20190405103137D5271 - 1305959825 - 563437 - CH 15

Copyright © 2018 Cengage.
All rights reserved 1

Chapter 15
Sustainability
and
the Natural
Environment
Copyright © 2018 Cengage. All rights reserved 2

Learning Outcomes
1. Discuss the concept of sustainability and its imperative.
2. Describe the natural environment, the impact of business on
the natural environment, and the ten major natural
environment issues.
3. Identify and discuss the issues that arise for businesses in
their responsibility for the environment and sustainability.
4. Discuss the role of governments in environmental and
sustainability issues.
5. Describe other environmental stakeholders, including
interest groups, employees, and investors.
6. Discuss business environmentalism sustainability goals, and
the future of the business/environment relationship.
Chapter Outline
• The Sustainability Imperative
• The Natural Environment
• A Brief Introduction to the Natural Environment
• The Impact of Business on the Natural Environment
• Responsibility for and Sustainability Environmental Issues
• The Role of Governments in Environmental and
Sustainability Issues
• Other Environmental and Sustainability Stakeholders
• Business Environmentalism and Sustainability
• The Future of Business: Greening and/or Growing?
• Summary
• Key Terms
Sustainability
and the Natural Environment
Sustainability -
• Business that meets the needs of the present without
compromising the ability of future generations to meet
their own needs.
• Akin to walking lightly on the earth, taking only what’s
needed, and leaving behind enough for future
generations to have access to the same resources.
• Creative business people need to develop new ways to
benefit the triple bottom line – people, planet, profits.
• Swift growth due to realization that sustainability is the
right thing to do, and can also drive revenue, savings,
and give a competitive edge.
The Sustainability Imperative (1 of 2)
• Years ago, discussing sustainability would bring
arguments about why businesses would benefit. Today,
the need for sustainability is a “given.” CERES’ Roadmap
to Sustainability identifies several key drivers:
Competition for resources - demand is growing more quickly
than they can be replaced.
Climate change - business must be prepared to respond to
new policies regarding emissions, and to take advantage of
new technology.
Economic globalization - wide disparities in social and
environment standards bring risks and opportunities.
Connectivity and communications - stakeholders can
monitor and react to sustainability efforts more quickly.
Reputations are quickly built and destroyed.
The Sustainability Imperative (2 of 2)
• A leading advocate of business sustainability is
Unilever. The CEO sought out long-term investors
as shareholders, rather than short-term hedge-
fund managers, banned quarterly earnings
reports, and embarked on a 10-year plan.
• Carbon emissions have been slashed by 32%
• Greenhouse gases- Halved by 2020
• Water – halve water associated with consumer
use of products by 2020
• Sustainable sourcing – 100% of agricultural raw
materials sustainably by 2020
The Natural Environment
• For years, businesses conducted their operations with
little concern for environmental consequences. They
consumed significant amounts of materials and energy,
causing waste accumulation and resource degradation.
• They caused major air, water, and land pollution
problems. They looked the other way, labeling the
negative consequences of their actions as externalities
—side-effects or by-products not intended, and often
disregarded.
• Any environmental effort usually came from
compliance or efficiency. Businesses would stop
damaging the environment only when it became illegal
or unprofitable to do so.
• Now, environmentalism is becoming profitable.
A Brief Introduction
to the Natural Environment
• This chapter focuses on the natural environment—what it
is, why it is important, how it has become a major concern,
and what businesses and other organizations have done to
it or for it.
• The environment has become one of the most significant
societal issues of our time.
• To help you make environmental business decisions in the
future, we’ll describe the variety of responses humans and
businesses have developed to address these issues, and
present data.
• The emphasis is on two themes:
• Humans are part of their natural environment
• The environment is complex, defying simple analyses
Glossary of Environmental Terms
Bio-based Product A product composed of biological
products or renewable agricultural or
forestry materials.
Environment External living, working, and playing
spaces and natural resources and more.
Carbon Footprint The amount of greenhouse gases one

