Green Business: Ethical Issues

By R. Yuvarani

It is becoming extremely difficult for business owners to ignore the relevance of protecting the environment, improving the quality of life and similar issues, including the conservation of natural resources, reducing environmental pollution, protecting endangered species and controlling land use. Many companies are even finding that consumers are willing to pay more for a green product.

The last three decades have seen a progressive increase in worldwide environmental consciousness. This has been driven by a number of factors from increased media coverage to rising evidence of environmental problems, such as the depletion of the ozone layer, acidification of rivers, forest degradation, global warming, the rise of pressure-group activity, tougher legislation and major industrial disasters. Concern has moved from the local scale to a national and increasingly global scale.

The rate of environmental degradation has intensified. The 19th century brought the first large scale pollution as companies geared to produce goods as fast as possible with virtual disregard for human or environmental well-being. Nations battled for industrial supremacy using raw materials and creating pollution at a staggering rate. As countries became economically stronger, competition also grew. More efficient production methods were employed, and few companies, if any, gave a thought to the impact they were having on their surroundings. With the increase in water pollution from the chemical works and air pollution from the iron and steel industry, towns and cities began to pay the price for high industrial productivity.

As the 1980s progressed, it became increasingly clear that, although the starkest predictions of resource depletion and population explosion had failed to materialize, all was far from well with the planet. A number of published analyses of the environment showed that according to a wide range of indicators, the environment was becoming increasingly stressed. Concern among consumers and the electorate began to mount, with the inevitable consequence being that environmental issues moved from the fringes to the center of the business and political agenda.

Environment’s Role in Business

The environment’s role in business is profoundly obvious but easy to overlook. It provides every business with its inputs and a destination for all its outputs. It also provides the business with the physical space within which its operations occur. For businesses dealing directly with environmental resources, such as agriculture, tourism and oil, the importance of the physical environment has always been apparent.

Society in its present form and on its current trajectory of development, however, cannot be sustained indefinitely. The physical environment has limited resources and limited capacity to absorb pollution and waste. The underlying cause of society’s current unsustainability relates to the way in which economics and technology have come to dominate our thinking about business and the environment. Conventional marketing within industry is very much a product of this techno-economic perspective. This has created a ‘gray’ culture that is not sustainable and therefore terminal. To transform this into a ‘green’ sustainable culture, there is a need to balance consideration of the economic and technical impacts and aspects of businesses with understanding of their social and physical implications.

It is now widely accepted that societies, economies and the businesses within them need to find a more sustainable path for future development. In the business world, the vocabulary of management was suddenly expanded by the discussion of green consumers, green markets, green products and the practice of environmental, or green, marketing.

For the majority of the companies, improving environmental performance has, until recently, been a question of legislative compliance and occasional reactions to external events and pressures. It has only been companies in the front-line sectors such as oil, chemicals, power and cars that have gone beyond a reactive and tactical approach to green issues.

However, by the early 1990s, a shift away from a technical-compliance oriented approach towards a more proactive green strategy was noticed. Companies were increasingly pursuing competitive advantage and product differentiation by increasing investment in environmental marketing, green design and improving overall corporate eco-performance.

In addition to these externally motivated changes, the realization is dawning within industries that sustainability will not be reached simply by demand-pull from the market and compliance-push from the regulators. The changes that are needed to safeguard the future of the environment and the economy must partly be driven from the business community, which means they must proactively integrate eco-performance into the strategies, systems and cultures of the organization.

Three Rs of Environmentalism

Following are the three R s of environmentalism:

• Reduce
• Reuse
• Recycle

Green business refers to the development and distribution of ecologically safe products. It refers to products and packages that have one or more of the following characteristics:

1. Less toxic
2. More durable
3. Contain reusable materials
4. Made of recyclable material

In short, these are products that meet the three Rs of environmentalism and are considered environmentally responsible.

In the early-to-mid 1960s, concern arose about the social responsibility of businesses and their impact on the natural environment and the health and welfare of the planet. This concern was heightened during the early 1970s in response to Limits to Growth and resulted in the emergence of both the societal marketing concept and the ecological marketing concept.

In response to the new green challenge that emerged during the early 1980s, these early concepts have amalgamated to create an environmental business concept. Green business is thus a form of socio-ecological marketing whereby the goods and services sold and the practices involved in their sale take into account the environmental ramifications of society as a whole.

Defining Green Business

The basic business process essentially involves matching the controllable internal variables of the marketing mix with the demands of the business environment. Environmental business is no different in principle. Only the internal variables and external demands that must be reconciled have been slightly modified.

Green business takes into account the wider relationship of the organization and its products to the surroundings. It is about an aware, open, targeted and sensitive approach that integrates the strategic link between the company, the environment and marketing rather than being primarily concerned with tactical communications opportunities. The prime emphasis is on developing relationships and satisfying separate stakeholders’ needs in an environmentally and socially responsible manner. The key stakeholders are customers, investors, directors, employees, the community, legislators, pressure groups, suppliers and the media.

Green business differs from its societal and ecological predecessors in its intertwining of ecological and social concerns, in the breadth of the ecological agenda that it tackles, and in its potential application across all types and sectors of business. Green marketing goes beyond societal marketing in four key ways:

1. It employs an open-ended rather than a long-term perspective.
2. It focuses more strongly on the natural environment.
3. It treats the environment as something that has an intrinsic value over and above its usefulness to society.
4. It focuses on global concerns rather than those of particular societies.

The key elements of green business can be summarized as follows:

• A balanced approach to the social, technological, economic and physical aspects of businesses and society
• An emphasis on long-term, sustainable and qualitative development rather than short-term, unsustainable and quantitative growth
• A holistic approach aimed at reversing the reductionist and fragmented approach of previous business theory and practice.
• A consideration of consumers as real human beings rather than as hypothetical economic entities
• An emphasis on meeting the genuine needs of consumers rather than on stimulating superficial desires
• A recognition that consumers and society have multiple and sometimes conflicting wants and needs
• A view of the company and all its activities as part of the product that is consumed
• A recognition that the large-scale, long-distance nature of the current economy is not sustainable and that in the future small and local will be beautiful
• Embracing the concept of eco-performance that incorporates the non-market outputs of the company with performance of the product during and after use and the environmental impact of companies that contribute to the creation and marketing of the product elsewhere in the supply chain
• The pursuit of added socio-environmental value as well as added techno-economic value

Studies on Green Business

One of the most informative scholarly articles on green business, Green Advertising: Salvation or Oxymoron?, demonstrates that the concept of green advertising is far more complex than the existing marketing literature suggests. Green is characterized in this study as a two-dimensional concept with those dimensions being political and human. Furthermore, it breaks down the term “green” by recognizing five distinct types:

1. Environmentalism
2. Conservationism
3. Human welfare
4. Preservationism
5. Ecology

A second study published in 1995 by Banerjee produced a multi-dimensional analysis of environmental advertising, and it suggests that environmental appeals are becoming increasingly common. In addition, the result of a content analysis designed to uncover the underlying structure of green advertising are presented, and a majority of advertisers in the sample attempted to project a green corporate image rather than focus on the environmental benefits of their product or service.

Most of the studies on green advertising focus on the communication aspect of green business, which is still important. Studies that cover the entire gamut of green business are woefully lacking, and many that do exist were conducted in international culture and context, such as India, that may not be relevant in the United States. However, it is generally recognized that the greatest benefits are experienced when advertising both the corporate image and the environmental benefits of its products and services.

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