MGMT2004 Notes PDF

MGMT2004 – Business and sustainable development Module 2 – weak vs strong Module objectives - Have gained an understanding of the meaning of sustainability and the basic principles of sustainable development - Be able to differentiate between weak and strong aspects of sustainability and...

MGMT2004 – Business and sustainable development Module 2 – weak vs strong Module objectives - Have gained an understanding of the meaning of sustainability and the basic principles of sustainable development - Be able to differentiate between weak and strong aspects of sustainability and also - Critically think about how business management should approach sustainable development The 15 Global Challenges provide a framework to assess the global and local prospects for humanity. The Challenges are interdependent: an improvement in one makes it easier to address others; deterioration in one makes it harder to address others. Arguing whether one is more important than another is like arguing that the human nervous system is more important than the respiratory system. Can you see why there is a growing desire to shift away from the economic paradigm of development? The tragedy of the commons - Hardin (1968) suggested that excessive population growth and exploitation of natural resources leads to the ‘tragedy of the commons’ - When nobody owns a particular resource it gets exploited to the extent that the resource becomes unusable for everybody Greater Focus on Participation and Local Solutions to existing and emerging problems  Paradigm shift towards Sustainable Development for all not just selected few 189 countries adopted the UN Millennium Declaration and committed to the Millennium Development Goals (MDGs) in 2000 MDGs reflect on a shared vision for reducing poverty around the world The central goal is to reduce by half the proportion of people living on less than US$1.25 a day by 2015 relative to 1990 SDG’s and the drivers 1. Universality: we’re in this together and the goals are applicable to all countries rich & poor 2. Sustainability: the goals are holistivve and target social, economic and environmental issues 3. Leave no one behind: we cannot claim to have met a goal unless it is met for everyone 4. Participation: all countries and multiple stakeholders involved in putting together SDGs Paradigm Shift - Paradigm: a framework for observation and understanding the patterns that influences what we think and how we want to solve problems e.g. theory, norm common sense - Paradigm shift is achange from one way of think / examining to another Shift towards sustainable development “to Sustain”: - Support - Keep in being - Keep in certain state - Keep at proper level or standard “Sustainability” - Continuance - Maintenance and - The ability to continue an activity or maintain a certain condition indefinitely “to develop” - Improve - Get better - Progressive transformation of economy and society Sustainability or sustainable development Sustainability = Aim Sustainabile development = objective - If an activity is said to be sustainable: it should be able to continue forever - SD= development that meets the needs of the present without compromising the ability of future generations to meet their own needs Inter-species equity: making sure that all of us have the same rights and opportunities now and in the future Precautionary principle: Making sure that the lack of scientific certainty doesn’t compromise common sense to minimize risks Sustainability: Steep career of a term - Sustainability was first conceived as an environmental issues only o Sustainability meant nature conservation - Today, sustainability stands for the balancing of many issues and dimensions o Sustainability now encapsulates political, social and cultural as well as environmental and economic concerns Weak sustainability (optimistic view) - Maintenance of high standard of living through the maintenance of various forms of capital - Substitutability of natural capital e.g. economic rationality - Anthropocentric o Emphasis on human needs and values e.g. triple bottom line - Mechanistic worldview o Everything can be measured and explained o If you cannot measure it, it does not exist - Nature is ascribed utilitarian values only o Nature only matters when useful to humans (resources) - Optimist and strong faith in o Technology and science will save the day Anthropocentric (planet is for people to exploit) Optimistic (science & technology can fix problems) Economic rationality (substitutability of capitals) Strong sustainability (pessimistic view) - This view suggest that man-made capitals cannot serve as a substitute for (critical) natural capital - Pessimistic assumptions o Focuses on precaution and carrying capacity - Ecocentric worldview o Nature matters in its own right - Challenges entrenched structures and beliefs o Rejects economic rationality and technocracy o Calls for radical social, political and economic reform - Trans-scientific / multi disciplinary o New approach to science based on integration and holism as opposed to sole reliance on single disciplines Weak camp: optimists Strong Camp: pessimists The paradox Achieving the ideal balance: to increase profits, strengthen society and in the process not damage the environment remains paradoxical Sustainable development requires - Inter-species, intra-species and inter-generational equity considerations; and the adoption of the precautionary principle in the context of weak or strong sustainability paradigm - Business as an integral component to achieve SDGs Unanswered questions remaining - How should business address the trade-offs - How could businesses deal with the vaguesness and paradox  - How might businesses be able to shift paradigms Discussion board question - How relevant is the weak vs. strong sustainability debate for business? Answer: The weak vs. strong sustainability debate is relevant as it will decide how companies will operate depending on which conception of sustainability they adopt. The chosen conception will ultimately lead to differing outcomes based on which conception was adopted, both for strategic and operational sustainability. Relying on the weak ideal of sustainability implies that there is only so much one company can achieve and that societal, economic and environmental problems are not ultimately dependent on one company’s approach alternatively the strong ideal for sustainability has a holistic approach to