Instead, a negative externality occurs whenever an economic entity does not fully internalize the costs of their activity. In these situations, society, including the environment, bears most of the costs of economic activity. Sustainable Business Concepts  Environmental Externalities Understanding a Pigovian Tax A popular example of a Pigovian-style tax is a tax on pollution. Pollution from a factory creates a negative externality because impacted third parties bear part of the cost of pollution. This cost might manifest through contaminated property or health risks. The polluter only takes into consideration the private costs, not the external costs. Once Pigou factored in external costs to society, the economy suffered deadweight loss from excess pollution beyond the “socially optimal” level. Pigou believed that state intervention should correct negative externalities, which he considered a market failure. He suggested that this be accomplished through taxation. Sustainable Business Concepts  Environmental Externalities Counterargument to a Pigovian Tax Pigou’s externality theories were dominant in mainstream economics for 40 years but lost favor after Nobel Prize-winner, Ronald Coase, presented his ideas. Using Pigou’s analytical framework, Coase demonstrated that Pigou’s examination and solution were often wrong, for at least three separate reasons: Once Pigou factored in external costs to society, the economy suffered deadweight loss from excess pollution beyond the “socially optimal” level. Pigou believed that state intervention should correct negative externalities, which he considered a market failure. He suggested that this be accomplished through taxation. 1.- Negative externalities did not necessarily lead to an inefficient result. 2.- Even if they were inefficient, Pigovian taxes did not tend to lead to an efficient result. 3.- The critical element is transaction cost theory, not externality theory. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business A well-rounded approach to corporate sustainability should account for the four pillars of sustainability—Social, Human, Economic, and Environmental. Each of these pillars represents an area where businesses should strive for sustainable. operations. 50 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Social The Social Pillar refers to the broader impact a business has on society at the local, national, or global level. Transparent governance, community consulting, and a culture that promotes beneficial social practices are all ways to remain socially sustainable. For example, your business can foster social sustainability by providing jobs for diverse individuals and groups, making ethical supply chain choices, and setting a positive example as an entity. Fair pay, safe working environments, and an emphasis on enriching employee experience contribute to responsible resource use—a critical element of environmentalism. operations. https://www.starbucks.es/responsibility/sourcing/farmer-support 51 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Human The Human Pillar focuses on creating positive change in the production, provision, or consumption of business products or services. Investing in healthcare, education, or training services are ways to foster human sustainability. For example, your business can practice the values of the Human Pillar by providing health benefits to employees and their family members or by supporting educational services in local communities. A focus on your employees' health, learning, and skill development can encourage sustainable awareness.t t https://avieradvisors.com/microsoft/microsofts-other-benefits-compensation/ he individual and community levels. 52 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business The Economic Pillar balances the need for economic growth with the needs of the other sustainability pillars. Businesses achieve that balance by prioritizing monetary expansion that does not deplete natural, human, or social capital. For example, your business could make environmentally-positive economic choices such as investing with other companies committed to resource preservation. You could also create business relationships with entities that offer mutually-beneficial social and sustainable initiatives. Business growth should support the broader health of the economy while still improving the standard of living for all. Take note that you do not need to select green causes over profits. Instead, choose initiatives that offer growth yet still contribute to the environment in a meaningful way. at the individual and community levels. 53 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Environmental The Environmental Pillar focuses on the impact a business has on the environment, natural ecosystems, and social health systems. An environmentally sustainable business can meet the needs of the current population without compromising the needs of future generations. In practice, this could mean that your business does not produce pollutants, deplete resources, or damage neighborhood environments. For example, you could plant trees to offset your paper consumption or develop a paperless process that results in no deforestation at all. community levels. 54 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Top 10: global sustainability trends for 2022 As ESG becomes the enabler of continued business in the eyes of investors, these are the sustainability trends that we expect to see from global companies. ‘Sustainability’ is a very versatile word, particularly when discussing climate change, net-zero emissions, the management of waste and byproducts of an increasingly industrialised world—which all come under that all-important environmental, social and governance (ESG). In 2022, we’ve already received great insights through the latest news and executives and leaders that are working on the sustainability ‘frontline’ to provoke the necessary positive climate change. operations. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 1.- All-electric infrastructure implementation With the increasing number of renewable energy sources, there is more work to take place between governments and businesses to develop the necessary infrastructure to support the sustainable storage of renewably-sourced energy, encourage consumers to adopt alternatively- powered vehicles, and ensure that buildings are prepared for a future without fossil fuels. GRIDSERVE is a prime example of how vehicle charging infrastructure providers can develop to accommodate sustain transport and electric power. Top 10: global sustainability trends for 2022 Sustainability Magazine. https://sustainabilitymag.com/top10/top-10-global-sustainability-trends-for-2022?cid=19936 Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 2.