C H A P T E R
N I N E
and Global Business
The world community faces unprecedented ecological challenges in the 21st century, including climate change, resource scarcity, and threats to biodiversity. Many political and business leaders have
embraced the idea of sustainable development, calling for economic development without depleting
the natural capital on which future generations depend. A critical task in coming decades for government policymakers, civil society organizations, corporate leaders, and entrepreneurial innovators will
be to find ways to meet simultaneously both economic and environmental goals.
This Chapter Focuses on These Key Learning Objectives:
LO 9-1 Understanding how business and society interact within the natural environment.
LO 9-2 Defining sustainable development.
LO 9-3 Recognizing the ways in which population growth and economic development interact with the
world’s ecological crisis.
LO 9-4 Examining common environmental issues, including climate change, that are shared by all nations
LO 9-5 Analyzing the steps both large and small businesses can take globally to reduce ecological damage and promote sustainable development.
LO 9-6 Describing the leading global codes of environmental conduct.
Chapter 9 Sustainable Development and Global Business 189
In 2015, representatives of 193 of the world’s nations gathered at the United Nations in
New York City to adopt the Sustainable Development Goals, also known as Agenda 2030
because of the deadline for meeting them. The goals were broad and aspirational, covering
many aspects of economic and social development. But all shared a vision of a sustainable
future in which humanity could thrive without destroying the environmental basis for life
on Earth. Agenda 2030 called, for example, for clean drinking water, renewable energy,
responsible consumption and production, protecting the oceans, halting deforestation, and
aggressive action on climate change. “We are determined,” said the United Nations statement, “to take the bold and transformative steps which are urgently needed to shift the
world onto a sustainable and resilient path.”1
Meeting these ambitious goals will surely require the involvement of businesses, both
large and small, from all over the globe, in the pursuit of sustainability. Companies of all
types have embraced the challenges of operating within the limits of the Earth’s natural systems. Many have recognized the cost savings associated with operating more efficiently, the opportunities to serve consumer markets in emerging economies, the benefits
of reducing regulatory risk, and the competitive advantages of innovation in sustainable
technology. Consider the following examples:
∙ In 2018, McDonald’s, the world’s largest restaurant chain, announced that by 2025 one
hundred percent of customer packaging—at all locations across the globe—would come
from renewable, recycled, or certified sources. It would also offer recycling receptacles
for patrons to use at all locations to dispose of their waste. At the time of the announcement, about half of the company’s packaging met this standard, and only 10 percent
of its locations offered recycling. Because of its enormous size—37,000 restaurants in
more than 100 countries—McDonald’s commitment promised a huge impact. “We look
forward to doing more and continuing to raise the bar,” said the company’s chief sustainability officer.2
∙ Taylor Guitars makes high-end acoustic and electric guitars, played by such well-known
musicians as Taylor Swift, Jason Mraz, and Dave Matthews. To assure its supply of
ebony, a hardwood that grows in tropical rain forests and is used to make fret boards, the
company bought a saw mill in Cameroon, West Africa. Taylor Guitars quickly ended
the wasteful practice of cutting down 10 ebony trees to find one with solid black wood,
which had stressed the forest and endangered remaining supplies. Instead, they began
using all the ebony they harvested, and educated their customers that the wood naturally
came in many hues other than black. “Our vision was to transform the way that ebony
is harvested, processed, and sold,” said Bob Taylor, the president of the company. “To
accomplish this, we assumed the role of guardian of the forest, and we operate with the
philosophy to use what the forest gives us.”3
∙ Airbus Group is a European multinational corporation that makes aircraft, including the
world’s largest passenger jet. The company has endorsed Agenda 2030 and has pledged
to support carbon-neutral growth in the aviation industry. In support of this goal, the
company has partnered with farmers, energy companies, and researchers to develop
new biofuels that can be “dropped in” to today’s aircraft as part of a fuel blend, cutting
“U.N. Adopts Ambitious Global Goals After Years of Negotiations,” The New York Times, September 25, 2015. The full text
of the Agenda 2030 is available at https://sustainabledevelopment.un.org/post2015/transformingourworld.
