Chapter 10: Ecology and Sustainable Development in Global Business

Chapter 10Ecology and Sustainable Development in Global BusinessCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCh. 10: Key Learning ObjectivesUnderstanding how business and society interact within the natural environment Defining sustainable developmentAssessing the major threats to the Earth’s ecosystemRecognizing the ways in which population growth, inequality, and economic development interact with the world’s ecological crisisExamining common environmental issues that are shared by all nations and businessesAnalyzing the steps both large and small businesses can take globally to reduce ecological damage and promote sustainable development10-*Business and Society in the Natural EnvironmentBusiness 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 10-*Figure 10.1Business, Society and the Natural Environment: An Interactive System 10-*Sustainable DevelopmentDevelopment 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 alleviationEconomic development cannot occur at the expense of degrading the forests, farmland, water, and air that must continue to support life on this planetSustainable development is about fairness 10-*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 periodRenewable resources (water, forests) can be naturally replenishedNonrenewable resources (such as fossils fuels like oil, coal) once used are gone foreverExamples of natural resources that are now being depleted or polluted at well above sustainable rates Water resourcesFossil fuelsArable land10-*Forces of Change Accelerating Ecological CrisisPressure on the earth’s resource base is becoming increasingly severeThree critical factors have combined to accelerate the ecological crisis facing the world community and to make sustainable development more difficultPopulation explosionWorld poverty and income inequalityRapid growth of many developing nations10-*Population of the World and Major AreasFigure 10.2 10-*Share of the World’s Private Consumption by Income FifthsFigure 10.3 10-*The Earth’s Carrying CapacityThe Earth’s resource base is essentially finite, or boundedLimits to growth hypothesis suggests human society is overshooting Earth’s carrying capacity, with drastic consequences if changes are not made10-*Ecological FootprintOne 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 technology10-*Restoring the Balance of Earth's Carrying CapacityThis 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 wasteChanging 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 activities10-*Global Environmental Issues Commonsa 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 10-*Global Environmental Issues Ozone DepletionOzone 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 planetSince 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 10-*Global Environmental IssuesClimate Changechanges in the Earth’s climate caused by increasing concentrations of carbon dioxide and other pollutants produced by human activity Global Warmingphenomenon where the average surface temperature of the Earth has risen and continues to rise over time 10-*Figure 10.4 Global Warming10-*Causes of Climate Change Fossil Fuelsthe burning of fossil fuels such as oil, natural gas, and coal releases carbon dioxideBlack 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 10-*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 ratified10-*More Global Environmental IssuesDecline of biodiversityRefers to the number and variety of species and the range of their genetic makeupScientists estimate that species extinction is occurring at 100 to 1,000 times the normal, background rate due to pollution and habitat destructionA major reason for the decline in the earth’s biodiversity is the destruction of rain forestsOnly half of the original tropical rain forests still standRain forests destruction is ironic because they may have more economic value standing than cut10-*More Global Environmental IssuesThreats to marine ecosystemsRefers to oceans, salt marshes, lagoons, and tidal zones that border them, as well as diverse communities of life they supportSalt water covers 70 percent of the earth’s surface and supports many speciesKey categories of threats to these ecosystemsFish populationsCoral reefsCoastal developmentOcean acidity10-*Response of the International Business CommunitySince 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 10-*Voluntary Business InitiativesLife cycle analysisInvolves collecting information on the lifelong environmental impact of a product, from extraction of raw material to manufacturing to its distribution, use, and ultimate disposalIndustrial ecologyRefers to designing factories and distribution systems as if they were self-contained ecosystems Extended product responsibilityCompanies have a continuing responsibility for the environmental impact of the products and services, even after they are soldCarbon neutralityAn organization or individual produces net zero emission of greenhouse gases; this is usually accomplished by a combination of energy efficiencies and carbon offsets10-*Codes of Environmental ConductSome of the leading universal codes include the following:Business Charter for Sustainable Development – developed by the International Chamber of CommerceCERES Principles – developed by the Coalition for Environmentally Responsible EconomiesISO 14000 – a series of voluntary standards developed by the ISO, an international group based in SwitzerlandThe Equator Principles – a set of environmental standards developed by the financial services industryMany executives are championing the idea that corporations have moral obligations to future generations10-*