Business and the Environment

Read this chapter to learn how businesses can play a vital role in sustaining the environment.

The High Cost of Inaction

According to estimates from the EPA, by the year 2050, Earth's population will be about ten billion people. Dramatic population growth has had a very significant and often negative human impact on the planet. Not only are there more people to feed, house, and care for, but new technologies allow businesses to harness natural resources in unprecedented amounts. NGOs and government agencies alike have taken notice. For years, the Department of State and the Department of Defense have considered climate change to be a potential threat to the long-term security of the United States. If unmanaged, climate change could pose a risk to both U.S. security and Department of Defense facilities and operations.

Other respected organizations are also alerting the public to the risks of ignoring climate change.

The Union of Concerned Scientists (UCS) has released a detailed report identifying approximately twenty serious risks that will be faced if the problem is not addressed in a substantial way. These risks include rising seas and increased coastal flooding, more intense and frequent heat waves, more destructive hurricanes, wildfires that last longer and produce more damage, and heavier precipitation in some areas and more severe droughts in other areas. In addition to extreme weather events, there would likely be widespread forest death in the Rocky Mountains and other mountain ranges, the destruction of coral reefs, and shifts in the ranges of plants and animals. Both military bases and national landmarks would be at risk, as would the electrical grid and food supply. The UCS, with a membership consisting of the world's most respected scientists, bases its projections on scientific research studies that have produced empirical evidence of climate change. Its official position is that "global warming is already having significant and very costly effects on communities, public health, and our environment".

Environmental protection and climate change issues receive varying degrees of support at the national level, depending on the commitment different presidents make to them. During periods in which the administration in Washington demonstrates a lower priority for climate change issues, such as the Trump administration's announced intention to withdraw from the Paris Climate Accord, private companies may take the lead on actions to reduce global warming emissions.

For example, Microsoft founder Bill Gates recently announced the creation of a private initiative to invest $20 billion on climate-related research and development over the next five years. This is an example of government-funded early experimental research that a business may be able to turn into a commercially viable solution. If government steps back, private-sector companies concerned about long-term sustainability may have to take a leadership role.

Ultimately, it requires the cooperation of public and private efforts to address climate change; otherwise, the impacts will continue to intensify, growing more costly and more damaging".

This video produced by the National Oceanic and Atmospheric Administration in conjunction with the State Department and an Oregon state agency shows the magnitude of ocean pollution. As of 2017, only two states (California and Hawaii) have banned plastic bags, according to the National Conference of State Legislatures.

Sustainability often requires the public and private sectors to cooperate. Inaction contributes to disasters like the 2017 devastation of Houston by Hurricane Harvey and of Puerto Rico by Hurricane Maria. There is often tension between developers who want to build and cities that try to legislate for more green space. Green space not only offers a place for recreation and enjoyment of nature, but also provides essential natural drainage for rain and flood waters, reducing the likelihood that developed areas will end up underwater in a storm.


Flooding in Houston: Is the Status Quo Sustainable?
A symbiotic relationship exists between development and flooding in urban areas such as Houston, Texas. Imagine you are a member of the urban planning commission for the city council of Houston, which recently suffered traumatic flood damage from several major storms, including Hurricanes Harvey and Ike, and Tropical Storm Allison, all of which occurred since 2001 and caused a total of approximately $75 billion in damages.

The floods also caused dozens of deaths and changed the lives of millions who lived through them. Future storms may increase in severity, because climate change is warming ocean waters.

The mayor and the city council have asked the planning commission to propose specific solutions to the flooding problem. This solution must not rely exclusively on taxpayer funds and government programs, but rather must include actions by the private sector as well.

One of the most direct solutions is a seemingly simple tradeoff: The greater Houston area must reduce the percentage of land covered by concrete while increasing the percentage of land dedicated to green space, which acts like a sponge to absorb flood waters before they can do severe damage. The planning commission thinks the best way to accomplish this is to issue a municipal ordinance requiring corporate developers and builders to set aside as green space an amount of land at least equal to what will be covered by concrete, (neighborhoods, office buildings, parking lots, shopping centers). However, this will increase the cost of development, because it means more land will be required for each type of project, and as a result, developers will have higher land costs.


