A Primer on Sustainability

Ronald Whitfield

• Publisher: Business Expert Press
• Year: 2013
• ISBN:
  9781606496350
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

This book will take a broad look at the ways in which the concept of sustainability is being applied in the business context. It answers the question, "What does Sustainability mean to the way we practice business?" A key characteristic is its concise, readable, comprehensive treatment of the complex issues sustainability raises for the business world. The goal of the book is to provide the reader an introduction to knowledge and skills they need to help organizations understand and act upon the principles of sustainability. The reader will also gain a deeper understanding of the relationships among business, society, and the environment. The approach of this book is to examine a variety of market failures and how different businesses choose to respond to them. It will explore strategies to correct these market failures - with improved product innovation, entrepreneurial activity, and government action. This book will also explore the techniques and tools of sustainability from a practical, business-oriented perspective. As an introduction to sustainability, this book will function to anchor the Business Expert Press sustainability collection, helping the reader appreciate its coherence and depth. This book is written for an advanced undergraduate and graduate-level business school reader, as well as for their professors. It will also find a readership with science, social science and engineering professors and students for courses on sustainability in those disciplines and with the management practitioner striving to build the competitive advantage sustainability can confer.

CHAPTER 1

Sustainability: Meaning and Context

Learning Objectives

• Understand the various meanings of sustainability, including its relationships with nature and technology, applying a global point of view

• Differentiate between the concepts sustainability, corporate social responsibility, and corporate accountability

• Become familiar with sustainability as seen from a corporate perspective

• Grasp the concept of the supply chain and its importance to sustainability in the business context

• Become familiar with A Primer’s approach to sustainability

To begin our exploration of sustainability, we focus on its definition, an area that is a bit more complicated than we might think at first. We look at the supply chain, an important part of sustainability discussions, next and then move on to an exploration of sustainability’s context. The chapter closes with a description of A Primer’s approach.

What Does Sustainability Mean?

Sustainability is a concept with no universally accepted meaning, and, as a result, it often means different things to different people. In this regard, it is similar to a concept in cinematography called the Rashomon effect. In the Japanese movie by the same name, four eyewitnesses to a single event tell their versions of what happened. Each witness offers substantially different but equally plausible detailed accounts of the same event. As director Akiro Kurosawa lets the story unfold, the film audience never knows for sure the true sequence of events. Students and scholars may have similar feelings about readings on sustainability.

Nature, Technology, and Global Considerations

Some experts believe that sustainability means that nature’s bountiful resources (pure water, clean air, fertile soil) are finite and need to be protected. They distinguish between man-made capital (e.g., machinery and equipment) and natural capital—the resources that nature provides. One of their basic concerns is the question of how much we would pay for the creation of fertile farmland or other ecosystem services that nature provides for free. This perspective on sustainability builds upon the seminal work of Robert Costanza, Rudolf de Groot, and others. Costanza and his colleagues estimate that if we had to pay for ecosystem services such as pollination, soil formation, and over a dozen other services that nature provides at no cost, the value would exceed the global gross national product by a significant margin.¹ Of course, the monetization and estimation of ecosystem services will be a herculean effort that will depend on many assumptions and sophisticated models that produce a wide range of monetary values. Nevertheless, few doubt the fundamental conclusion that if we actually had to pay for ecosystem services, the global economic system would be quite different from what we witness today.

Man-made capital typically is owned and controlled by a single individual or corporation, but natural capital is generally a societal resource. Both forms of capital are valuable and both can be improved or degraded over time. When man-made capital degrades, we can fix it or replace it. When natural capital degrades, it can also be protected or improved, but this often requires collective or government action. For example, in the absence of regulation, cutting timber on public land results in the removal of more trees than can be replaced by normal replenishment and growth. Proponents of the protectionist view argue for putting a price on these resources because otherwise their value would be deemed insignificant. As a familiar business axiom states: “what gets measured, gets managed.” If individuals and businesses acting in their own self-interest do not have to pay for the use of these resources, the resources will tend to be over-used. To cite another example, what if apple orchard owners had to pay beekeepers provide bees to pollinate their trees? Or what if the beekeepers had to pay the orchard owner to provide access to their apple tree blossoms so that their bees could make honey? We often take nature’s resources for granted, especially if they are available to us at no cost. The challenge in developing measures of these services in monetary terms is dealt with by many authors including David Pearce in his book, Blueprint for a Green Economy.

Another group of experts focuses on the strong role that advanced technology and science can play in identifying and implementing solutions to our environmental problems. For every problem, they seek and expect to find a solution. These experts believe that there are technical fixes to all of the planet’s ills and that they should be developed and implemented as widely as possible. For example, if chlorofluorocarbons (CFCs) that are used in refrigeration deplete the ozone layer, then science can create new chemical compounds that do not deplete the ozone layer. These new refrigerants actually have been developed. Similarly, if burning fossil fuels results in ever increasing levels of carbon dioxide and higher planetary temperatures, then action is required to find a variety of technological solutions to the problem—ranging from altering the volume of solar radiation that reaches the earth (giant mirrors in space) to storing large amounts of carbon dioxide in underground geologic formations (carbon sequestration), to promoting greater use of nuclear power. With the exception of nuclear power, these new technologies, often called geo-engineering, have not yet been developed.