emits.
Carbon neutral Maintaining a balance between
producing and using carbon dioxide.
Carrying capacity Volume and intensity of use by
organisms that can be sustained
Entropy A measure of disorder of energy
indicating its unavailability for recycling
for the same use.
Ecosystem All living and nonliving substances
present in a particular place, interacting
Irreversibility The inability of humans and nature to
restore environmental conditions to a
previous
© 2015 Cengage state.
Learning 10
The Impact of Business
on the Natural Environment
The Top Ten fundamental environmental issues:
1. Climate Change
2. Energy
3. Water
4. Biodiversity and Land Use
5. Chemicals, Toxics, and Heavy Metals
6. Air Pollution
7. Waste Management
8. Ozone Layer Depletion
9. Oceans and Fisheries
10. Deforestation
Climate Change
Climate change global warming creates the:
Greenhouse effect - the prevention of solar heat absorbed by
our atmosphere from returning to space, can persist in the
atmosphere for centuries.
• Melting glaciers, decline in crop yields, and the effects of
sea-level rise are all signs of warming.
• Environmental Protection Agency’s Clean Power Plan
introduced in 2015 under the Clean Air Act address climate
change issues
• In 2016, the Paris Agreement on Climate Change brought
190 countries together with an aim to limit global warming
to below 2 degrees Celsius.
• Some businesses us internal carbon tax or carbon pricing
to offset emissions with investments in sustainability
projects. Copyright © 2018 Cengage. All rights reserved 12
Global Carbon Dioxide Emissions

Energy
• A major environmental issue is energy inefficiency,
wasting nonrenewable sources of energy.
• Fossil fuels such as coal, oil, and natural gas were
formed millions of years ago under unique conditions;
once they are depleted, they will be gone forever.
• Because such fuels are not equally distributed around
the world, disastrous armed conflicts result.
• Businesses should use as little non-renewal energy as
possible, and shift to renewable sources such as
solar, wind, hydroelectric, biomass
• Energy represents a challenge and an opportunity;
firms that succeed in this area will reap big profits.
Water
• Both quality and quantity of water
endangered.
Quality – Degradation of oceans & waterways
• Municipal sewage, industrial wastes
• Urban runoff, agricultural runoff
• Atmospheric fallout, overharvesting
• Dam sedimentation, deforestation
• Overgrazing, over-irrigation
• More than a billion people lack clean water.
• Quantity –
• Earth is a closed system with a fixed water supply;
growing populations use more water.
• The world is facing water bankruptcy.
Biodiversity and Land Use
Biodiversity - The variation of life forms inside
an ecosystem, serves as a key indicator of its
health. It is being lost at an unprecedented rate.
• Ecosystem and habitat destruction, pollution,
other excesses in individual and organizational
activities are responsible.
• Species die off at a natural rate of 1 to 5 a
year, now dozens go extinct each day.
• Land degradation threatens the livelihood of
more than one billion people, especially in
Africa, the continent most affected by drought.
Chemicals, Toxics and Heavy Metals
Toxic substances -
• Chemicals or compounds that may cause
damage to the nervous system, reproductive
and developmental problems, cancer and
genetic disorders and the environment.
• Can be intentionally or unintentionally created.
• Two main problems -
1. We are not always aware of the effects of
exposure to chemicals.
2. Toxic substances can be associated with
industrial accidents, causing unforeseen
widespread biological damage.
Air Pollution
Outdoor Air pollution -
• Acid Rain
• Global Warming
• Smog
• Depletion of the ozone layer
• Serious respiratory illnesses
Indoor Air Pollution –
• Comes from oil, gas, kerosene, coal, wood and tobacco
products, building materials and furnishings, damp carpets,
household cleaning products and lead-based paints.
• Long term effects—respiratory diseases, heart disease and
cancer—can be fatal.
Waste Management
Reduce
Reuse
Recycle

