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CHAPTER 12
Sustainability: Ethical and Social
Responsibility Dimensions
SUMMARY
It is now normal for businesses to practice environmental responsibility and sustainability. The reality is
that environmental global issues have business consequences. Businesses must ethically lead in places
where government provides no laws regulating environmental protection and sustainability. We focus
on how to integrate ethics into strategic business decisions and how inaction concerning the natural
environment creates a host of ethical issues.
In this chapter, we outline key issues and risks in making business decisions if those decisions
affect the natural environment. Identifying issues and risks provides opportunities for responsible
INSTRUCTOR NOTES FOR “AN ETHICAL DILEMMA”
This case deals with Jared and his job at Darwin Chemical Company (DCC), a multinational firm with
subsidiaries in eight countries. DCC promotes Jared to plant manager for its Chinese subsidiary. Jared
quickly finds a regulation violation in the plant’s waste disposal procedures. For the past several years,
under the previous plant manager’s direction, workers have often dumped chemical waste into the local
river. Jared knows the local community depends on the river for food and water. Jared takes immediate
action. He orders a halt to production while he investigates the matter. He speaks to all employees,
stating they will all now follow proper disposal procedures. He also reports the situation to his
supervisor, who is pleased with Jared’s quick action. However, his supervisor discourages Jared from
reporting the situation to the Chinese authorities.
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 71
LECTURE OUTLINE
I. Defining Sustainability
A. Sustainability is the potential for the long-term well-being of the natural environment,
including all biological entities, as well as the mutually beneficial interactions among nature
and individuals, organizations, and business strategies.
B. Sustainable development has become a top concern for many businesses as it involves
meeting the needs of the present without compromising the ability of future generations to
meet their own needs.
II. How Sustainability Relates to Ethical Decision-Making and Social Responsibility
A. Sustainability, like social responsibility, seeks to maximize positive and minimize negative
impacts on stakeholders; therefore, sustainability issues fit our stakeholder orientation model.
B. Corporate social responsibility creates long-term favorable stakeholder responses and
increases employees’ company identification and commitment.
C. Sustainability, social responsibility, and ethics are not interchangeable.
1. Sustainability is only one aspect of ethical decision-making. Corporate social
2. There are four reasons social responsibility is such an issue for business:
a. Sustainable business practices can create competitive advantage
b. Information about organizations is readily available, both positive and negative
c. Organizations can use their products and brand identity to create social value, quality,
III. Global environmental issues
A. Atmospheric
1. Air pollution
a. Air pollution typically arises from three different sources:
i) Stationary sources—factories and power plants
2. Acid rain
a. Acid rain occurs when factory emissions such as nitrous oxide and sulfur dioxide mix
3. Global warming
a. Global warming refers to the fact that carbon dioxide and other gases collecting in
the Earth’s atmosphere traps the sun’s heat like a greenhouse and prevents Earth’s
surface from cooling.
b. The burning of fossil fuels in the twentieth century could be causing increased
the Cancun Package. The agreement called for industrialized countries to cut
greenhouse gas emissions and create a $100 billion a year green fund by 2020 to help
poorer countries.
i) The United States, China, and Japan did not agree to the treaty but did discuss
emissions reductions.
ii) In 2012 the Doha Gateway Agreement amended the Kyoto Protocol. It calls for
B. Water
1. Water pollution
a. Chemicals found in fertilizers and pesticides can drain into water supplies with each
2. Water quantity
a. Some parts of the globe increasingly worry about the quantity of water, not just water
quality.
C. Land
1. Land pollution
a. Land pollution results from the dumping of residential and industrial wastes, strip
mining, and poor forest conservation.
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 73
2. Waste management
a. Landfills are one of the biggest contributors to land pollution.
i) Abandoned landfills are filled with plastics and other materials that can take
3. Deforestation
a. The world’s forests are being destroyed at a rate of 46,000 to 58,000 square miles
annually.
4. Urban sprawl
a. The post-WWII building boom transformed the United States from a nation of low-
density communities to a nation of large-scale suburban developments at the edges of
5. Biodiversity
6. Genetically modified organisms
a. Transferring desired genes from one organism to another creates genetically modified
(GM) organisms. Typical desired results include pest resistance, drought resistance,
or higher crop yield.
74 Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions
IV. Environmental Legislation
A. Environmental Protection Agency (EPA)
1. The most influential regulatory agency dealing with environmental issues and enforcing
2. It was created in 1970 to coordinate environmental agencies involved in conducting
3. It was the culmination of a decade of growing protests over the deterioration of
environmental quality, peaking with the publication of Rachel Carson’s Silent Spring.
4. The EPA protects Americans from significant health and environmental risks, among
5. The EPA established five strategic goals, outlined in Table 12-3, which reflect public
priorities.
B. Environmental legislation
2. Clean Air Act
a. This law established air-quality standards and regulates atmospheric emissions from
a variety of sources.
3. Endangered Species Act
a. The Endangered Species Act provides a program for the conservation of threatened
and endangered plants and animals and the habitats in which they are found.
4. Toxic Substances Control Act
a. This law requires reporting and testing of chemicals that pose an environmental or
5. Clean Water Act
a. This law was designed to prevent, reduce, or eliminate water pollution and granted
6. Pollution Prevention Act
a. This law focuses industry, government, and public attention on reducing the amount
7. Food Quality Protection Act
a. This act amended the Federal Insecticide, Fungicide and Rodenticide Act and the
Federal Food Drug and Cosmetic Act in 1996.
