Transcript Ecology and Sustainable Development in Global Business

Chapter 10
Ecology and Sustainable
Development in Global
Business
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Ch. 10: Key Learning Objectives
 Understanding how business and society interact within
the natural environment
 Defining sustainable development
 Assessing the major threats to the Earth’s ecosystem
 Recognizing the ways in which population growth,
inequality, and economic development interact with the
world’s ecological crisis
 Examining common environmental issues that are shared
by all nations and businesses
 Analyzing the steps both large and small businesses can
take globally to reduce ecological damage and promote
sustainable development
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Business and Society in the
Natural Environment
 Business and society operate within constraints of the
planet and its resources.
 For human society to survive over time it must operate
sustainably: in a way that does not destroy or deplete these
natural resources for future generations
 Preserving our common ecosystem (or unified natural
system) and assuring its continued use is an urgent
imperative for governments, business, and society
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Figure 10.1
Business, Society and the Natural
Environment: An Interactive System
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Sustainable Development
 Development that “meets the needs of the present
without compromising the ability of future generations
to meet their own needs”
 Protecting the environment will require economic
development focused on poverty alleviation
 Economic development cannot occur at the expense of
degrading the forests, farmland, water, and air that must
continue to support life on this planet
 Sustainable development is about fairness
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Threats to the Earth’s Ecosystem
 Sustainable development requires that human society use
natural resources at a rate that can be continued over an
indefinite period
 Renewable resources (water, forests) can be naturally
replenished
 Nonrenewable resources (such as fossils fuels like oil, coal) once
used are gone forever
 Examples of natural resources that are now being
depleted or polluted at well above sustainable rates
 Water resources
 Fossil fuels
 Arable land
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Forces of Change
Accelerating Ecological Crisis
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Pressure on the earth’s resource base is becoming
increasingly severe
Three critical factors have combined to accelerate the
ecological crisis facing the world community and to
make sustainable development more difficult

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
Population explosion
World poverty and income inequality
Rapid growth of many developing nations
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Figure 10.2 Population of the World and
Major Areas
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Figure 10.3 Share of the World’s
Private Consumption by
Income Fifths
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The Earth’s Carrying Capacity
 The Earth’s resource base is essentially finite, or
bounded
 Limits to growth hypothesis suggests human society is
overshooting Earth’s carrying capacity, with drastic
consequences if changes are not made
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Ecological Footprint
 One method of measuring the Earth’s carrying
capacity
 The amount of land and water a human population
needs to produce the resources it consumes and to
absorb its wastes, given prevailing technology
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Restoring the Balance of Earth's
Carrying Capacity
 This is without a doubt one of the great challenges facing
the world’s people. Any solution will require change on
many fronts:
 Technological innovation – Develop new technologies to produce
energy, food, and other necessities of human life more efficiently
and with less waste
 Changing patters of consumption – Individuals and organizations
concerned about environmental impact could decide to consume
less or choose less harmful products and services
 “Getting the prices right” – Some economists have called for public
policies that impose taxes on environmentally harmful products or
activities
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Global Environmental Issues
 Commons
 a shared resource, such as land, air, or water that a group of people
use collectively
 The paradox of the commons is that if all individuals attempt to
maximize their own private advantage in the short term, the commons
may be destroyed, and all users, present and future, lose. The only
solution is restraint, either voluntary or through mutual agreement.
 Tragedy of the commons: freedom in a commons brings ruin to all
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Global Environmental Issues
 Ozone Depletion
 Ozone is a bluish gas, composed of three bonded oxygen atoms, that
floats in a thin layer in the stratosphere between 9 and 28 miles
above the planet
 Since mid-1970s, scientists have understand that chlorofluorocarbons
(CFCs), manufactured chemicals formerly widely used as
refrigerants, insulation, solvents, and propellants in spray cans, could
react with and destroy ozone in the upper atmosphere
 In 1987, world leaders negotiated the Montreal Protocol, agreeing to
cut CFC production
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Global Environmental Issues
 Climate Change
 changes in the Earth’s climate caused by increasing
concentrations of carbon dioxide and other pollutants produced
by human activity
 Global Warming
 phenomenon where the average surface temperature of the
Earth has risen and continues to rise over time
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Figure 10.4
Global Warming
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Causes of Climate Change
 Fossil Fuels
the burning of fossil fuels such as oil, natural gas, and coal releases
carbon dioxide
Black carbon
 the sooty smoke that is created by the incomplete combustion of
diesel engines and wildfires is the second largest contributor to climate
change, responsible for as much as 18 percent of global warming
 Deforestation
 Trees and other plants absorb carbon dioxide and remove it from the
atmosphere; therefore cutting down trees contributes to global
warming
 Beef production
 Methane, a potent greenhouse gas, is produced as a by-product of
the digestion of some animals, including cows
 CFCs
 Destroy the ozone and are also considered greenhouse gases
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Global Climate Change Initiatives
 Kyoto Protocol
 Multination agreement in 1997, went in to effect in 2005
 Requires industrial nations to reduce greenhouse gas
emissions 5% below 1990 levels
 European Union has taken lead on reducing emissions
 As of 2012, 193 nations had ratified
 U.S., which was responsible for 18 percent of the world’s
carbon emissions has not ratified
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More Global Environmental Issues
 Decline of biodiversity
 Refers to the number and variety of species and the range of
their genetic makeup
 Scientists estimate that species extinction is occurring at 100
to 1,000 times the normal, background rate due to pollution
and habitat destruction
 A major reason for the decline in the earth’s biodiversity is
the destruction of rain forests
 Only half of the original tropical rain forests still stand
 Rain forests destruction is ironic because they may have more
economic value standing than cut
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More Global Environmental Issues
 Threats to marine ecosystems
 Refers to oceans, salt marshes, lagoons, and tidal zones that
border them, as well as diverse communities of life they
support
 Salt water covers 70 percent of the earth’s surface and
supports many species
 Key categories of threats to these ecosystems
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Fish populations
Coral reefs
Coastal development
Ocean acidity
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Response of the International
Business Community
 Since so many ecological challenges cross national
boundaries, the international business community
has a critical role to play in addressing them
 Numerous voluntary initiatives are being undertaken
by companies around the world to put the principle of
sustainable development into practice
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Voluntary Business Initiatives
 Life cycle analysis
 Involves collecting information on the lifelong environmental
impact of a product, from extraction of raw material to
manufacturing to its distribution, use, and ultimate disposal
 Industrial ecology
 Refers to designing factories and distribution systems as if they
were self-contained ecosystems
 Extended product responsibility
 Companies have a continuing responsibility for the environmental
impact of the products and services, even after they are sold
 Carbon neutrality
 An organization or individual produces net zero emission of
greenhouse gases; this is usually accomplished by a combination
of energy efficiencies and carbon offsets
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Codes of Environmental Conduct
 Some of the leading universal codes include the
following:
 Business Charter for Sustainable Development – developed by
the International Chamber of Commerce
 CERES Principles – developed by the Coalition for
Environmentally Responsible Economies
 ISO 14000 – a series of voluntary standards developed by the
ISO, an international group based in Switzerland
 The Equator Principles – a set of environmental standards
developed by the financial services industry
 Many executives are championing the idea that
corporations have moral obligations to future generations
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