Global Business Perspectives
The Global Business Environment
LeCTURE 10
Challenges and responsibilities
Ecology and climate change
Impacts of environmental concerns on societies and organizations
Summary of contents
Environmental degradation in context
Climate change
What are the effects of climate change?
Business responses
Transboundary pollution and energy strategies
International legal frameworks
Challenges of environmental protection for business
Sustainable consumption
Challenges and responsibilities
Conclusions
Environmental degradation in context
Ecology refers to the interactions between living organisms and their habitats
Biodiversity – the variety of plant and animal life, their distribution and number; affected by environmental degradation
Environmental degradation is caused mainly by human activity, associated with industrialization
Rapidly growing developing countries have prioritized economic development, but now face environmental pressures – from their own populations and the international community
Causes of environmental degradation
Globalization and the environment
Economic development through industrialization now encompasses many developing countries
Benefits of employment and economic growth, but also urbanization, industrial farming and the spread of modern consumer lifestyles
Deforestation – the felling of forests for land – for factories, fuel and agriculture
Global commons – resource domains that are not the territory of any one country – the high seas, atmosphere and Antarctica
Climate change
Climate change can result from natural causes or human activity
Global warming currently occurring is caused by build-up of greenhouse gases (GHGs) in the earth’s atmosphere
Carbon dioxide (CO2) emissions are particularly to blame, caused by:
Burning of fossil fuels, especially coal-fired power stations
Factory production
Energy for transport
Emissions are growing most quickly in the world’s large developing economies
Impacts of climate change
All continents are experiencing shifts in climate due to global warming
Heatwaves, droughts, desertification, floods and hurricanes are some of the phenomena
Insecurity of supplies of food and water
Rising sea levels affect islands and low-lying regions
Threats are worse for developing countries
Vulnerable to floods, droughts and storms, and have fewer resources
Global co-operation to combat climate change
UN Intergovernmental Panel on Climate Change (IPCC) – brings together scientific evidence and issues reports
Kyoto Protocol divided the world into developed and developing countries
Specified targets for reducing emissions in developed countries only
Aimed to reduce emissions to 5% below 1990 levels by 2012, which proved unattainable
Introduced principle of emissions trading – polluting industries can ‘buy’ credits from other countries in order to meet targets
Paris accord on climate change, 2015
186 countries put forward intended nationally defined contributions (INDCs)
Target of reducing global warming to not more than 2C, ambitiously revised downwards to 1.5C
Countries’ INDCs to be monitored by ‘stocktaking’ every 5 years
Developed countries pledged financial help to developing countries to mitigate climate change
Ratifications by countries have proceeded rapidly, including the US, China and India
Business responses to climate change initiatives
Businesses generally view climate change initiatives in a negative light, as adversely affecting them
Many businesses lobby or join lobby groups against climate change measures
National regulation remains the main focus – if laws are introduced, businesses must comply
Companies are expected to commit large sums to technology transfer for developing countries
Government incentives and funding are seen by businesses as essential to help fund R&D into green technology
Transboundary pollution
Transboundary pollution refers to the transfer of pollutants through water, soil and air from one country to another
Largescale industrial operations release waste into waterways and pollutants into the air, which can cause contamination long distances away
Acid rain, caused mainly by burning fossil fuels, can gradually destroy rivers and forests, which can be continents away from the source
Coal-burning power stations, central to development policies in China and India, are growing sources of pollution
Meeting energy needs
Governments are focusing on renewable energy, such as wind turbines and solar power
The case for nuclear power – low levels of emissions and reduces reliance on non-renewable sources of energy (such as oil and coal) but carries risks:
Risk of catastrophic disaster, such as the meltdown of the Chernobyl reactor in 1986
Risks of radioactive escape from nuclear reprocessing, recycling and treatment of nuclear waste
The Fukushima disaster in Japan in 20 11- earthquake and tsunami – lessons in design, management and liability in cases of accidents at nuclear power stations
International legal frameworks
UN Environment Programme (UNEP) dates from 1972
Brundtland Report (1987) introduced the concept of sustainable development: meeting the needs of the present generation without compromising the ability of future generations to meet their needs
Rio Summit and Rio Declaration (1992)
Principle of state sovereignty over resources is acknowledged, but also responsibility for sustainable development
Polluter-pays principle, but difficult in practice to compel the polluting state
Sustainable development goals (SDGs)
UN launched the SDGs in 2015
They superseded the 8 millennium development goals (MDGs)
MDGs, including reducing hunger and poverty, had been achieved only partially
SDGs are more ambitious and wider ranging
Are they achievable?
Many can be measured (such as piped water), but many relate to social and political systems, that involve institutional arrangements
Sustainable development goals (SDGs)
Sustainable development in the business context
Businesses seek new cleaner technology for economic reasons as well as social responsibility
Sustainable development involves a duty to stakeholders, including future generations
The business has an environmental footprint – involves looking at all phases of its operations
If a business is party to environmental degradation, it impedes a country’s sustainable development goals
Environmental management
Assessing environmental impacts, devising and following through suitable strategies
Companies using subcontractors and licensing arrangements face challenges in implementing environmental policies, as independent companies are not directly under their control
Environmental reporting
An element of triple-bottom-line reporting (financial and social being the other two)
Standardization through ISO 14000 certification on environmental management
Aspects of environmental management
Texaco’s legacy in Ecuador
Texaco’s oil extraction in Ecuador 1962-92 left behind environmental contamination and detriment to human health
Texaco had only limited contractual obligations to clean up after their departure
Ecuadorians have pursued Texaco and, later, Chevron (who took it over) in numerous court actions, with some limited success, but no payments forthcoming
Chevron consistently denied liability, and has launched 2 ISDS actions against Ecuador
Sustainable consumption
Lifestyle decisions made by consumers impact on the environment. Includes:
Shopping for environmentally-friendly products
Recycling
Using less pollutant transport
Investing in socially responsible funds
Green consumerism – How willing are people to alter lifestyles?
Is sustainable consumption reduced consumption?
Challenges and responsibilities
Harmful effects of industrialization and urbanization in the developing world are no longer seen as merely local problems, but global issues linked to sustainable development
Development is usually associated with western consumer lifestyles – more cars, cheap air travel, throwaway appliances
Businesses tend to wait for changes in the law, rather than take voluntary measures
Governments must balance priorities of reducing poverty, and retain a focus on economic growth
Conclusions
Environmental degradation and climate change are linked to industrialization and urbanization
We now know much more about the damaging impacts of global warming than previous generations knew
Combating environmental degradation involves both legal and ethical obligations
Pressures are now mounting on both businesses and governments to commit to sustainable development goals