Module 11

What is Sustainability?

The issue of sustainability raises a number of questions that business and society are in the process of addressing:

· What is the extent of firms’ responsibility for the environment?

· Beyond legal requirements, should firms be made to internalize the environmental costs of operations (e.g., clean up the pollution their operations generate)?

The term sustainability was popularized by the United Nations (UN) in a 1987 report. It was officially named “Our Common Future,” but later became known as the Brundtland Report after its main author, Gro Harlem Brundtland—Norwegian prime minister and chair of the UN’s World Commission on Environment and Development.

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The Brundtland Report, April 1987

The Brundtland Report popularized the term sustainability, and its definition (above) has become the most commonly used. Though sometimes used to capture broader CSR-related issues, sustainability discussions were born as a response to issues of resource utilization and the unsustainable rate of their extraction. While sustainability is important, it is only a subset of strategic CSR which encompasses total firm operations (see figure 11.1, below).

(Chandler, 2020)

CSR is a view of the corporation and its role in society that assumes a responsibility among firms to pursue the interests of stakeholders, broadly defined, and a responsibility among the firm’s stakeholders to hold the firm to account for its actions.

COP21 (2015) & COP24 (2018)

The in Paris is the most significant international advancement in recent years. While COP21, which took four years to negotiate, does recognize the problem of climate change, it does not do so with the clarity or urgency needed to solve the problem. Subsequent meetings, such as , were intended to add necessary details but, instead, delayed action further. Governments and the UN still prefer to gloss over substantial differences in order to preserve the symbolism of global unity.

Key COP21 agreements include: 

· The United States has pledged to reduce greenhouse gas emissions “26%–28% below 2005 levels by 2025.”

· The EU has committed to reductions in emissions “40% below 1990 levels by 2030.”

· Mexico “has put in place the strongest climate legislation of any developing country, . . . 40% below the current trend line by 2030.”

· China “has promised by 2030 to reduce its carbon-dioxide emissions, per unit of GDP, to at least 60% below 2005.”

The COP24 agreement contained four main parts:

1. Establishing a standard to measure greenhouse gas emissions.

2. A call for emissions cuts that extend beyond each country’s prior commitments.

3. A call to detail promised aid for climate change polices in developing countries.

4. Establishing a process for countries that fail to meet their commitments.

The Planet

The excerpt below is originally from an article by The New York Times Magazine which devoted an edition in 2018 solely to the issue of climate change. 

"The world has warmed more than one degree Celsius since the Industrial Revolution. The Paris climate agreement . . . hoped to restrict warming to two degrees. The odds of succeeding, according to a recent study based on current emissions trends, are one in 20. If by some miracle we are able to limit warming to two degrees, we will only have to negotiate the extinction of the world’s tropical reefs, sea-level rise of several meters and the abandonment of the Persian Gulf. . . . The prospect of a five-degree warming has prompted some of the world’s leading climate scientists to warn of the end of human civilization” (Chandler, 2020, p. 277).

The excerpt serves as an ominous warning that the transformation needed to continue human civilization will require a global revolution, not just good works and voluntary commitments.

Module 11

Four Reasons for Firms to Care About Sustainability

There are four main reasons that sustainability is relevant for firms. Select each reason below to explore them.

Climate Change

Climate change is real. For-profit firms are both the main cause of this problem and the main hope for a solution. Our planet will be destroyed unless firms alter their operating practices.

Total Carbon Emissions by Country

(Chandler, 2020)

The decisions each of us makes every day compound to create this global problem, which continues to grow with the rapid expansion of living standards. For example, "America uses more electricity for cooling than Africa uses for everything," (Chandler, 2020, p. 281). Figure 11.2, above, demonstrates the cumulative effects of our decisions. As luxuries such as air-conditioning continue to become accessible, their carbon emissions grow at alarming rates. 

I'm Not a Tree Hugger | Global Weirding

Source:

Resilience

A changing climate will affect business operations. Managing risk and adapting to the new environment will increasingly be an aspect of business success.

Resilience is a means to "help vulnerable people, organizations and systems persist, perhaps even thrive, amid unforeseeable disruptions. Where sustainability aims to put the world back into balance, resilience looks for ways to manage in an imbalanced world,” (Chandler, 2020, p. 283).

Climate change dramatically impacts operations today, so some form of resilience is essential. A few examples of industries adapting due to climate change include the automobile industry developing electric cars, farmers using carbon farming to revitalize soil, and banks modifying their lending practices and policies to avoid aiding in environmentally damaging projects. Firms that proactively respond to the concerns of their stakeholders will succeed while those who ignore them will fail. 

The fashion group Burberry is a recent example of a firm which has adapted to meet the concerns of its stakeholders by announcing it would no longer burn unsold clothes at the end of each season. "Burberry’s announcement was aimed at younger shoppers who are environmentally conscious and, increasingly, a core demographic for the luxury-goods business. Brands across the industry are abandoning fur; imposing animal-welfare standards on their suppliers; and touting their policies for recycling and waste," (Chandler, 2020, p. 283).

