A series of Q&A questions. (case study) The knowledge of Business and Sustainable Development is required

Module10MGMT2004SustainabilityStakeholders_TheRoleofGovernmentandNGOs_Updated2.ppt

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MGMT 2004: Business and Sustainable Development

Stakeholders: Government and NGOs

Lecture 8

Environmental Issues in Business 201

Lecture 10

The Roles of Government and Non-Government Organisations in Pursuit of Sustainability

This lecture will cover the:

• challenges of policy-making for sustainability

• complexities of engaging with stakeholders

• significance of business-stakeholders nexus for sustainability

Stakeholders: Government and NGOs

Lecture 8

Environmental Issues in Business 201

Why do business relations with Government and NGOs matter for sustainable development?

Why is stakeholder’s interest important for businesses?

How is the policy making process for sustainability challenging?

What are the sustainability policy tools?

Stakeholder influence: threat or an opportunity for businesses?

What do you think is the most important problem facing the world today?

What do you think is the most important problem facing Australia today?

Remember this from the 2nd lecture?

Nature of Problems

Simple: e.g. How to Bake a Cake?	Complex: e.g. How to Land on the Moon?	Wicked: e.g. How to Raise a Child?
Recipes are tested to assure easy replication	Sending one rocket increases assurance that the next will be okay	Raising one child provides experience but no assurance of success with the next
No particular expertise is required but cooking experience increases success rate	High levels of expertise in a variety of fields are necessary for success	Expertise can contribute but is neither necessary nor sufficient to assure success
The best recipes give good results every time – usually one or two stakeholders	There is a degree of certainty of outcome – multiple stakeholders with complementary interests collaborate with each other	High degree of uncertainty of outcome – a wide variety of stakeholders with conflicting and competing vested interests

Lecture 8

Environmental Issues in Business 201

Ten attributes of wickedness (Rittel & Webber 1973):

1. There is no absolute definition

2. The search for solutions is never ending

3. Solutions are based on good-or-bad premise instead of true-or-false

4. Effectiveness of solutions is hard to measure effectively

5. There is no opportunity to come up with a solution by trial-and-error

6. There is not an exhaustively describable set of potential solutions

7. Every problem is essentially unique

8. Every problem can be considered to be a symptom of another problem

9. Possible solutions involve multiple stakeholders wanting different outcomes

10. Policy-makers are liable for the consequences of the solutions they prescribe.

Sustainability Challenge

Lecture 8

Environmental Issues in Business 201

Business Stakeholders

Stakeholders represent groups or individuals who can be affected or are affected by the functioning of an organisation (Freeman 2010).

NGOs

Local

communities

Creditors

Government

Suppliers

Consumers

Employees

Corporation

Shareholders

Internal

External

Trade unions

Business with Government and NGOs

Actors	Reactive interest	Proactive interest	Influence areas	Issue examples
Business	Profit	TBL	Celebrity leaders, political influence, R&D capacity	UN Compact, 4th Gen CSR, SDGs
External Stakeholders
Government (e.g. local, state, federal)	Tax, economic growth, balance the budget, pollution clean-up	Invest in and support TBL strategies and solutions, pollution prevention	Compliance & enforcement, Eco-efficiency & effectiveness	Carbon pricing, renewable energy subsidy, social enterprise grants
NGOs (e.g. International Council on Clean Transportation (ICCT), Sea Shepherd, Bill and Melinda Gates Found.	Anti-corporation, Environmental awareness, Activism	Partner with business/government to foster TBL solutions that reflect ART	Agenda setting, informing public (inc research) mobilizing media, lobbying (inc boycotting)	Watchdog (i.e. Volkswagen), Wildlife conservation, SDGs

Regulatory pressure is important for businesses because:

Regulation can help

increase awareness of CEOs and managers

change behaviours of industries and households

reduce the footprint of both production/consumption

People and companies respond to price signals

Environmental/social costs are internalised - making environmentally harmful products/services more costly for both producers/consumers

Price may act as deterrent or incentive for consumers

Cost associated with regulatory compliance affect companies’ competitiveness

Regulation = policy attempts by governments to influence behaviors of various actors e.g. consumers, companies, civil society, public sector

Lecture 8

Environmental Issues in Business 201

Cost internalisation is the incorporation of negative externalities [notably environmental depletion and social impact] in the price of a product/service

Private costs (P) – e.g. the cost of acquiring and running a vehicle i.e. fuel, oil, maintenance, depreciation, insurance, drive time
External costs (E)– e.g. the disposal of used oil or flat batteries, if unregulated will end up costing government agencies more to clean-up
Social costs (S) – e.g. private cost + the cost of externalities to the resulting from the vehicle usage that the vehicle owners don’t pay

S = P + E

So, if E > 0, then S > P

Meaning, if we don’t internalise the cost of externalities - the value of product will be less than what it should be

Lecture 8

Environmental Issues in Business 201

Difficulties in:

demonstrating that failure to regulate would lead to undesired side effects

extrapolating undesired side effects/explaining the causes of such effects

Policy scepticism

‘Less than 3% ‘Climate sceptics’ (vs more than 97% scientists) have been able to stall policy changes by muddying the waters:

the earth's climate has not become unpredictable

human activity is not the main cause behind the changing climate

global warming will bring weather related benefits

government actions are useless unless all nations act

Much of the scepticism is manufactured by corporate interests e.g. Exxon funds sceptical climate change research
Arguments about the public good are often a mere façade e.g. Monsanto argues GM food protects consumer interests

Lecture 8

Environmental Issues in Business 201

Pressure on governments from all across the spectrum

There are growing calls for better protection of social and environmental interests

NGOs ask for better social welfare provisions e.g. increases in minimum wages

NGOs want political action on climate change and tighten corporate regulations

At the same time, the government is required to provide favourable conditions for business and commerce

Business pressure to fast-track environmental impact assessments for approval of mining operations

Business lobbying efforts against environmental protection

Importantly, policy-makers always wish to be re-elected

Sustainability (long-term solutions beyond an election cycle) policy-making is therefore considered risky

Policy for whom?

Who or what are the policy priorities?

Political resistance
Tough regulation may be seen as a threat to industry
Higher taxes (prices) do not win elections

Measurement / enforcement / punishment
Incentives to cheat
Compliance can be difficult to monitor

Need to reconcile seemingly conflicting aims: but where is the blueprint?
Industry competitiveness
Environmental effectiveness
Social acceptability

Lecture 8

Environmental Issues in Business 201

Right Pricing

Uncertainty about environmental sensitivity and thus about right level of taxes, charges and fines

What are the risks of getting the prices wrong?

Are environmental cost fully internalized?

Uniformity
One size does not fit all
Different industries face different problems with compliance

Regressivity

- Fairness of cost sharing

- Is everybody equally affected by policies?

Lecture 8

Environmental Issues in Business 201

1. Paramedics

2. Firefighters

3. Pilots

4. Rescue volunteers

5. Nurses

6. Pharmacists

7. Farmers

8. Medical specialists