Benefits of Going Green - Essay Example

? BENEFITS OF GOING GREEN I.Benefits of Going Green Introduction With the rising significance of sustainable development in the recent years, the environmental policies of all companies have undergone significant changes based on sustainable development approach. In this regard, the main initiatives by corporate managers include inclusion of environmental vision along with other managerial issues into corporate culture, integration of environmental policy and environmental management system, continuous monitoring of the environment management system and careful decision on strategic issues by considering environmental impacts also(Liu,2002).However, the critics of this approach show that there are serious costs associated with going green that may outweigh the benefits .In some cases they show that this can lead to sacrificing economic growth in developing nations(Prasad and Kochher,2009). Given this background, this essay examines whether going green is an empty fad or it is a powerful tool for competitive advantage in modern organizations. Case studies of organizations are utilized for this purpose. 2. Going Green Policy At a global level, sustainable development has gained importance ever since the United Nations Framework Convention on Climate Change (1992). Based on the UNFCC (1992) Article 3.4, sustainable development needs to be integrated with national development policies by considering the need for economic development to address climate change problems (Winkler et al, 2002). In this convention, the focus has been more on reduction of greenhouse gas emission and their targets than on sustainable development. After this, much discussion has been done on the links between sustainable development and climate change and the inclusion of sustainable development concept in environmental policy. The sustainable development requirements approach to environmental policy started in developed nations first. Reports show that greenhouse gas emissions are going on rising with the ongoing economic reforms that aim at improving economic growth (Mc Kibbin, 2004). Based on economic theory, there are two main mitigation measures to reduce the greenhouse gas emission. One is a tradable permit system for emission rights and the other is taxing carbon emissions (Mc Kibbin, 2004). Studies have shown that the permit system for emission rights developing nations will result in a rise in costs in terms of sacrificing economic growth since most economic activities rely on energy here. The shift from cheap fossil fuels to expensive non-carbon energy will adversely affect economic growth and development (Prasad and Kochher, 2009). Recent estimates show that the cost for investment in reducing greenhouse gas emissions by 550 MtCO2 in the major energy emitting sectors cost S$25billion, which is equivalent to the amount needed for the development goals here(Prasad and Kochher,2009). The next possible option is carbon taxing. Taxing can be practically problematic since the taxes will be imposed on not only the emissions that are removed on the margin but on all emissions. Consequently, the income transfers from the firms to government will be very much larger than the costs of greenhouse gas emission abatements (McKibbin, 2004).Thus it can be shown that any form of abatement measure will impose significant costs in terms of sacrificing economic growth and development in developing nations. This will not be a problem for developed nations, which have already achieved a high level of development in terms of all the indicators while in developing nations, where most people live below the poverty line, sacrificing development means a lot. Based on the different scandals that arose in the recent years like Enron scandal, it is argued that business ethics is essential which plays a major role in the functioning of companies (Broomhill, 2007).Studies show the beneficial effects of green policy depend on the expectations of stakeholders and the constraints placed by the restrictive legislations produced by the states(Broomhill, 2007).Moreover, green policy is reported as a kind of risk management strategy by some authors(Porritt,2005). Other advantages include innovation promotion, risk mitigation, promoting business ethics and promoting social sustainability (Broomhill, 2007). Thus the main benefits of adopting green policy practices include assistance in recruitment processes, risk management, differentiating between brands, diversion of attention from the negative externalities of bigger corporations (Broomhill, 2007). The critics of green policy argue it as preventing competition and economic freedom (Henderson, 2001). In addition to these studies show the need for regular monitoring of the voluntary green policy activities for becoming successful. These do not happen in many cases as shown in many studies (Christian Aid, 2004). Based on the entity theory, the business entity and the owners of an entity have separate identities and existence. Hence, all the stakeholders have the right to have equal access to information. All the stakeholders are considered to be the providers of capital for the business and hence are supposed to get equal access to information according to this perspective .This is based on the argument of information asymmetry being one of the main causes of market inefficiency, which in turn can lead to the failure of an entity (Kabalski, 2009). Moreover, even among the stakeholders themselves some stakeholders concerned about environmental protection and stakeholders who are main information providers of an entity’s human resource and management may claim to be included as the main users of financial information(ICAEW,2003;Kabalski,2009).Based on these it can be argued that though it can be argued that the new framework can act to the interests of multiple stakeholders ,it cannot satisfy the needs of all stakeholders to the same degree. For example, Natura, the Brazil’s leading cosmetics company has many stakeholders including both domestic and foreign stakeholders. This has created many challenges including lack of organized production chains, logistics constraints, difficulty accessing the communities due to their remote location and low technical training (Smith, 2009). Thus studies show that prioritizing certain stakeholders as main users of financial information need not conflict with the other groups’ interests (Kabalski, 2009). 