Business In Society - Business And The Environment - John R. Palmer Lecture Notes PDF

BUSINESS IN SOCIETY BUSINESS AND THE ENVIRONMENT Professor John R. Palmer  Learning Outcomes 14- 2 1. Understand the extensiveness of business’s responsibilities toward the environment. 2. Describe the influence of government in addressing envi...

BUSINESS IN SOCIETY BUSINESS AND THE ENVIRONMENT Professor John R. Palmer  Learning Outcomes 14- 2 1. Understand the extensiveness of business’s responsibilities toward the environment. 2. Describe the influence of government in addressing environmental concerns. 3. Define environmental non-governmental organizations (ENGOs) and appreciate their influence on corporations. 4. Explain how market-driven environmentalism approaches work. 5. Describe a corporation’s responses to environmental concerns in the context of the main functions of business.Describe the influence of government in addressing environmental concerns. 6. List the sustainability measures and standards that exist and become aware of corporate and industry initiatives to report on their environmental responsibilities.  Remember 3E / 3P 3  The environment is a key element of CSR – Environmental → Economic  Ethical  People – Planet → Profit This Course CSR Stakeholders Globalization Environment My perspective Ethics  Business, Its Stakeholders, 14- 4 and the Natural Environment  Environmental issues confront virtually all aspects of the corporation, from:  Input of resources to manufacturing process  Workplace conditions through to the way products are packaged and sold  Managers must cope with planning, organizing, leading, and controlling all the aspects of the environmental issue  Commons → any resource used as though it belongs to all Air, water, natural animal stocks …  The Environmental Ethic and Sustainable Development 14- 5  Environmental ethic → set of values or principles that govern a corporation’s practices relating to the environment  Sustainable Development → development ensuring that the use of resources and the impact on the environment today does not damage prospects for the use of resources or the environment by future generations  Business sustainable development → 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 needed in future  Environmental Concerns 14- 6 in Business and Society  Acid rain  Ozone  Air pollution  Pollution  Ecosystems  Waste management  Energy production  Water quality and consumption  Climate change /  Nature and wildlife global warming  Government’s Influence 14- 7  Extensive government involvement exists through public policy formulation and the regulation of all aspects of the natural environment  Government departments and agencies established to:  Regulate the activities of corporations  Assist corporations in meeting environmental performance targets  Examples: Environment Canada, Canadian Council of Ministers of Environment, National Roundtable of the Environment and the Economy, Canadian Environmental Assessment Agency/Impact Assessment Agency  Responses by Government 8  Responses of Governments in Canada  Canadian Environmental Protection Act (Federal government)  Impact Assessment Act (replaced the Environmental Impact Assessment Act)  Air Quality Legislation (Provincial governments)  Water Quality Legislation (Federal government) ◼ Canada Water Act ◼ Fisheries Act ◼ Navigable Waters Protection Act ◼ Arctic Waters Pollution Prevention Act ◼ Canada Shipping Act ◼ Dominion Water Power Act  Land-Related Legislation  Kyoto Protocol  Environmental NGO Influence 14- 9  Environmental non-governmental organizations (ENGOs) → groups that hold shared values or attitudes about the challenges confronting the natural environment and advocate for changes to improve the condition of the environment.  Influence corporations through protests, blockades, boycotts, and annual shareholder meetings  Example: Greenpeace  The power of NGO’s 10  Just before the Exxon Valdez oil spill in 1989 the CERES organization was formed. CERES then developed ten principles that have been advanced as models for businesses to express and practice environmental sensitivity  Many major companies have endorsed these principles:  e.g., Coca-Cola, American Airlines, General Motors, Sunoco  Why Do ENGOs Target Some Firms? 