sustainability and that business can directly improve or create further divide within the realms of economic, environmental and social injustice. Each approach to business sustainability will have different aims, tools of measurement and requirements to achieve the objectives. Leena Lankoski, Hopwood, B., Mellor, M., & O'Brien, G. (2005). Sustainable development: mapping different approaches. Sustainable development, 13(1), 38-52 Alternative conceptions of sustainability in a business context,Journal of Cleaner Production,Volume 139, 2016, Pages 847-857,ISSN 0959-6526, https://doi.org/10.1016/j.jclepro.2016.08.087. (https://www.sciencedirect.com/science/article/pii/S0959652616312355) Module 3 – Corporate social responsibility (CSR) Module Objectives - Describe the concept of CSR - Distinguish the connections and differences between sustainability and CSR - Demonstrate an understanding of the CSR history and its evolution in the context of business management Civic virtue for responsible businesses - Civic virtue is an ethical standpoint influenced by welfare of the society even if at the expense of individual self-interests - Companies are increasingly held responsible for economic, environmental and social injustice and there is a growing public disquiet about unethical business conduct Paradigm shift of business responses - Denial and resistance o Re-emption of policy changes o Reactive lobbying o Confrontation - Reaction o Passive compliance o Cost internalisation o No advantage gained - Strategic and pro-active o Anticipation of change (even lobbying for progressive change) o Voluntary adoption of new technology o Pressure becomes strategic advantage Understandings of CSR - Actions that appear to further some social good, beyond the interests of the firms and that which is required by law - The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large CSR is a performance management tool through which a company achieves a balance of economic, environmental and social imperatives (triple bottom line approach) while at the same time addressing the expectations of shareholders and stakeholders Definition: CSR reflects on management practices that address the impacts of an organisation on business, society and the environment and seek to create positive social value through core business Dimensions Examples 1. Environmental a cleaner environment and environmental stewardship  address environmental impact i.e. Mitigate or minimize adverse environmental outcomes 2. Social contribute to a better society i.e. Integrate social concerns in business operations consider the full scope of externalities i.e. the impact on societies or communities 3. Economic contribute to economic development or poverty reduction preserving the profitability of business operations 4. Stakeholder interaction with stakeholders i.e. shareholders, suppliers, customers, communities interaction with employees 5. Voluntariness based on ethical framework beyond just legal obligations i.e. Voluntary The challenge for business is not so much to define CSR, as it is to understand how CSR is socially constructed in a specific context and how to take this into account when business management strategies are developed to do better and avoid tokenism Business case for CSR as a way to achieve SDGs - Healthy business in a healthy society o Theory suggests that interests of business and society overlap, producing dual or blended value o Companies act upon enlightened self interest o Producing both social and economic benefits - Research suggests that good CSR yields o Better company image o Higher share price o Better productivity o Improved sales  o Better staff attraction/ retention CSR policies and practices that enhance the competitiveness of a company and simultaneously advance socio-economic and environmental conditions of the communities in which the company operates is a win- win option (double dividend) CSR = Sustainability - Growing convergence of CSR dimensions and sustainability principles - At the level of business practices, sustainable development initiatives are increasingly couched as CSR initiatives - Interchangeable use of CSR and sustainability terminology by business o Sustainability management – responsible o Sustainability reporting – CSR reporting o Sustainable investment – responsible investment CSR ≠ Sustainability - Environment not captured in many CSR definitions - Ethics is murky o What is socially and environmentally just, right and ethical can be manipulated - Nature is reduced to a stakeholder preference o Environmental concerns are addressed by way of consumers buying green products or demanding greener company practices - Reduction to business case CSI CSR Sustainability means business survival Sustainability means Triple Bottom Line Profits should be achieved at any cost Profits at any cost is not the main purpose Focus on shareholder’s interest Focus on stakeholder’s interest Avoiding Bad Doing good + Avoiding Bad o CSR as a pathway to sustainability has become an economic rationale i.e. we do CSR because we make money out of it CSR Government - More legal obligations - Rising compliance pressure o Changing rules - Consumers/ shareholders o Growing green consumer demand o Demand for protection of shareholder value   Changing demand - Society and environment o Declining natural resources o Increasing population, social conflict  Changing supply Shifting business environment and CSR Agenda - Yesterday o Corporation could afford to be oblivious to the negative social and environmental impacts it was having - Today o Corporations strive to reduce impacts and protect their image - Tomorrow o Corporations must learn to create positive social value and to self-environmental solutions CSR specific observations - CSR is the newest ‘old’ thing in business management - The understandings of CSR continue to change (and will do so) - CSR-sustainability nexus is not straight forward (sometimes outright CSI) and requires continuous improvement Broader business outlook - Business environment is changing rapidly - Businesses’ relationships with stakeholders are no longer restricted to the market based actors - Failure to respond to regulatory, social and environmental shifts can result in irresponsible business practices – Changing rules, demand, and supply Discussion board question - Assess the merits and demerits of Corporate Social Responsibility (CSR), using real world examples Answer: