Copyright © 2008 McGraw-Hill Ryerson Ltd. 1 Chapter Fourteen The Environment and Business...

Chapter 14 Copyright © 2008 McGraw-Hill Ryerson Ltd. 1

ChapterFourteen

The Environment and Business Responsibilities

Prepared by Mark Schwartz, York University

Canadian Business and Society: Canadian Business and Society: Ethics & ResponsibilitiesEthics & Responsibilities


Chapter Outline

Defining Environmental Ethic and Sustainable Development Environmental Concerns in Business and Society Government’s Influence Environmental NGO Influence Market-Driven Environmentalism Managing Responses to Environmental Concerns The “Greening” of Business Functions Measuring and Reporting on Environmental Sustainability Dissenting Views on the Environment The Environment: Corporate Opportunities and Threats


Defining Environmental Ethic and Sustainable Development Environmental ethic: the set of values or

principles that govern a corporation’s practices relating to the environment.

Sustainable development: development ensuring that the use of resources and the impact on the environment today does not damage prospects for the use of resources or the environment by future generations.


Sustainable Development

For business – sustainable development means – adopting business strategies and activities that will meet the needs of an enterprise and its stakeholders today, while protecting, sustaining and enhancing the human and natural resources that will be needed in the future.


Theoretical Approach – Eco-Feminism

Expanding the notion of the self.

More ‘caring’ approach to the environment

Instead of polluting the environment, it becomes I am polluting myself.


The Natural Environment

Concern for the environment has been intensified by environmental disasters but also the deterioration of the natural environment.


Business, Its Stakeholders and The Natural Environment The concern for the environment is a growing but not

entirely recent phenomenon.

Drucker (1972) – Everybody today is ‘for the environment’. Laws and

agencies designed to protect it multiply at all levels of government. Big corporations take full-colour ads to explain how they’re cleaning up, or at least trying to. Even you as a private citizen probably make some conscientious effort to curb pollution.


Strategies for The Environment and Sustainable Development The Environmental Ethic

Environmental ethic is evolving from a focus on ecology – essentially a set of values or principles about practices relating to the environment.

Society and many businesspersons now have some sense of obligation or moral responsibility to the environment which is expressed in different ways.


Values and principles of the environmental ethic (from a business perspective include): New business development needs to take account of the

environment from the design stage through to ultimate disposal.

Environmental management should be the responsibility of staff at all levels as an integral part of their job

Environmental performance should be built into the reward structure of the organization

Product and process responsibility should be from cradle to the grave

Agreed upon values and beliefs should be used as the guiding principles for conducting all business.


Environmental Concerns in Business and Society Acid rain Air pollution Ecosystems Energy production

and consumption Nature and wildlife

Ozone Pollution Waste management Water quality Climate change/

global warming


Five R’s

Reduce Reuse Recycle (and for business) Refuse – to use products

or engage in activities harmful to the ecology

Reject – the products that do not respect the environment


Government’s Influence

Government departments and agencies: Environment Canada Canadian Council of Ministers of Environment National Roundtable of the Environment and the Economy Canadian Environmental Assessment Act Agency

Regulation: Canadian Environmental Protection Act, Canadian

Environmental Assessment Act, Kyoto Protocol


Environment and Sustainable Development Strategies Fixing Problems Management awareness of the potential effect that

the enterprise’s activities have on the environment and a decision to do something about it.

Resolve environmental problems and implement ‘damage control’ strategies as problems occur.

Problems include – non-compliance with regulations etc.

Would seem to be the most common strategy


Compliance with Laws and Regulations

More consistent in countries with considerable environmental legislation.

Some companies ignore legislation Establishment of programs and organizational structures to

implement and monitor their compliance with the legislation and regulations.

Progressive companies establish their own environmental policies which may go beyond the requirements imposed by governments.

Compliance done through newsletters, audits, internal communications (policies and manuals).

Cost of not complying may be severe – result in civil liability and criminal prosecution.


Environmental NGO Influence Environmental non-governmental organizations

(ENGOs): groups that hold shared values or attitudes about the challenges confronting the natural environment and advocate for changes to improve the condition of the environment.

Such groups (e.g., Greenpeace) influence corporations through protests, blockades, boycotts, and annual shareholder meetings.


