Chapter 11: Managing Environmental Issues

CHAPTER 11Managing Environmental IssuesCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCh. 11: Key Learning ObjectivesKnowing the main features of environmental laws in the United States and other nationsUnderstanding the advantages and disadvantages of different regulatory approachesAssessing the costs and benefits of environmental regulationDefining an ecologically sustainable organization and the stages through which firms progress as they become more sustainableUnderstanding how businesses can best manage environmental issuesAnalyzing how effective environmental management makes firms more competitive 11-*Role of GovernmentIn many nations government regulates business activity in order to protect the environmentBy setting common standards, governments can take cost of pollution control out of competitionGovernments can also provide economic incentives and offer systems for resolving disputes11-*Major Areas of Environmental RegulationEnvironmental Protection Agency (EPA), main agency charged with pollution control, was established in 1970In the United States, the federal government regulates in three major areas of environmental protection:Air pollutionWater pollutionLand pollution (including solid and hazardous waste) 11-*Leading U.S. Environmental Protection LawsFigure 11.111-*Major Areas of Environmental RegulationAir pollutionOccurs when more pollutants are emitted into the atmosphere than can safely be absorbed and diluted by natural processesA special problem of air pollution is acid rainThe efforts of the U.S. government to reduce acid rain illustrate some of the difficult trade-offs involved in environmental policyWater pollutionOccurs when more wastes are dumped into waterways than can be naturally diluted and carried away11-*Major Areas of Environmental RegulationLand pollutionThe contamination of land by both solid and hazardous wasteMovement for environmental justice – efforts to prevent inequitable exposure to hazardous risks in disadvantaged communitiesSuperfund or CERCLA legislation passed in 1980Established fund to clean up the most dangerous toxic waste sites in the U.S. Of 1,200 sites put on National Priority List, by 2008 only 332 of them had been fully cleaned upAs many of 10,000 other sites might need clean-upProgram is regarded as public policy failure11-*Alternative Policy ApproachesEnvironmental standardsStandard allowable levels of various pollutants are established by legislation or regulatory actionAlso called command-and-controlCan be environmental quality standard or emission standardMarket-based mechanismsBased on the idea that the market is a better control than extensive standards that specify precisely what companies must doTradable permits - allows businesses to buy and sell the right to pollute, a process known as cap-and-tradeEmissions charges or feesGovernment incentives11-*Alternative Policy ApproachesInformation disclosureThe government encourages companies to pollute less by publishing information about the amount of pollutants individual companies emit each year Also called regulation by publicity or regulation by embarrassmentCivil and criminal enforcementThe threat of fines or even prison can be an effective deterrent to corporate outlaws who would otherwise degrade the environmentEuropean regulators have actively pursued environmental criminalsU.S. Sentencing Commission has established guidelines for sentencing environmental wrongdoers11-*Advantages and Disadvantages of Alternative Policy Approaches to Reducing PollutionFigure 11.211-*Costs and Benefits of Environmental RegulationFigure 11.311-*Greening of ManagementEnvironmental regulations establish minimum standards for environmental performanceMany firms are now voluntarily moving beyond compliance to improve environmental performance in all operational areasThis is referred to as the greening of managementThree reasons companies take this pathGain competitive advantageGain legitimacyMoral commitment to ecological responsibility11-*Stages of Corporate Environmental ResponsibilityClean technology Businesses develop innovative, new technologies that support sustainabilityProduct stewardshipManagers focus on all environmental impacts associated with the full life-cycle of a productPollution preventionFocuses on minimizing or eliminating waste before it is created11-*Ecologically Sustainable OrganizationCompanies that operate consistently with principles of sustainable developmentIs an “ideal,” absolute standard against which real organizations can be measuredSome visionary companies are trying to achieve thisSupportive government policies and widespread movement among many businesses and other social institutions will be needed for ESOs to succeed11-*Environmental PartnershipsVoluntary, collaborative partnerships with environmental organizations and regulators to achieve specific objectives Draw on the unique strengths of the different partners to improve environmental quality or conserve resources 11-*Environmental Management in PracticeOrganizational elements of many proactive green companiesTop management involvement in sustainabilityLine manager involvementCodes of environmental conductCross-functional teamsRewards and incentivesEnvironmental audits to track progressPublish combined “sustainability reports” integrating social, economic and environmental performance11-*Environmental AuditsA way for green companies to track their progress toward meeting environmental goalsMore recently, many firms have moved to integrate their social and environmental reporting into a single sustainability report 11-*Environmental Management as a Competitive AdvantageCost savingsCompanies that reduce pollution and hazardous waste, reuse or recycle materials, and operate with greater energy efficiency can reap significant cost savingsProduct differentiationCompanies that develop a reputation for environmental excellence and that produce and deliver products and services with concern for their sustainability can attract environmentally aware customers11-*Environmental Management as a Competitive AdvantageTechnological innovationTechnological innovation can lead to imaginative new methods for reducing pollution and increasing efficiencyReduction of regulatory riskCompanies that are proactive with respect to their environmental impacts are often better positioned than their competitors to respond to new government mandatesStrategic planningCompanies that cultivate a vision of sustainability must adopt sophisticated strategic planning techniques11-*