Definition: CSR reflects on management practices that address the impacts of an organisation on business, society and the environment and seek to create positive social value through core business. Definition: Corporate social responsibility can be summarised as reaching ‘commercial success in ways that honour ethical values and respect people, communities and the natural environment’(business for Social Responsibility, 2003) as well as keeping companies accountable of their impact within these dimensions. The advantages of a company acting within a socially responsible manner can not only improve a companies profitability but has shown that customer engagement is higher with companies that are seen to act within an ethical and moral way. Additional Costs, clashing of business objectives, differing interests of shareholders, competitive disadvantage are all possible negative impacts that a company could experience once a CSR policy has been implemented (Dahlsrud, 2008). Corporate social responsibility is a leading tool in all decisions made within each area of business for companies. Business for Social Responsibility. 2003b. Overview of Corporate Social Responsibility. http://www.bsr.org/BSRResources / IssueBriefDetail.cfm? DocumentID=48809 [23 June 2003]. Business for Social Responsibility. 2003b. Overview of Corporate Social Responsibility. http://www.bsr.org/BSRResources/IssueBriefDetail.cfm?DocumentID=48809 [23 June 2003]. Dahlsrud, A. (2008), How corporate social responsibility is defined: an analysis of 37 definitions. Corp. Soc. Responsib. Environ. Mgmt, 15: 1-13. https://doi- org.dbgw.lis.curtin.edu.au/10.1002/csr.132 Advantages: A CSR policy improves company profitability and value. The introduction of energy efficiencies and waste recycling cuts operational costs and benefits the environment. CSR also increases company accountability and its transparency with investment analysts and the media, shareholders and local communities. This in turn enhances its reputation among investors such as mutual funds that integrate CSR into their stock selection. The result is a virtuous circle where the company's stock value increases and its access to investment capital is eased. Module 4 – The natural Step and Natural Capitalism Learning Modules 1. The principles of market based environmentalism (MBE) 2. The underpinnings of the natural step (TNS) framework and natural capitalism (NC) 3. The actual and potential contributions of TNS and NC to the broader sustainable development agenda Environment: ecosystems and their constituent parts, including people and communities and natural and physical resources and the qualities and characteristics of locations, places and areas; and heritage values of places; and the social, economic and cultural aspects of a thing mentioned. The definition of environment suggests that the scope of environmentalism is not only limited to environmental conservation but also human rights, labour and disarmament issues Capitalism and the Market - Capitalism subscribes to a system of private control over the means of production and distribution of goods as well as the overall business operations o Profit o Competition o Innovation - A free market can be considered an “ideal” mechanism in which there are no interventions and regulations posed by the government (except to enforce private contracts and property ownership) on businesses and terms of what they do Legislation/ Regulation - Attempts by governments to influence the behaviour of various actors e.g. vcivil society, market and tiers of the state - Command and control instruments aim to dictate a certain behaviour of actors based on technology use or performance i.e. mandatory seatbelts - Market based instruments aim to influence the behaviour through price signals i.e. internalize environmental externalities (atleast in theory) by making it expensive to pollute Market based environmentalism - Economic growth creates conditions for environmental improvement and MBE: o Acknowledges: growth >economic activity > pollution o Assumes: growth>economic activity>higher income o Higher income>changed preferences to buy green/expensive products - Market doesn’t penalise companies that do the wrong things for the society and the environment (unethical behaviour is not always punished) - Market assumes that costs and benefits in the future are not worth as much to people today The Natural Step Framework TNS is a frameowkr that helps businesses to focus on improving industrial processes rather than responding to the environmental effects (being proactive instead of reactive) - Business investments and directors are specifically chosen to steer organisations in a sustainable pathway TNS sustainability System conditions - The prerequisite for TNS is an all-embracing definition of the conditions that must apply in any sustainable society. These conditions, known as the system conditions, have been developed by an international network of scientists. System condition 1 – In a sustainable society, nature is not subject to systematically increasing concentrations of substances extracted from the earths crusts System Condition 2 – In a sustainable society, nature is not subject to systematically increasing concentrations of substances produced by society System Condition 3 – In a sustainable society, nature is not subjected to increasing degradation by physical means System condition 4 – In a sustainable society, fellow species are not subjected to disparity and humiliation Natural capitalism: natural capitalism like TNS is an alternative market based framework to traditional capitalism. It applies a mind-set of responsible abundance i.e. get more from less Traditional capitalism mindset  Economic progress can best occur in free market systems  Preference for an economic system based on private ownership and less government intervention  Resource scarcities will lead to innovation/development of substitutes  Environment is a minor factor of production, i.e. economic growth is a priority for a high standard of living  Free enterprise and market forces will optimize the use of resources Natural capitalist mindset  Environment is not a minor factor of production but an envelope that sustains the entire economy.  The availability and functionality of natural capital is the limiting factor to future economic development.  Badly designed business systems, population growth, and wasteful patterns of consumption are the primary causes of loss of natural capital.  