- Penalty actions for lack of climate action Following discussions at COP26 and other climate events, and understanding the severity of the climate issue, large organisations in particular are likely to experience stricter regulation on climate disclosure and, similar to any other legislation, will be penalised for poor compliance. This was already exercised in the past and will continue to grow as a means of encouraging businesses to be more sustainable. The law that could make climate change illegal - BBC Future https://www.bbc.com/future/article/20200706-the- law-that-could-make-climate-change-illegal Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 3.- More clean air initiatives As we’ve already seen, cities are putting in the work to eliminate emissions in cities—projects like London’s Ultra-Low Emissions zone is a great example of this. Cities are also innovating to develop green spaces and implement renewable energy projects to suit their unique landscapes. The clean air package: Improving Europe's air quality. The clean air package aims to substantially reduce air pollution across the EU. The proposed strategy sets out objectives for reducing the health and environmental impacts of air pollution by 2030, and contains legislative proposals to implement stricter standards for emissions and air pollution. The package was published by the Commission on 18 December 2013, and consists of a communication on the 'clean air programme for Europe', plus three legislative proposals on emissions and air pollution. The clean air package: Improving Europe's air quality - Consilium (europa.eu) https://www.consilium.europa.eu/en/policies/clean-air/ Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 4.- More climate change disclosures Reporting has become a critical part of any sustainability strategy and is a necessity for correct climate disclosures. Firms will soon be expected to provide data on their actions to reduce emissions and limit energy consumption. Carbon offsetting will also come under this disclosure and, in many countries, firms will be obliged to report on their financial contributions to the environment as well. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 4.- More climate change disclosures Corporate disclosure of climate-related information Guidance for companies on how to report on the impacts of their business on the climate and on the impacts of climate change on their business. The guidelines on reporting climate-related information integrate the recommendations of the Financial stability board's taskforce on climate-related financial disclosures (TCFD) and take account of the forthcoming taxonomy on sustainable activities that is under development. Overview of the new guidelines on reporting climate-related information (europa.eu) https://finance.ec.europa.eu/system/files/2019-06/190618-climate- related-information-reporting-guidelines-overview_en.pdf Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive There is a lot of talk about net-zero emissions and company’s targets to achieve it, but us businesses get closer to this target through dedicated actions, they will look to take this one step further to become climate positive. However, there is still some discrepancy between the inclusion of carbon offsets in a truly net-zero climate strategy. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Carbon neutral means that any CO2 released into the atmosphere from a company's activities is balanced by an equivalent amount being removed. Climate positive means that activity goes beyond achieving net-zero carbon emissions to create an environmental benefit by removing additional carbon dioxide from the atmosphere. Carbon negative means the same thing as “climate positive.” Carbon positive is how organisations describe climate positive and carbon negative. It’s mainly a marketing term, and understandably confusing–we generally avoid it. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Climate Neutral refers to reducing all GHG to the point of zero while eliminating all other negative environmental impacts that an organisation may cause. Net-Zero carbon emissions mean that an activity releases net-zero carbon emissions into the atmosphere. Net-Zero emissions balance the whole amount of greenhouse gas (GHG) released and the amount removed from the atmosphere. What is the difference between carbon-neutral, net-zero and climate positive? (plana.earth) https://plana.earth/academy/what-is-difference- between-carbon-neutral-net-zero-climate-positive Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Carbon neutral was the New Oxford American Dictionary‘s word of the year in 2006 – and since then, has been catapulted into the mainstream world. By definition, carbon-neutral (or carbon neutrality) is the balance between emitting carbon and absorbing carbon emissions from carbon sinks. Or simply, eliminate all carbon emissions altogether. Carbon sinks are any systems that absorb more carbon than they emit, such as forests, soils and oceans. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Become carbon-neutral. Becoming carbon neutral is the new mantra of Wall Street and worldwide companies, but how to make it happen? As experts in the field, Plan A advises companies to apply a carbon accounting framework to the initiative they are trying to address. First, we advise you to calculate your company’s carbon footprint, which you can do easily with our Carbon Management software. Once the total carbon footprint is calculated, you will have a better sense of how much your company's need to counteract. Then, reduce carbon emissions by analysing the worst carbon indicators - where your company emit the most and acting upon it. Finally, offset what’s left. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Difference between Carbon neutral and Net-zero. As established previously, carbon-neutral and net-zero are two similar terms. In both cases, companies are working to reduce and balance their carbon footprint. When carbon-neutral refers to balancing out the total amount of carbon emissions, net-zero carbon means no carbon was emitted from the get- go, so no carbon needs to be captured or offset. For example, a company's building running entirely on solar, and using zero fossil fuels can label its energy as “zero carbon.” However, when referring to "net-zero", it is crucial to specify net-zero carbon or emissions. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 5.