“By 2025, All of McDonald’s Packaging to Come from Renewable, Recycled, or Certified Sources; Goal to Have Recycling
Available in All Restaurants,” January 16, 2018, press release, at http://news.mcdonalds.com.
“The Crelicam Mill in Cameroon,” www.taylorguitars.com/about/sustainable-ebony; and Bob Taylor, “Remarks at the
Remarks at the 15th Annual Awards for Corporate Excellence,” www.state.gov/secretary/remarks/2014/01/220756.htm.
190 Part Four Business and the Natural Environment
carbon emissions. Since 2016, Airbus has offered its customers, such as Cathy Pacific
Airlines, the option of having their new aircraft delivered from the factory using the
sustainable fuel. “This is a major step for Airbus,” said the company’s head of new energies. “It enables us to demonstrate that aviation biofuels are today a reality.”4
These examples suggest some of the great creativity that businesses were bringing to
the ecological challenges of the 21st century. Can businesses, governments, and society,
working together, put the global economy on a more sustainable course? This chapter will
describe the major sustainability challenges facing society and both the risks and opportunities these challenges present to businesses globally. The following chapter will focus on
specific areas of government regulation and the ways in which businesses, in the United
States and other countries, have sought to manage for sustainability.
Business and Society in the Natural Environment
Business, society, and the environment are deeply interrelated. Business and society operate within, and depend on, the natural environment. The extraordinary planet on which
we live provides the abundant resources humans use to thrive, but it also imposes constraints. We have only one Earth, and its resources are finite. Natural capital refers to the
world’s stocks of natural assets, including its geology, soil, air, water, and all living things.5
The United Nations has estimated that the value of natural capital to society is as high as
$72 trillion per year.6 These assets make human life possible. For human society to survive
over time it must operate sustainably, in a way that does not destroy or deplete these natural resources for future generations. This fundamental truth confers on business leaders
both great challenges and great opportunities.
Chapter 1 introduced the idea of systems theory and explained how businesses cannot
be understood in isolation, but only in relationship to the broader society in which they
operate. This idea can be extended to the relationship between business and society, on one
hand, and the natural environment, on the other. In this view, business and society can be
most fully understood in relationship to the broader natural environment in which they are
embedded and with which they interact. This relationship is illustrated in Figure 9.1.
The well-known image of the Earth as seen from space—a blue-and-green globe, girdled by white clouds, floating in blackness—dramatically shows us that we share a single,
unified natural system, or ecosystem. Preserving our common ecosystem and assuring its
continued use is an urgent imperative for governments, business, and society. As KPMG
International stated in its report, Expect the Unexpected, “The central challenge of our age
must be to decouple human progress from resource use and environmental deterioration.”7
The need for balance between economic progress and environmental protection is captured
in the concept of sustainable development. This term refers to development that “meets the
needs of the present without compromising the ability of future generations to meet their
KPMG (in partnership with the U.N. Global Compact), “Sustainable Development Goals Industry Matrix,” at www.kpmg.com;
and “Airbus Demonstrates Regular Customer Delivery Flights with Sustainable Jet Fuel,” June 1, 2017, at www.airbus.com/
“What is Natural Capital,” www.naturalcapitalforum.com. See also Paul Hawken, Amory Lovins, and L. Hunter Lovins, Natural Capitalism: Creating the Next Industrial Revolution (Boston: Little, Brown, 1999).
“The State of Green Business Report 2018,” at www.greenbiz.com.
“Expect the Unexpected: Building Business Value in a Changing World,” KPMG International, 2012.