3. Case Studies KFC Corporation, based in Louisville, Kentucky is one among the most popular chicken restaurant chains in the world with very high financial performance. Though one of the main aims of KFC is to promote animal welfare, there have been lot of criticisms on KFC’s treatment of animals for their products by organizations like People for the Ethical Treatment of Animals (PETA). Though KFC has responded to it by arguing that their suppliers meet all legal requirements, PETA still criticizes their cruel treatment to animals (Kentucky fried cruel.com, 2009).Further the customers complain about the cleanliness in KFC also. Another example is the manipulation of electricity by Enron for profit maximisation purpose at the expense of citizens of California. All these give importance to shareholder wealth maximization as the main aim of their businesses. Another example is the negative effects on small businesses by Wal-Mart and the resulting adverse effects on communities in the rural areas (Vedder and Cox, 2006). Moreover, the treatment of the workers here has been subject to heavy criticism according to many reports (Wittman, 2006).These include overtime work without pay that is enforced illegally, discrimination against disabled and non privileged people, very bad pay scale, very expensive insurance packages which are not affordable to even full time workers, lack of recognition etc(Wittman, 2006). Rather than simply concentrating on financial performance, Natura, Brazil’s leading cosmetics company focused on personal, business and public relationships, which has been one main contributing factor for its success. Hence, the company has been in the social service field also including educating poor children, training school teachers in Brazil and in other parts of the world. The company has been following sustainable business development model, which gave it a self-identified image (Smith, 2009). The environmental friendly policies of the company include stopping testing on animals, becoming carbon neutral in 2007 through Carbon Neutral Programme as a result of the Climate Change Project etc. the environmental friendly principles of the company have been a main factor behind the success of the company. The main values of the company include humanism which includes establishing and maintaining relationships between human beings, balance which promotes harmony and the natural dynamics of men, transparency which means conducting all the business processes in a clear manner and creativity based on innovation (Smith, 2009). The main problems associated with this approach include accounting for the conflicting interests of various stakeholders, the relative importance to be given to different stakeholders etc. Another approach called radical political economy approach takes a very critical stand on green policy. This approach criticizes voluntary green policy and sees green policy as a method to escape from regulation by outsiders and corporate control so that destructive socially and environmental activities are focused in the name of green policy (Broomhill, 2007). 4. Conclusion In this essay, the benefits and costs of going for green policy based on different case studies are discussed. It can be recommended that the benefits of going for green policy depends on how they are implemented and proper implementation of green policy is therefore needed for the improved performance of the company based on the above discussion. Stakeholder interests need to be considered in the decision making processes. Business ethics is needed for effective functioning of a company in the cross border settings. II. Organizational Strategies to Improve Environmental and Ethical Stance 1. Introduction The guiding principles of sustainable development are classified into ethical principles and operating principles (Chiras, 1991).In this essay, the practices to improve the ethical and environmental stances of a UK hotel chain are discussed. 2. Ethical Practices The ethical principles are the following. (1)Natural rules compliance is needed since men being a part of nature are subject to rules of nature. Otherwise, it will lead to their own destruction (2)Cooperation with natural forces by humans is needed and not domination over natural forces (3) Fair sharing of limited resources is needed due to the need of these resources by everybody and are closely interrelated (4)Material and intellectual needs have to be balanced properly to reduce the environmental impact based on environment friendly practices (5) Global cooperation and consensus is needed to reduce the environmental problems since irrespective of nation of origin, all human beings are subject to the environmental issues. Hence, global cooperation and consensus is needed to tackle this issue effectively Based on the neoliberal definition, however, the main social responsibility of business is shareholder wealth maximization utilizing its resources, giving importance to the shareholders in a business. On the other hand, neo Keynesian approach defines CSR as “a company’s commitment to operate in an economically, socially and environmentally sustainable manner recognizing the interests of stakeholders” (Broomhill, 2007, p7).Thus this approach gives importance to stakeholders in contrast to the shareholders as emphasized by the neoliberal approach. The stakeholders include investors, clients, staff, government, local communities and environment. This is based on the stakeholder theory developed by Freeman (1984).Based on this approach, the interests of stakeholders need to be considered in the decision making setting of an organization. The main ethical practices include humanism which includes establishing and maintaining relationships between human beings, balance which promotes harmony and the natural dynamics of men, transparency which means conducting all the business processes in a clear manner and creativity based on innovation. Based on the different scandals that arose in the recent years like Enron scandal, it is argued that business ethics is essential which plays a major role in the functioning of companies (Broomhill, 2007).Studies show the beneficial effects of CSR depend on the expectations of stakeholders and the constraints placed by the restrictive legislations produced by the states(Broomhill, 2007).Moreover, CSR is reported as a kind of risk management strategy by some authors(Porritt,2005). Other advantages include innovation promotion, risk mitigation, promoting business ethics and promoting social sustainability (Broomhill, 2007). Thus the main benefits of adopting CSR practices include assistance in recruitment processes, risk management, differentiating between brands, diversion of attention from the negative externalities of bigger corporations (Broomhill, 2007). 