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Business Ethics MGT610

LESSON 29

THE ETHICS OF POLLUTION CONTROL

To make this position clear, it is helpful to distinguish between private costs and social costs.

Private costs are the actual cost a firm incurs to produce a commodity. Social costs include the

costs that the firm does not paythe costs of pollution and medical care that result from the

manufacture of the commodities. The divergence of private and social costs is problematic

because the divergence means that price no longer accurately reflects all of the costs of a

commodity. This means that resources are not being allocated efficiently, and society's welfare

consequently declines.

When markets do not take all costs into account, more of a commodity will be produced than

society would demand if it could measure what it is actually paying for the commodity. In

addition, producers ignore these costs and do not try to minimize them. Since goods are no

longer efficiently distributed to consumers, pollution violates the utilitarian principles that

underlie the market system.

The remedy for external costs, according to utilitarians, is to internalize them to ensure that the

producer pays all of the real costs of production and uses these costs to determine the price of

the commodity. To internalize the costs of pollution, a firm may be required to pay all those

harmed by pollution. A problem with this way of internalizing the costs of pollution, however,

is that when several polluters are involved, it is not always clear just who is being harmed and

by whom. Alternatively, the firm might install pollution control devices and stop the harm at its

source.

This way of dealing with pollution is consistent with the requirements of distributive justice.

Since pollution's external costs are largely borne by the poor, pollution produces a net flow of

benefits away from the poor and towards the rich. Internalizing these costs can reverse this

flow. However, if a firm makes basic goods, such as food, then internalizing costs may place a

heavier burden on poorer people.

Internalizing external costs is also consistent with retributive and compensatory justice, because

those who are responsible for pollution bear the burden of rectifying it and compensating those

who have been harmed. Taken together, these requirements imply that (a) the costs of pollution

control should be borne by those who cause pollution and who have benefited from pollution

activities, whereas (b) the benefits of pollution control should flow to those who have had to

bear the external costs of pollution. Internalizing external costs seems to meet these two

requirements: (a) The costs of pollution control are borne by stockholders and customers, both

of whom benefit from the polluting activities of the firm; and (b) the benefits of pollution

control flow to those neighbors who once had to put up with the firm's pollution.

From an ecology-based organizational ethic are:

a. Organizations' responsibilities go beyond the production of goods and services at a

profit.

b. These responsibilities involve helping to solve important social problems, especially

those they have helped create.

c. Corporations have a broader constituency than stockholders alone.

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Business Ethics MGT610

Corporations have impacts that go beyond simple marketplace transactions.

Corporations serve a wider range of human values than just economics.

Green Marketing, Environmental Justice, and Industrial Ecology

1. Green marketing is the practice of "adopting resource-conserving and environmentally-

friendly strategies in all stages of the value chain."

2. Environmental justice is "the pursuit without discrimination based on race, ethnicity,

and/or socioeconomic status concerning both the enforcement of existing environmental

laws and regulations and the reformation of public health policy."

Rights of Future Generations and Right to a Livable Environment

1. The debate about the rights of future generations centers on the extent to which present

generations should bear responsibility for the preservation of the environment for future

generations. According to the ethicist John Rawls, "Justice requires that we hand over

to our immediate successors a world that is not in worse condition than the one we

received from our ancestors."

2. This "environmental right" supersedes individuals' legal property rights and is based on

the belief that human life is not possible without a livable environment. Therefore, laws

must enforce the protection of the environment based on human survival.

Recommendations to Managers

Boards of directors, business leaders, managers, and professionals should ask four questions

regarding their actual operations and responsibility toward the Environment:

a) How much is your company really worth?

b) Have you made environmental risk analysis an integral part of your strategic planning

process?

c) Does your information system "look out for" environmental problems?

d) Have you made it clear to your officers and employees that strict adherence to

environmental safeguarding and sustainability requirements are a fundamental tenet of

company policy?