14- 11  ENGOs select corporations to target based on:  Firm is the source of the environmental impact  Extent of the consequences of the firm’s actions  Denser relationships among firm’s ENGOs  Larger the firm  Greater influence of the firm within their industry  Previous interactions with ENGO  Closeness of the firm to consumers in the supply chain  Firm’s brands are well known  Influence of Market-Driven Environmentalism 14- 12  Standard environmentalism → government regulation is necessary remedy for the market’s failure to provide enough environmental amenities  Market environmentalism → economic incentives created by market are more effective at protecting the environment than government intervention  Market factors influencing environmentalism are:  Economic growth  Free trade  Property rights  Differences between Standard and Market Environmentalism 14- 13 Factors Standard Free-Market World is dynamic and two forces counteract harm: Viewed as destructive, because Economic (1) increased income drives a demand for producing more creates more Growth more environmental quality, and (2) environmental harm stimulation of innovation that improves environmental quality Considered part of the Forces industries to be more competitive, problem: prevents countries accelerating adoption of newer, cleaner Free Trade from following own higher levels technologies; trade restrictions possible to of protection; and belief that protect environment under WTO; countries rich countries exploit poor open to trade grow faster Powerful tool for protecting because Property Faith in government to solve ownership incentive creates stewardship Rights versus problem for the public good incentive and gives individuals power to Regulation protect the environment. © 2020 McGraw-Hill Education Ltd. TABLE 14.2  Market-Driven Environmentalism 14- 14  Carbon pricing → financial instrument that businesses and governments are using to reduce carbon emissions, which can be done in one of three ways:  Cap-and-Trade → governments cap total carbon emissions and then give or sell companies carbon permits that add up to the ca  Carbon Pricing → governments impose a fee on carbon  Output-based Price System → instead of paying the charge on fuels that they purchase, industrial facilities in the system will face a carbon price on the portion of their emissions that are above a limit  Carbon Tax – the Misunderstood Solution 15  Goal – reduction of carbon footprint both by individuals and businesses  Method – implement a tax on carbon products  We were about 20 years too late to implement a Carbon Tax solution  A “disincentive” tax – people will choose a more carbon-friendly product to pay less carbon tax (4 cyl. car, EV, geothermal heating/cooling)  These funds go into a special account that cannot be used for general revenue purposes  Businesses may draw from these funds in order to re-engineer their processes to become more carbon-friendly  Taxpayers receive a “refund” to counter hardships  Reality – businesses are lazy  Rarely use the funds for the intended purpose  Prefer to simply add the cost of the tax to you, the consumer ◼ This adds up multiple times over the entire supply chain  Market-Driven Environmentalism Cont’d… 14- 16  Offsets (emissions-reduction credits) → credits purchased from other corporations or organizations to mitigate greenhouse gases released into the environment  The funds generated used to finance undertakings that will result in the reduction of emissions  Carbon capture and storage (CCS) → carbon emissions are captured and injected into underground formation.  Referredto as carbon sequestration or geosequestration  Can be expensive and difficult to implement  Business Responses to Environmental Issues 14- 17  Management positions and committees should be created to deal with the environment issue  Key to have top management commitment so that there are practical principles to:  Gide the corporation’s environmental efforts  Integrate environmental affairs with operations  Encourage environmental professionals to meet mounting environmental requirements  Business Responses to 14- 18 Environmental Issues Cont’d…  Different approaches to environmental concerns:  Token response - focuses on damage control as problems arise and attempts are made to fix them (“greenwashing”)  Compliance with laws and regulations - concern about lawsuits and prosecution has motivated managers and executives to adopt strategies of compliance  Comprehensive environmental management - management seeks to gain a competitive advantage by taking an active stance on environmental issues  Sustainable development - corporations integrate concepts of sustainable development into their business strategies and environmental policies  Business Responses to 14- 19 Environmental Issues Cont’d…  Corporations need comprehensive environmental policies and programs  Referred to as environmental management systems (EMS) → ensure that environmental practices become an important component of the corporation’s overall strategy  EMS helps corporations to: ◼ Reduce costs ◼ Respond to investor demands ◼ Facilitate regulatory approaches and mitigating operational risk ◼ Hire best employees ◼ Meet consumer demand for “green” products and services  Managing Responses to 20 Environmental Concerns  Financial Management 14- 21  Includes consideration of environmental factors and involves many aspects:  Accounting guidelines  “Eco-insurance” products now available  Environmental assessments necessary to determine influence on financial performance and liability  Investments being screened for environmental performance  Shareholders unhappy with a corporation’s environmental policy may hurt its financial performance  Marketing 14- 22  Green marketing → selling environmentally friendly goods and services to consumers  Consumers are increasingly considering eco-labels when purchasing products  To increase the legibility and trust in eco-labels, third- party certification is occurring  Are consumers willing to pay the increased prices often necessary for many green products?  