PIA2224 Env Issues & Sustainable Deve, 2024-25 SemA

Friday, 9:00-11:50
YEUNG LT5

Lecture-4: Corporate Environmental

Management: promoting sustainable business

○DONG Liang (董亮）

a Department of Public and International Affairs
b School of Energy and Environment
City University of Hong Kong
[email protected]

1
Outline

• Causal mechanism of motivating business for

environmental innovation
• Corporate environmental toolbox
① Evolutionary responses of industries: from pollution control to
life cycle management
② Build system: Environmental management system (EMS)
③ Strategy innovation: Corporate Social Responsibility (CSR)

2
UN’s survey to 1000 Global CEOs on sustainability

3
Global CEO’s responses to survey

4
 % of CEOs believe sustainability should be
96 integrated into company strategy and operations

% of CEOs cite complexity of implementation

49 across functions as the most significant barrier
to company-wide sustainability
Source: A New Era of Sustainability, UN Global Compact - Accenture CEO Study 2010
6
7
Galaxy S24: Samsung's First Flagship Phones
With Recycled Cobalt

8
 Corporate Sustainability
A driver of long-term profitable growth

9
Why is Business critical?

• Business is focused on learning and change.

• Change can and does happen relatively quickly

• Business is a global institution.

• The challenges are fundamentally global in nature

• Business is the source of technological innovation.

• Technology is the proximate cause of environmental
impact

Dr. John Ehrenfeld, Director Emeritus, MIT Technology, Business and Environment Program
Causal mechanism: Motivations to make change

危 機

“Expect the Unexpected: Building business value in a changing world,” KPMG, 2012 11
Top risks are environmental
The World Economic Forum (WEF) 2020 top risks

2015 2016 2017 2018 2019 2020

1 1 1 1 1 1 Extreme
weather

2 Involuntary 2 Climate action 2 Climate action

2 2 migration 2 failure failure

3 Failure of 3 Climate action 3 natural

national 3 3 3
governance failure disasters

4 State collapse 4 Interstate 4 Terrorist attacks 4 4 data fraud 4 Biodiversity loss

or crisis conflict or theft

5 Unemployment 5 Natural 5 Climate action 5 Human-made

5 5 Cyberattacks
catastrophes failure environmental
disasters

Economic Environmental Geopolitical Societal Technological

12
Source: World Economic Forum
Sustainable Development for Business

• Sustainable development for business means

“adopting business strategies and activities that meet the

needs of the enterprise and its stakeholders today while
protecting, sustaining, and enhancing the human and natural
resources that will be needed in the future” (International
Institute for Sustainable Development 1994: 4).

• Sustainable business has interdependent economic, environmental,

and social objectives (Triple Bottom Line)

• Long-term viability depends on integrating all three objectives in

decision-making

13
 What if you
don’t redefine
your business
purpose –
Strategic drift
14
【Porter Hypothesis】: Can win-win and
whether to adopt a win-win strategy?

Michael Porter: Companies which invest in green innovation and

establish standardized green research and development
technologies can often gain first-mover advantage

• Resource productivity: economic

output/resource consumption. More
pollution means lower resource
production;
• Innovation can enhance the
competitiveness of companies

15
Uncover the “Cost of Environment” Iceberg
AND, transform into business opportunities!!

THE HIDDEN COST

Proper environmental governance is a
OF WASTE
way to help people to uncover the
hidden cost and follow the target.

Adapted from: Bierma, TJ., F.L. Waterstaraat, and J. Ostrosky. 1998. “Chapter
13: Shared Savings and Environmental Management Accounting,” from The
Green Bottom Line. Greenleaf Publishing: England.

16
Key solutions for sustainable
business
Not an end, but a start

17
Part-1: from pollution control
to life cycle management

18
Cultural Changes and the Environment: The
Industrial Revolution
• Industrial Revolution (mid-1700’s):
• began in England and spread to US in the 1800s
• people lived in improved living conditions (longer and healthier)
• environmental degradation dramatically increased
• factory towns sprung up, less people needed to farm

19
The Industrial Revolution: Dramatic Increase
in Environmental Impact
• Factory towns grew polluted, noisy and very hazardous. (air pollution, water
pollution, toxics)
• Coal smoke filled cities.
• Fossil fuels powered larger farm machines for larger farms.