Chapter 9 Sustainable Development and Global Business 191
and the Natural
own needs” or, more simply, “ensuring a better quality of life for everyone, now and for
generations to come.”8 At its core, sustainable development is about fairness—a central
tenet of ethics, as explained in Chapter 5. Fairness requires that the benefits and burdens of
an action be distributed equitably, according to an accepted rule. Sustainable development
requires an equitable distribution of the benefits gained from the use of natural resources
for both current generations (the developing world countries should receive its fair share
along with the countries in the developed world) and across generations (the present generation should not gain at the expense of future generations). This can only occur if governments and business leaders work to promote economic development that does not further
degrade the environment. The very nature of consumption itself will need to change as
people come to emphasize the quality of their lives over the quantity of goods they own,
and innovation in a dynamic market economy will need to find new ways to meet human
aspirations in a more resource-efficient manner.
What would a sustainable society look like? Of course, there are many paths to sustainability, and there is no way to know for sure what the future will hold. But, some cities have
set out to demonstrate what might be possible. One such city is Curitiba, Brazil, which is
profiled in Exhibit 9.A.
Threats to the Earth’s Ecosystem
Humanity has entered a new geological era, called the Anthropocene (the period in which
human activity has been the dominant influence on climate and the environment). Since
the Industrial Revolution, humans have become a powerful force, altering the face of
the planet and rivaling the forces of nature herself—glaciers, volcanoes, asteroids, and
earthquakes—in impact. Human beings have literally rerouted rivers, moved mountains,
and burned vast forests. By the early part of the 21st century, human society had transformed about half of the Earth’s ice-free surface and made a major impact on most of the
rest. In many areas, as much land was used by transportation systems as by agriculture.
World Commission on Environment and Development, Our Common Future (Oxford: Oxford University Press, 1987), p. 8;
“Sustainable Development: The UK Government’s Approach,” http://sd.defra.gov.uk.
Curitiba: Brazil’s Sustainable City
The world is becoming increasingly urbanized. By 2050, two-third’s of the world’s people are expected to be
living in cities, as rural migrants pore into urban areas from the surrounding countryside. How cities grow will
therefore have a great impact on society’s future sustainability.
Curitiba, Brazil, has been called the “greenest city on earth.” The capital of the state of Paraná, this city of
almost 2 million has long embraced innovation in urban planning. Eighty-five percent of the population uses
public transit rather than cars, with speedy buses moving along dedicated express lanes, stopping at tube
stations where people can get on and off without using stairs. The city boasts 150 square feet of green space
per resident, four times the World Heath Organization standard, and has planted 1.5 million trees. Buildings
are repurposed rather than torn down and rebuilt: the planning department, for example, is in an old furniture
factory. Nine out of ten residents recycle their paper, metal, glass, and plastic; and many participate in a
program in which they can exchange trash for tokens, good for bus tickets and vegetables. “Curitiba is not a
paradise,” said the mayor. “But it is a model for many cities in the world.”
According to Arcadis, a global design and engineering firm, the most sustainable cities in the world—
ranked by their impact on the planet—now include Zurich, Wellington, and Singapore. The factors considered
include the use of renewable energy, recycling, clean drinking water, and low air pollution and greenhouse
Sources: “Story of Cities #37: How Radical Ideas Turned Curitiba into Brazil’s ‘Green Capital,’” The Guardian, May 6, 2016;
“The Five Greenest Cities in the World,” Huffington Post, August 30, 2016; World Economic Forum, “Inspiring Future Cities and
Urban Services,” April, 2016; Bill McKibben, Hope, Human and Wild (Minneapolis, MN: Milkweed Editions, 2007); and Arcardis,
Sustainable Cities Index 2016, www.arcadis.com.
The climate itself had been profoundly altered by emissions of global warming gases.
Although significant natural resources—fresh water, fertile land, and forest—remained,
exploding populations and rapid economic development had reached the point where, by
most measures, the demands of human society had already exceeded the carrying capacity
of the Earth’s ecosystem.