The introduction of new technologies can create their own sets of issues, because there may be unintended consequences that follow from their implementation. As technology experts Michael and Joyce Huesemann argue, “… technology will necessarily produce both positive and negative effects. This character of technology creates a serious intellectual challenge for technological optimists who exclusively focus on the positive aspects of technology while ignoring the, often enormous, negatives.”²

CFCs are a good case in point. Until they were invented, household refrigerators used toxic and flammable gases like ammonia as coolants. Small leaks sometimes resulted in explosions, fires, damage to property, and even death. Refrigerators were often placed in separate rooms or outdoors to mitigate these dangers. CFCs are colorless, odorless, nonflammable, noncorrosive, and nontoxic products that eliminated the danger posed by refrigerator leaks. In just a few years, refrigerators using CFCs became the standard for home kitchens and later for commercial refrigeration and automobile air-conditioning systems. It was not until the 1970s that scientists discovered the damage CFCs caused to the stratospheric ozone layer, an unintended consequence of their use. CFCs have now been replaced by more advanced products that do not damage the ozone layer.

When faced with these scientific and technological uncertainties, some experts prefer a “go slow” approach called the precautionary principle. Advocates of this principle deem it better to enact precautionary policies even before scientific consensus emerges, particularly in cases where the use of novel technologies may have substantial, irreversible, or even catastrophic consequences. An important milestone in the evolution of this concept was reached at the United Nations Conference on Environment and Development in Rio de Janeiro in 1992 (often referred to as the Earth Summit), when the participants endorsed Article 15, which states:

In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. When there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.³

In these cases, following this principle would avoid or at least mitigate the potential damage that these technologies could cause to human health and the environment. The precautionary principle is largely unconcerned with balancing the perceived economic benefits of the technology against its costs, an approach that is the primary basis of the regulatory system of the United States and many other nations. Because science and scientists have difficulty in quantifying risk or characterizing uncertainty, the precautionary principle generally favors status quo and tilts the playing field toward falsely rejecting potentially beneficial technology, as opposed to falsely accepting harmful technology. It has also been criticized because the burden of proof that a technology is safe (as opposed to proving that it does not cause harm) is borne by the technology’s advocates.

Still another group of experts looks at sustainability issues from a global perspective. Issues related to sustainability—like climate change, water scarcity, and poverty—often require not only a global perspective but also global decision-making capacity. These experts often point out the divergence between rich, developed countries and poorer, developing countries. They often cite cultural differences, income inequality, and ecological footprints as factors to consider in comparative studies across regions. Many of these experts point out the need for global agreements on particular topics, like the Kyoto Protocols on Climate Change, with enforcement mechanisms to achieve particular goals. Many industrialized economies signed this agreement in the late 1990s, although the United States and Australia declined, and Canada withdrew from the agreement in 2011, citing the high economic cost of complying with the terms of the treaty. Global sustainability issues pose particularly difficult questions. How do countries prioritize their sustainability goals relative to their other goals, such as feeding the population, fostering rapid economic growth, and alleviating poverty? Second, is the imposition of Western-style environmentalism on developing countries entirely justified? Some experts claim that a rapidly growing emerging economy has different priorities, of which sustainability is only one of many. Other experts claim that the over-consumptive practices of the developed world may be depriving the developing world of the fruits of modern society.

Sustainability, Corporate Social Responsibility, and Corporate Accountability

These concepts of sustainability that we have reviewed here are closely related yet different from other movements with similar goals, such as corporate social responsibility (CSR) and corporate accountability (CA). CSR refers to voluntary business activities that account for the social and environmental impact created by the business. As currently practiced, this means that companies commit to develop policies that integrate socially responsible practices into normal business operations and to report progress on an annual basis to stakeholders. Early CSR reports often focused on philanthropy as a driver of CSR; for example, building schools in impoverished areas where the company operated. More recently, this concept has been supplanted by a broad commitment to protect and improve the lives of workers and the communities in which companies do business. Published CSR reports now routinely address issues impacting virtually every area of operations: corporate governance, worker hiring and training, relationships with suppliers and purchasing behavior, and the company’s energy and environmental impact. Exhibit 1.1 compares the CSR approach with the concept of sustainability.

Exhibit 1.1. Comparison of Sustainability and CSR Approach

	Sustainability	Corporate social responsibility
Value proposition	Firm creates socioeconomic benefits with a low environmental footprint—the company and community coming together	Firm acts as a good corporate citizen through philanthropy
Methods	Actions are integral to competition and long-term profit maximization	Actions are discretionary or because of external pressure
Strategies	Agenda is company-specific and internally generated	Agenda is determined by noncore business interests
Impact	Large impact because its actions realign the entire company budget and operations	Limited impact because its actions are intended to improve company image with few operational changes
Examples	Patagonia, Burt’s Bees	British Petroleum

CA, on the other hand, can be “defined as the ability of those affected by a corporation to control that corporation’s operations.”⁴ Under this strict definition, companies would be held to a much higher standard of behavior. In place of voluntary activities to improve a company’s social and environmental performance, CA adherents propose the creation of institutional mechanisms that hold corporations legally responsible for their behavior on social, ethical, and environmental dimensions. These mechanisms would impose duties on publicly traded companies, their senior management, and the board of directors with respect to the company’s performance and social and environmental impacts. Under the CA concept, legal liability would attach to corporate breaches of international laws and agreements, and enforcement mechanisms could be imposed.

...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Abstract
• Contents
• Preface
• Acknowledgments
• Chapter 1 Sustainability: Meaning and Context
• Chapter 2 Systems and Tools for Sustainability
• Chapter 3 Thinking About Major Sustainability Issues
• Chapter 4 Decision Making in Sustainability: Case Studies
• Chapter 5 Concluding Thoughts
• Notes
• References
• Index
• Ad Page
• Backcover