Canadian Business and Society

ETHICS, RESPONSIBILITIES, AND

Fifth
SUSTAINABILITYAND
Edition

CHAPTER
14

The Environment
and Business
Responsibilities
Prepared By:
Renée Majeau, NAIT

© 2020 McGraw-Hill Education Limited 14-1

 Learning Outcomes
1. Understand the extensiveness of business’s responsibilities toward the
environment.
2. Describe the influence of government in addressing
environmental concerns.
3. Define environmental non-governmental organizations
(ENGOs) and appreciate their influence on corporations.
4. Explain how market-driven environmentalism approaches
work.
5. Describe a corporation’s responses to environmental concerns
in the context of the main functions of business.Describe the
influence of government in addressing environmental concerns.

© 2020 McGraw-Hill Education Ltd. 14- 2

 Learning Outcomes

6. List the sustainability measures and standards that exist and become
aware of corporate and industry initiatives to report on their
environmental responsibilities.
7. Appreciate that there are dissenting views on the environment and
consider how business should respond.
8. Identify the opportunities and challenges for a corporation’s response
to environmental concerns.

© 2020 McGraw-Hill Education Ltd. 14- 3

 Business, Its Stakeholders,
and the Natural Environment

• Environmental issues confront virtually all aspects of the

corporation, from:
 Input of resources to manufacturing process
 Workplace conditions through to the way products are packaged
and sold
• Managers must cope with planning, organizing, leading,
and controlling all the aspects of the environmental issue
• Commons  any resource used as though it belongs to all

© 2020 McGraw-Hill Education Ltd. 14- 4

 The Environmental Ethic and
Sustainable Development
• Environmental ethic  set of values or principles that govern
a corporation’s practices relating to the environment
• Sustainable Development  development ensuring that the
use of resources and the impact on the environment today does
not damage prospects for the use of resources or the
environment by future generations
• Business sustainable development  adopting business
strategies and activities that meet the needs of the enterprise
and its stakeholders today while protecting, sustaining, and
enhancing the human and natural resources needed in future

© 2020 McGraw-Hill Education Ltd. 14- 5

 Environmental Concerns
in Business and Society

• Acid rain • Ozone

• Air pollution • Pollution
• Ecosystems • Waste management
• Energy production and • Water quality
consumption • Climate change / global
• Nature and wildlife warming

© 2020 McGraw-Hill Education Ltd. 14- 6

 Government’s Influence
• Extensive government involvement exists through public
policy formulation and the regulation of all aspects of the
natural environment
 Canadian Environmental Protection Act, Canadian Environmental
Assessment Act, Kyoto Protocol
• Government departments and agencies established to:
 Regulate the activities of corporations
 Assist corporations in meeting environmental performance targets
 Examples: Environment Canada, Canadian Council of Ministers of
Environment, National Roundtable of the Environment and the
Economy, Canadian Environmental Assessment Act Agency

© 2020 McGraw-Hill Education Ltd. 14- 7

 Environmental NGO
Influence
• Environmental non-governmental organizations
(ENGOs)  groups that hold shared values or attitudes
about the challenges confronting the natural environment
and advocate for changes to improve the condition of the
environment.
 Influence corporations through protests, blockades, boycotts, and
annual shareholder meetings
 Example: Greenpeace

© 2020 McGraw-Hill Education Ltd. 14- 8

 Why Do ENGOs Target
Some Firms?
• ENGOs select corporations to target based on:
 Firm is the source of the environmental impact
 Extent of the consequences of the firm’s actions
 Denser relationships among firm’s ENGOs
 Larger the firm
 Greater influence of the firm within their industry
 Previous interactions with ENGO
 Closeness of the firm to consumers in the supply chain
 Firm’s brands are well known

© 2020 McGraw-Hill Education Ltd. 14- 9

 Influence of Market-Driven
Environmentalism
• Standard environmentalism  government regulation is
necessary remedy for the market’s failure to provide
enough environmental amenities
• Market environmentalism  economic incentives created
by market are more effective at protecting the environment
than government intervention
• Market factors influencing environmentalism are:
 Economic growth
 Free trade
 Property rights

© 2020 McGraw-Hill Education Ltd. 14- 10

 Differences between Standard
and Market
Factors Environmentalism
Standard Free-Market

World is dynamic and two forces

Viewed as destructive, because
Economic
producing more creates more
Growth
environmental harm
counteract harm:
(1) increased income drives a demand for
more environmental quality, and (2)
stimulation of innovation that improves
environmental quality

Considered part of the Forces industries to be more competitive,

problem: prevents countries accelerating adoption of newer, cleaner
Free Trade from following own higher technologies; trade restrictions possible
levels of protection; and belief to protect environment under WTO;
that rich countries exploit poor countries open to trade grow faster