Human welfare is best served by improving the quality and flow of desired services delivered.  All forms of capital need to be valued and global inequities of income and material well- being need to be redressed.  - Market based environmentalism (MBE) assumes that economic growth creates conditions for environmental improvements, so richer means greener. The premise of MBE does have limitations in terms of resolving contemporary social and environmental challenges. - Frameworks such as TNS and NC reflect on the desire to overcome the limitations of MBE. They are the indicators of the sustainability paradigm shift within the business sector aimed at changing the way entire market operates and not just one company. Discussion board question - Discuss the potentials and pitfalls of The Natural Step (TNS) in the context of Market-based Environmentalism. Answer: Definition: the assumption that market based environmentalism Module 5 – Cleaner production, eco-efficiency and eco-effectiveness - Explain the workings of cleaner production, eco-effectiveness and eco-efficiency in the business context - Differentiate between cradle to grave and cradle to cradle principles Foundation concepts: - Carrying capacity - Cicular economy - Cradle to cradle - Cradle to grave - Decoupling - Dematerialization - Linear economy - Resources intensity - Reuse economy Global resource extraction 1980 – 2013 - Global material extraction more than doubled in the past 30 years, from around 36 billion tonnes in 1980 to almost 85 billion tonnes in 2013, an overall growth of 132%. Two distinct  phases of material extraction can be identified. A period of modest growth between 1980 and around 2002, with only a short period of stagnation caused by the collapse of the former Soviet Union. From 2003 onwards, growth of global material extraction increased significantly, mainly driven by the rise of emerging economies such as China and India. Growth rates were unevenly distributed among the main material categories. Particularly the extraction of industrial and construction minerals increased significantly (by more than 240%), indicating the continued importance of this resource category for industrial development, in particular for building up housing, energy and transport infrastructure in emerging economies. Global extraction of metal ores increased by 183% and fossil fuels by 82% in the period of 33 years. Increases in biomass extraction amounted to 61%. The share of renewable resources in total resource extraction thus is constantly decreasing (from around 39% in 1980 to less than 27% in 2013). Global resource intensity 1980 – 2013 - This analysis addresses the question, whether on the global level, a de-coupling between economic growth and material extraction could be observed over the past 30 years. It can be seen that between 1980 and 2013, world GDP (in constant prices) grew by almost 150%. At the same time, global material extraction increased by around 130%. Across the whole time period, a slight relative de-coupling could be observed. - However, the dynamic changed completely around the year 2000. Before the millennium, material intensity of the world economy decreased constantly, indicated that a relative de- coupling occurred. In the year 2000, 20% less materials were required to produce a US$ of global economic output compared to 1980. However, since 2000, the material intensity curve bounds upward, indicating that in the past 15 years, not even a relative de-coupling can observed. Due to the rapid expansion of material extraction activities in many world regions, growth rates in extraction are even above the global growth rates for GDP. Currently, the world economy is therefore on a path of re-materialisation and far away from any – even relative – de-coupling. NOTE: Resource intensity is a measure of materials or natural resources (e.g. fossil fuel, water) used per GDP + GHG (GDP = the value of goods and services produced over a year, GHG=carbon emissions) Linear economy - In a linear economy, raw materials are used to make a product, and after its use any waste (e.g. packaging) is thrown away. It works according to the take-make-dispose step plan: o Resources are extracted o Products are produced and used o Discarded and disposed as waste - So system cares about maximizing the amount of products produced and sold but does not care about the waste Decoupling = Using less resources per GDP (i.e. dematerialize) + minimizing environmental impacts Dematerialization = the reduction in the quantity of materials required to fulfill economic functions in our society i.e. wise use of resources or do more with less Environmental impacts – pollution is the introduction of wasteful substances (visible or invisible) into an environment causing harm, instability or disorder to the natural functioning of ecosystems (and their inhabitants) Thermal pollution – is the degradation of water quality due to processes that change ambient water temperature e.g. caused by discharging clean but hot water used as a coolant in a power plant Pollution reduction principles Polluter pays principle: it identifies that people or organisations responsible for pollution are accountable for any social or environmental damage and should be responsible for paying the costs of damage Cradle to grave principles: using techniques e.g. life cycle assessment to find ways to minimise pollution associated with business activity Cradle to grave principle: using techniques e.g. life cycle asserssment to find ways to prevent pollution associated with business activity i.e. it pursues economic, ecological and social values through the practice of intelligent design and zero waste Cleaner production “the continuous application of an integrated preventive environmental strategy applied to proceses, products and services to increase overall efficiency and reduce risks to humans and the environment.” Guiding principles - Precaution: reducing externalities through redesign of industrial systems of profuction and consumption which currently might be material intensive - Prevention: making changes upstream in the system of production and consumption - Integration: integration across economic, social and environmental boundaries to achieve efficiency Cleaner Production in industry is often thought to encompass five general approaches, or prevention techniques. These are: 1. product modification: changes in the product design and possibly it's use system, in order to reduce environmental impacts of its production or of its use and disposal. 