Assignment Questions - Environmental, Business and Economic
Boludo
QUESTION8.pdf
Environmental responsibility &
business
LECTURE 8
Environment and Policy
Dr Aideen Foley [email protected]
Learning outcomes
Why does this matter?
If we consider economic actors and businesses to be central to the success of environmental policy, we need to consider how they engage with environmental aims, including beyond legislative measures, in order to understand priorities and design effective policy.
By the end of the session, you should be able to:
Distinguish between different models of corporate sustainability (CS) that businesses may use engage with environmental aims beyond legislative tools.
Critically assess businesses’ environmental claims, distinguishing between ‘real’ and suspect.
1. Theories of corporate sustainability
Criteria for sustainability Dyllick, T. and Hockerts, K., 2002. Beyond the business case for corporate sustainability. Business strategy and the environment, 11(2), pp.130-141.
Eco-efficiency Efficient use of natural capital – do more with less
Business
SocietyNature
Socio-efficiency Maximising + (e.g. donations) and minimising – (e.g. accidents) social impacts
Eco-effectiveness Processes that are not destructive, otherwise ‘efficient’ use may still lead to degradation
Sufficiency Moderation guiding collective behaviour
Socio-effectiveness Judging business against maximum + social impact that could be achieved
Ecological equity Ensuring no group (including
future generations) bear disproportionate
environmental burdens
Analysis of 37 definitions of ‘corporate social responsibility’ Dimension ratio reflects relative use.
Dahlsrud, A., 2008. How corporate social responsibility is defined: an analysis of 37 definitions. Corporate social responsibility and environmental management, 15(1), pp.1-13.
Stakeholder dimension 88%
Social dimension 88%
Economic dimension 86%
Voluntariness dimension 80%
Environment dimension 59%
Corporate social responsibility can be limited in focus
Business
SocietyNature?
Socio-efficiency Maximising + (e.g. donations) and minimising – (e.g. accidents) social impacts
Socio-effectiveness Judging business against maximum + social impact that could be achieved
Corporate sustainability is a broader term and can potentially engage with all these criteria
Eco-efficiency Efficient use of natural capital – do more with less
Business
SocietyNature
Socio-efficiency Maximising + (e.g. donations) and minimising – (e.g. accidents) social impacts
Eco-effectiveness Processes that are not destructive, otherwise ‘efficient’ use may still lead to degradation
Sufficiency Moderation guiding collective behaviour
Socio-effectiveness Judging business against maximum + social impact that could be achieved
Ecological equity Ensuring no group (including
future generations) bear disproportionate
environmental burdens
4P matrix of ‘corporate sustainability’ People, profit, planet, principles
Van Marrewijk, M. and Werre, M., 2003. Multiple levels of corporate sustainability. Journal of Business ethics, 44(2-3), pp.107-119.
Pre-CS (Red): No ambition for CS, except when forced from the outside (e.g.
through legislation). Constant reinforcement will be required.
Profit-driven CS (Orange): CS is promoted if profitable (includes improved reputation)
Compliance-driven CS (Blue): CS perceived as an obligation, or correct behaviour.
Caring CS (Green): CS initiatives go beyond compliance and profit, balancing economic, social and ecological concerns, which are all important in themselves.
Synergistic CS (Yellow): Win-together approach seeking to create value in the
economic, social and ecological realms of corporate performance. Sustainability is
recognised as inevitable direction of progress.
Holistic CS (Turquoise): CS is fully integrated in every aspect of the organization, aimed at contributing to
the quality and continuation of life of every being and entity, now and in the future, since all beings and
phenomena are mutually interdependent.
Why do firms move beyond compliance? Prakash, A., 2001. Why do firms adopt ‘beyond‐compliance’ environmental policies?. Business strategy and the environment, 10(5), pp.286-299.
Efficiency
4 policy types:
Type 1. Beyond compliance, profitability can be assessed, and meets or exceeds profit criteria.
Type 2. Beyond compliance, profitability cannot be assessed.
Type 3. Required by law, profitability can be assessed, and meets or exceeds profit criteria.
Type 4. Required by law, profitability cannot be assessed.
Legal
Efficiency
Legal
???
Motivations
Type 1 example
Eco-efficiency in action, but how is the company doing on other sustainability criteria?
*http://business.edf.org/projects/featured/past-projects/better-packaging-with-mcdonalds/
Better packaging practices introduced by McDonald’s in 1991 saved the company an estimated $6 million per year*.
