Sustainability

- Economic Inequality
- Environmental Economics
9.3 The Triple Bottom Line (TBL): Excelling on Three
Measures of Company Performance

Profit People

Planet
Sustainability and Sustainable Business Practices

• Sustainability
• Is the relationship of a firm to its environment and
its use of natural resources.
• Sustainable Business Practices
• Are those practices of a firm that meet the needs
of the present without compromising the ability
to meet the needs of the future.
Crafting Corporate Social Responsibility
and Sustainability Strategies

Pursuing a Sustainable CSR Strategy

in the Firm’s Value Chain Activities

Moral Case: Business Case:

Stakeholder Competitive
Benefits Advantage
Combating the Evasion of CSR and Socially Harmful Business
Practices

Increased public
awareness of misdeeds of
bad behavior by firms
Harmful and
Increased legislation and Unethical
regulation correct and Business
punish firms Actions and
Behaviors

Refusal to do business with

irresponsible firms
Economic Inequality
Who are the rich and the poor?
Inequality at all-time high
Finds BBS survey; rich-poor gap way out of
proportion; appears as a puzzle to fast-paced
GDP growth

Gini index < 0.2 represents

perfect income equality, 0.2–0.3
relative equality, 0.3–0.4 adequate
equality, 0.4–0.5 big income gap,
and above 0.5 represents severe
income gap.

Bangladesh: The state of income inequality

Environmental Economics
The tragedy of the commons
Tragedy of the Commons

• Individual incentives can sometimes lead people to make personal choices that are bad
for the group as a whole.
• Example: The commute game. Imagine a simple world where everybody just goes back
and forth between work and home.
• Only two options: drive or take the bus.
• Only one goal: shortest possible commute.
The commute game

• If everybody takes the bus, the commute takes 20 minutes (including 10 minutes to walk
to the bus stop and wait for the bus).
• If everybody drives, the commute takes 40 minutes because of traffic jams.
• The bus gets stuck in traffic just like every other vehicle, so you can always get to work
10 minutes faster by driving.
 Solutions?
• “Invisible hand”
• “Education”
• “Appeals to conscience”
• “Vigilante action”
• “Mutual coercion”
The Tragedy of the Commons has two parts

1. It’s better for the group as a whole if everyone

makes Choice A rather than Choice B.
2. Each person individually prefers to make Choice B.

• Under the hood is a negative externality:

when I choose B, it hurts you, and when
you choose B, it hurts me.
Example: Traffic congestion

1. It’s better for the group as a whole if everyone takes the bus.
2. Each person individually prefers to drive.

• Negative externality: My driving creates an external cost by

creating congestion that slows down everyone behind me.
Example: Overfishing

1. It’s better for the group as a whole if everyone limits how much they fish so that
there will be enough fish next year.
2. Each person individually prefers to maximize their individual profits by fishing like
crazy.

• Negative externality: When I catch fish, I create external

costs by reducing your ability to catch fish next year.
Overfishing: Tuna
• Atlantic bluefin tuna
• Worth up to $100,000 each
(for making sushi)
• Highly migratory.

Decline in population

www.bigmarinefish.com/loading_901_lb_giant.jpg
www.e2.org
Solution: Ban fishing?

• Advantage: This works! (Whale

populations have rebounded,
Marine Protected Areas work)
• Disadvantage #1: This is not
economically efficient or equitable
for most fisheries.
• Disadvantage #2: What about
tribal rights to fish?

www.makah.com
Solution: Limit fishing?

• Restrict types of boats, types of

gear, etc.
• Limit annual catch (TAC: (Total
Allowable Catch)

www.greenpeace.org/raw/image_full/internation...

• Advantage #1: These can help limit overfishing

• Disadvantage #1: Economically inefficient.
• Disadvantage #2: There’s still a race for fish that can be
dangerous and inefficient.
The race for fish

• Fish today—while you still can—before the TAC (Total Allowable

Catch) limit is reached for the year!
• Example: the 2005-2006 Alaska king crab season lasted just 4
days (250 boats caught 14m pounds)
• Dangerous for workers, consumers get frozen fish

upload.wikimedia.org/.../220px-Redkingcrab.jpg
“The United States and European Union alone had
emitted more than half of the total carbon emitted
up to the turn of the century, contributing far more
to global warming than their developing country
counterparts”, according to the World Resources
Institute.
 Is it a tragedy of the
commons?

Who bears the

responsibility?

What implies a right to

development of a country?