2. input substitution: the use of alternative input materials, as product raw material or production or consumption auxiliary, to reduce environmental impacts of the production or of the product use and disposal; 3. technology modifications: changes in the production facilities to reduce environmental impacts of the production processes. A huge variety of technology modifications can be thought of, from as simple as efficient spray nozzles, better monitoring and control devices to completely new process technologies; 4. good housekeeping: changes in operating and maintenance procedures, management and information systems, to reduce leaks, spills, left-overs etc.; 5. recycling and recovery: useful application of the waste stream preferably in the facility in which the waste stream is generated; In line with the environmental management hierarchy, the recycling option is the least preferred. Some argue therefore that source reduction should be the first tier in Cleaner Production and recycling only the second tier in Cleaner Production. However, in practice in industry it makes much sense to include the on site reuse and recycling approach as part of the Cleaner Production strategy. Reduce material intensity (make more products with fewer inputs) Reduce energy consumption (make more products with less energy) Reduce dispersion of toxic substances (make more products but pollute less) Enhance recyclability (make your products recyclable) Maximise use of renewables (make products using materials that won't deplete) Extend product durability (make products that last …) Increase service intensity (meet demand with service & not with more products) Cost savings Less waste, Reduced material inputs Improved Risk management Reduced risk and liabilities Marketing advantage Innovation and competitiveness Human Resource Benefits Better morale, loyalty Value Creation and Protection Improved quality and safety = improved shareholder value The eco-efficiency logic suggests “sustainability requires that the growth in the consumption of goods and services be accompanied by a proportional decline in the energy and material intensity of that consumption” Source: Rees (1995)  Efficiencies may be negated  E.g. biofuel cars = more car usage or expensive food (rebound effect)  Reuse economy  Economy based on recycling, materials are reused. E.g. input substitution but the economy still produces lots of waste  Solutions are company based (vs the system based)  E.g. 50% less cyanide pollution still is 100% harmful Eco-Effectiveness Seeks to emulate nature i.e. nature is wasteful from a fragmented or individual species perspective but every bit of waste is a resource for somebody else … Waste equals food i.e. Resource, it is driven by cradle to cradle (zero-waste) thinking and hence requires business to reinvent itself so that they no longer contribute to resources depletion - Eco-Effectiveness defines a positive agenda, envisioning a positive system as the goal— starting, for instance, acknowledging that something is only 10% positive, and working toward 100% positive. Circular economy in action: Cradle to cradle (C2C) certified products C2C certified products are:  safe for both human and environmental health  no toxicity  biodegradable, etc.  designed for easy recovery and reuse of materials  based on renewable energy and resources  water-wise  socially responsible 1. Cleaner production (~C2G) applies an integrated environmental strategy to focus on industrial processes to increase efficiency and reduce socio-environmental risks [environmental efficiency delivers economic benefits]  2. Eco-efficiency (~C2G) focuses on 3. Eco-effectiveness (~C2C) proposes a maintaining or increasing the economic value supportive relationship with ecological while decreasing ecological impacts e.g. do system and economic growth e.g. do better less bad [economic efficiency delivers [interested in the flow of energy and environmental benefits] materials instead of just $$] Module 6 – Environmental Management Systems Learning Objectives 1. describe the nature and implementation of EMS 2. Identify the obstacles for businesses concerning the uptake of ISO certification 3. Assess the benefits and drawbacks of recognised certification schemes Credentials and Standards - Credentials have always been important as a way to set and sell standards in the business world - Claims of product safety, lab tested performance or celebrity endorsements have helped businesses to grow for decades Importance of standards  Improved transparency & communication  Commonly agreed parameters  Fill regulatory vacuum ◦ Market-based substitute to government regulation  Facilitate world trade based on trust  Foster benchmarking of products Standards set globally ◦ International electrotechnical commission: The world’s leading institution that prepares and publishes International Standards for all electrical, electronic and related technologies. Environmental standards - ISO is a group of voluntary standards adopted universally (160+ countries around the world)/ EMAS is a quasi regulation issued by the European Union - EMAS covers only industrial productions whereas ISO is much wider in scope, production, distribution, services i.e. only production sites are eligible for certification under the EMAS - EMAS is more holistic in nature and in comparison ISO certified companies need to go through stringent hoops in order to be EMAS certified ISO ISO also means ‘equal’ (as in isobar, isometric, isotope) Develops international standards in all technical areas except electrical and electronics (responsibility of IEC)  Promotes development of standardization in the world with the aim of easing international trade of goods and services Has a portfolio of over 22,500+ standards for all three sectors (business, state, & civil society) that provide practical tools related to triple bottom-line (economy, environment & society). ISO 9001 Quality Management  Quality refers to all those features of a product (or service) which are required by the customer ◦ Quality management means what the organization does to ensure that its products or services satisfy the customer's quality requirements and comply with any regulations applicable to those products or services.  