20
Responses of industries to pollution

PASSIVE REACTIVE
Ignore pollution Dilution and dispersion

1 2

CONSTRUCTIVE PROACTIVE
End-of-pipe treatment • Cleaner Production
• LCM
3 4

can you find the difference of the

pictures and what they mean?
Environmental regulation to companies
• Top-down pollution control strategy
• Sewage charges (排污收費)
• User VS Producer charges (使用者VS生產者收費)
• Emission permits & trading（排污許可＆交易權）
• Tax & subsidy （環境稅和補貼）
• Each has the merit and challenge

22
Theory:
Life cycles of products & service and Life Cycle management

Life Cycle Management(LCA) is to manage the environmental

impact of a product (or Service) from raw material acquisition
through end of life disposition (cradle-to-grave)

Material Component Product Packaging & End of Use &

Processing Use
Extraction Fabrication Assembly Distribution disposal

Manufacturing Reuse
Remanufacture
Recycle

Waste Treatment
Theory: waste hierarchy
Transition to strategic management for business

Pollution Prevention Hierarchy

Long
Source Reduction Strategic
Term

Recycle/Reuse

Control
Technology

Disposal
Short
Tactical The Pollution
Term
Prevention Hierarchy
gauges the value of
environmental
policies.
Environmental management in a life cycle perspective
• Clean fuel act;
• Road management.

• Cleaner production;
• Eco-design on the product.
• CSR;
• Supply chain management
• Pollution control; • Reuse;
• Industrial symbiosis; • Recycling;
• EPR; • Pollutants regulation;
• EMS • End-of-pipe
• Resource tax;
• Carbon tax;
• Subsidies for Renewable
• Environmental tax;
resources;
• Environmental
• Regulations on resources
education
exploration

Concept Design Raw Retail/

Material Transport Manufacture Transport Consumer Transport Disposal
Extraction Use

Life cycles (Supply Chain) Scope

25
In practice: Corporate environmental management
toolbox in certification system

26
① Proactive environmental strategies:
Cleaner Production

Prevention of Waste
generation:
- Good housekeeping
- Input substitution
- Better process control
- Equipment modification
- Technology change
- On-site recovery/reuse
- Production of a useful by-
product
- Product modification

27
Cleaner production
Definition by UNEP
“ Cleaner Production is the continuous application of an
integrated, preventive environmental strategy towards
processes, products and services in order to increase
overall efficiency and reduce damage and risks for
humans and the environment.”

Continuous Processes Humans

ENVIRONMENTAL RISK
Preventive Products
STRATEGY REDUCTION

Integrated Services Environment

Benefits by adopting Cleaner Production

Improving
environmental situation

Continuous
Increasing environmental
economical benefits improvement

Gaining
competitive
Increasing
advantage
productivity

29
Key elements

Cleaner Production in 7 points:

1. CP adds value to the EMS: it places emphasis on pollution prevention
rather than control, with clear improvement in environmental performance.
2. CP does not deny or impede growth but insists that growth can be
ecologically sustainable.
3. CP is not limited only to manufacturing industries of a certain type or size,
it can be applied towards the provision of services also.
4. CP includes safety and protection of health.
5. CP emphasizes risk reduction.
6. CP improves immediate efficiency as well as long-term efficacy.
7. CP is Win-Win-Win factor: it benefits the environment, communities and
businesses.
Cleaner Production implementation

OPERATION

TECHNOLOGY

PRODUCTION PROCESS

INPUT MATERIALS PRODUCTS

Relationship with other environmental management activities:

1- UNFCCC/Kyoto – Green House Gas emissions
2- Basel Convention – Waste minimisation
3- Stockholm Convention – Avoid unintentionally
produced POP’s, persistent organic pollutants (PCB’s, dioxins WASTE &
and furans) EMISSIONS
Policies implementations

• Improve equipment OPERATION

TECHNOLOGY • Improved management;
and process control;
• New tech • Workers skills & process
control

PRODUCTION PROCESS

Change INPUT MATERIALS • Modification

PRODUCTS
• Eco-design

WASTE &
EMISSIONS
• Re-use and recycling
② Green Supply Chain management based on LCM

“Management of raw materials and services from suppliers to

manufacturer/service provider to customer and back with improvement
of the social and environmental impacts explicitly considered”. ---Green
supply chain management

Adapted from Sarkis

33
Green supply chain measures

• Product design.

• Manufacturing by-products.

• By-products produced during product use. Is this a

Green car?
• Product life extension.

