Chapter 15 The Natural Environment as Stakeholder

LEARNING OUTCOMES

After studying this chapter, you should be able to:

1. Discuss the concept of sustainability. 2. Describe ten major natural environment issues. 3. Describe the NIMBY environmental problem. 4. Discuss the roles that business and government play in environmental issues. 5. Explain the concept of environmental ethics.

TEACHING SUGGESTIONS

INTRODUCTION – This chapter identifies what is meant by the term environment and why it has become one of the most significant issues in our lives. As background for the discussion, the authors describe some of the major environmental issues facing us. They then focus on the variety of responses the government and organizations have developed to address these issues. Two themes are emphasized—that humans are part of the natural environment and that environmental issues are extremely complex.

KEY TALKING POINTS – If nothing else, this chapter should scare the students into realizing that environmental issues are critically important and that the environment is a critical business stakeholder. The authors certainly do not use “scare tactics,” nor do they need to do so. The facts alone are more than sufficient to get the message across—we need to do something about the environmental crises now. Business will have to be a key player in the effort, precisely because it is a major contributor to the problem.

There is a tremendous amount of information available to supplement this chapter. Depending on the instructor’s and students’ particular interests, the discussion could center on existing problems, individual business’s efforts to alleviate environmental impacts, more general approaches to solutions, or public policy questions such as economic growth versus sustainable development. Two broad questions that might generate spirited discussion are: (1) the consequences of using a short-term outlook (e.g., quarterly financial results) to address long-term problems like environmental degradation, and (2) the performance of the current administration in environmental matters.

Some books that are very informative and may be of interest include:

Carson, R. 1962. Silent Spring. Boston: Houghton Mifflin. This is the book, that for many people, alerted them to the pending ecological disaster. Unfortunately, more than forty years after publication, it is still highly relevant. Business and Society Chapter Notes

Schumacher, E. F. 1975. Small is Beautiful. New York: Harper & Row Publishers. Trained as an economist, Dr. Schumacher nonetheless took a very different approach to the dismal science. Two short essays are particularly relevant to this chapter—“The Problem of Production” and “Buddhist Economics.”

Hawken, P. 1993. The Ecology of Commerce. New York: HarperBusiness. This book is mentioned in the chapter as an inspiration for Paul Dolan, former president of Fetzer Vineyards. It also spurred Ray Anderson at Interface Carpets (http://www.interfaceinc.com/) to reorganize his firm to a sustainable operations model.

Anderson, R. 1998. Mid-Course Correction. Atlanta: Peregrinzilla Press. Mr. Anderson calls his reading of Hawken’s book a personal epiphany that awakened him to what he and others of his generation were doing to the planet, and how that would affect his grandchildren’s lives.

Diamond, Jared. 2005. Collapse: How Societies Choose to Fail or Succeed. New York: Viking Books. Mr. Diamond examines the role that various ecological factors played in the success or failure of different historical societies.

In addition, the documentary, An Inconvenient Truth, addresses the issue of climate change and some potential problems related to this environmental issue as well as potential solutions. While students may view climate change from a politically-charged perspective, it is important to get students to have an educated discourse on the science behind this issue and the United States’ involvement in global efforts to address this issue.

Finally, two videos aired on PBS stations address the question of over consumption, its effects on our lives, and its effects on the planet. Affluenza and Escape from Affluenza may appear visually dated to students, but its message is still instructive. These videos are well suited to discussions about the social and environmental costs exacted by continued economic growth.

PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:

Cases: The Body Shop: Pursuing Social and Environmental Change The High Cost of High Tech Foods Something’s Rotten in Hondo Coke and Pepsi in India: Issues, Ethics and Crisis Management The Hudson River Cleanup and GE The BP Oil Spill and Mental Health New Belgium Brewery: Building a Business on Sustainability Safety? What Safety?

Ethics in Practice Cases: Going Down the Drain

Spotlight on Sustainability: There’s an App for That Business and Society Chapter Notes

Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters.

