Lecture 9: Sustainability

and the Natural

Environment

Natural Resources
Naturally occurring materials that are exploited
for need and consumption often after
processes of extraction and processing
e.g. Air, water, fishery, forestry, minerals, oil,
wind

Types of Natural
Resources
Renewable resources: resources that
have a significant rate of growth or renewal
on a relevant economic time scale; e.g.: solar, wind, tidal
energy, air, forests, fisheries
Nonrenewable or exhaustible resources: e.g. oil, coal,
natural gas, copper, iron, silver, some plant and animal
species,
Natural resources must be thought of in terms of (i) stocks
thought to exist and (ii) flow of natural resource
commodities or services being produced from these stock

Economic exploitation
Based on extraction and processes that require
energy; they change and contaminate the
eco-systems and generate by-product i.e.
waste as pollution that needs to be absorbed
by the environment
These have a private costs (which is normally
accounted for ) and social cost that has
always been seen by businesses as
externalities. This is less and less the case
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Earths Services to
Humans

Unsustainable
Business Practices Waste
Western industry and agricultural
CO2 Emissions & Air
system overall has great impact on
pollution & Toxic
global warming
substances
+
think of Union Carbide and the
Bhopal Disaster. Dec.3, 1984
exposed to lethal gas (Methyl
Isocynate) 3775 died (?); hundreds
The global fishing fleet is 2-3 times of thousands were injured
larger than what the oceans can
sustainably support.
Unless the current situation improves,
stocks of all species currently fished
for food are predicted to collapse by
Overfishing of
2048
Oceans
http://wwf.panda.org/about_our_earth
/blue_planet/problems/problems_fishi
6
ng/

Unsustainable Business Practices

Waste is costly &
generates health
hazard
The Waste
Management Mantra:
Reduce, Reuse,
Recycle
Increases GHGs emission
Deforestation &
Disrupts water cycles; precipitation destruction of
and rivers flows
bio-diversity
Increases soil erosions
Destroys livelihoods

Business and Water:

What is the Problem?
Reservoir

Volume

Oceans

1,370

97,25

Freshwater

38,71

2,75

29

2,05

9,5

0,68

0,125

0,01

0,065

0,005

0,013

0,001

of which: ice caps

groundwater
lakes
soil
moisture
atmosphere

0,0017
Source: Jeffrey Sachsrivers
(2008)
Note: Volume measured in Millions of KM3
biosphere

0,0006

0,0001
0,00004

Waste & pollution of

Water =
Water Bankruptcy

Global Water Crisis

1.2 billion people
lack access to clean
water
Unmet demand:
water stress affects
a variety of regions
(e.g. parts of India
and China)
Squeeze created
by: (a) growing
population, (b)
agriculture and
industrial production,
and (c) climate
change affects (e.g.
less snowmelt water)
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Millennium Ecosystem Assessment

The speed of global warming is greater than

anything seen for 10,000 years difficult for

species survival / adaptation e.g. 12 % of birds,
25 % of mammals and at least 32 % of
amphibians are threatened with extinction in the
next century.
Food production has kept pace with population
growth, but at a cost - depleted soils, over-fished
oceans, polluted waters.
The impact of ecosystem disruption often falls
first and most heavily on the poor, while wealthier
economies can afford some engineered solutions
that at least temporarily forestall the crisis.

The bottom line of the MA findings is that human

actions are depleting Earths natural capital,
putting such strain on the environment that the
ability of the planets ecosystems to sustain
future generations can no longer be taken for
granted.

BBC Video Clips

http://
www.bbc.co.uk/learningzone/clips/rainforest-des
truction-kalimantan-indonesia-and-costa-rica/30
10
96.html

Climate Change
The worrying part of it is :
Anthropogenic Global Warming
Conclusions of the National Academy of
Sciences in the report titled Advancing the
Science of Climate Change: Americas Climate
Choices, 2010:
Climate change is occurring, is caused largely by
human activities, and poses significant risks for
and in many cases is already affectinga broad
range of human and natural systems
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The Intergovernmental Panel on

Climate Change (IPCC)
The leading international body for the assessment of

climate change.
Warming of the climate system is unequivocal, as is
now evident from observations of increases in global
average air and ocean temperatures, widespread
melting of snow and ice and rising global average sea
level.
The temperature increase is widespread over the
globe and is greater at higher northern latitudes. Land
regions have warmed faster than the oceans.
(Climate Change 2007: Synthesis Report)
https://www.ipcc.ch/index.htm
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Business and Climate Change

Understanding Global Warming
Figure 1: Keeling Curve
measuring the atmospheric
carbon dioxide
concentration
Note: Smoothed line is the annual
average (ppmv = parts per million by
volume)

Figure 2: Global average

near-surface temperatures
from 1850-2005
Note: Individual annual averages
shown as bars, dark line is the
smoothed trend

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Business and Climate Change:

The Greenhouse Gas Effect
Human-induced Activities
Causing Higher Greenhouse
Gas Levels:

Source: Washington State University

Greenhouse gases act like a

greenhouse: they let solar radiation
into the planet but also absorb some
of the outgoing radiation and trap
heat energy in the atmosphere (which
then warms the Earth)

Burning fossil fuels (oil,

gasoline, gas, and coal)
Deforestation (double
effect: burning of wood and
missed photosynthesis)
Indirect effects of
population growth and
mass consumption

