Transcript Slide 1

Chapter 13
Ecological challenges
for business and society
Learning Objectives:
To identify the changes taking place in the ecological environment, and their
impacts on human well-being
To gain an overview of the roles of national governments and international
bodies in environmental regulation
To assess the impact of environmental factors in international business strategy
and operations
To examine environmental management in practice
To form an clearer picture of the challenges and policies
needed for environmentally sustainable economic
activities, on the part of businesses, governments and
consumers
Aims of the lecture
• To identify the changes taking place in the
ecological environment, and their impacts
on human well-being
• To gain an overview of the roles of
national governments and international
bodies in environmental regulation
• To assess the impact of environmental
factors in international business strategy
and operations
• To examine environmental management in
Elements of the natural environment
• Ecosystem – set of relationships between living organisms
and their habitat
•Includes human, plant and animal life
• Biodiversity – variety of living organisms co-existing in the
same habitat
• Environmental changes are now taking place more rapidly
than in previous periods, and...
•The causes are largely associated with human activity.
Figure 13.1: Environmental indicators
Industrialization and social impacts
• Economic growth has brought
improvements in human well-being,
including...
• Improved health, life expectancy, education,
housing
• The processes:
• Industrialization – factory production
brought rising incomes
• Increase in power generation
• Urbanization – changing lifestyle from rural
to urban
Figure 13.2: Industrialization and its impacts
Pollution
• Pollution – the release of harmful substances through air,
soil or water
• Air quality – poor air quality is harmful to health, a growing
problem in urban areas of developing countries
• Transboundary pollution – pollution extending across
national borders, a form of which is…
•Acid rain – accumulation of pollutants in atmospheric
water, caused mainly by burning fossil fuels
Figure 13.3: Air
pollution in
selected cities
Source: World Bank (2007) ‘Pollution in China’,
www.worldbank.org
Climate change
• Global warming – global rise in temperatures, of both air
and water, impacting on all forms of life and ecosystems
•Caused by build-up of greenhouse gases (ghg), mainly
CO2, in turn caused by emissions from industrial
activities, energy generation and transport
•Associated with extreme weather events, droughts,
desertification, floods, storm surges, high sea levels
•Likely effects are food and water scarcity, especially in
the poorest regions
• Developed and emerging economies have the highest
emissions.
Figure 13.4: Rising levels of greenhouse gases
Source: HM Treasury (2006) Stern Review on the Economics of
Climate Change, www.hm-treasury.gov.uk
Figure 13.5: Global CO2 emissions, 2006
Source: Netherlands Environmental Assessment Agency (2007)
‘China now no. 1 in CO2 emissions’, www.mnp.nl
Figure 13.6:
Greenhouse
gas emissions
per capita in
EU, 2004
Source: European Environment Agency (2006) Greenhouse gas emission trend and
projections in Europe 2006, http://reports.eea.europa.eu
Governance and the environment
• National governments use legal and policy tools to
•Control emissions and other pollution, regulate
planning, control waste disposal
• Governments have also devised additional green policies:
•Emissions trading scheme – a firm can buy credits to
offset emissions from less pollutant firms
•Recycling requirements, environmental taxes, funding
for R&D into clean technology
• International co-operation – stems from the UN’s Rio Summit
of 1992
International governance
• Rio Summit introduced the ‘polluter pays’ principle.
• Concept of sustainable development (stemming from the
Brundtland Report of 1987):
•Development that meets the needs of the present
without compromising those of future generations
• Kyoto Protocol of 1998 – target for developed countries
•Reduce emissions to 5% below 1990 levels by 2008-12
•Became law in 2005
• After Kyoto? Developing countries now account for ¾ of
the increase in CO2 emissions.
Business strategy and sustainability
•Changes in environmental policies are
usually seen as a cost, potentially reducing
a firm’s competitiveness. Why would it seek
to improve its environmental credentials?
• Legislation by governments, both current and
anticipated.
• Concern that the firm’s current business model
will not be sustainable in the long term – the
business case.
• Ethical strategy – associated with CSR, which
commits the company to standards beyond
Figure 13.7:
Determinants of corporate environmental strategy
Competitive advantage and environmental
strategies
• Traditional view of a conflict between
ecological and economic goals is giving
way to competitive advantage built on
sustainability:
• Innovations in clean technology and
resource efficiency
• Developing core competencies in ecological
management
• Product differentiation based on green
credentials
• Possibilities of first-mover advantages
Environmental management in practice
• The challenges:
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Water scarcity
Habitat change
Climate change
Overexploitation of the oceans
Depletion of natural resources
Loss of biodiversity
• Environmental management involves...
• Assessing and monitoring environmental
impacts
• Making changes in processes which
improve environmental performance.
Figure 13.8:
Identifying and responding to environmental impacts
Monitoring environmental performance
•Measuring, monitoring and disclosure of all
processes in the business...
• Involves setting targets and adapting to new
situations
• Third-party verification – the use of
independent specialist bodies enhances
credibility
•Triple bottom line reporting on...
• Financial
• Social
Aspects of
corporate performance
Meeting energy needs
• Growth in GDP and energy consumption
move together.
• Two major issues:
1) Depletion of non-renewable sources of
energy (eg coal)
2) Climate change
• Reducing reliance on fossil fuels is
essential to a sustainable energy policy.
The solutions?
• Nuclear power – low carbon, but costly and
entails safety risks
Figure 13.9:
Share of
total
greenhouse
gas
emissions in
the EU 25
countries by
sector, 2004
Source: European Environment Agency (2007)
Europe’s Environment: the Fourth Assessment,
www.eea.europa.eu
Figure 13.10: Shifting sources of power generation in the UK
Source: UK Department for Business, Enterprise and Regulatory Reform (2006)
Energy Review 2006, www.dti.gov.uk
Waste and recycling
• Industrial processes, urban living and
increased volumes of packaging add up to
mountains of waste
• Landfill & incineration produce
greenhouse gas emissions, but there are
other ways of dealing with waste:
• Entire life of the product is under scrutiny
• Producers’ responsibility for using
recyclable materials
• Recycling – paper, wood, glass, plastic,
textiles, metal
Figure 13.11:
Hierarchy of waste
treatment methods
What about consumers?
• Households responsible for 15.5% of EU
ghg emissions.
• Consumers in emerging markets are
rapidly adopting lifestyles of older
industrialized societies, especially the
BRIC countries (Brazil, Russia, India &
China).
• How consistent are consumers?
• Concerned about the environment, but
reluctant to pay more for renewable energy.
• Sustainable consumption – living
Conclusions
• Changes in the ecological environment,
largely attributable to human activity, have
led to environmental degradation and
climate change.
• Governments, businesses and consumers
all have a role to play in attenuating
environmental damage – in both
developed and developing economies.
• Ecological concerns now impact on
corporate strategy, from both business
and ethical perspectives.