Market-Driven Environmentalism Emissions trading: A system whereby

corporations set targets for greenhouse gas reduction; if one corporation cannot meet the target, it purchases credits from those that have met their targets.

Offsets: Credits purchased from other corporations or organizations to mitigate greenhouse gases released into the environment.


Managing Responses to Environmental Concerns Token response (e.g., ‘greenwashing’) Compliance with laws and regulations Comprehensive environmental management

(gaining a competitive advantage) Sustainable development


The “Greening” of Business Functions Financial management Marketing (e.g., green marketing) Human resources Production


The ‘Greening’ of the Business Function

Finance GAAP – balance sheets must state the estimated liability for

restoring capital asses to environmentally sound conditions. future cost of storing hazardous and toxic materials. Problem – estimating pollution costs/requirements of strict

government legislation. Eco-insurance now available – however, high costs,

availability of coverage (i.e. those who need it cannot get it, vice-versa).

availability of capital. screening of investments.


Organizational Structural Arrangements Key to have top management commitment so

that there are practical principles to guide the firm’s environmental efforts, to integrate environmental affairs with operations, and to encourage environmental professionals to meet mounting environmental requirements.

Hiring of managers responsible for environmental issues – combination of management and technical expertise.


Corporate Environmental Accountability The environment is a popular and desired topic in

annual reports, giving enterprises and industry associations opportunities to advertise the actions they are taking to protect the environment.

Creation of codes. Create awareness and to signal that the enterprise is active in this area.

Use of environmental audits – any systematic documented, periodic and objective review by a firm (or other regulated entity) of facility operations and practices related to meeting appropriate requirements.


Corporate Environmental Accountability Government legislation

– environmental assessments.

Awards programs – identify, encourage and promote technology, design and management initiatives which have helped to protect and/or improve the environment.


The ‘Greening’ of the Business Function

Finance GAAP – balance sheets must state the estimated liability for

restoring capital asses to environmentally sound conditions. future cost of storing hazardous and toxic materials. Problem – estimating pollution costs/requirements of strict

government legislation. Eco-insurance now available – however, high costs, availability

of coverage (i.e. those who need it cannot get it, vice-versa). availability of capital. screening of investments.


Marketing

Development of marketing slogan ‘Go Organic’ – expresses society’s concern.

Green products on the market

Much debate about the usefulness of green products


Measuring and Reporting on Environmental Sustainability Type and amount of materials used Source of energy and efficiency of use Source and quality of water Impact on biodiversity Reduction of emissions, effluents, and waste Product design that minimizes impact Compliance with environmental laws Use of efficient transportation

Source: GRI, 2006


Comprehensive Environmental Management Management seeks to gain a competitive advantage by

taking an active stance on environmental issues. The focus on processes and systems-simple compliance with legislation and regulation is not sufficient. In these companies, everyone becomes involved in environmental management. Environmental issues are integrated into all aspects of corporate management. Environmental objectives are set for key operating activities, they are not left to just the ‘environmental services department’.

Internal and external corporate reporting.


Measuring and Reporting on Environmental Sustainability Coalition for Environmentally Responsible

Economies (CERES) International Organization for Standardization ISO

14000 International Institute for Sustainable Development

(IISD) Canadian Sustainability Indicators Network (CSIN) Environmental and Sustainable Development

Indicators Initiative (ESDI)


Dissenting Views on the Environment According to some business journalists:

Concept difficult to define and understand Means stopping or constraining economic

development Implies capitalism is unsustainable Lacks understanding of markets Executives are being misled


The Environment: Corporate Opportunities Reputations likely enhanced Customers attracted Investors attracted Costs reduced through recycling/conservation More competent staff attracted Better integration with local community New technologies or expertise developed More efficient ways of producing products found


The Environment: Corporate Threats Corporate image may deteriorate Revenues may suffer if customers are lost Investors may decide not to invest Material and production costs may increase Financial penalties increasing Insurance premiums can increase Potential alienation from local community Government may enact stricter legislation


Framework for Managing Sustainable Development Stakeholder analysis Policies and Objectives Operational Plans Corporate Culture Measures and Standards of Performance Management Reports Monitoring

Copyright © 2008 McGraw-Hill Ryerson Ltd. 1 Chapter Fourteen The Environment and Business...

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