ISO 9001 certification deals with how organizations: ◦ enhance customer satisfaction, and ◦ achieve continual improvement of its performance ISO 14001 Why do companies get ISO certified?  Environmental Management is relatively a ‘new turf’ for business  There is much confusion as to what is expected of firms as many environmental aspects are not subject to regulation or standards  There is a wide range of company practices, which are difficult to compare  There is a recognised need for a standardised approach for environmental management in business  ISO 14001: certification for Environmental Management Systems EMS  EMS is an integrated tool, designed to help companies not only realise legal compliance but environmental, economic and social benefits through waste minimisation and efficiency gains   It includes the organisational structure, planning and resources for developing, implementing and maintaining policy for environmental protection  The main purpose of an EMS is to systematically control adverse environmental impacts and ensure that established objectives are met. It helps in scrutinizing environmental performance … (Massoud et al., 2010) Objectives of EMS To develop, implement, manage, coordinate and monitor corporate environmental activities for compliance and efficiency: Compliance = reaching/maintaining the legal standards Efficiency = improved economic bottom-line To provide an independent means of external verification that can vouch for - reliable and comprehensive system to implement, monitor and evaluate their environmental initiatives Making EMS effective  Management must commit ◦ Senior management needs to be committed and involved in EMS  Evaluate legal requirements ◦ Specific legal requirements against company’s operations must be cross-referenced  Provide adequate resources  ◦ Requisite human, financial and physical resources required, including allocations for training and EMS coordination  Set relevant SMART targets ◦ Objectives and targets should be specific, measurable, action oriented, realistic and relevant and time bound  Continuously improve your EMS/Recognise the marketing benefits ◦ Use of external audits in order to improve the process/feature EMS as a core part of your CSR to your customers (with the help of ISO)  Market Drivers ◦ Green consumerism Potential of ◦ First mover advantage ISO 14001 ◦ Cost reduction advantage ◦ Market access!!! Certification ◦ Social Drivers ◦ Public opinion ◦ Media attention ◦ Community pressure ◦ Employee expectations Minimise environmental liabilities (risk management) Maximize the efficient use of resources (reduce cost) Demonstrate a good corporate image (market advantage) Build awareness of environmental concern among employees (organisational culture) Improve recognition outside the market sector (community groups, state agencies) Gain a better understanding of the environmental impacts of business activities (improved eco-efficiency/do less harm) Limitations of ISO 14001 certified EMS - Is not a product standard - Is not a performance standard - Is not a tool of change for doing better - Does not require or establish limits of pollution - Does not mandate best practice technology - Dependent on the credibility and work-ethic of a certifying agency - Resource intensive (time/cost/interruption) - Does not consider ethics i.e. weapon manufactures can be certified (Krut and Glecckman 2013) Cost of ISO 14001 Certification Cost associated with developing and implementing the ISO 14001 includes: Acquiring information necessary for completing the certification requirements; Record keeping and documentation, and changes in practices necessary for meeting the requirements of the ISO 14001; Employee training (the opportunity costs) Time associated with auditing (both internal and third party) to verify that the policies and practices meet the standards; Registration (paid to the national agency that oversees ISO standardization). Renewal of certification (need to do it every three years) Comparison between 42 ASX listed/ISO 14001 certified companies and 60 ASX listed/non-certified and found that certified companies were no better than non-certified companies in terms of environmental engagement. ◦ ISO 14001 certification reflects on the practice of an Environmental Management System (EMS) – a tool designed to help companies realise legal compliance as well as TBL performance ◦ EMS is an internal process to manage environmental risks and opportunities. Whereas ISO 14001 is an external certification of that process but not the outcome. ◦ ISO certified EMS is certainly a positive way forward in terms of CSR, but it is not the ideal blueprint to achieve sustainable development. Module 7 – Eco-preneurship Learning Objectives Describe the nature and growth of green market; Describe social & eco-entrepreneurship in the context of sustainable development; Apply social & eco-entrepreneurial lens to resolve local/global challenges Green Economy - The green economy is described as an economy in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress on social development, simultaneously improving human well-being and social equity, and significantly reducing environmental risks and ecological scarcities (p. 367) Green Market - Green Market can be viewed as an economic vision for green growth and development – in which businesses can trade green products and services that help the planet, generate profit, and improve people’s lives in ways consistent with the principles of sustainable development Changing environmental trends - Peak Oil refers to the point in time when, as a global society we have reached the maximum possible rate for petroleum extraction per unit of time, meaning after this point the demand will outstrip the supply of fossil fuels (Kerschner et al. 2013) Green Growth  Wind power is projected to expand from US$63.5 billion in 2009 to US$114.5 billion in 2019.  