• Product end-of-life.

• Recovery processes at end-of-life.

(Linton et al, 2007)

34
 Evaluating the supply chain as a system leads to life
cycle optimization.
System View of Environmental Life Cycle
Inputs
Raw Material Energy $

Stage
Concept Design Raw Retail/
Material Transport Manufacture Transport Consumer Transport Disposal
Extraction Use

Outputs Product Waste $

Minimize the
Maximize the
“bad” inputs
“good” outputs.
and outputs.
USPS worked with direct mail vendors to reduce
supply chain cost and waste.
Direct Mail Supply Chain
Direct Ensure Ensure changes Target mailings
Mailers proper do not affect to generate less
addressing sorting capability waste
realize
higher
Direct Post Sorting Post
response Mailer Office Facility Office Customer Waste
rates and
lower
operating
costs Recycle
undeliverable Problem: Excessive
mail direct mail waste
Target recycled and cost
Undeliverable
content and Items
recyclable
materials Estimated savings (USPS) = $500 Million (1997)
Source: Greening the Mail, 1999, LMI
• Global Greenhouse
Gas Strategy
• Sustainable certified
seafood • Encourage customer to
• Global Logistics
recycle their electronics
• Organic cottons
• Greater transparency in • Recyclable or biodegradable
sourcing packaging • Recycling E-waste
• Adopt the Global
Organic Textiles • Alternative
• Closer relationships • Green-colored shelf tag • Disposing E-waste safer
Standard fuels
with suppliers

Product planning,
Sourcing Transportation Retailing Customer Waste
design

37
Rethink to behind theory: Cost reduction in a life cycle
perspective

Waste Reduction Opportunities in the Life Cycle

Concept Design Raw Retail/

Material Transport Manufacture Transport Consumer Transport Disposal
Extraction Use
Control
Reduce Reuse/Recycle Dispose
Technology

High
Potential for life
cycle cost savings

Cumulative life
cycle costs
Low
Part-2: build system: Corporate
Environmental management system
(EMS)

39
EMS (Environmental Management System)

• An EMS is simply a collection of activities undertaken to ensure that environmental

issues are managed....

• An EMS is important for:

• Consistently complying with environmental laws

• Improving overall environmental performance

• Addressing environmental liability from current or past practices

• Maximizing investment in environmental affairs

• Integration of environmental objectives into overall mission and business

objectives

• Providing an environmentally safe workplace

40
EMS Evolution
• Until 1960s when gained public attention
• Corporations reacted to increased legislation
• Responsible Care Program (Canada) in 1984
• British created the first national EM standard BS 7750 in 1994
• A Canadian standard Z750 was created in 1994
• Legislated in 1993, EU published EMAS in 1994, open in 1995.
• In the U.S. no national standard was developed during the 1990s, however groups of
companies did (e.g. GEMI)
• The first international EMS was ISO 14001 by ISO.
• Based on:
• The success of ISO 9001
• Increasing international concern (UN Conference of Rio 1992)
• Created a Technical Committee 207
• The ISO 14001 was published for the first time in 1996.

41
EMS Basis & Components

An EMS is based on the following

components: Policy
•Policy
•Planning
Check Plan
•Implementation
•Quality assurance/control
•Management review
•Stakeholder involvement Do
•Community Environmental Activity
•(Required for ISO 14001)
Review for Continuous
Improvement

42
ISO 14001 and EMS

• ISO 14001 is an internationally agreed standard that sets out the

requirements for an environmental management system.
• It helps organizations improve their environmental performance through
more efficient use of resources and reduction of waste, gaining a
competitive advantage and the trust of stakeholders.

43
ISO 14001 Standards

• Voluntary

• Set up the by industry: countries can adapted into their legislation

• Is aimed to improve processes not performance itself

• Key aspect is that of continual improvement

• Doesn’t require the publication of an environmental statement

• Provides the company with a guideline on how to manage environmental

aspects

• Requires management commitments and involvement from all employees

44
Part-3: From policies to
environmental strategy: Corporate
social responsibility (CSR)

45
Main Concepts of CSR and related theory

CSR (Carrol, 1979)

Firms have responsibilities to societies including economic, legal,
ethical and discretionary (or philanthropic).
- See also DeGeorge (1999) on the “Myth of the Amoral Firm”

Social Contract (Donaldson, 1982; Donaldson and Dunfee, 1999)

– There is a tacit social contract between the firm and society; the
contract bestows certain rights in exchange for certain
responsibilities.