Ozone Depletion
Ozone depletion -
• Ozone is harmful near the surface of the earth,
but vital in the atmosphere.
• It blocks dangerous ultraviolet radiation from the
sun.
• Decrease in stratospheric ozone comes from
human use of chlorofluorocarbons (CFCs) and
other chemicals.
• In 2013, the hole in the ozone was at its second
smallest point in 20 years.
Oceans and Fisheries
Watershed - an area that drains to a common waterway.
We all live in a watershed.
• Trillions of gallons of sewage & industrial waste are
dumped into marine waters each year.
• These & other pollutants do significant damage coastal
ecosystems, resulting in shellfish bed closures, seafood-
related illnesses, and reduced shoreline protection from
floods and storms.
• Once inconceivable, now 85% of the world’s fisheries
are at capacity, over capacity or have collapsed. The
oceans are running out of fish to meet human needs.
• Conservation efforts have helped some species recover,
and such efforts continue.
Deforestation
• Humans depend on forests for building materials,
fuel, medicines, chemicals, food, employment and
recreation.
Deforestation -
• Adds to soil erosion problems.
• Plays a key role in global warming; Felled trees can
no longer absorb carbon dioxide. Dead trees release
it into the atmosphere.
• Accounts for 20% of global carbon emissions –
more than the world’s trains, boats and planes
combined.
Responsibility
for Environmental Issues
• Wicked problems - (smog, toxic waste and acid rain) are
problems with complexity, uncertainty,
interconnectedness, ambiguity, conflict, and societal
constraints. When no one takes responsibility -
• Tragedy of the commons – is likely to occur
• A “commons” (our environment) is a plot of land available
to all.
• Constraints must be placed on the use of the commons
because self-interest is likely to lead individuals and
organizations to behave in ways that will not sustain our
shared resources.
Environmental Ethics
• Humans must consume at least some plants and
water to survive. What level is ethical? Which
school of environmental thought should we apply?
• Kohlberg – levels of moral development
• Utilitarianism – greatest good for greatest number
• Integrating sustainability into a firm’s philosophy is
a natural extension of stakeholder theory, including
as a stakeholder the ecological system from which
the firm obtains resources and to which it bears
responsibility for its impacts, both positive and
negative.
The NIMBY Problem
Not in my Backyard: NIMBY -
• Reflects human denial of responsibility for misuse
of the environment.
• Entities causing environmental pollution are not
identified as the sources of the problem, so no
action is taken.
• A NIMBY attitude avoids or denies the root cause of
the damage.
• One popular cartoon pictures a stream of polluting,
honking cars passing along the highway in front of a
billboard that reads:
• “Honk if you love the environment.”
The Role of Governments
in Environmental and
Sustainability Issues
• Governments have played major roles in
environment issues:
• developed habitable lands,
• protected, taxed and zoned natural
environment-based areas, and
• exercised regulatory control over how those
environments could be used.

Responses of Governments
in the United States (1 of 5)
National Environmental Policy Act (NEPA, 1970)
• permit required for discharge of hazardous
waste into navigable waters
• requires federal agencies to prepare
Environmental Impact Statements (EISs)
Environmental Protection Agency (EPA, 1970)
• An independent agency to research pollution
problems, aid state and local government
efforts, and administer many federal
environmental laws
Air Quality Legislation – The Clean Air Act

• Sets standards and timetables for implementation
• Created Emissions trading (cap and trade)
• Intended to reduce a particular pollutant over an
entire industrial region by treating all emission
sources as if they were beneath one bubble.
• A business can increase its emissions in one part
of a plant or region if it reduces its pollution by as
much or more in another part of the plant or
region.
• Businesses that reduce their emissions can trade
them to other businesses, earning income.
Water Quality Legis. – The Clean Water Act

• Involves both state and federal governments
• Goal: to achieve water quality safe for humans,
and protection of fish, shellfish and wildlife
• Banned discharge of pollutants into navigable
waters through pollution permit system
• Set timetables for installation of state-of-the-art
pollution control equipment.
• Marine Protection , Research & Sanctuaries Act
set a similar system for coastal waters
• The Safe Drinking Water Act of 1974 establishes
maximum contaminant levels for drinking water.
Land-Related Legis. – Solid Waste Disposal Act

• State and local governments mainly responsible
• Resource Conservation & Recover Act set up a
regulatory system for tracking hazardous waste
• Toxic Substances Control Act requires businesses
to identify chemicals posing substantial risks.
• Superfund (CERCLA) places responsibility for
remediation of hazardous waste dumps
• Emergency Planning and Community Right-to-
Know Act requires manufacturers to report
annually all of their releases into the environment
of any of more than 500 toxic chemicals
Endangered Species –
• World’s species are disappearing at an alarming rate
• Nearly 20,000 species now considered threatened or
extinct
• Endangered Species Act (1973)

• Prohibits harm to endangered and threatened
species
• May require moving the species to another
location or restricting threatening business
activities, resulting in intense political conflicts
between business and environmental groups

International Government Environmental
and Sustainability Responses (1 of 2)
• United Nations Environmental Programme

(UNEP) – has led the way in identifying global
environmental and sustainability problems
and resolutions:
• Montreal Protocol, 1987 - by which most
CFC-producing nations agreed to a quick
phase-out of these ozone-destroying
substances. This was the first UN treaty to
achieve universal ratification.

