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
effect the natural environment. Identifying issues and risks provides opportunities for responsible
individual and organizational responses to promote sustainability. We examine the concept of
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 had often dumped chemical waste into the local
river. Jared knew the local community depended on the river for food and water. Jared took immediate
action. He ordered a halt to production while he investigated the matter. He spoke to all employees,
stating they would all now follow proper disposal procedures. He also reported the situation to his
supervisor, who was pleased with Jared’s quick action. However, his supervisor discouraged Jared
from reporting the situation to the Chinese authorities.
Jared’s ethical dilemma is his knowledge of chemical dumping into the local waters and
deciding if he should report the situation to the local regulating authorities. Jared’s supervisor advises
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 71
directly consume the chemicals without becoming sick, the local people get concentrated doses if they
drink the water and eat the fish from the river.
LECTURE OUTLINE
I. Defining Sustainability
A. Sustainability from a strategic business perspective 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. Please note sustainability can have different definitions, particularly in different cultures.
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.
D. Four reasons social responsibility is such an issue
1. Sustainable business practices can create competitive advantage
2. Information about organizations is readily available, both positive and negative
3. Organizations can use their products and brand identity to create social value, quality,
and consumer loyalty
4. Companies are using their sustainable and socially responsible decisions to differentiate
their firms and promote their products
III. Global environmental issues
A. Atmospheric
1. Air pollution
a. 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. Burning of fossil fuels in the twentieth century could be causing increased
concentration of ‘greenhouse’ gases like carbon dioxide and methane in the Earth’s
atmosphere.
b. Most scientists believe concentrated greenhouse gases accelerate global warming,
72 Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions
national output. The U.S. did not ratify the treaty. The treaty was unpopular with
polluting MNCs. At that time, government leaders did not want to jeopardize U.S.
businesses and the economy.
d. World leaders could not decide how to fairly reduce national emissions, even though
attempting with the Cancun Package of 2010
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 amount of water, not just water
quality. By 2030, estimates say almost half of the world’s population will live in
areas with major water stress.
b. Proactive companies face this reality and produce solutions.
C. Land
1. Land pollution
a. Land pollution from dumping of residential and industrial wastes, strip mining, and
2. Waste management
a. Landfills are one of the biggest contributors to land pollution. Abandoned landfills,
filled with plastics and other materials could take 1,000 years to degrade. Some
communities and even countries have banned plastic grocery bags. Starbucks offer a
3. Deforestation
a. Reasons for deforestation vary but include the boom in biofuels, farming, logging,
poverty, and accessing natural resources. Short-term profits are short-lived as
rainforest soil is of poor quality.
term view of environmental management.
4. Urban sprawl
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 73
a. The post-WWII building boom transformed the U.S. from a nation of low-density
communities to a nation of large-scale suburban developments at the edges of
established towns and cities. Inner cities died while people traveled greater distances
by automobiles.
5. Biodiversity
a. Many plants and animals have become extinct and thousands more are threatened.
6. Genetically modified organisms
a. Transferring desired genes from one organism to another and creating a new life
form creates genetically modified (GM) organisms. Typical desired results include
IV. Environmental policy and regulation
A. Environmental protection agency (EPA)
1. The most influential regulatory agency dealing with environmental issues and enforcing
environmental legislation in the United States is the Environmental Protection Agency
(EPA). Created in 1970, it was the culmination of a decade of growing protests over the
B. Environmental legislation – Table 12.4 Laws Protecting the Environment
1. Clean Air Act – 1970
a. Established air-quality standards; requires approved state plans for implementation of
the standards, with states responsible for the quality of their air.
b. The general populace overwhelmingly agrees with the purpose of the Clean Air Act,
which has important implications for businesses and their relationships with
consumers
2. Endangered Species Act – 1973
a. Provides a program for the conservation of threatened and endangered plants and
animals and the habitats in which they are found
74 Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions
b. Makes it illegal for anyone to discharge any pollutant from a point source into
navigable waters without a permit
5. Pollution Prevention Act – 1990
a. Focuses industry, government, and public attention on reducing the amount of
6. Food Quality Protection Act – 1996
a. Amended the Federal Insecticide, Fungicide and Rodenticide Act and the Federal
7. Energy Policy Act – 2005
a. Addresses the way energy is produced in the United States in terms of energy
efficiency, renewable energy, oil and gas, coal, tribal energy, nuclear matters and
security, vehicles and motor fuels, hydrogen, electricity, energy tax incentives,
V. Alternative Energy Sources
A. Wind power
1. The Great Plains – one of the greatest sources of wind energy in the world – makes wind
power a resource for the United States, which could meet up to 20% of the nation’s
energy needs
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
C. Solar power
1. 100 percent renewable energy which can be converted into electricity using photovoltaic
cells
2. The technology remains expensive and inefficient compared to traditional energy, and the
infrastructure for mass production of solar panels is not in place in many locations
D. Nuclear power
1. Nuclear power is pollution-free and cost-competitive but remains controversial due to
Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions 75
1. Hydropower is a powerful renewable energy source with the ability to decrease
greenhouse gas emissions and air pollution if used properly
2. A major downside is the destruction of wildlife – and possibly human – habitat
VI. Business Response to Sustainability Issues
A. Responses – Figure 12.3 Positive Links Between Environmental and Economic Performance
1. Many firms are learning that being environmentally friendly and sustainable has
numerous benefits – including increased goodwill from stakeholders and even money
B. Green marketing
1. Green marketing is a strategic process involving stakeholder assessment to create
meaningful long-term relationships with customers, while maintaining, supporting, and
enhancing the natural environment
C. Greenwashing
1. Greenwashing involves misleading a consumer into thinking a product or service is
more environmentally friendly than it really is
2. Greenwashing may increase sales in the short-term, but this strategy can seriously
backfire with criticism and decreased sales in the long-term
3. Another challenge with greenwashing is determining whether companies are actually
engaging in deception
VII. Strategic Implementation of Environmental Responsibility
A. Recycling initiatives
1. Recycling is the reprocessing of materials, especially steel, aluminum, paper, glass,
rubber, and some plastics, for reuse
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
CASE NOTES
The following pages provide notes and suggestions for handling the twenty cases contained in Business
Ethics, Tenth Edition. The cases are meant to help students realize that ethics can be applied to specific
business situations, as well as to aid them in recognizing the ethical issues that arise from the “real world”
of business.
Class discussions of the cases are particularly useful because they encourage a sharing of views and
expose students to a variety of personal moral philosophies. In fact, the instructor might encourage
students to explore their own personal moral philosophy and to apply that philosophy to some of the
events described in the cases.