Stakeholder Theory (Freeman, 1984) – A stakeholder is “any

group or individual who can affect or is affected by the achievement
of an organisation’s purpose.” Argues that it is in the company’s
strategic interest to respect the interests of all its stakeholders.
Some examples of CSR

• Ronald Macdonald House

https://www.youtube.com/watch?v=8wOCFS6SyzE

• Ikea “Soft toys”

https://www.youtube.com/watch?v=WsJ6CV-6ZpA
Definition of CSR

Business dictionary defines CSR as "A company’s

sense of responsibility towards the community and
environment (both ecological and social) in which it
operates. Companies express this citizenship (1)
through their waste and pollution reduction
processes, (2) by contributing educational and social
programs and (3) by earning adequate returns on the
employed resources."

48
Key Issues in CSR
• Labour rights (ethics)
• child labour
• forced labour
• right to organise
• safety and health

• Environmental conditions
• water & air emissions
• climate change

• Human rights (ethics)

• cooperation with paramilitary forces
• complicity in extra-judicial killings

• Poverty Alleviation
• job creation
• public revenues
• skills and technology
Case in HK, McDonalds stop offer dining inside
shop after 6:00PM , 2021

50
Stakeholders engaged

.
CSR Management: Plan, Do, Check, Act method

Plan Do

• Consult stakeholders • Establish management

systems and personnel
• Establish code of conduct
• Promote code compliance
• Set targets

Act Check
• Corrective action • Measure progress
• Reform of systems • Audit
• Report
Implications for Enterprises: CSR Management

How do companies address CSR management issues?

• Policies - Code of Conduct Principles, values, standards, or rules
of behaviour that guide the decisions,
procedures and systems of an
• Systems - Compliance Management organization

• Reporting - Accounting and Reporting

Compliance management is the process which ensures that a set of

people are following a given set of rules. The rules are referred to as
the compliance standard or compliance benchmark, while the process is
what manages their compliance.
Compliance management can take many forms.
Benefits of CSR practices

• Triple bottom line ("People, planet and profit“) - People" refers to

fair labor practices, the community and region where the business
operates. "Planet" refers to sustainable environmental practices.
Profit is the economic value created by the organization after
deducting the cost of all inputs, including the cost of the
capital (by John Elkington1994)
• Brand differentiation build customer loyalty based on distinctive
ethical values.
• Reduced scrutiny and/or risk management Corporations are
keen to avoid interference in their business through taxation
and/or regulations and risks.
Management by certification

ISO 26000: Social Responsibility

• Introduced in 2010
• NOT a Management System
• NOT a Standard (voluntary)
Objectives of ISO 26000

• to assist all kinds of organizations in contributing to

sustainable development.
• to encourage organizations to go beyond legal compliance,
recognizing that compliance with law is a fundamental duty
of any organization and an essential part of their social
responsibility.
• to promote common understanding in the field of social
responsibility.
• to complement other instruments and initiatives for social
responsibility, not to replace them.
► Thus, ISO 26000 is a voluntary guidance standard!

56
CSR to ESG (environmental, social and governance)

57
Summary: A evolutionary view of company’s
responses to environment
Stages 1st 2nd 3rd 4th 5th
NA Obey Responsibility Reform Sustainable
development
Design for
sustainability
Not In My Back Yard Integrated environmental
management system
Environmental cost
accounting
Product Safety / Life Cycle
Assessment
Environmental Management System /
ISO14000
Stakeholder involvement
Pollution prevention / waste minimization
Pollution control
Reaction of Before 1970 1970s 1980s 1990s 2000s
companies NA Reactive type Preventive type Forward Strategic
looking
Environmental NA Comply the law Reduce Improve Life cycle
targets environmental ecological green product
impact & cost efficiency upstream and
Take Competitive downstream
responsibility Advantage productivity
Increase

（Nattrass，2010）
Review on today’s content

• Causal Mechanism of corporate’s motivations to make change

towards sustainability;
• Concept and mechanism of the corporate environmental
management toolbox:
✓ Cleaner production and green supply chain management as life
cycle management applications;
✓ EMS
✓ CSR
• Their applications to novel business models.

• Next week we will go to ESG

59
Thanks for your attention☺

☺If you feel interests to my research, pls feel free to reach me☺
[email protected], and via many social networks
60