International Government Environmental
Responses (1 of 2)
• Global Compact – joins firms across the world
to support environmental and social
principles.
• Global Reporting Initiative (GRI) – a
collaborating center of the UNEP. GRI
developed a sustainability reporting
framework, now the most widely used
standard in the world; outlines principles and
indicators that organizations can use to
measure and report their economic,
environmental and social performance.
Other Environmental and Sustainability
Stakeholders
Environmental Interest Groups –
• A collection of nonprofit membership and think-
tank organizations has moved the world in the
direction of environmental responsibility. Known as
“the environmental movement,” they are
responsible for the “greening” of nations.
• Environmental interest groups have evolved, and
have been instrumental in significantly influencing
business environmental policy.
• Examples: Environmental Defense is working
with Federal Express on building a new
generation of vehicles; with DuPont on
developing nanotech standards; with PHH Arval
on becoming the first carbon neutral fleet.
Environmental Groups Based on
Cooperation with Business
Radicals Confrontational behaviors
Seek pragmatic reform through

Mainstreamers
cooperation and confrontation
Avoid confrontation, and are

Accommodators
more trusting of corporations

Other Sustainability Interest Groups
Green consumers - actual and potential
customers of retail who express preferences for
environmentally-friendly products and services.
Green employees - play a major role in
promoting environmentalism at work.
Green investors - individuals and organizations
who prefer to invest with firms that are
associated with environmentally-oriented
companies. A growing number of bond offerings,
money market fund and other financial
instruments now include environmental
components.
Business Environmentalism and Sustainability
• These firms are “shaking up” sustainability. They have
taken “principled stances” and/or led innovative
programs for better social and environmental
conditions.
• Patagonia – Recycled decades before others
• Made its outdoor gear out of old plastic soda
bottles
• Discovered the dangers of cotton due to
dependencies on pesticides, insecticides, and
defoliants.
• Apple – Partners with multiple initiatives to avoid
conflict of minerals and unfair labor conditions. The
electronics brand with the highest use of
renewable energy.
Business Environmentalism and
Sustainability
• CVS Health – Stopped the sale of tobacco products
in their stores. Offer smoking cessation programs.
• Tesla – Known for the development of the electric
vehicle. Building an ecosystem of sustainable brands –
group of interconnected elements, formed by
interactions with others in its community and
environment.

Business & Environmental Partnerships-
Activists, NGOs, & Interest Groups –
• Accommodation replacing antagonism with

understanding of mutual dependence.
• Business needs environmental partners to inform
and validate environmental efforts.
• Activists, NGOs and interest groups need business to
change the way it operates in order to protect the
planet.
• GreenBiz survey shows corporations view NGOs in 4
ways: trusted partners, useful resources, brand
challenged, and the uninvited.
The Future of Business:
Greening and/or Growing?
• The salient environmental question:
• How much is enough?
• How much economic growth?
• How much materials and energy?
• Limits on growth are not popular. But the
problem with unrestrained economic growth
is that, unless technology or people change
significantly within a generation,
environment problems will change in degree
from significant to severe.
Key Terms (1 of 2)
• acid rain • circular economy
• air pollution • climate change
• Biodiversity • cost-benefit analysis
• COP19 • deforestation
• • ecosystems
COP21
• • emissions trading
cap and trade
• • Endangered Species
carbon neutral
• carbon positive Act (ESA)
• • energy inefficiency
CERES’ Roadmap to
• environment
Sustainability
• clean air act • Environmental
• Clean Water Act Impact Statements
(EISs) 41
Copyright © 2018 Cengage. All rights reserved
Key Terms (2 of 2)
• Environmental • recycling
Protection Agency (EPA) • superfund
• externalities • sustainable apparel
• fossil fuels coalition
• global compact • sustainability
• Global Reporting • toxic substances
Initiative (GRI) • Toxic Substances
• global warming Control Act
• greenhouse effect • tragedy of the
• internal carbon tax commons
• Montreal Protocol • triple bottom line
• NGOs • Warsaw International
• NIMBY Mechanism
• ozone • watershed
• wicked problems

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Carbon Footprint The amount of greenhouse gases one

Copyright © 2018 Cengage. All rights reserved 13

Copyright © 2018 Cengage. All rights reserved 19

Copyright © 2018 Cengage. All rights reserved 26

Air Quality Legislation – The Clean Air Act

Water Quality Legis. – The Clean Water Act

Land-Related Legis. – Solid Waste Disposal Act

• Endangered Species Act (1973)

Copyright © 2018 Cengage. All rights reserved 31

• United Nations Environmental Programme

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Radicals Confrontational behaviors

Seek pragmatic reform through

Avoid confrontation, and are

Copyright © 2018 Cengage. All rights reserved 35

Copyright © 2018 Cengage. All rights reserved 38

• Accommodation replacing antagonism with

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