LECTURE OUTLINE

I. THE SUSTAINABILITY IMPERATIVE

II. A BRIEF INTRODUCTION TO THE NATURAL ENVIRONMENT

III. THE IMPACT OF BUSINESS UPON THE NATURAL ENVIRONMENT A. Climate Change B. Energy C. Water D. Biodiversity and Land Use E. Chemicals, Toxics, and Heavy Metals F. Air Pollution G. Waste Management H. Ozone Depletion I. Oceans and Fisheries J. Deforestation

IV. RESPONSIBILITY FOR ENVIRONMENTAL ISSUES A. Environmental Ethics B. The NIMBY Problem

V. THE ROLE OF GOVERNMENTS IN ENVIRONMENTAL ISSUES A. Responses of Governments in the United States 1. Air Quality Legislation 2. Water Quality Legislation 3. Land-Related Legislation 4. Endangered Species B. International Government Environmental Responses

VI. OTHER ENVIRONMENTAL STAKEHOLDERS A. Environmental Interest Groups B. Green Consumers C. Green Employees D. Green Investors

VII. BUSINESS ENVIRONMENTALISM A. Patagonia B. 3M Company C. The Business Case for Sustainability 1. Cost-Benefit Analysis Business and Society Chapter Notes

2. Triple Bottom Line D. Business and Environmental Activist Partnerships E. Systematic Business Responses to the Environmental Challenge

VIII. THE FUTURE OF BUSINESS: GREENING AND/OR GROWING?

IX. SUMMARY

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

Students should recognize that their answers to these discussion questions should be well reasoned and supported with evidence. Although some answers will be more correct than others, students should be aware that simplistic answers to complex questions, problems, or issues such as these will never be “good” answers.

1. Sustainability is a firm’s ability to meet the needs of the present generation without sacrificing future generations’ quality of life. Firms achieve sustainability by balancing economic prosperity, ecosystem viability, and social justice.

2. The textbook lists several environmental issues that have reached the critical stage: climate change, energy, water, biodiversity/land use, air pollution, waste management, ozone depletion and deforestation, among others. I would emphasize climate change as possibly the most critical environmental issue, in light of its political, social and global implications. Furthermore, no other environmental issue has received as much press or attention in recent memory. This particular issue is being addressed in the court of public opinion as well as our nation’s capital. The impact of water pollution also is likely to receive increased attention due to the 2010 BP Oil Spill.

3. As E. F. Schumacher says in Small is Beautiful, the underlying reason for many of our environmental problems is our failure to distinguish between capital and income. By capital, Schumacher is referring to the nonrenewable sources of energy that we consume without making any efforts to replace it (which we cannot do) or develop new sources of renewable energy. If we recognized the dangers of using up our “capital,” we would be much more careful of it. From that underlying failure to recognize the ramifications of what we are doing, we have overpopulated the planet, polluted it, and have developed toxic materials that have the potential to literally destroy life on earth.

4. The future outlook for the environment is, in a word, dismal. Although, as the authors note, nature itself is a polluter and destroyer, it does so within a balanced overall system. Humans have upset that balance, and it will take a complete reversal of our value systems and economic goals to rectify the problems we have created. If we do not act soon, the environmental problems that we have created may be irreversible (some climatologists already assert that certain effects of climate change are irreparable). Students should be encouraged, however, that some actions have at least yielded positive results. While the results are inconclusive, there is evidence that the hole in the ozone layer is repairing itself as a result of the international community’s efforts under the Montreal Protocol. Business and Society Chapter Notes

5. Of course, we all have responsibility for addressing environmental issues, because we all have an impact on the environment. How much we consume, the type of cars we drive, and the temperature at which we keep our houses (and much more) all have an impact. However, individual effort can do little to correct the problems we have created. The collective efforts of the international community, through environmental interest groups, and especially businesses and governments are absolutely necessary to even begin to resolve these issues.

