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The Environmental Responsibility An ethical dilemma

The Environmental Responsibility An ethical dilemma. Gaurav Sagar Amrita Vaswani Ema Hoffmann September 2004. Background. APP (Asian Pulp & Paper) is a major paper manufacturer in Asia It uses low price timber from rainforest hardwood as raw material Large international investor base.

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The Environmental Responsibility An ethical dilemma

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  1. The Environmental Responsibility An ethical dilemma Gaurav Sagar Amrita Vaswani Ema Hoffmann September 2004

  2. Background • APP (Asian Pulp & Paper) is a major paper manufacturer in Asia • It uses low price timber from rainforest hardwood as raw material • Large international investor base • Market depression • Price erosion • Escalation of debt: £8.5bn debts in 2001 • Sharp fall in share price from £5 to 8p • Indonesian government interferes to save APP from bankruptcy, thus perpetuating the escalation of commitment

  3. Engine of destruction? Irresponsible and unethical competition and environmental behaviour

  4. Main ethical issues APP • Environmentally damaging behaviour: clear-cutting of rainforests without re-plantation • Responsibility towards investors and shareholders vs. social responsibility • Anti-competitive actions: is price dumping ethical?

  5. Main ethical issues Investors • Ethical to invest in such a business? • Ethical not to care for a remote country? Would the investors have invested if forests in their own country would have been affected? • Ethical to force APP to continue cutting trees or consider as sunk cost? • To what extent can banks be held responsible for the behaviour of their clients? Limited Liability of investors. • What resources can banks allocate for investigating the ethical character of their clients’ activities? …Where do you draw the line?

  6. Main ethical issues Government • To what extent should the government regulate the unethical behaviour of companies? • Governmental responsibility: economic situation of the country vs. environment …Where do you draw the line?

  7. Investor value ◄ ◄ Revenue Increase; higher employee loyalty; better competitive environment, etc Sustainable competitive advantage Better use of resources in the long run Improved brand equity and company attractiveness Corporate responsibility

  8. Principle Situation Recommendation • Maximizing investor wealth • Social responsibility • Should companies engage in environmentally irresponsible behaviour? • Should a company consider any other stakeholders apart from its shareholders? And if yes, then to what extent? • Win-win solution: invest in environment-friendly actions such as recycling or replantation of trees

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