Chapter 5 Ethics and the Environment5-*
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Ethical Thought
“Earth provides enough to satisfy every man’s need, but not every man’s greed.”
Mahatma Gandhi
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Is It Just Me or Is It Getting Hotter in Here?
Exxon Mobil claimed it was doing its part to help foster renewable energy – selling the oil that is used to help operate wind turbines
BP and Royal Dutch/Shell have developed alternative fuel strategies
Exxon opposed the Kyoto environmental sustainability accord and disputes that fossil fuels are the main cause of global warming
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Is It Just Me or Is It Getting Hotter in Here?
Exxon’s research and development budget focuses on adapting and improving fossil fuels, not alternative fuels.
Lee Raymond, CEO of Exxon, was given a total of $51.1 million in total compensation in 2005
In 2005, Exxon announced that it made $36.13 billion in profits, the highest level ever for the oil company
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The Tragedy of the Commons
Credited to Garrett Hardin, but its roots go back to Aristotle
Aristotle stated that what is common to the most people will receive the least amount of care
Underlying belief is that free access with unrestricted use of any resource that is finite will ultimately ruin the resource through overexploitation
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The Tragedy of the Commons
From a natural environment context, the tragedy of the commons would predict the eventual use of all the natural resources on Earth due to the lack of control over their use
Hardin argues that there is a finite amount of energy available and as the population grows, the human race needs to reduce its level of energy consumption instead of increasing it.
Hardin refutes Adam Smith’s invisible hand by arguing that the self-interests of each individual do not always translate into the promotion of the public good for everyone.
Hardin recommends privatizing resources, having polluters pay for their damage, and having government regulations to control for the use of natural resources.
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Considered a stakeholder without a voice
Decision makers would only consider the natural environment as a stakeholder if the consequences that impact the natural environment also had an impact on the performance evaluation of the firm or the individual decision maker
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Natural Environment as a Competitive Advantage
By focusing on environmentally friendly strategies, firms are able to market their goods as ecofriendly which helps differentiate their products
Strategy 1: Ecoefficency
Strategy 3: Ecobranding
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EPA levied its largest civil administrative penalty against DuPont
DuPont was charged with hiding information about the dangers caused my one of the chemicals used to make Teflon
DuPont paid $16.5 million in fines and research and education funds
DuPont’s stock closed down by 10 cents per share
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Stated commitment to:
Operating beyond compliance
Integrating environmental goals
Enhancing corporate social responsibility
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Employees as Environmental Stakeholders
Three types of environmental initiatives that can be generated from an employee:
Initiatives that decrease the environmental impact of the company through the policies of reuse and recycling
Initiatives that solve an environmental problem such as hazardous substance use reduction
Initiatives that develop a more ecoefficient product or service that uses fewer resources and/or less energy
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Environmental disclosures are usually the first information source used by stakeholders.
Easy to obtain from a company’s website
Stanwick & Stanwick found that firms that had both a formal environmental policy and a detailed description of their environmental commitment had higher financial performance levels than firms that were low financial performers
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Cost savings
Increased profits
A framework and strategy for improving environmental performance
A network of business and industries interested in becoming better environmental stewards
Public recognition
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Periodic, objective and documented assessment of an organization’s operations compared to audit criteria
Allows management a measure of ensuring that they are in compliance with environmental regulations
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Systematic equal allocation of environmental benefits and burdens
Evolved from the perception that lower income areas with minority ethnic groups within a community would receive a disproportionate amount of environmental burdens and a disproportionately low allocation of environmental benefits
NIMBY – Not in my back yard
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Environmental Sustainability
Ability of an organization or country to protect the use of future resources by properly maintaining and protecting the resources that are currently being used
Three major components:
A system to ensure the sustainable management of the earth’s natural resources
The development of social and institutional structures that would support the sustainable management of the natural resources
Changes in the economic framework so it would support the sustainable management of the earth’s natural resources
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Survival economies
Emerging economies
Developed economies
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Developed by John Elkington
3BL – ‘People, Planet, Profit’
Focuses on the financial, social, and environmental performance of the company
Centers on the vested interests of all stakeholders instead of focusing solely on the interest of the shareholders
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Adopted by financial institutions around the globe
Provide a means for monitoring the potentially adverse risks, both social and environmental, that come with financing projects around the globe
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Created in December 1997
Aim was to have every industrialized nation in the world involuntarily reduce the level of greenhouse gas emissions into the atmosphere by 5.2% compared with 1990 GHG emission levels
Initially not ratified because the US did not sign the agreement
Finally ratified in 2005 when Russia joined the treaty
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Two Inconvenient Truths
Al Gore, former US Vice President, won an Academy Award in 2007 for his documentary ‘An Inconvenient Truth’
Focused on global warning
Luster of the Academy Award rubbed off because the Tennessee Center for Policy Research revealed that Gore’s mansion near Nashville, TN consumed more electricity in one month than the average American uses in an entire year
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Climate Change as a Strategic Option
Firms whose assets are directly affected by weather patterns must plan for fundamental changes in the global climate
Firms involved in insurance, real estate, agriculture and tourism will be impacted by shifting climate patterns
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Questions for Thought
Explain several ways that companies ‘walk the walk’ and ‘talk the talk’ when it pertains to corporate environmental issues.