6. Deontology is the most likely ethical theory to help resolve the environmental crisis. This theory emphasizes doing our duty, with little emphasis placed on the outcomes of our actions. Thus, a deontologist would be likely to recognize a duty to not harm the environment. Business people, however, tend to be utilitarians—seeking to do only those acts that provide a surplus of benefits over costs. The problem is not with the theory, per se, but in our inability to fully perform the calculus required. Utilitarianism requires that all costs and benefits enter the equation, but practically speaking, that is impossible. As a result, people tend to include only those easily identifiable items, like financial costs and benefits. That type of utilitarian calculus all too often ignores the very real, but hard-to- measure environmental costs.

7. Patagonia and 3M are among those cited in the textbook as examples of sustainable businesses. In addition to those listed in the textbook, other firms are also running sustainable businesses. Ben & Jerry’s has been a long-time supporter of environmentalism, and Interface Carpet is a pioneer in developing a sustainable carpet manufacturing process. Car manufacturers that have focused on sustainable initiatives through the development of hybrid technology have obtained a competitive advantage over companies that have been slow to adopt this technology. These businesses have attracted a new class of consumers who may be environmentally-friendly, looking for tax-breaks and desiring a cheaper gas bill. The book lists cost-benefit analysis and triple bottom line reporting as decision processes that can help. I personally have grave concerns about the use of cost-benefit analysis, simply because in the vast majority of cases, many (and often the most important) costs and benefits are left out of the analysis. Analysts include only those relatively easy figures, and thus make decisions that have enormous long-term impacts with only easily-captured, short-term information. I would argue that cost-benefit analysis, as practiced in the majority of cases, has been a major contributor to our environmental problems.

8. As noted previously in the text, companies have economic responsibilities, as well as legal, ethical and philanthropic responsibilities. The key to this question is whether the company should focus on unlimited economic growth. Companies must focus on economic growth, but they cannot do so at the expense of their other responsibilities. Continued emphasis on unlimited economic growth without focusing on a company’s legal and ethical responsibilities will only use up our resources more quickly, thus shortening the remaining life of our planet. The criterion of economic growth was established in a time when survival was the primary concern. We have essentially solved that problem now, so we are using a model designed to answer the wrong question. Several students may object to this Business and Society Chapter Notes

line of reasoning, accurately citing the poverty and hunger in less developed countries. Although the results they refer to are correct, they derive from a different problem, not production. The new problems are ones of distribution and sustainability. We grow enough food and make enough stuff for everyone in the world to have at least the basic necessities, but the way those goods are distributed is wildly flawed. Unless we stop population growth, slow or cap use of resources, develop sources of renewable energy, and redistribute wealth and income, life on this planet will eventually cease to exist.

GROUP ACTIVITY

Have students calculate their carbon footprint, which can be determined by various websites (http://www.climatecrisis.net, http://www.carbonfootprint.com/calculator.aspx, etc.). The instructor may want to review the class results and note the top three to five contributors of carbon dioxide emissions (i.e., car use, airplane use, utility use). Once the top three to five class contributors of carbon dioxide emissions are identified, students should develop proposals of realistic methods/steps that students in the class can take to reduce their carbon dioxide emissions. Students should focus on novel ideas that may not have been developed yet and be ready to present their proposals in a five-minute presentation to the entire class.

INDIVIDUAL ASSIGNMENT

Ask students to research current international agreements and proposed U.S. laws and regulations regarding climate change. As a starting point, instructors may want to guide students to the following websites: http://www.pewclimate.org/international/copenhagen-climate-summit-summary http://news.bbc.co.uk/2/hi/science/nature/8422307.stm http://www.usclimatenetwork.org/policy/copenhagen-accord-commitments http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9efb85257359003fb69d/ea1bf25579e54 1b1852577220055c20c!OpenDocument http://www.businessweek.com/news/2010-05-13/greenhouse-gas-rules-made-final-by-epa-as- alternative-to-bill.html

In connection with their research, students should prepare a typed-written response to the following questions:

(1) What is the Copenhagen Accord? What is the United State’s role in this agreement?

(2) How will the new EPA rules regarding greenhouse gases affect business? Specifically, what requirements do the rules place on business? Business and Society Chapter Notes

(3) Should government regulate greenhouse gas emissions? If so, how? Or, do you think that individuals and corporations should voluntarily take action? If so, what steps would you recommend that individuals and corporations take?