Chapter 10

Ecology and Sustainable Development in Global

Business

Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Ch. 10: Key Learning Objectives

Understanding how business and society interact within the natural environment

Defining sustainable development Assessing the major threats to the Earth’s ecosystem Recognizing the ways in which population growth,

inequality, and economic development interact with the world’s ecological crisis

Examining common environmental issues that are shared by all nations and businesses

Analyzing the steps both large and small businesses can take globally to reduce ecological damage and promote sustainable development

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Business and Society in the Natural Environment

Business 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

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Figure 10.1

Business, Society and the Natural Environment: An Interactive System

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Sustainable Development

Development 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 alleviation Economic development cannot occur at the expense of

degrading the forests, farmland, water, and air that must continue to support life on this planet

Sustainable development is about fairness

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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 period Renewable resources (water, forests) can be naturally

replenished Nonrenewable resources (such as fossils fuels like oil, coal) once

used are gone forever

Examples of natural resources that are now being depleted or polluted at well above sustainable rates Water resources Fossil fuels Arable land

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Forces of Change Accelerating Ecological Crisis Pressure on the earth’s resource base is becoming

increasingly severe Three critical factors have combined to accelerate the

ecological crisis facing the world community and to make sustainable development more difficult

Population explosion World poverty and income inequality Rapid growth of many developing nations

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Population of the World and Major Areas

Figure 10.2

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Share of the World’s Private Consumption by Income Fifths

Figure 10.3

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The Earth’s Carrying Capacity

The Earth’s resource base is essentially finite, or bounded

Limits to growth hypothesis suggests human society is overshooting Earth’s carrying capacity, with drastic consequences if changes are not made

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Ecological Footprint

One 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 technology

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Restoring the Balance of Earth's Carrying Capacity This 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 waste

Changing 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 activities

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Global Environmental Issues Commons

a 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

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Global Environmental Issues Ozone Depletion

Ozone 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 planet

Since 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

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Global Environmental Issues

Climate Change changes in the Earth’s climate caused by increasing

concentrations of carbon dioxide and other pollutants produced by human activity

Global Warming phenomenon where the average surface temperature of the

Earth has risen and continues to rise over time

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Figure 10.4 Global Warming

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Causes of Climate Change Fossil Fuels

the burning of fossil fuels such as oil, natural gas, and coal releases carbon dioxide

Black 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

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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 ratified

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More Global Environmental Issues Decline of biodiversity

Refers to the number and variety of species and the range of their genetic makeup

Scientists estimate that species extinction is occurring at 100 to 1,000 times the normal, background rate due to pollution and habitat destruction

A major reason for the decline in the earth’s biodiversity is the destruction of rain forests

Only half of the original tropical rain forests still stand Rain forests destruction is ironic because they may have more

economic value standing than cut

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More Global Environmental Issues

Threats to marine ecosystems

Refers to oceans, salt marshes, lagoons, and tidal zones that border them, as well as diverse communities of life they support

Salt water covers 70 percent of the earth’s surface and supports many species

Key categories of threats to these ecosystems• Fish populations• Coral reefs• Coastal development• Ocean acidity

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Response of the International Business Community

Since 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

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Voluntary Business Initiatives Life cycle analysis

Involves collecting information on the lifelong environmental impact of a product, from extraction of raw material to manufacturing to its distribution, use, and ultimate disposal

Industrial ecology Refers to designing factories and distribution systems as if they

were self-contained ecosystems

Extended product responsibility Companies have a continuing responsibility for the environmental

impact of the products and services, even after they are sold

Carbon neutrality An organization or individual produces net zero emission of

greenhouse gases; this is usually accomplished by a combination of energy efficiencies and carbon offsets

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Codes of Environmental Conduct Some of the leading universal codes include the

following:

Business Charter for Sustainable Development – developed by the International Chamber of Commerce

CERES Principles – developed by the Coalition for Environmentally Responsible Economies

ISO 14000 – a series of voluntary standards developed by the ISO, an international group based in Switzerland

The Equator Principles – a set of environmental standards developed by the financial services industry

Many executives are championing the idea that corporations have moral obligations to future generations

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