- From net-zero to climate positive Difference between Carbon neutral and Net-zero. On the contrary, net-zero emissions refer to the overall balance of greenhouse gas emissions (GHG) produced and GHG emissions taken out of the atmosphere. Even if the scientific concept is often applied to countries like the US, China, it can also be used for organisations. In other words, net- zero describes the point in time where humans stop adding to the burden of climate-heating gases in the atmosphere. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 6.- Carbon offsetting continues Organisations are more able to invest money over time. Particularly in the public sector as well as the critical corporations that support it, carbon offsetting is a way of contribution and requires businesses to carefully consider who will take on the sustainability burden of their organisation. This will often include investments in renewable energy developments, carbon sequestration initiatives, or protection of natural resources. Companies like Ecologi are developing great initiatives to help businesses take care of their carbon emissions. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 7.- Hybrid working reduces company emissions While the hybrid working setup was a response to the coronavirus pandemic, many organisations are sustaining the model of work, which is not only beneficial to their employees but brings down their overall emissions contributions. Less people will travel to the office on a regular basis and will cut their travel costs and greenhouse gas (GHG) emissions. Carbon emissions - what's the impact of hybrid working? (zevero.earth) https://www.zevero.earth/post/carbon- emissions-whats-the-impact-of-hybrid-working Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 8.- Renewable energy sourcing Mentioned alongside carbon offsetting, businesses are taking control of their energy sourcing. Take example for the leading technology firms that have been investing heavily in renewable energy as part of their product portfolios. The fossil-fuel derived businesses are also under pressure to make the switch to a more sustainable form of energy supply and change their means of doing business. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 9.- ESG is critical for investment Perhaps the most common area of discussion at Sustainability LIVE this year, investment firms are holding out for environmental, social and governance (ESG) disclosures. The current struggle is regulation and standards, which are currently finding their places within industries, but the leading investors believe this is one of the next aspects of sustainable business to be standardised. How ESG investment returns are growing as market evolves | Sustainability Magazine https://sustainabilitymag.com/sustainability/esg-investment-assessing-past-current-future-projections-finance Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends 10.- Consumer sentiments on sustainable products The consumer goods industry is already changing rapidly, and it will continue to do so as more consumers become conscious of their environmental impacts and the recyclability of the products that they buy. Food and beverage companies have responded well to this and have implemented recyclable packaging initiatives to cater for the growth in local food deliveries. Consumer goods firms are also working with research & development teams to create circular packaging by design. Deloitte researches consumer sustainability behaviour | Sustainability Magazine https://sustainabilitymag.com/diversity-and-inclusion-dandi/deloitte-researches-consumer-sustainability-behaviour Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends What Drives Sustainability Trends? 1.- Regulation 2.- Industry Standards 3.- Social Pressure Notable Sustainability Trends Looking to the future, several corporate sustainability trends are likely to continue into 2022 based on the current adoption rates. Let's examine a few of these continuing sustainable practices. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Sustainable Finance Businesses are increasingly making sustainable financial decisions or holding themselves accountable when failing to meet green standards. In 2020, Visa introduced its green bond worth $500 million to foster environmental sustainability and a sustainable payments ecosystem. Tesla recently cited ecological concerns as the reason they backed out of accepting Bitcoin payments. EU regulations also require financial advisors and financial market participants to disclose sustainability information to potential investors, a huge step forward for investment transparency in the EU. If you and your business already implement sustainable financial options, you will remain ahead of expected legislation, all while creating sustainable economic growth. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Renewable Energy The price of power from renewable sources has plummeted over the last decade. As it's now one of the cheapest options for power today, we are sure the widespread adoption of renewable energy will continue. Apple, Intel, Google, and Microsoft are all heavily reliant on renewable energy, citing price and price predictability as reasons for the switch. Your business can also leverage the cost savings included with clean energy for better business efficiency and a greener future. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Give-Back Programs Organizations like Nordgreen have introduced Give-Back programs, where businesses donate portions of their profits to charities, relief efforts, and other good causes. The popularity of this approach continues to grow, and if you implement a similar program, your business could attract new consumers who are looking to give back through their purchases. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Sustainable Food Products Food production, packaging, shipping, and waste are all undergoing a sustainability revolution. For example, seaweed, cornstarch, or mushroom-derived products are all replacing plastic packaging. In a bid to reduce food waste, manufacturers are innovating around surplus or leftover ingredients to create or supply new products such as Cascara Coffee and insect protein. If your business deals with quantities of food or extensive shipping and packaging operations, you can select sustainable options that help your bottom line and also help preserve our natural resources. Sustainable Business Concepts Sustainable Business Trends, Trade, Industry, Jobs, Consumption Sustainable Business Trends Innovative Partnerships When sustainability goals intersect, businesses can form partnerships that multiply for effectiveness and efficiency. For example, the 10x20x30 initiative saw leading food retailers engage with over 200 of their suppliers across 80 countries to cut food waste in half by 2030. https://pacecircular.org/10x20x

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