These rapid changes pose severe threats to many businesses. They face limited supplies
of critical resources, unpredictable weather changes, and increased political risk, among
many other challenges. Yet the environmental problems faced by society also present business with great opportunities. Established firms and innovative entrepreneurs who can
figure out, for example, how to build offices and houses that are more energy-efficient,
produce energy without irreversibly altering the climate, or devise systems to recycle and
reuse obsolete electronics, can both help society and enjoy great commercial success.
Forces of Change
Pressure on the Earth’s resource base is becoming increasingly severe. Two critical factors
have combined to accelerate the ecological crisis facing the world community and to make
sustainable development more difficult: population growth and the rapid industrialization
of many developing nations.
The Population Explosion
A major driver of environmental degradation is the exponential growth of the world’s population. A population that doubled every 50 years, for example, would be said to be growing exponentially. Many more people would be added during the second 50 years than
during the first, even though the rate of growth would stay the same. Just 10,000 years ago,
the Earth was home to no more than 10 million humans, scattered in small settlements.
For many thousands of years, population growth was gradual. Around 1950, the world
Chapter 9 Sustainable Development and Global Business 193
population reached 2.5 billion. World population crossed the 6 billion mark in 1999 and
the 7 billion mark in late 2011. The United Nations estimates that the population will reach
slightly more than 11 billion by 2100. To gain some perspective on these figures, consider
that a baby born in 2015 who lives to be 85 years old will see the world’s population
increase by more than 3 billion people.
Population growth in the coming decades will not be distributed equally. In the industrialized countries, especially in Europe, population growth has already slowed. Almost all
the world’s population growth over the next century is predicted to be in less developed
countries, especially in Africa, as shown in Figure 9.2.
The world’s burgeoning population will put increasing strain on the Earth’s resources.
Each additional person uses raw materials and adds pollutants to the land, air, and water.
The world’s total industrial production would have to quintuple over the next 40 years
just to maintain the same standard of living that people have now, if technology remains
A second source of pressure on the Earth’s resource base is the rapid industrialization
of many countries. Many parts of Africa, Asia, and Latin America are developing at a
rapid pace. This is positive because it is reducing poverty and slowing population growth.
But economic development has also contributed to the growing ecological crisis. Industry
requires energy, much of which comes from burning fossil fuels, releasing pollutants, and
disrupting the climate. The agricultural “green” revolution, although greatly increasing
crop yields in many parts of the world, has caused contamination by pesticides, herbicides,
and chemical fertilizers. Development is often accompanied by rising incomes, bringing
higher rates of both consumption and waste. In many instances, environmental regulations
have lagged the pace of development.
China dramatically illustrates the tight connection between rapid economic development and environmental risk. China is one of the fastest-growing economies in the
world, expanding at a rate approaching 10 percent annually on average over the past
30 years (although its economy has recently slowed somewhat). The evidence of
industrialization is everywhere, from skyscrapers under construction, to cars crowding
Source: United Nations
Population Division, “World
Population Prospects: The
2017 Revision: Key Findings
and Advance Tables,” 2017.
The projections represent the
medium-range scenario. Other
estimates are higher and lower.
All estimates are available at
World Population (in billions)
Population of the
World and Major
194 Part Four Business and the Natural Environment
the streets, to factories operating 24/7 to produce goods for export. Yet a major consequence has been increased pollution. By the mid-2010s, 90 percent of China’s cities
failed to meet air quality standards, and residents routinely wore face masks and stayed
indoors to protect themselves from choking smog. In 2013, the government finally
changed course, adopting a five-year plan to drastically limit coal burning, car emissions, and construction dust. By 2018, most of the plan’s goals had been met, although
at the cost of many factory and mine closures. Said the Chinese president Xi Jinping,
“Clear waters and green mountains are as good as mountains of gold and silver.”9
China and other fast-growing developing nations challenge business and society to
“leapfrog” stages and move directly to cleaner technologies and methods of production.
The Earth’s Carrying Capacity
The Earth’s rapid population growth, together with economic development of many of the
world’s poorer nations and p ...
Purchase answer to see full