Sustainabili ty criteria
They have 29,000 restaurants with nearly 3,000 new ones added each year. A valid report on sustainability and social responsibility must ask the question: What if everybody did it? … The report carefully avoids the corporation's real environmental impacts. It talked about water use at the outlets, but failed to note that every quarter-pounder requires 600 gallons of water … "Sustaining" McDonald's requires a simple unsustainable formula: cheap food plus cheap non-unionized labor plus deceptive advertising = high profits. An honest report would tell stakeholders how much it truly costs society to support a corporation like McDonald's. It would detail the externalities borne by other people, places, and generations.
Hawken, P., n.d. McDonald’s and Corporate Social Responsibility [WWW Document]. URL https://www.iatp.org/news/mcdonalds-and-corporate-social-responsibility-by- paul-hawken (accessed 8.3.18).
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4P matrix of ‘corporate sustainability’ People, profit, planet, principles
Van Marrewijk, M. and Werre, M., 2003. Multiple levels of corporate sustainability. Journal of Business ethics, 44(2-3), pp.107-119.
6. Holistic CS (Turquoise): CS is fully in every aspect of the organization, aimed at contributing to the quality and continuation of life of every being and entity, now and in the future. The motivation for CS is that sustainability is the only alternative since all beings and phenomena are mutually interdependent. Each person or organization therefore, has a universal responsibility towards all other beings
Pre-CS (Red): No ambition for CS, except when forced from the outside (e.g.
through legislation). Constant reinforcement will be required.
Profit-driven CS (Orange): CS is promoted if profitable (includes improved reputation)
Compliance-driven CS (Blue): CS perceived as an obligation, or correct behaviour.
,
Why do firms move beyond compliance? Prakash, A., 2001. Why do firms adopt ‘beyond‐compliance’ environmental policies?. Business strategy and the environment, 10(5), pp.286-299.
Efficiency
4 policy types:
Type 1. Beyond compliance, profitability can be assessed, and meets or exceeds profit criteria.
Type 2. Beyond compliance, profitability cannot be assessed.
Type 3. Required by law, profitability can be assessed, and meets or exceeds profit criteria.
Type 4. Required by law, profitability cannot be assessed.
Legal
Efficiency
Legal
???
Motivations
Type 2 example
Environmental management certification (ISO 14001)
Signalling theory predicts improved economic performance as consumers select firms demonstrating good environmental behaviour.
Post-hoc analysis confirms this (e.g. Ferron et al., 2012), but this could not have been known with certainty when the certification was first being introduced.
Ferron, R.T., Funchal, B., Nossa, V. and Teixeira, A.J., 2012. Is ISO 14001 certification effective?: an experimental analysis of firm profitability. BAR-Brazilian Administration Review, 9(SPE), pp.78-94.
Policies as ‘conscious artefacts’ traceable to individuals preferences? Prakash, A., 2001. Why do firms adopt ‘beyond‐compliance’ environmental policies?. Business strategy and the environment, 10(5), pp.286-299.
Power-based processes Leadership-based
processes
▪ Managers seek to maximize status.
▪ Policy adoption might lead to increases in budgets and headcounts, creating promotion opportunities.
▪ Managers seek a conscious building of consensus.
▪ To be persuasive, the credibility and expertise of policy-supporters is important.
Regulation considerations Pre-empt regulation: deter consumer groups from demanding legislation.
Influence regulation: signal to government what controls should be.
Deflect enforcement: If regulator observes voluntary action, they may divert their resources to monitoring & enforcement elsewhere.
Lyon, Thomas P., and John W. Maxwell. Corporate environmentalism and public policy. Cambridge University Press, 2004.
Larger businesses
▪ More to lose in terms of reputation?
▪ More visible, under more public pressure?
Businesses with a poor environmental
track-record
▪ Poor track record = more kudos for participation?
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Reputation considerations Videras, Julio, and Anna Alberini. "The appeal of voluntary environmental programs: which firms participate and why?." Contemporary Economic Policy 18.4 (2000): 449-460.
4P matrix of ‘corporate sustainability’ People, profit, planet, principles
Van Marrewijk, M. and Werre, M., 2003. Multiple levels of corporate sustainability. Journal of Business ethics, 44(2-3), pp.107-119.
Pre-CS (Red): No ambition for CS, except when forced from the outside (e.g.
through legislation). Constant reinforcement will be required.
Profit-driven CS (Orange): CS is promoted if profitable (includes improved reputation)
Compliance-driven CS (Blue): CS perceived as an obligation, or correct behaviour.
Caring CS (Green): CS initiatives go beyond compliance and profit, balancing economic, social and ecological concerns, which are all important in themselves.
Synergistic CS (Yellow): Win-together approach seeking to create value in the
economic, social and ecological realms of corporate performance. Sustainability is
recognised as inevitable direction of progress.