Natural Capital

Acting proactively on an important social issue is a rational argument for CSR. It is in firms’ best interests to act before they are forced to do so.

Natural Capital is the stock of all resources that exist in the natural environment. 

Currently, many firms are choosing to act now, devising ways to account for the natural capital that their operations consume.The trouble is that when people have tried to estimate the cost of resources that are currently extracted and utilized below cost by business, the amounts are very large (once both the damage done and the cost of replacement are included):

Nearly half of the world’s 1,200 largest companies would be unprofitable if they had to pay their fair share of the $3.4 trillion environmental and social costs of their resource consumption and pollution.

Calculating the value of this natural capital and incorporating these costs into planning, therefore, constitutes the third reason for firms to care about sustainability. It is important (and will only become more so) because, as noted in Chapter 8, “if prices reflected all the costs, including ecological costs spread across generations, the world would not face sustainability challenges, at least in theory (Chandler, 2020, p. 285).

Stakeholders

As the need to act becomes apparent, stakeholders will increasingly demand change. Those firms that move first will be best placed to succeed in a more environmentally aware world.

If we, collectively, ask firms to pollute the environment (which we are currently doing), they will do it efficiently. On the other hand, if we ask firms to protect and preserve the environment, they will also do that efficiently.

Firms are a tool we have invented to create value, and they are very good at it. They will do what we want them to do. So, if we are not happy with what they are currently doing, we need to ask them to do something else.

“‘The Story of Bottled Water’, released on March 22, 2010 (World Water Day), employs the Story of Stuff style to tell the story of manufactured demand–how you get Americans to buy more than half a billion bottles of water every week when it already flows virtually free from the tap. Over five minutes, the film explores the bottled water industry’s attacks on tap water and its use of seductive, environmental-themed advertising to cover up the mountains of plastic waste it produces. The film concludes with a call for viewers to make a personal commitment to avoid bottled water and support public investment in clean, available tap water for all,” (The Story of Bottled Water, para. 1).

Source:

References

1. Global Weirding with Katharine Hayhoe. (2019, March 6). I'm Not a Tree Hugger | Global Weirding [Video file]. Retrieved from

2. The Story of Bottled Water. (n.d.). Retrieved from

Module 11

Waste in the Global Economy

Our current economic system is hugely inefficient in terms of resource utilization and is unsustainable. In this section, we'll look at two issues which demonstrate the extent of the issue – eWaste and single-use plastics.

Waste is a central driver of the global economy. The more products that are bought, the better a firm performs, and the faster the economy grows. So, mass consumption and fast turnover are essential. The focus is less on what we need, and more on what we want. In the current economic model, the quicker we throw products away and buy new ones, the quicker the GDP rises. 

As we touched on in Module 2, fast fashion is among leading industries in major pollution around the world. Watch the analysis below of waste in the fashion industry, in general, as a result of "fast fashion," in particular.

Source:

e-Waste

According to the Environmental Protection Agency’s latest figures (2010), in the United States:

· 142,000 computers and over 416,000 mobile devices are thrown away every day.

· In total, 2.4 million tons (384 million units) of e-waste are discarded annually.

· Only 27% (of total weight) and 19% (of total units) of e-waste are recycled.

(Chandler, 2020)

E-waste is now the world's fastest growing avenue of waste. Watch the Story of Electronics from the Story of Stuff Project "to explore the high-tech revolution’s collateral damage – 25 million tons of e-waste and counting, poisoned workers and a public left holding the bill. Host Annie Leonard takes viewers from the mines and factories where our gadgets begin to the horrific backyard recycling shops in China where many end up. The film concludes with a call for a green ‘race to the top’ where designers compete to make long-lasting, toxic-free products that are fully and easily recyclable,” (The Story of Stuff Project, para. 1).

Source:

The most substantial change will come from large corporations, but in order to carry out the ideas that strategic CSR teaches, all stakeholders – consumers in particular (that's us!) – must be engaged and informed. Consider the following questions, and post your thoughts on the Padlet board below.

· How can you minimize the amount of e-waste you produce?

· How often do you upgrade your smartphone or computer?

· Is it fair that workers in developing countries (including children) have to clean up our e-waste?

Plastic

Plastic is versatile, cheap, and made from materials of which we have an abundance (such as oil). So, our homes (and landfills) are filled with single-use plastic. It's produced in large quantities to keep up with consumer demand, but very little of it is being recycled.

Since the 1950s: “8.3bn tonnes [of plastic] has been created. That’s the weight of one billion elephants. According to a groundbreaking study . . . just 9% has been recycled, 12% incinerated and 79% has accumulated in landfills or the wider environment,” (Chandler, 2020, p. 293).

Figure 11.5 Annual Global Plastic Production (1950-2015)

Note: Annual production, million tons, approximate numbers. (Chandler, 2020)

References

1. The Economist (2018, November 29). The true cost of fast fashion | The Economist [Video file]. Retrieved from

2. The Story of Electronics. (n.d.). Retrieved from