Caution 23  Yes: some clients will accept to pay extra for “greener” products/solutions  Think of ◼ organic fruits/vegetables ◼ Toyota Prius  However, there is a limit  Think of ◼ Chevrolet Volt  Just as we balance stakeholder requirements, Green can also be a balance  Human Resources 14- 24 Practices and Policies to Create the Green Workplace  Eco-friendly policies and practices are influencing the Offering a recycling program for office products, including donating and discounting used office furniture to employees or charities, and banning disposables such as plastic utensils and paper cups and plates. recruitment and retention of employees: Conserving energy by using energy-efficient lighting systems, and equipment, and installing automatic shutoffs of idle equipment. Reducing consumption of paper, packaging, and other office supplies Encouraging employees to be more environmentally friendly by promoting walking, biking, and using public transport to work or car-pooling. Providing bike stands, showers, and fare subsidies. Creating a pesticide-free green landscape with trees, lawns, and gardens. Reducing emissions through less travel and climate control, striving for carbon neutrality. Purchasing renewable energy credits. Conducting virtual meetings through video and teleconferencing thus reducing travel. Using natural lighting, with windows and skylights. Investing in community environmental initiatives. Requiring suppliers to be green. Publicly disclosing sustainability initiatives through reports that identify objectives and detail the progress made in achieving them. Convincing employees of program benefits and top management support. Providing incentives for environmentally friendly behaviour. Organizing employee committees to provide advice on practices. © 2020 McGraw-Hill Education Ltd. TABLE 14.3  Operations 14- 25  Business is trying to implement environmentally friendly processes and technologies into all aspects of operations or the production function  Three main areas of activity: ◼ Pollution reduction ◼ Waste management and recycling ◼ Energy conservation Unenvironmental IT Operations  Cooling and Server usage are main draws of electricity  IT culture – “let’s buy this and try that”  IT sprawl – and the “BYOD” mentality  Archaic equipment and thought processes ◼A perceived need to “touch” your IT assets ◼ High power use, low actual use  Small datacentre electricity cost Datacentre Electricity Cost Location Rate Kentucky 4.1 Pennsylvania 5.08 $7.00 Quebec 5.32 Cost ($million/yr) $6.00 Ontario 6.5 $5.00 Manitoba 6.77 BC 6.8 $4.00 Alberta 7.7 $3.00 California 7.75 Connecticut 9.47 $2.00 New Brunswick 9.85 $1.00 Newfoundland 10.407 $- Saskatchewan 10.84 Kentucky Pennsylvania Quebec Ontario Manitoba BC Alberta California Connecticut New Brunswick Newfoundland Saskatchewan New York PEI Nova Scotia Hawaii Nunavut New York 11.34 PEI 12.05 Nova Scotia 12.638 Hawaii 13.71 Location Nunavut 52.39 *12,000,000 kwH per year Example: IBM “Big Green”  (IBM is commonly referred to as “Big Blue”)  “Sustainability is no longer an option. Sustainability is an imperative”  Began as a project to reduce their own costs, evolved into creating a sellable set of solutions  Make existing products and processes more efficient for both the environment and business  Developing new innovations that can help the word become smarter, drive economic and operational improvements, increase accountability, and lessen environmental impact  Standardize the entire organization on one server platform (with few [temporary] exceptions)  Virtualize and consolidate  Create tools, improve processes They then took the in-  Results: house solution they  Reduced Data Centre footprint by 75% developed, and marketed  Reduced Cooling usage by 80% it to other customers  Reduced Electricity usage by 75%  Measuring and Reporting on Environmental Sustainability 14- 29  Examples of indicators used to evaluate environmental performance:  Type and amount of materials used  Source of energy and efficiency of use  Source and quality of water  Impact on biodiversity  Reduction of emissions, effluents, and waste  Product design that minimizes impact  Compliance