Without holistic approach, scope for conflicting goals remains
Many brands (including Unilever- owned ones like Dove) use single-use sachets to make personal hygiene products available to poorer inhabitants in emerging economies
Singh, R., Ang, R.P. and Sy- Changco, J.A., 2009. Buying less, more often: an evaluation of sachet marketing strategy in an emerging market. The Marketing Review, 9(1), pp.3-17.
In the Indian village of Puttaparthi, in the state of Andhra Pradesh, vet Reddy is preparing for an operation. The patient, a cow…
Reddy rummages around in the stomach until he encounters a tough brown lump. It is made up of different types of plastic that have accumulated in the animal’s stomach ... Too big to remove in one go, Reddy has to break off bits of plastic one by one … At the end of the operation Reddy has filled two big soup pans with plastic goo. The cow has lost 53 kilos (116 pounds).
Dupont-Nivet, D., 2017. Inside Unilever’s sustainability myth [WWW Document]. New Internationalist. URL https://newint.org/features/web- exclusive/2017/04/13/inside-unilever-sustainability-myth (accessed 8.3.18).
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Holistic approach would involve resolving rather than balancing the three Ps
People
ProfitPlanet
Planet
People
Profit
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... the corporation is in line with the scientific consensus and the international political process on curbing emissions… There is little to suggest, however, that corporations engage in the radical rethinking of systemic problems that the situation's gravity would seem to call for.
Frequency of keywords in corporate non-financial reports (Ihlen, 2009)
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Ihlen, Ø., 2009. Business and climate change: the climate response of the world's 30 largest corporations. Environmental Communication, 3(2), pp.244-262.
Break 15 mins
2. Voluntary standards or ‘Green clubs’
‘Green clubs’ Many organisations adhere to voluntary standards or certifications, either business-led, government-led or 3rd party-led.
These standards and certifications differ from programmes and targets specific to the firm, in that many firms are following the same standard, theoretically giving coherency to terms used.
A common theme is information. Membership sends a signal to consumers, allowing the firm to tap into green markets.
policy instruments
legislative measures
market- based
regulatory
non- legislative
business-led government
voluntary 3rd party
certification
Types of policy instrument
Suasive instruments
Sermon
Non- legislative tools
Require relatively low levels of control.
Offer more cost- effective pollution control vs. C&C (potentially).
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No need to pass legislation, so can move more quickly than imposed regulations.
Only option when there is no authority in place that could adopt & enforce a “command and control” regulation or a tax. E.g. OECD’s Guidelines for Multinational Enterprises.
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Stupak, I., Titus, B., Clarke, N., Smith, T., Lazdins, A., Varnagiryte-Kabasinskiene, I., Armolaitis, K., Peric, M. and Guidi, C., 2013. Approaches to soil sustainability in guidelines for forest biomass harvesting and production in forests and plantations. In Proceedings of the Workshop W (Vol. 6, pp. 2-6).
1. The hidden trade-off: suggesting a product is “green” based on a narrow set of attributes without attention to other important environmental issues.
2. No proof: claim that cannot be substantiated by supporting information or reliable third-party certification
3. Vagueness: claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the consumer (e.g., “all-natural”).
4. Irrelevance: claim that may be truthful but is unimportant or unhelpful for consumers seeking environmentally preferable products (e.g., “CFC-free”).
5. Lesser of two evils: claims that may be true within the product category, but distract the consumer from the greater impacts of the category as a whole.
6. Fibbing: committed by making environmental claims that are simply false.
7. False labels: certification-like images with green jargon such as “eco-preferred”.
7 sins of greenwashing Dahl, R., 2010. Green Washing: Do you know what you’re buying?. Environmental health perspectives, 118(6), p.A246.
Adapted from: The Seven Sins of Greenwashing: Environmental Claims in Consumer Markets
Mandarins
Stringent club standards with
enforcement rules
Country Clubs
Standards without enforcement rules
Bootcamps
Lenient club standards with
enforcement rules
Greenwashes
Lenient standards without credible
enforcement rules
Types of ‘green club’
40Prakash, Aseem, and Matthew Potoski. The voluntary environmentalists: Green clubs, ISO 14001, and voluntary environmental regulations. Cambridge University Press, 2006.
Case study: Sustainable Slopes Business-led self assessment
Little evidence of improvement relative to non-members, after 5 yrs.
Weak institutional mechanisms: members opt for easier, short-term, visible actions (e.g. recycling) over major change (e.g. habitat management).