Biofuels reached US$44.9 billion in 2009 and are projected to grow to US$112.5 billion by 2019  Solar photovoltaic (PV) was expected to grow from a $30.7 billion industry in 2009 to US$98.9 billion by 2019. However, in 2010, its value was already 82 billion, which suggests that projections will be exceeded  Organic cosmetics were an industry worth US$ 7 billion in 2006; in 2011 it is worth US$ 9.1 billion  The global organic food market in 2010 was worth US $46 billion; in 2011 it grew to US$67.2 billion Going Green  The green economy was seen as a pathway out of the 2008/2009 global economic downturn ◦ Australia: (The Australian, February 2009)  The Australian government used a multi-billion-dollar green jobs package to stimulate the economy. ◦ USA: (Los Angeles Times, January 2009)  In his first term, Barack Obama wanted to spend US $150 billion over the next decade to promote energy from the sun, wind and other renewable  sources as well as energy conservation. His goals were to create 5 million new jobs repowering America over 10 years Green Markets: old Players  Green markets are often captured by conventional businesses that have turned green(er)  Their greening efforts can often be limited  Greening efforts are frequently driven by ◦ cost advantages ◦ reputational benefits ◦ market and compliance pressures ◦ Measures taken often involve: ISO certification Cleaner Production Eco-efficiency Green Markets: New Players  A different brand of businesses has also helped define and/or enter green markets  They operate on the basis of conviction  These so-called eco or social businesses are designed to be pro planet or pro people from the start-up  Their business goal is the attainment of environmental and/or social goals Green Economy  The world has seen a 20 % increase in the number of green collar jobs in the last decade. Jobs related to energy reduction and emissions management have alone increased by 180%.  Strong growth predicted in green collar jobs e.g.  climate risk management  corporate social responsibility  environmental health and safety  environmental law  green accounting  green marketing  NGO management  renewable energy sales  stakeholder engagement  sustainability   urban and regional planning  Projected investments in renewable energy of US$630 billion by 2030 are expected to translate into at least 20 million additional jobs in the renewable energy sector. Entrepreneurs Entrepreneurs = individuals who conceive new business ideas, and take on the risks required to convert those ideas into reality. The ability of an individual to identify problems (economic, environmental, social) and finding ways to make solutions as business opportunities = entrepreneurship. Individuals such as Bill Gates or Richard Branson are better known than most heads of state These entrepreneurs exercise influence well beyond economics e.g. environmental and social issues They influence political, social, environmental and cultural arenas Entrepreneurs, especially those of large corporations, can shape markets or help find better alternatives Eco-Entrepreneurship - Eco-entrepreneurship can be broadly described as a business approach which concentrates on environment based profitability i.e. doing good while doing well - Regulation Driven o Solar subsidy policy leading to solar panel business (manufacturing, consulting, installing or repairing) - Market Driven o Carbon offset programs, healthy meals or drinks - Value Driven o Ecological or even religious values e.g. vegetarian café Social Entrepreneurship  Social entrepreneur recognises when a part of society is stuck and provides new ways to get it unstuck.  Focus on goals that improves community well-being rather than just profit.  Social entrepreneurs are not content just to give a fish or teach how to fish. They want to change the way fishing is done.  Social enterprises are said to bridge the not-for-profit sector with the for-profit sector. Global challenge of poverty reduction Cycle of Destitution  Difficulty to kick-start micro-businesses in impoverished places ◦ Lack of skills and education ◦ Lack of financial collateral ◦ Inability to raise capital ◦ Dependence on ‘loan sharks’  Quasi-slavery  The poor get poorer or remain poor Conclusion  Green Economy/Market can be viewed as a different vision for growth and development  Eco/social entrepreneurship is about thinking outside the box of just ‘profit’  Underlying social/eco entrepreneurship is the goal of addressing the root causes of sustainability challenges  Achieving sustainable development goals requires more than just a few eco/social entrepreneurs + not all products and services within the green economy are green  However, if we are to overcome the limitations of traditional capitalism and transition towards a green economy, it requires more entrepreneurs, like you guys perhaps, with consciousness and willingness, to utilise business as a force for good. Module 8 – Green Marketing Learning Objectives Describe the difference between conventional and green marketing  Understand the strengths and weaknesses of green marketing Identify the potential of sustainability marketing as a way forward Marketing: Marketing is about developing products and services that meet consumer needs at the right price and communicating their benefits effectively in the market place Conventional Marketing Equation Marketing techniques have evolved over time i.e. intensified advertising in social media. However, profiting from consumer satisfaction remains the primary motive behind marketing theory and practice Theories of Marketing  Positioning In order to maximize sales (and profits), products or services offered must be positioned in such a way that consumers should believe that they need to buy what's being advertised Perceived-value Either offer similar products and services at higher price/rate than the competition so that consumers will believe what’s being advertised is superior Or offer cheaper prices than the competition so that consumers will believe its more value for the money Types of Marketing - Social marketing: the main focus is on the application of well-known marketing tools and techniques to foster social change - Green marketing: the main focus is on promoting products and services with minimum detrimental impact on the natural environment - Sustainability marketing: the main focus is on building and maintaining viable relationships with customers, the society, and the environment The paradox of marketing  Marketing is the driving force behind unsustainable economic growth and individual lifestyles  Contributes to over-consumption  Complicit in the promotion of unsustainable/unethical values and behaviours (suppliers & buyers)  The ‘more is better maxim’ of marketing seems to violate sustainability principles and arguably undermines efforts to mainstream ethical and ecologically sensitive consumer behaviour Marketing with a conscience - There is an increasing recognition and desire within the business sector to change the way marketing is done in line with the triple