Business Ethics

Chapter 5
ETHICS AND THE ENVIRONMENT

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• The technology has enabled us to manipulate and control
nature has also polluted our environment and rapidly
depleted our natural resources.
• According to the U.S. Environmental Protection Agency (EPA).
We produced 3.9 billion tons of toxic wastes, of which 247
million pounds were released as surface water discharge. Our
total energy consumption for the year was 100 quadrillion
BTUs (British Thermal Units) which is equivalent to about
17.24 billion barrels of oil or 721 billion gallons of gasoline.
• Each U.S. citizen annually accounts for the consumption of
about 1,300 pounds of metal and 18,500 pounds of other
minerals, and each produces over 7 pounds of garbage every
day of the year.

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• More than 2 million people are estimated to die
prematurely each year due to indoor and outdoor air
pollution.
• Severe indoor air pollution occurs in many poor
communities when biomass and coal are used for
cooking and heating in enclosed places without
adequate ventilation.
• Outdoor air pollution arises from many sources,
including industrial processes, motor vehicles, energy
generation, and wildfires.
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 Pollution and Resource Depletion
• Threats to the environment come from two
sources:
– Pollution: The undesirable and unintended
contamination of the environment by human
activity such as manufacturing, waste disposal,
burning fossil fuels, etc.
– Resource Depletion: The consumption of finite or
scarce resources.

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 The Dimensions of Pollution and Resource Depletion

Major Types of Air Pollution

• Greenhouse gases: carbon dioxide, methane,
nitrous oxide.
• Ozone depleting gases: chlorofluorocarbons
• Acid rain gases: sulfur oxides.
• Airborne toxics: benzene, formaldehyde, toluene,
trichloroethylene, and 329 others.
• Common air pollutants: carbon monoxide, sulfur
oxides, nitrogen oxides, airborne lead, ozone,
particulates.

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 Major Types of Water Pollution
• Organic wastes: human sewage, animal
wastes, bacteria, oil.
• Inorganic pollutants: salt brines, acids,
phosphates, heavy metals, asbestos, PCBs,
radioactive chemicals.

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 Major Types of Land Pollution
• Toxic substances: acids, heavy metals,
solvents, pesticides, herbicides, and phenols.
• Solid wastes: residential garbage, industrial
wastes, agricultural wastes, and mining
wastes.
• Nuclear wastes: high level, transuranic, low-
level.

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 Depletion of Non-Renewable Resources
• Extinction of species through destruction of natural
habitats.
• Natural resources depleted at peaked rate, not exponential
rate.
• Fossil fuel depletion:
– Coal in 150 years
– Natural gas in 30–40 years
– Oil between 2010 and 2040
• Mineral depletion:
– Copper and mercury in 2100
– Aluminum during 21st century
– Indium and antimony in 10 years
– Tantalum in 20–116 years.

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 The Ethics of Pollution Control
• Ecological Ethics = The ethical view that nonhuman
parts of the environment deserve to be preserved for
their own sake, regardless of whether this benefits
human beings.
– The “Last Man” Argument
• Asks us to imagine a man who is Earth’s last survivor.
• We recognize it is wrong for the last man to destroy all
nonhumans.
• So we must recognize some nonhumans have intrinsic
value apart from humans.

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 Environmental Rights
• Humans have a right to fulfill their capacities
as free and rational and a livable environment
is essential to such fulfillment.
• So humans have a right to a livable
environment and this right is violated by
practices that destroy the environment.
• Such environmental rights can lead to
absolute bans on pollution even when the
costs far outweigh the benefits.

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• The people have a right to clean air, and pure water, and to the
preservation of the natural scenic, historic, and aesthetic values of the
environment.

• Pennsylvania’s natural resources . . . are the common property of all

the people, including generations yet to come.

• As trustees of these resources, the commonwealth shall preserve and

maintain them for the benefit of all people.

• Blackstone’s Theory
• Blackstone's meaning is simply that no human law has any moral
validity or force against natural law, and that no human law can
affect the content of a natural right as such.

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Video Link

(5) Air Pollution In Pakistan I A Documentar

y – YouTube

ttps://www.youtube.com/watch?
v=jSmmmYfO7pU

(5) DESTRUCTION OF HABITATS AND FR

AGMENTATION – YouTube

(5) What are Different types of Pollution | En

vironmental Issues | Ecology | Extra class N
EET – YouTube

https://www.youtube.com/watch?
v=61NQYep1So0

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 Private and Social Costs
• Private cost: The cost an individual or
company must pay out of its own pocket to
engage in a particular economic activity.

• Social cost: The private internal costs plus the

external costs of engaging in a particular
economic activity.

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 Markets and Pollution
• Total costs of making a product include a seller’s internal
private costs and the external costs of pollution paid by
society.
• A supply curve based on all costs of making a product lies
higher than one based only on sellers’ internal private costs.
– The higher supply curve crosses the demand curve at a lower
quantity and a higher price than the lower supply curve.
• When sellers’ costs include only private costs, too much is
produced and the price is too low (Compared to when all
costs are included).
– This lowers utility and violates rights and justice.

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Markets and Partial Controls
•One way to answer the questions that Blackstone’s theory of
environmental rights raises is to see environmental problems as market
defects.