Critical Thinking
  • As a member of the urban planning commission, you will have to convince the stakeholders that a proposal to require more green space is a workable solution. You must get everyone, including developers, investors, neighborhood homeowner associations, politicians, media, and local citizens, on board with the idea that the benefit of sustainable development is worth the price. What will you do?
  • Is this a matter that should be regulated by the local, state, or federal government? Why?
  • Who pays for flood damage after a hurricane? Are your answers to this question and the preceding one consistent?

U.S. government agencies, such as the National Aeronautics and Space Administration (NASA) and National Oceanic and Atmospheric Administration, have identified many challenges in which sustainability can make a positive contribution. These include climate change, decreasing supplies of clean water, loss of ecological systems, degradation of the oceans, air pollution, an increase in the use and disposal of toxic substances, and the plight of endangered species.

Progress toward solving these challenges depends in part on deciding who should help pay for the protection of global environmental resources; this is an issue of both environmental and distributive justice.

One way to address the issue of shared responsibility between corporations and society is the implementation of a "cap and trade" system. According to the Environmental Defense Fund, cap and trade is a viable approach to addressing climate change by curbing emissions that pollute the air: The "cap" is a limit on greenhouse gas emissions - if companies exceed their cap, they must pay penalties - whereas the "trade" allows companies to use the free market to buy and sell pollution allowances that permit them to emit a certain amount of pollution.

At present, there are more questions than answers, including how much of the responsibility lies with governments, how this responsibility can be allocated between developed and developing nations, how much of the cost should the private sector bear, and how should these divisions of cost and responsibility be enforced. Private companies must bear part of the cost, and the business sector recognizes they have some responsibility, but many disagree on whether that should be in the form of after-the-fact fines, or before-the-fact fees and deposits paid to the government. Regulations may very well have to be international in scope, or companies from one country may abuse the environment in another.


Is It Ethical to Dump Toxic Waste in Countries That Allow It?

Should a multinational company take advantage of another country's lack of regulation or enforcement if it saves money to do so?

A New York Times news correspondent reporting from Nigeria found a collection of steel drums stacked behind a village's family living compound. In this mid-1990s case, ten thousand barrels of toxic waste had been dumped where children live, eat, and drink.

As safety and environmental hazard regulations in the United States and Europe have driven toxic waste disposal costs up to $3,000 per ton, toxic waste brokers are looking for the poorest nations with the weakest laws, often in West Africa, where the costs might be closer to $3 per ton. The companies in this incident were looking for cheap waste-dumping sites, and Nigeria agreed to take the toxic chemical waste without notifying local residents. Local people wearing shorts, t-shirts, and sandals unloaded barrels of polychlorinated biphenyls, placing them next to a residential area. Nigeria has often been near the top of the United Nations' list of most corrupt nations, with government leaders cutting deals to line their own pockets while exposing their citizens to environmental hazards.

A more recent example occurred in Côte d'Ivoire (Ivory Coast) in 2006, when residents discovered that hundreds of tons of "slops" (chemicals) from a foreign-owned ship had been dumped near Abidjan, the country's commercial capital. The ship was owned by a multinational energy company named Trafigura. According to a report from Amnesty International, more than 100,000 residents were sickened, leading to fifteen deaths. Trafigura had illegally dumped the toxic waste in Côte d'Ivoire after searching for a disposal site in several other countries.


Critical Thinking
  • Should a U.S. or European company take advantage of a country's weak approach to business and political ethics?
  • Would your answer change if your decision saved your company $1 million?
Inaction on issues of sustainability can lead to long-term environmental consequences that may not be reversible (the death of ocean coral, the melting of polar ice caps, deforestation). Another hurdle is that it is sometimes difficult to convince companies and their investors that quarterly or annual profits are short-term and transitory, whereas environmental sustainability is long-term and permanent.