3. Environmental Practices The operating principles of sustainable development are the following (Liu, 2002). (1)Population control is necessary for a sustainable future due to the rapidly growing population seen in many nations (2)Unnecessary energy consumption is necessary for sustainable development (3) The waste products can be recycled and used and use them as energy (4) Need for using renewable energy sources like wind, solar energy, trees etc to be preferred over using non renewable energy sources like plastic, fossil fuels, synthetic cloth etc. Nuclear energy is considered to have the lowest lifecycle greenhouse gas emissions when compared to the other technologies generating electricity. Reports show that the emission of CO2 from nuclear power is only about 25g equivalent per kWh compared to the emission by fossil fuel chains of 450 to 1 250 gCO2-equiv./kWh(Nuclear Energy Agency,2006) Moreover, it gives a very strong and reliable base load output (Weisser et al , 2008). Other advantages are suggested as less environmental burdens like acid rains, ozone layer depletion or urban smog and strict monitoring of the radioactive emission (Nuclear Energy Agency, 2006). According to the proponents of nuclear energy, disposal of wastes from nuclear plants is not very problematic when compared to the disposal of large volumes of wastes from the coal energy system (Nuclear Energy Agency, 2006). Sovacol (2008) in a critical survey of 103 greenhouse gas equivalent emissions for nuclear power plants reports that though nuclear power plants do not directly contributes to greenhouse gas emissions, the life cycle emissions arise through plant construction, operation, uranium mining and milling, and plant decommissioning. According to the estimates of International Energy Agency (2007), the role played by nuclear energy in electricity generation will decline to 13 percentage. The reasons for this decline are the safety concerns due to the major accidents occurred in many nations ,, health concerns de to a nuclear disaster, problems related to the disposal of radioactive waste, transport of nuclear materials, problems like terrorism, economic problems like need for financing decommissioning and disposal of nuclear waste, and rising safety needs for new and existing nuclear plants(Ball Foundation, 2005). Hence, the adoption of nuclear energy as an alternative source needs many factors like intergovernmental and national efforts, public support, technology advancement and strong safety requirements (IAEA, 2007). In addition to these, some natural rules for sustainability have been identified as mechanisms through which nature purifies air and water, the natural mechanisms of supplying nutrients to all species on earth like carbon and nitrogen cycles, existence of food chains or food webs in which men are at the top as well as decomposer food chains (Chiras, 1991; Peavy etal, 1995; Liu, 2002 etc). There are two main mitigation measures to reduce the greenhouse gas emission. One is a tradable permit system for emission rights and the other is taxing carbon emissions (McKibbin, 2004). The companies are also entitled to emit the greenhouse gases especially CO2 up to a certain ceiling by the national governments of many developed nations. Those companies which exceed their quotas can buy their excess credits form the carbon market and those below the credits can sell in the carbon markets. Thus a nation can reach the Kyoto Protocol quota if all companies and individuals balance their quota. Thus this carbon credits are meant to reduce the emissions through providing a monetary value to the cost of pollution (Ratnatunga, 2007). 4. Conclusion The discussion shows that sustainable development emphasizes the need for economic development and environmental policy to go together rather than mutually exclusive objectives. Since the rapid industrialization, population growth and other man made activities like fossil fuel burning, deforestation etc have created huge environmental impact on future generations, they will stand as a stumbling block in meeting the development objectives of future generations .Hence environment friendly practices need to be practised for achieving development objectives. Now the need for sustainable development approach in environment policy has been recognized all over the world and is being practiced at the corporate and national level. Sustainable development based approach has been included in the corporate culture of most companies and in the policies of national governments. The main ethical practices include humanism which includes establishing and maintaining relationships between human beings, balance which promotes harmony and the natural dynamics of men, transparency which means conducting all the business processes in a clear manner and creativity based on innovation. Based on the different scandals that arose in the recent years like Enron scandal, it is argued that business ethics is essential which plays a major role in the functioning of companies. Some natural rules for sustainability have been identified as mechanisms through which nature purifies air and water, the natural mechanisms of supplying nutrients to all species on earth like carbon and nitrogen cycles, existence of food chains or food webs in which men are at the top as well as decomposer food chains. There are two main mitigation measures to reduce the greenhouse gas emission. One is a tradable permit system for emission rights and the other is taxing carbon emissions. . The report shows that CSR as a means for profit maximization alone need not be beneficial and can have several adverse consequences affecting the wellbeing of the stakeholders. This focuses only on the shareholders and not the broader category of stakeholders. On the other hand the CSR focusing on the interests of stakeholders can be beneficial to the society as shown from the report. A main limitation associated with this is to account for the conflicting interests of various stakeholders. Moreover, the relative importance to be given to various stakeholders also is a matter of concern as discussed in the report. The discussion shows the need for CSR to be based on business ethics for becoming beneficial to the society. 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