Powerful tool for protecting because

Property
Faith in government to solve ownership incentive creates stewardship
Rights versus
problem for the public good incentive and gives individuals power to
Regulation
protect the environment.
TABLE 14.2
© 2020 McGraw-Hill Education Ltd. 14- 11
 Market-Driven
Environmentalism
• Carbon pricing  financial instrument that businesses
and governments are using to reduce carbon emissions,
which can be done in one of three ways:
 Cap-and-Trade  governments cap total carbon emissions and
then give or sell companies carbon permits that add up to the ca
 Carbon Pricing  governments impose a fee on carbon
 Output-based Price System  instead of paying the charge on
fuels that they purchase, industrial facilities in the system will
face a carbon price on the portion of their emissions that are
above a limit

© 2020 McGraw-Hill Education Ltd. 14- 12

 Market-Driven
Environmentalism Cont’d…
• Offsets (emissions-reduction credits)  credits
purchased from other corporations or organizations to
mitigate greenhouse gases released into the
environment
 The funds generated used to finance undertakings that will result
in the reduction of emissions
• Carbon capture and storage (CCS)  carbon emissions
are captured and injected into underground formation.
 Referred to as carbon sequestration or geosequestration
 Can be expensive and difficult to implement

© 2020 McGraw-Hill Education Ltd. 14- 13

 Business Responses to
Environmental Issues
• Management positions and committees should be created to
deal with the environment issue
• Key to have top management commitment so that there are
practical principles to:
 Gide the corporation’s environmental efforts
 Integrate environmental affairs with operations
 Encourage environmental professionals to meet mounting
environmental requirements

© 2020 McGraw-Hill Education Ltd. 14- 14

 Business Responses to
Environmental Issues
• Cont’d…
Different approaches to environmental concerns:
 Token response - focuses on damage control as problems arise
and attempts are made to fix them
 Compliance with laws and regulations - concern about lawsuits
and prosecution has motivated managers and executives to adopt
strategies of compliance
 Comprehensive environmental management - management
seeks to gain a competitive advantage by taking an active stance
on environmental issues
 Sustainable development - corporations integrate concepts of
sustainable development into their business strategies and
environmental policies
© 2020 McGraw-Hill Education Ltd. 14- 15
 Business Responses to
Environmental Issues
Cont’d…
• Corporations need comprehensive environmental policies
and programs
 Referred to as environmental management systems (EMS) 
ensure that environmental practices become an important
component of the corporation’s overall strategy
 EMS helps corporations to:
• Reduce costs
• Respond to investor demands
• Facilitate regulatory approaches and mitigating operational risk
• Hire best employees
• Meet consumer demand for “green” products and services

© 2020 McGraw-Hill Education Ltd. 14- 16

 Financial Management

• Includes consideration of environmental factors and

involves many aspects:
 Accounting guidelines
 “Eco-insurance” products now available
 Environmental assessments necessary to determine influence on
financial performance and liability
 Investments being screened for environmental performance
 Shareholders unhappy with a corporation’s environmental policy
may hurt its financial performance

© 2020 McGraw-Hill Education Ltd. 14- 17

 Marketing

• Green marketing  selling environmentally friendly goods

and services to consumers
• Consumers are increasingly considering eco-labels when
purchasing products
 To increase the legibility and trust in eco-labels, third-party
certification is occurring
• Are consumers willing to pay the increased prices often
necessary for many green products?

© 2020 McGraw-Hill Education Ltd. 14- 18

 Marketing

• Green marketing  selling environmentally friendly goods

and services to consumers
• Consumers are increasingly considering eco-labels when
purchasing products
 To increase the legibility and trust in eco-labels, third-party
certification is occurring
• Are consumers willing to pay the increased prices often
necessary for many green products?

© 2020 McGraw-Hill Education Ltd. 14- 19

 Human Resources
Practices and Policies to Create the Green Workplace

• Eco-friendly policies and practices are influencing the

• Offering a recycling program for office products, including donating and discounting used office furniture
recruitment
to andandretention
employees or charities, of employees:
banning disposables such as plastic utensils and paper cups and plates.
• Conserving energy by using energy-efficient lighting systems, and equipment, and installing automatic
shutoffs of idle equipment.
• Reducing consumption of paper, packaging, and other office supplies
• Encouraging employees to be more environmentally friendly by promoting walking, biking, and using
public transport to work or car-pooling. Providing bike stands, showers, and fare subsidies.
• Creating a pesticide-free green landscape with trees, lawns, and gardens.
• Reducing emissions through less travel and climate control, striving for carbon neutrality.
• Purchasing renewable energy credits.
• Conducting virtual meetings through video and teleconferencing thus reducing travel.
• Using natural lighting, with windows and skylights.
• Investing in community environmental initiatives.
• Requiring suppliers to be green.
• Publicly disclosing sustainability initiatives through reports that identify objectives and detail the progress
made in achieving them.
• Convincing employees of program benefits and top management support.
• Providing incentives for environmentally friendly behaviour.
• Organizing employee committees to provide advice on practices.