with environmental regulations  Use of efficient transportation mode  Environmental Sustainability Measures and Standards 14- 30  Coalition for Environmentally Responsible Economies (CERES) (noted earlier)  International Organization for Standardization ISO 14000  International Institute for Sustainable Development (IISD)  Canadian Sustainability Indicators Network (CSIN)  Environmental and Sustainable Development Indicators Initiative (ESDI)  Dissenting Views on the Environment 14- 31  Not everyone agrees that business should play leading role in protecting environment  Criticisms of sustainability:  Concept difficult to define and understand  Means stopping or constraining economic development  Implies capitalism is unsustainable and morally lacking  Lacks understanding of markets and moralistic system of markets  Executives are being misled into responding to it as a social issue  The Environment: Corporate Opportunities 14- 32  Corporations face many opportunities as they attempt to practice sustainable development:  Reputations likely enhanced  More competent staff attracted  Customers attracted  Investors attracted  Costs reduced through recycling/conservation  Better integration with local community  Business opportunities emerge from new technologies  More efficient ways of producing products found  The Environment: Corporate Challenges 14- 33  Corporations face many challenges as they attempt to practice sustainable development:  Corporate image may deteriorate  Revenues may suffer if customers are lost  Investors may decide not to invest  Material and production costs may increase  Financial penalties increasing  Insurance premiums can increase  Potential alienation from local community  Government may enact stricter legislation  From a Linear to a Circular Economy 14- 34  Linear economy → raw materials used to produce goods or products that are used and not recycled or may be even non-recyclable  Reuse economy → after use, some goods are recycled and reused in production but the remainder is still waste  Circular economy → restorative and regenerative by design so materials constantly flow around a closed loop system preserving value rather than being used once and then discarded  Extended producer responsibility (EPR) and life cycle thinking  Resources 35 PRO  The Upside of Down ◼ Thomas Homer-Dixon  An Inconvenient Truth ◼ Al Gore CON  The Skeptical Environmentalist  “Verdens sande tilstand” (1998) – “The True State of the World” (2001) ◼ Bjørn Lomborg MIXED  The Magic Washing Machine ◼ Hans Rosling  Summary 14- 36  Concern for the natural environment is widespread in society and business has a responsibility to respond. Responding to this concern is challenging as many stakeholders and issues influence corporations. Corporations must develop an environmental ethic or set of values relating to their practices toward sustainable development in the economy. Each corporation must develop strategies and practices to meet its own and its stakeholders’ needs today while ensuring that future resources will be available.  Governments have implemented environmental policies through legislation and regulations and the establishment of various agencies. Environmental assessments by businesses are now commonplace. However, the federal government is reducing its regulation of environmental impacts.  Influence of a different type comes from environmental non-governmental organizations (ENGOs). Hundreds of such organizations exist and corporations are learning how to respond to or cooperate with them.  Another possibility is to leave solutions to environmental concerns to market-driven initiatives. Instead of being required by governments to respond, it is argued that relying on market forces is more effective. Emissions trading and offsets are two examples.  When corporations act on environmental concerns, the responses must be managed with appropriate organizational structures, environment management systems, and corporate strategies. As corporations attempt to respond to environmental concerns, there are implications for all the major functions of business  Many sustainability measures and standards have been developed by ENGOs, business organizations, and industry associations. Indicators that measure a corporation’s environmental performance are used. Many corporations issue elaborate environmental reports.  Dissenting views on the environment are held in the business community and by other stakeholders. Not all businesspersons believe that climate change is a problem. Even public attitudes are mixed in that surveys indicate consumers are concerned, but this concern is not always reflected in purchasing decisions  The environment presents corporations with opportunities and threats. But, many corporations are developing an environmental ethic that achieves sustainable development.