Module 7: Business Ethics and the Environment

Module 7: Business Ethics and the Environment ACCT19083 Corporate Governance and Ethics

LEARNING OBJECTIVES Identify and evaluate the key contemporary issues concerning the environment Discuss the role that business plays in both harming and preserving the environment Identify and evaluate the ethical issues involved in preserving the environment.

The environment Humans use the earth’s natural resources for food, clothing and shelter. The level of industry that has fed our consumption has damaged these resources. Rivers and lakes are dirty and the air is unclean. Lush forests are disappearing, and with them countless species of plants and animals.

THE ENVIRONMENT (CONT.) Half the world’s wetlands have disappeared. 80 per cent of its grasslands now suffer from soil degradation. 20 per cent of its dry-lands are in danger of turning into deserts. Groundwater is seriously depleted.

THE ENVIRONMENT (CONT.) As a result, the earth is losing its capacity to continue to provide the goods we need, threatening our economic well-being and, ultimately, our survival.

ENVIRONMENTAL ETHICS AND FOOD Chemicals used in agriculture damage the environment. Chemical residue is present in the food we consume. Causing health concerns; children particularly at risk Large-scale corporate farming exacerbates these problems.

GENETIC FARMING: PROBLEMS Reduction in plant biodiversity Increase in ‘super-pests’ Reduction in farmers’ independence caused by an increased reliance on agricultural corporations Meat industry’s ecological costs second only to those of the motor industry

LARGE-SCALE FARMING: PROBLEMS Chemical pollution of land, waterways and food Degradation and erosion of soil Loss of seed and animal diversity Energy and resources consumed in shipping, processing and packaging foods Range of human health concerns

Water 70 per cent of world’s water is used for irrigation. 22 per cent is used by industry. 8 per cent is left for human consumption. 1 billion people lack access to clean water. 2.4 billion have no sanitation. In Australia, much of which is desert, water is taken from rivers, lakes and groundwater in order to grow crops that are entirely unsuitable for the climate.

DEGRADATION OF AUSTRALIA’S RIVERS Intensive irrigation has contributed to salination and ecological damage. Increased demand for water for city and irrigation use, and reduced water flows, owing to drought conditions, have placed great pressure on the viability of our water systems.

Air pollution Air pollution is responsible for thousands of deaths and millions of sick days every year: Asthma Emphysema Lung cancer Heart disease Risk to pregnant women Danger to young, developing lungs

CLIMATE CHANGE Human activity is heating the planet. The past decade was the hottest on record. Spring comes, on average, one week earlier than in the past. Weather patterns are more erratic than in the past. The Arctic ice sheet and the world’s glaciers are melting. Research has found a correlation between warmer temperatures and coral disease.

Nuclear energy Significant risks from use of nuclear energy Concern about safe disposal of nuclear waste Uncertainty about future effects of nuclear waste disposal

Environmental responsibility What are business’ responsibilities in regard to: environmental degradation? resource depletion? the abuse of animals for commercial purposes?

BUSINESS AND ECOLOGY As a business operates, it is functioning within an ecological system. Webs of interdependency structure ecosystems. Predators and prey, producers and consumers, and hosts and parasites are linked together, creating interlocking mechanisms – checks and balances – that stabilise the system.

BUSINESS AND ECOLOGY (CONT.) Every living organism affects, and is affected by, its environment. Humans possess the power to damage the stability of natural ecosystems. Many human commercial activities have unpredictable and disruptive consequences for ecosystems.

THE ENVIRONMENT: BUSINESS’ TRADITIONAL ATTITUDES Environmental problems have been created by: viewing of the environment as a ‘free and unlimited good’ spillovers, or externalities private interest vs. the common good

The ethics of environmental protection Who should pay the costs of pollution control: those responsible? those who would benefit? Free riders vs. social contract How do we divide the bill?

THE COSTS OF POLLUTION CONTROL Cost–benefit analysis How do we measure human well-being and other costs and benefits? Benefits are especially difficult to calculate in environmental matters, because they often take an aesthetic form. Any assessment of costs and benefits will be subject to various factual uncertainties and significantly influenced by the values one holds. Ecological economics Equating the value of something with its replacement cost

ACHIEVING OUR ENVIRONMENTAL GOALS Regulations Incentives Pricing mechanisms Combination of methods

1. REGULATIONS Regulation makes use of direct public regulation and control in determining how the pollution bill is paid. It provides legally enforceable standards. However, it is difficult to create an equitable system of governance. Displacement costs resulting from industrial relocation or shutdown due to environmental regulations can be high.

2. INCENTIVES Government might give firms a tax break or match grants. Minimises government interference Gives way to voluntary action Likely to be a slow process A subsidy for polluters

3. PRICING MECHANISMS Charge firms according to the level of pollution they produce Place the cost of pollution control directly upon the polluters Pollution costs become production costs; firms would be motivated to reduce these Pollution permits: Set limits on the amount of pollution a firm can produce by means of permits. Allow firms to trade the right to emit pollutants.

Delving deeper into environmental ethics The Western world uses most of the world’s resources. Australia has one of the largest ecological footprints in the world. Our dependence on foreign resources raises a variety of moral issues: Political and economical domination of other countries Does any nation have the moral right to consume a disproportionate amount of the world’s finite resources?

OBLIGATIONS TOFUTURE GENERATIONS We have an obligation to leave a habitable world for future generations. But if these people do not yet exist, how can they have rights? If we conclude that future generations should be granted rights, what specifically are those rights?

The value of nature Anthropocentricism: Nature only has value because humans value it. Nature has intrinsic value: Aesthetic beauty Part of our ecosystem

Our treatment of animals Do animals have rights? Can animals suffer or feel pain? Is it moral to use animals for testing? Is it wrong to eat animals?

Module 7: Business Ethics and the Environment