TABLE 14.3
© 2020 McGraw-Hill Education Ltd. 14- 20
 Operations

• Business is trying to implement environmentally friendly

processes and technologies into all aspects of operations or
the production function
 Three main areas of activity:
• Pollution reduction
• Waste management and recycling
• Energy conservation

© 2020 McGraw-Hill Education Ltd. 14- 21

Measuring and Reporting on
Environmental Sustainability
• Examples of indicators used to evaluate environmental
performance:
 Type and amount of materials used
 Source of energy and efficiency of use
 Source and quality of water
 Impact on biodiversity
 Reduction of emissions, effluents, and waste
 Product design that minimizes impact
 Compliance with environmental regulations
 Use of efficient transportation mode

© 2020 McGraw-Hill Education Ltd. 14- 22

 Environmental Sustainability
Measures and Standards

• Coalition for Environmentally Responsible Economies

(CERES)
• International Organization for Standardization ISO 14000
• International Institute for Sustainable Development (IISD)
• Canadian Sustainability Indicators Network (CSIN)
• Environmental and Sustainable Development Indicators
Initiative (ESDI)

© 2020 McGraw-Hill Education Ltd. 14- 23

 Dissenting Views
on the Environment
• Not everyone agrees that business should play leading role
in protecting environment
• Criticisms of sustainability:
 Concept difficult to define and understand
 Means stopping or constraining economic development
 Implies capitalism is unsustainable and morally lacking
 Lacks understanding of markets and moralistic system of markets
 Executives are being misled into responding to it as a social issue

© 2020 McGraw-Hill Education Ltd. 14- 24

 The Environment:
Corporate Opportunities
• Corporations face many opportunities as they attempt to
practice sustainable development:
 Reputations likely enhanced
 More competent staff attracted
 Customers attracted
 Investors attracted
 Costs reduced through recycling/conservation
 Better integration with local community
 Business opportunities emerge from new technologies
 More efficient ways of producing products found

© 2020 McGraw-Hill Education Ltd. 14- 25

 The Environment:
Corporate Challenges
• Corporations face many challenges as they attempt to
practice sustainable development:
 Corporate image may deteriorate
 Revenues may suffer if customers are lost
 Investors may decide not to invest
 Material and production costs may increase
 Financial penalties increasing
 Insurance premiums can increase
 Potential alienation from local community
 Government may enact stricter legislation

© 2020 McGraw-Hill Education Ltd. 14- 26

 From a Linear to a
Circular Economy
• Linear economy  raw materials used to produce goods
or products that are used and not recycled or may be even
non-recyclable
• Reuse economy  after use, some goods are recycled and
reused in production but the remainder is still waste
• Circular economy  restorative and regenerative by
design so materials constantly flow around a closed loop
system preserving value rather than being used once and
then discarded
 Extended producer responsibility (EPR) and life cycle thinking

© 2020 McGraw-Hill Education Ltd. 14- 27

 Summary

• Concern for the natural environment is widespread in

society and business has a responsibility to respond.
Responding to this concern is challenging as many
stakeholders and issues influence
corporations. Corporations must develop an environmental
ethic or set of values relating to their practices toward
sustainable development in the economy. Each corporation
must develop strategies and practices to meet its own and
its stakeholders’ needs today while ensuring that future
resources will be available. (LO 14.1)

© 2020 McGraw-Hill Education Ltd. 14- 28

 Summary Cont’d…

• Governments have implemented environmental policies

through legislation and regulations and the establishment
of various agencies. Environmental assessments by
businesses are now commonplace. However, the federal
government is reducing its regulation of environmental
impacts. (LO 14.2)
• Influence of a different type comes from environmental
non-governmental organizations (ENGOs). Hundreds of
such organizations exist and corporations are learning how
to respond to or cooperate with them. (LO 14.3)

© 2020 McGraw-Hill Education Ltd. 14- 29

 Summary Cont’d…
• Another possibility is to leave solutions to environmental
concerns to market-driven initiatives. Instead of being
required by governments to respond, it is argued that
relying on market forces is more effective. Emissions
trading and offsets are two examples. (LO 14.4)
• When corporations act on environmental concerns, the
responses must be managed with appropriate
organizational structures, environment management
systems, and corporate strategies. As corporations attempt
to respond to environmental concerns, there are
implications for all the major functions of business.
(LO 14.5)
© 2020 McGraw-Hill Education Ltd. 14- 30
 Summary Cont’d…

• Many sustainability measures and standards have been

developed by ENGOs, business organizations, and industry
associations. Indicators that measure a corporation’s
environmental performance are used. Many corporations
issue elaborate environmental reports. (LO 14.6)
• Dissenting views on the environment are held in the
business community and by other stakeholders. Not all
businesspersons believe that climate change is a problem.
Even public attitudes are mixed in that surveys indicate
consumers are concerned, but this concern is not always
reflected in purchasing decisions. (LO 14.7)
© 2020 McGraw-Hill Education Ltd. 14- 31
 Summary Cont’d…
• The environment presents corporations with opportunities
and threats. But, many corporations are developing an
environmental ethic that achieves sustainable development.
(LO 14.8)

© 2020 McGraw-Hill Education Ltd. 14- 32