8. Energy Policy Act
a. This bill gives tax breaks and loan guarantees to alternative energy companies like
nuclear power plants, solar, and wind energy and requires utilities to comply with
federal reliability standards for the electricity grid.
V. Alternative Energy Sources
A. Wind Power
1. It holds great promise for the United States because of the Great Plains—one of the
2. Despite roadblocks such as an outdated national power grid, many people believe the U.S
will be a wind power hot spot in the future, providing opportunities for businesses.
B. Geothermal power
1. Some advantages of this energy source includes the fact that geothermal energy provides
2. Some disadvantages include the fact that geothermal energy is expensive and drilling
sites are sparse, resulting in high initial costs.
C. Solar power
1. Solar power is 100 percent renewable energy which can be converted into electricity
using photovoltaic cells.
D. Nuclear power
2. It has greatly reduced France’s emissions.
76 Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions
3. Yet it is controversial due to safety concerns (e.g., nuclear reactors damaged in Japan
after the 2011 earthquake and tsunami) as well as how to properly dispose of the waste.
E. Biofuels
2. Ethanol in the United States is made from corn, with critics citing increased food prices
and sustainability as major causes for concern.
3. Scientists are investigating grass and algae as a source of biofuels as they are nonedible.
F. Hydropower
1. Hydropower is a powerful renewable energy source with the ability to decrease
greenhouse gas emissions and air pollution if used properly.
3. A major downside is the destruction of wildlife and possibly human habitat.
VI. Business Response to Sustainability Issues
A. Many firms are learning that being environmentally friendly and sustainable has numerous
benefits—including increased goodwill from stakeholders and even money savings from
being more efficient.
1. Figure 12-3 suggests mechanisms for how improving a company’s environmental
performance can increase revenues and reduce costs.
2. Better environmental performance can increase revenue in three ways: through better
3. Better environmental performance can reduce costs by improving risk management and
stakeholder relationships, reducing the amount of materials and energy used, reducing
capital and labor costs, and possibly reducing fines for government compliance.
B. Green marketing
1. Green marketing is a strategic process involving stakeholder assessment to create
3. Many products are certified as ‘green’ by environmental organizations (e.g., Green Seal
and Eco-label) and carry a special logo that identifies them as such.
C. Greenwashing
1. Greenwashing involves misleading a consumer into thinking a good or service is more
2. Greenwashing may increase sales in the short-term, but this strategy can seriously
backfire with criticism and decreased sales in the long-term.
4. Research indicates that greenwashing destroys consumer trust and creates consumer
confusion and perceived risk associated with green products.
5. There is growing agreement that companies should work to protect and preserve
sustainability by implementing these goals:
a. Strive to increase efficiency and eliminate waste.
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 77
VII. Strategic Implementation of Environmental Responsibility
A. Recycling Initiatives
2. Companies and even local and regional governments are finding ways to recycle water to
avoid discharging chemicals into rivers and streams and preserve diminishing water
supplies.
B. Stakeholder Assessment
1. This process requires acknowledging and actively monitoring the environmental concerns
of all legitimate stakeholders.
2. A company should have a process in place for identifying and prioritizing the many
3. Strong relationships with stakeholders involves the willingness to acknowledge and
openly address potential conflicts.
C. Risk analysis
2. Debate surrounding environmental issues forces corporate decision makers to weigh
evidence and take some risks.
3. Many environmental decisions involve trade-offs for various stakeholders’ risks, and
4. A high-commitment organization will incorporate new information and insights into the
strategic planning process.
D. Strategic Environmental Audit
2. Companies may wish to use globally accepted standards as benchmarks.
a. ISO 14000 is a comprehensive set of environmental standards that encourage a
cleaner, safer, and healthier world. Companies that abide by this standard must
review their environmental management systems periodically and identify all aspects
of their operations that could impact the environment.
DEBATE ISSUE: TAKE A STAND
Have your students split into two teams. One team will argue for the first point, and the other will argue
for the opposing view. The purpose is to get students to realize that there are no easy answers to many
of these issues. This issue deals with carbon restrictions. Those who argue for carbon emissions
regulations can argue that carbon restrictions will benefit the nation and the environment because they
will reduce air pollution and hinder global warming. They might also force coal plants to become more
efficient. The opposition might point out the enormous cost these regulations will have on coal
companies—and to consumers in the form of higher energy prices. They might also point out how
certain states like Arkansas depend heavily on coal plants for employment. Stricter carbon emissions
regulations might cause some plants to shut down, leading to unemployment.
78 Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions
“RESOLVING ETHICAL BUSINESS CHALLENGES” NOTES
This case concerns Keisha and her job in the marketing and public relations department of Smith’s
Sodas, which offer quality fruit-flavored soft drinks in unique flavors such as pomegranate and
blueberry. Its goal is to compete with Pepsi or Coca-Cola and differentiate itself as an environmentally
friendly company. Keisha takes the lead in a marketing initiative promoting the company’s new
biodegradable packaging meant to appeal to the eco-conscious consumer. Keisha learns from a reporter
that composting is the only way the packaging will biodegrade. Additionally, only certain conditions