bottom line Marketing has the potential to be used as a tool to do less harm or do better:  Altering consumption patterns for society’s long-term best interests  Educate and raise awareness about the impact of our consumption  Change values, life-styles and consumer choice  Help challenge the status quo or existing norms Eco Labels The potential of eco labels was globally recognized in 1992 Rio Earth Summit An informative means for consumers to make choices to reduce their negative impacts + influencing the green market in terms of better products and services Type I, II, and III labels  Purpose of Eco Labels For businesses: provides a way to measure performance and also communicate and market the environmental credentials of product & services For consumers: guides their purchasing decisions by providing behind the scene info on products & services For governments: encourages the behavioral change of producers and consumers towards long-term sustainability without regulatory measures (C&C or MBE) It empowers people to discriminate between products that are harmful to the environment and those more compatible with environmental objectives…so ecolabels are the tools of green marketing Green Marketing Green Marketing consists of all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment [Polonsky 1994, p. 2]  Promotes products or services by employing environmental claims either about their attributes or about the systems, policies and processes of the firms that manufacture or sell them (Prakash 2002: 285)  Channels consumer demand towards environmentally less problematic areas of consumption (Hockerts 2003) Target Group Types of Consumers [Sources: Ginsberg & Bloom (2004) & Brooks et al. (2009)] Share Type Explanation 11% True Blue Greens Likely to buy green products and services 5% Greenback Greens Will buy green but won’t make lifestyle changes 33% Sprouts Care but don’t put in extra effort 18% Grousers Environmental issues are somebody else’s problem 31% Basic Browns Unaware or don’t care Types of Consumers [Source: Ogilvy and Mather (1992)] Share Type Explanation 16% Activist Likely to buy green products and services 34% Realist Are worried about the state of the environment 28% Complacent Environmental issues are somebody else’s problem 22% Alienated Unaware or don’t care Understanding the consumers - Numbness  ◦ People are too busy and simply do not have (make) time or don’t want to know ◦ Reluctance to change lifestyles ◦ Green issues are too big to handle  What can I do about melting ice caps?? - Apathy ◦ Green labels have a bad name because of perceptions of poor performance and ideological slant ◦ Dislike of ‘green’ labels ◦ Scepticism about industry's green claims  Akrasia ◦ Inconsistency in their demand – mostly opportunistic - consumption choices often do not reflect personal values. - Self-righteousness – self-deception ◦ I recycle and therefore I am green - Financially struggling ◦ We may like to buy organic but simply cannot afford to do so because of large price premiums ◦ Reluctance to pay more – fear of price gauging Ingredients of effective green marketing  Adequate pricing ◦ Consumers must be willing and able to afford premiums  Adequate greenness ◦ Price, image & performance may be more important  Product performance ◦ Product must be/do more than being green ◦ Credibility of claims ◦ Consumers need to believe your claim ◦ Instilling an sense of wanting to make a difference ◦ Demonstrate that using your product will make a difference ◦ Encourage behavioural change Potential of green marketing  Green marketing can help communicate the need to: ◦ Improve environmental quality  ◦ Look for alternative product choices ◦ Promote ‘better’ practices in industry ◦ Raise awareness ◦ Educate consumers Pitfalls of green marketing ◦ Social, Economic, and Environmental:  Not really about reducing the levels of consumption in the society  Primarily about sales or profits at the end of the day  Superficial and unethical environmental improvements or misleading claims Greenwashing - It’s greenwashing when a company or organization spends more time and money claiming to be “green” through advertising and marketing than actually implementing business practices that minimize environmental impact. It’s whitewashing, but with a green brush (http://greenwashingindex.com/about-greenwashing/) - Greenwashing Index o Public rating system for greenwashed advertising o CHOICE Australia o Reporting system which registers consumer complaints o NGO registers o E.g. Greenpeace, Sierra Club 7 Sins of greenwashing  Sin of the hidden trade-off ◦ e.g. made from 100% paper  Sin of no proof ◦ e.g. This product is ‘green’  Sin of vagueness ◦ e.g. environmentally friendly  Sin of irrelevance ◦ e.g. CFC free hairspray  Sin of lesser of two evils ◦ e.g. fair trade tobacco  Sin of worshipping false labels  ◦ e.g. free to roam chooks  Sin of fibbing ◦ E.g. Outright lying and deceit Prevalence of greenwashing - In 2007, over 95% of environmental product claims committed at least one of the seven sins of greenwashing; by 2010, this percentage had fallen by half and the number of genuinely green products on offer rose significantly Marketing for sustainability Can we really market what will be perceived as: – deprivation – anti-development – moralistic – a step back? Sustainability paradigm shift requires: – Promotion of ‘less being more’ – Reductions in aggregate levels of consumption – Acceptance of having to take a step back – Social transformation based on values (not the value of the stuff you keep in the storage) – Transition from consumers to customers ¾ of the world population have not even started to consume the way we do though India, China and Brazil have slowly begun to do so… Key elements of sustainability marketing Treating socio-ecological problems as a starting point of the marketing process, not as a set of externalities or constraints (i.e. businesses don’t operate in isolation) Understanding costumer behaviours holistically (i.e. numb or akrasia) Reconfiguring the marketing mix (i.e. 4P) Appreciating and utilizing the transformational potential of marketing activities and relationships (i.e. optimistic view of the future) Conclusion – Growing demand for green and ethical consumer products will continue to fuel green market and green marketing – Marketing will continue to reward unethical behaviour (due to price advantages) in the absence of complete information and safeguards