Rivera, J., De Leon, P. and Koerber, C., 2006. Is greener whiter yet? The sustainable slopes program after five years. Policy Studies Journal, 34(2), pp.195-221
Case study 3rd party certification? Should lend external legitimacy about participants’ environmental commitments.
https://fern.org/sites/default/files/news-pdf/FERN_PindoDeli-final_0.pdf
Criteria
“At least 10% of virgin wood fibres from forests shall come from forests that are certified as being managed so as to implement the principles and measures aimed at ensuring sustainable forest management.”
Enforcement
In the case of the Ecolabel, certification may involve a visit to the manufacturing facility, but not necessarily.
Decision can be based solely on desk-based audit of dossier provided by the company.
Case study: Danish agreements on energy efficiency in industry (1996)
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▪ Firms can enter a 3-year voluntary agreement with Danish Energy Agency, qualifying for a rebate on CO2 tax payment.
▪ Agreement is legally binding and non-compliance leads to tax rebate being annulled.
▪ Energy audit by external consultants was basis for action programme of improvements. Annual reports to DEA.
▪ Significant administrative costs on firms and public authorities, especially related to administration of tax rebates and checking energy audits.
▪ Scheme was revised in 2000: No more energy audits, only self-reporting.
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=env/epoc/wpnep%282002%2913/final
How are different stakeholders, including non- human stakeholders, represented in certification?
Balancing or resolving?
Leading participants in the RSPO share a common belief in ‘market and industrial’ virtues (Boltanski and Thévenot 2006) that facilitate a ‘business environment’ compromise. This is where growing market demand and profit are a ‘natural given’, where the intensification of large-scale oil palm monoculture goes hand in hand with the protection of forests, and where industry’s support is seen as a vector for development and poverty reduction…
Ponte, S. and Cheyns, E. 2013. Voluntary standards, expert knowledge and the governance of sustainability networks. Global Networks, 13: 459–477. doi:10.1111/glob.12011
Are Ponte and Cheyns (2013) describing a balancing or a resolving of 3P issues?
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‘Global’ versus ‘local’ knowledge
…of the 17 environmental NGO members of the RSPO in 2012, only three are national or local NGOs located in the South. Practically everyone who occupies a seat on the Executive Board or in a working group, and who chairs or speaks at the plenary roundtable sessions is a representative of an international or Northern NGO, a bank, an international conglomerate or a large Asian or European industrial or trading group.
Ponte, S. and Cheyns, E. 2013. Voluntary standards, expert knowledge and the governance of sustainability networks. Global Networks, 13: 459–477. doi:10.1111/glob.12011
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The role of smallholders
Many RSPO certificates delivered by auditors to grower companies have been formally contested by smallholders and local communities, who argued that land conflicts in their area were still unresolved… Although smallholders supply 30 per cent of the global production of palm oil, they hold no key positions*, are invariably absent from decisive moments in the RSPO process, and hardly ever get invitations to speak at the plenary sessions of the annual roundtables.
Ponte, S. and Cheyns, E. 2013. Voluntary standards, expert knowledge and the governance of sustainability networks. Global Networks, 13: 459–477. doi:10.1111/glob.12011
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Certification costs were too high for smallholders
Resources and capacity to actually meet the certification standard were lacking amongst smallholders
Opportunities to raise smallholder issues were lacking*
Making up for lost time?
RSPO Smallholder Strategy (2017) has recognised that the focus on larger producers meant that:
*There is now a seat on the Board to represent smallholders, but still via a European company.
Summary
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▪ Voluntary measures have potential to change business behaviour at low economic and administrative cost to government.
▪ Many motivations for participation; desire to avoid or pre-empt regulation, financial sense, placate shareholders.
▪ While environmental issues are increasingly coming to attention of business (CS), some suggestion that business is not yet engaging in radical rethinking.
▪ Challenges include lack of obligations for industry, limited participation, and lack of independent controls or poor controls.
▪ Schemes with strong regulations and enforcement may have a better chance instigating real change.
Discussion questions
Imagine you are attempting to create a new certification scheme for sustainable avocados. Each group will be approaching this from the perspective of a different stakeholder: growers, traders, retailers, investors, environmental NGOs and social NGOs.
▪ Complete the sentence: “When consumers see our symbol, they will know that this avocado…”
▪ How does your certification scheme work? What would be assessed, by whom, to what standards?
▪ What kinds of relationships would you seek to cultivate and prioritise to roll out your vision?
Background on sustainability issues around avocadoes: https://www.theguardian.com/commentisfree/2016/aug/12/hispters- handle-unpalatable-truth-avocado-toast
Discussion questions
King and Toffel (2009) suggest “a need for caution in predicting the effect of self-regulatory institutions. These institutions derive their meaning and power from the distributed interpretations and choices of numerous actors.”
Reflecting on the avocado exercise, to what extent did differences in power, choice, interpretation and meaning lead to differences in the schemes developed?
