Environmental Issues in Business - Management and Business Responsibilities

Business, Its Stakeholders, and the Natural Environment

Saint Mary�s University Department of Management MGMT 3480 Week 6 � The Environment and Business Responsibilities Preparation Required Reading � Sexty (5e) ? Chapter 6, The Environment and Business Responsibilities , pp. 259 -282 Task ? Upload your Initial Posting (200 -250 words) to the Discussion Board on or before June 8 and your Response Postings (at least three Response Postings; 100 -150 words each) on or before June 10 Business, Its Stakeholders, 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 ? a ny resource used as though it belongs to all The Environmental E thic and Sustainable Development � 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 S ustainable D evelopment ? 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 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 Government�s Influence � Extensive government involvement exists through public policy formulation and the regulation of all aspects of the natural environment ? Canadian Environmental Protection Act, Canadian Environmental Assessment Act, Kyoto Protocol � 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 Act Agency 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. ? Influence corporations through protests, blockades, boycotts, and annual shareholder meetings ? Example: Greenpeace Why Do ENGOs Target Some Firms ? � 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 � Standard environmentalism ? government regulation is necessary remedy for the market�s failure to provide enough environmental amenities � Market environmentalism ? e conomic 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 Factors Standard Free -Market Economic Growth Viewed as destructive, because producing more creates more environmental harm World is dynamic and two forces counteract harm: (1) increased income drives a demand for more environmental quality, and (2) stimulation of innovation that improves environmental quality Free Trade Considered part of the problem: prevents countries from following own higher levels of protection; and belief that rich countries exploit poor Forces industries to be more competitive, accelerating adoption of newer, cleaner technologies; trade restrictions possible to protect environment under WTO; countries open to trade grow faster Property Rights versus Regulation Faith in government to solve problem for the public good Powerful tool for protecting because ownership incentive creates stewardship incentive and gives individuals power to protect the environment. TABLE 14.2 Market - Driven Environmentalism � 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 Market - Driven Environmentalism , cont. � Offsets (emissions -reduction credits) ? c redits 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) ? c arbon emissions are captured and injected into underground formation. ? Referred to as carbon sequestration or geosequestration ? Can be expensive and difficult to implement Business Responses to Environmental Issues � 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 Environmental Issues, cont. � Different approaches to environmental concerns: ? Token response - focuses on damage control as problems arise and attempts are made to fix them ? 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 Environmental Issues, cont. � 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 Financial Management � 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 � 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? Marketing � 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? Human Resources � Eco -friendly policies and practices are influencing the recruitment and retention of employees: 14 - 20 Practices and Policies to Create the Green Workplace � 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. � 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. TABLE 14.3 Operations � 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 Measuring and Reporting on Environmental Sustainability � 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 � 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 � 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 � 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 � 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 � 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 Summary � 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 Summary , cont. � 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. Summary , cont. � 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. Summary , cont. � 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. Summary , cont. � The environment presents corporations with opportunities and threats. But, many corporations are developing an environmental ethic that achieves sustainable development Discussion Questions � Located under Week 6 Discussions o n Brightspace