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Business and Climate Change:

Why Is Climate Change a Concern?
Rising
Ocean
Levels

Ocean warming creates melting and disintegration of

great ice sheets of Greenland and Antartica / can
sub-merge coastal areas

Water
Availability

Melting of glaciers and snow in high mountains

becomes more likely creates water scarcity in some
regions (indirect effects on agricultural productivity,
food security and poverty levels)

Diseas
e
Transmissio
n

Changes in temperatures can expand geographic

range in which diseases are transmitted (e.g.
because insects enter new territory) / Malaria already
moved to African highland areas

Sources: The Stern Review on Climate

Change and the Intergovernmental Panel
on Climate Change (IPCC) Fourth
Assessment Round
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Without additional efforts to reduce GHG

emissions beyond those in place today,

emissions growth is expected to persist driven
by growth in global population and economic
activities.
Baseline scenarios, those without additional
mitigation, result in global mean surface
temperature increases in 2100 from 3.7 to
4.8C compared to preindustrial levels

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Business and Climate Change

Carbon Management
GT

Total

36

100

Fossil Fuels

29

81

11,5

32

of which:
electricity
industry
transportation
Source:
Jeffrey Sachs (2008)
residential
Note: GT = gigatons per year

commercial
Deforestation

The bulk of carbon emissions

can be reduced through these
steps:

22

6,5

18

19

Slow down or stop

deforestation
Reduce emissions from
electricity production
Reduce emissions from
automobiles
Clean up industrial
processes in some
industries (steel, cement,
refineries and
petrochemicals)
Economize on electricity
use (through eco-efficient
17

IPCC Report 2014 on Climate Change

18

Climate Change 2014

Video
https://www.youtube.com/watch?

v=jMIFBJYpSgM

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But the tide is changingActors &

Interventions
Legislators act nationally and internationally with
International agreements and protocols. For
example:
The Kioto Protocol to the United Nation Framework
Convention on Climate Change
Binding commitment of nation states to an agreed upon
reduction of GHGs emissions
37 states signed and ratified the Protocol, including
Europe, Japan & Australia for for 2008-12
The USA signed it but Congress never ratified it.
20

Global and national initiatives are making a

difference at least against blatant cases of

environmental abuses via mandatory regulation
1997, there were only 36 laws on the books
around the world meant to address climate
change, compared to 487 in 2014. The countries
included in the study account for 88 percent of
global emissions.
In the USA: Clean Air Act amended in 1990 but

comprehensive legislation is lagging behind

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The Role of Business

Active political involvement in shaping legislation and regulation

Often to maintain the status quo with negative results:

The example of the Global Climate Coalition 1998-2002
The coalition also opposed Senate ratification of the
Kyoto Protocolthat would assign such stringent targets for
lowering greenhouse gas emissions that economic growth in the
U.S. would be severely hampered and energy prices for
consumers would skyrocket. The GCC also opposed the treaty
because it does not require the largest developing countries to
make cuts in their emissions... At this point, both Congress and
the Administration agree that the U.S. should not accept the
mandatory cuts in emissions required by the protocol
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Or voluntary regulation
UN led initiatives: the UN Global Compact

launched in 2000

23

Growing consensus on the agenda of

sustainability and
sustainable development
Sustainable development is
development that meets the
needs of the present without
compromising the ability of
future generations to meet
their own needs

Source World Commission on

Environment and Development,
1987 Also called the Brundtland
Commissions

EnvironEnvironmental
mental
Protectio
Protectio
n
n

Economi
Economi
c
c
Prosperi
Prosperi
ty
ty

Social
Social
WellWellBeing
Being

24

Role of business:
Participate in and take responsibility for its

impact on system maintenance and

reproduction
Take responsibility for intergenerational equity

25

Sustainable Development and the Triple

Bottom line

The Upside Benefits: strive to innovation and entrepreneurship favors competiti

age; staying ahead of the curve
downside risk: negative repercussion of liabilities and reputation damage
right thing to do: Oil Shell says TINA
From Carroll and Bucholt
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Triple Bottom Line and

the 3 Ps
Elkington 1998: The Triple Bottom Line of 21 st

Century Business

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The greening world

NGOs and Advocacy groups
Green consumers
Green employees
Green investors: In 2010 US investors filed a

a record 95 climate change resolutions, a 40%

increase over 2009 (Carroll and Buchholtz
2012)

28

Green Business
Green as an opportunity: Business

environmentalism
Greening as a strategy not only for reputation,
risk management, brand power and potential
innovation but also to save energy and costs

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Sustainable, green businesses

Emergence of Businesses that are entirely

devoted to green and sustainability issues.

E.g Triodos Bank
http://www.triodos.com/en/about-triodos-bank

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Summary & Conclusions

The natural environment is an important

stakeholder that needs to be included in

cost/benefits calculations
It is even more important than others as there
is no business to be done on a dead planet
Growing global concerns (climate change, food &
water scarcity) have translated in mandatory and
voluntary initiatives
Sustainability agenda for Business means: TBL &
CSR but also a new wave of green businesses
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If we have time
Pepsi facing its future
What sustainability issues is Pepsi facing?
What would you recommend to Pepsi and

why?

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