Business and Environment Environmental Issues

Why should one study subject on environmental issue? Business Natural Environment Ecosystem 2 Environmental Issues Force for wealth creation Basis of Economy Basis of Economic activities Renewable and non- renewable resources Provides consumables like food, water Supports production Balance will create Sustainable Development

Business Strategy What it takes? What it makes? What it wastes? Environmental Issues 3 The Ecology of Commerce Natural resources from earth’s ecosystem Products and Services through industrial processes Garbage, pollution and eco-costs

Marketing Strategy BusinessMarketing Environmental Issues 4 Market depends on production of goods and services Eco-costs to be considered – product cost will go up Eco-Costs: Technology to minimize wastage Cost of materials having lesser impact on ecosystem Cost of non-conventional energy used Cost associated with disposal of hazardous wastes Cost associated with EMS and certification Cost of packaging Cost of penalties imposed for not following standards

Market Based Instruments (MBIs) Reducing eco-costs Subsidies for industries that use clean technologies, recycling programs, energy conservation and use of non-conventional energy Incentives to companies who incur additional cost in their operations for protection of ecosystems Incentives for companies in developed countries when they engage in clean technology transfer to developing countries Heavy taxes on activities that lead to environmental damage or resource depletion Tradable permit system in environmental management – tradable permits for greenhouse gas emission can be exchanged through the market. Command and Control method – a policy framework to mandate compliance to certain standards laid down by regulating authority Environmental Issues 5

Eco Marketing and Eco-Labeling Eco (Green) Marketing – Compatible with goals of the company – Educating consumers on eco-friendly products and why they should buy them – Response to demand for ecologically sound products – Production process compatible with ecosystem – Satisfying customers Eco-Labeling – Environmental claim that appears on products – ISO14020 provides guide to award of eco-labels – Green purchasing and Green shopping – focus on conservation of natural resources – Eco-mark scheme by GOI to increase consumer awareness in 1991 – awarding Eco-Label to products meeting specified criteria – Manufacturers being more accountable to environmental impact Environmental Issues 6

Manufacturing and Environment Al Gore - ‘Earth in the balance’, New products and technologies can hit market place without impacting environment Michael Porter - ‘Economic progress and environmental protection is not a conflicting proposition’ Lester Brown – ‘Throwaway mentality of people need to be changed’, US dumps 1 million computers a year for landfills, each computer has 1 kg of lead and this will leach in water tables to contaminate water Industrial ecology – where minimum raw material is used in manufacturing to maximize yield and eliminate waste Technology to help reducing waste – invent of mobile phone has helped saving tonnes of copper System thinking - on lean manufacturing to produce efficient products and eliminate waste Recycling as a concept in manufacturing – US gets 50% of its raw material for paper manufacturing through recycled papers Closed loop manufacturing – re-use of dumped products to create new products Environmental Issues 7

Environmental Accounting Environmental resources – natural capital Green accounting – to account for scarcities of natural resources in assessing cost and capital at nation level – useful in assessing sustainability of economic growth – The cost associated with decline of environmental resource should be accounted – Shadow price – non-market observed price related to pollution, waste material or environmental resources. It is adjusted to take account of social costs and benefits – No standard procedure in place to define accountability – Objectives Incorporate impact of environment on balance sheet of organizations Identify stages in LCA for cost reduction Allocate environmental cost in process of fixing prices Support sustainable practice in business Environmental Issues 8

Trade and Environment Debate on trade and environment since 1990’s International cooperation is essential to streamline trade-environment relationship Trade liberalization among countries will lead to economic growth at the cost of environment unless it is watched for Economic growth and trade are not harmful to environment. If environment danger occurs, it is because of market failure and need to be fixed by market instruments Environmental effects need to be internalized in the prices for trading on a sustainable basis Rio Declaration – ‘To promote an open non-discriminatory and equitable multi lateral trading system that will enable all countries to improve their economic structures and standard of living of their populations through sustained economic development’ Environmental Issues 9

Trade Rules and Environment Protection Trade agreement that established WTO states: – Objectives of sustainable development – Optimal use of world’s resources – To protect and preserve environment – Means of doing in a manner consistent with respective needs of countries at different levels of economic development – Raise living standards of population Environmental policies and trade should be compatible and harmonious Current agreements on trade and investments are unfair and are leaned towards developed countries. Pressure from poor countries to reform WTO and trade systems Environmental Issues 10

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