•If an industry pollutes the environment, the market prices of its

commodities will no longer reflect the full costs of producing the
commodities; the result is a misallocation of resources, a rise in waste,
and an inefficient distribution of commodities.

•Consequently, society as a whole is harmed as its overall economic

welfare declines. Individuals, then, should avoid pollution because they
should avoid harming society’s welfare.

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Three ethical deficiencies can be noted.

First,
•Allocation of resources in markets that do not take all costs into
account is not optimal because, from the point of view of society as a
whole, more of the commodity is being produced than society would
demand if society had an accurate measure available of what it is
actually paying to produce the commodity.

•Because the commodity is being overproduced, more of society’s

resources are being consumed to produce the commodity than is
optimal. The resources being consumed by overproduction of the
commodity are resources that could be used to produce other
commodities for which there would be greater demand if prices
accurately reflected costs. Resources are thereby being misallocated.

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Second,
•when external costs are not taken into account by producers,
producers ignore these costs and make no attempt to minimize
them like they minimize their other costs.

•Because the firm does not have to pay for external costs, it uses
up and wastes the resources being consumed by these external
costs (such as clean air).

•There may be technologically feasible ways of producing the

same commodities without polluting or by polluting less, but the
producer will have no incentive to find them.

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Third,
•when the production of a commodity imposes external costs on third
parties, goods are no longer efficiently distributed to consumers.
External costs introduce effective price differentials into markets:
Everyone does not pay equal prices for the same commodities.

• The neighbors who live near our imaginary electric plant, for example,
pay not only the prices the plant charges everyone else for electricity,
but also the costs the smoke from the burning fuel imposes on them in
the form of extra cleaning bills, medical bills, painting bills, and so forth.

• Because they must pay for these extra external costs, of course, they
have fewer funds to pay for their share of market commodities.
Consequently, their share of goods is not proportioned to their desires
and needs as compared with the shares of those who do not have to
pay the extra external costs.

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Pollution also violates the kind of justice or fairness that
characterizes a free competitive market. In a well-functioning
competitive market the value of what buyers and sellers on
average receive from their market exchanges equal the value of
what they contribute.
But when a market generates pollution, there are external costs
that some people have to pay in addition to what they pay for the
goods they receive from the market. These costs are unfair: They
are costs the producer imposes on people (for example, the people
who live near an electric plant that rains coal soot on them, forcing
them to pay higher doctor bills and cleaning bills and to accept
declining property values) and for which these people unfairly get
nothing in return

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 Ethical Approaches to
Environmental Protection
• Ecological approach.
– nonhumans have intrinsic value
• Environmental rights approach.
– humans have a right to a livable environment
• Market approach.
– external costs violate utility, rights, and justice;
therefore, they should be internalized.

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 Internalization of the
Costs of Pollution
• Absorption of external costs by the producer,
who then takes them into account when
determining the price of goods.
– But this process leads to environmental injustice
because the external costs of pollution are borne
largely by those who do not enjoy a net benefit
from the activity that produces the pollution.

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 Optimal Level of Pollution Removal
(Utilitarian Approach)
• Costs of removing pollutants rise as benefits of
removal fall.
• Optimal level of removal is the point where its
costs equal its benefits.
• But when costs and benefits are not
measurable, the utilitarian approach fails.
• When costs and benefits are not measurable
some use the precautionary principle, others
the maximin rule.

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 Precautionary Principle
• The principle that if a practice carries an
unknown risk of disastrous and irreversible
consequences, but it is uncertain how large
that risk is, then the practice should be
rejected until it is certain the risk is
nonexistent or insignificant.

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 Maximin Rule
• When risks cannot be measured, the most
rational procedure is to first assume that the
worst will happen and then choose the option
that leaves us best off when the worst
happens.

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 Alternative Approaches to Pollution
• Social Ecology
– Get rid of social systems of hierarchy and
domination
• Ecofeminism
– Change male pattern of dominating nature and
women
• Other feminists
– Extend the ethic of care toward nature

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 Conservation Based on Ethics
• Rawls:
– Leave the world no worse than we found it.
• Care Ethic:
– Leave our children a world no worse than we
received.
• Attfield:
– Leave the world as productive as we found it.

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 Sustainability
• We must deal with the environment, society,
and economy so that they have the capacity to
continue to meet the needs of present
generations without compromising the ability
of future generations to meet their own
needs.
• Environmental sustainability, economic
sustainability, and social sustainability are
interdependent.

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 Environmental Sustainability
• Not depleting renewable resources faster than
their replacement.
• Not creating more pollution than environment
can absorb.
• Not depleting non-renewable resources faster
than we find replacements.

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 Economic Growth
• Schumacher
– We must abandon the goal of economic growth if
we are to allow future generations to live as we
do.
• Others
– We must achieve a “steady state” where births
equal deaths and production equals consumption
and these remain constant at their lowest feasible
level.

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 Club of Rome Projections
• Suggest that continued economic growth will
deplete resources and increase pollution until
industrial output, food production, and
services decline, causing catastrophic
population loss sometime during the twenty-
first century.

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 Moral Questions Related to Economic
Growth
• It is troubling that current economic growth
policies have led to high rates of energy and
resource consumption in developed nations
while developing nations are left to consume
at low rates.

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 Case Study

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https://www.youtube.com/watch?v=QQYgCxu988s

https://www.youtube.com/watch?v=JyL58vlbvgw

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