McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 1

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 2 Chapter 5 Appendix: C Managing In Our Natural Environment

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 3 Business And The Environment: Conflicting Views Win-win mentality being “green” is potentially a catalyst for innovation, new market opportunities, and wealth creation Dissenting view not a single empirical analysis supports the “free lunch view” that spending money on environmental issues provides full payback to the firm business people upset by the financial cost of compliance with environmental regulations Balance business must weigh the environmental benefits of an action against value destruction

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 4 Why Manage With The Environment In Mind? Legal compliance government regulations and liability for damages provide strong incentives to comply with environmental guidelines Cost effectiveness in the short run, companies have realized cost savings from repackaging, recycling, and other approaches environmentally conscious strategies offer long-run cost advantages as well Competitive advantages environmental concerns can be transformed into entrepreneurial opportunities

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 5 Why Manage With The Environment In Mind? (cont.) Pubic opinion majority of U.S. population concerned about the negative effect of business on the environment consumers expect companies to develop environmentally friendly alternatives to current products and practices companies receive pressure from local communities and their own employees Long-term thinking helps business leaders understand the nature of their environmental responsibilities economic arguments - attention to environmental issues enhances the firm’s long-term viability

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 6 Why Manage With The Environment In Mind? (cont.) Long-term thinking (cont.) sustainable growth - economic growth and development that meets the organization’s present needs without harming the ability of future generations to meet their needs fully compatible with the natural ecosystems that generate and preserve life tragedy of the commons commons - shared property with a limited carrying capacity a finite resource’s ability to sustain a population carrying capacities are shrinking as precious resources become scarcer inevitably, conflict will arise over the remaining resources

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 7 Why Manage With The Environment In Mind? (cont.) Environmental movement 1900s the “earth decade” combines many diverse viewpoints conservation - concerned with the efficient use of resources compatible with business management environmental movement - showed that the unintended negative effects of human economic activities on the environment often are greater than the benefits posed a dilemma for business the symptoms of environmental problems are in the biological world source of these problems lies in economic and political organizations

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 8 Why Manage With The Environment In Mind? (cont.) Economics and the environment environmentalists criticize economics for its notions of efficiency and its emphasis on economic growth suggest that economists should supplement estimates of economic costs and benefits with other factors Qualitative judgments in cost-benefit analysis many environmental issues do not lend themselves to quantitative analysis fairness cannot be ignored when doing cost-benefit analysis International perspective environmental issues perceived differently around the world

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 9 What Managers Can Do Systems thinking environmental considerations relate to an organization’s: inputs - include source of raw materials and energy processes - procedures that reduce water and air pollution, noise and vibration, and waste outputs - products themselves or the waste or by-products of processes have an environmental impact Strategic integration environmental issues should be addressed in a comprehensive, integrative fashion

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 10 Comprehensive Approach To Environmental Issues Engage in “green” process and product design Establish environmentally focused stakeholder relationships Strategic integration Mission statement and strong values supporting environmental advocacy Establish framework for managing environmental initiatives Provide internal and external education

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 11 What Managers Can Do Life cycle analysis process of analyzing all inputs and outputs to determine the total environmental impact of the production and use of a product green design of initial packaging can minimize the need for repackaging, cut waste, and realize many benefits Implementation fundamental requirement for effective environmentalism is a commitment by top management essential to make employees accountable for actions that have environmental impact

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 12 What Managers Can Do (cont.) Strategy cut back on environmentally unsafe businesses carry out R&D on environmentally safe activities develop and expand environmental cleanup services compensate for environmentally risky projects make your company accountable to others make every new product environmentally better than the last

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 13 What Managers Can Do (cont.) Public affairs attempt to gain environmental legitimacy and credibility avoid losses caused by insensitivity to environmental issues collaborate with environmentalists The legal area try to avoid confrontation with state or federal pollution control agencies comply early take advantage of innovative compliance programs don’t deal with fly-by-night subcontractors for waste disposal

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 14 What Managers Can Do (cont.) Operations promote new manufacturing technologies aim for zero waste or zero discharge encourage technological advances that reduce pollution from products and manufacturing processes develop new product formulations eliminate manufacturing wastes find alternative uses for wastes insist that your suppliers have strong environmental performance assemble products with the environment in mind

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 15 What Managers Can Do (cont.) Marketing cast products in an environmentally-friendly light avoid attacks by environmentalists for unsubstantiated or inappropriate claims differentiate your product via environmental services Accounting collect useful data make polluters pay demonstrate that anti-pollution programs pay off use an advanced waste accounting system adopt full cost accounting show the overall impact of the pollution reduction program

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved. 5Ap - 16 What Managers Can Do (cont.) Finance gain the respect of the socially responsible investment community recognize true liability fund and then assist green companies recognize financial opportunities