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CASE STUDY 12
Tianlun Ge
PHIL 205
Market economy directly affect the environment by:
Depleting the natural recourses for the future generation
Increasing pollution for the future generations
The global interdependence makes the environmental pollution
a global problem
This calls for the stakeholders to collaborate in the formulation
of the policies
Market places fail to include the external costs in their
computation of the production costs
Thus undervaluing their products costs
Introduction Continued:
There is thus a need to carry out an extensive cost benefit
analysis in the business decisions
Environmental issues are brought about by open access to
resources without limitations or allocation of
responsibilities
Various scholars have attempted to address the
environmental problem with concepts such as
The Coase theorem
The tragedy of commons
There are however complications that arises from tring to
solve an environmental problem using a single theory
Environmental solutions should incorporate cost benefit
analysis, ethics, morals, and fairness for ideal solutions
Case Study
Lars Oslen, CEO of Electronic Manufacturing Inc. EMI is
tasked with the role of making recommendations to the
board in regards to a business decisions touching on the
environment.
A change in the environmental law gave manufacturers full
liabilities of recycling the waste products
The company can either construct a recycling plant in
Homeland where most operations and customers are
located, or Awayland where labor and health costs are
cheap
A decision will have to involve all the costs and as well all
the ethical and legal considerations
Case Study Continued …
Thus the company can opt to move the recycling plant
to Awayland, but in addition to internal operational
costs, I will also cater for external costs such as health
risks, and infrastructures .
Lars should assess the board’s willingness to pay for
the external costs and incorporate that in his decision
The external costs thus will include the health costs
and as well the negative impacts that will be brought y
the waste products
Utilitarian thinking dictates that the decision should
be to the best interest of the people
Solution
If the cost benefit analysis indicates that setting the
recycling plant in Awayland is cheaper, then the
company should include external costs such as health
improvement to the hosts.
In addition, they should liaise with the local
authorities to ensure compliance with the
environmental laws
There are international laws that governs waste
products, the company should also ensure that they
comply with those requirements
Alternative solution
EMI may consider outsourcing the recycling the
services to an expert .
Third party experts have the efficiency and experience
that is required to minimize the costs
They are conversant with the environmental laws and
thus they are not likely to breach them
They have developed the best practice standards that
allow them to formulate a solution that put in
consideration the environmental, ethical and legal
requirements
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Tianlun Ge
PHIL 205
8/3/2016
Sustainability and the Environment
Case Study
Our market economy greatly affects our planet in a negative way. Modern market
activities deplete future resources and as well create pollution that will affect the future
generations. The modern market participants not only affect their own environment, but even for
the global community and as well for the future generations. Often, the producers overlook the
external costs that are incurred indirectly in the process of production. This cost is thus passed to
the general population and as well to the future generations. Thus, there is need for the
government to come up with policies that will safeguard the interests of the markets while
protecting the environment. A cost benefit analysis is one of the methods that is applied by the
relevant stakeholders in the formulation of the policies. The policies should incorporate the
losses that are incurred by the current generations and as well those that will be incurred by the
future generations.
We can therefore say that the environmental issues arise from market failures that fail to
allocate resources appropriately, thus allowing everyone open access to the natural resources.
Various scholars have attempted to address the issue of environmental losses. Theorems such as
the tragedy of the commons and the Coase Theorem have been proposed but they all have a
shortcoming that hinders their implementation. Increasing globalization implies that problems
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from one region are most likely to cross borders to the neighboring countries. There is also an
element of interdependence of the global economies. Thus, if country A is experiencing
problems, the costs are likely to be felt by other nations as well. In addressing environmental
issues, besides the cost-benefit analysis, an ethical issue of virtues, fairness, what is right and as
well morals should also be brought to considerations.
In our case study, Lars Oslen, a CEO of Electronic Manufacturing Inc. EMI that
manufacture electronic is faced with an economic decision that has been brought about by
changes in the environmental laws. A change in the environmental law makes a manufacturer of
an electronic to be held responsible for the disposal of the exhausted products even after selling
them to the consumers. Thus, EMI will have to charge consumers large refundable deposits upon
acquisition of the products. This will make the products expensive and thus they will not be able
to compete effectively with the global companies. The CEO is thus tasked with the role of
recommending to the board of directors the best course of action that will reduce the recycling
costs. There are two possible solutions in the case, one, EMI could construct a recycling plant in
the home country and take advantage of the low transport costs. Two, EMI could ship the
exhausted products to Awayland, where labor and health costs are cheap.
In both cases, the company should consider both the internal costs and as well the
external costs. The internal costs will include the distribution costs and as well labor costs. The
external cost includes health costs of the workers and the neighboring communities and the
environmental impacts of setting up the plant in a particular region. In addition, the distribution
costs have attached external costs that will include the emission costs. Thus the company will
need to consider the interests of the local communities, the future generations and as the non
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human environment. In addition, there are ethical considerations that have to be addressed in
regards to setting up a waste recycling plant in Awayland.
According to Utilitarian thinking, EMI decision should optimize the human welfare.
Thus, it does not matter where the plant will be located, but the there should be a positive
impacts to the people around. Lars should assess the board’s willingness to pay for the health
costs that are associated with setting up of the recycling plant in a particular area. Accumulation
of these costs and as well the ethical issues will be summed up to make an informed decision. In
addition, the company will have to assess the legal requirements in the two countries. Thus, the
construction should abide by the rules of the resident and as well by the international rules such
as labor laws and as well environmental laws. The company will have a legitimate duty to assess
the environmental impact of the recycling plant to the host nation and device mechanisms that
will ensure that the country is not negatively affected by the plant.
In addition, there are corporate social responsibilities that a company should be part of.
Such responsibilities dictate that all actions should be for the welfare of the people. Thus, besides
the costs benefit analysis, EMI should also consider the welfare of the host nation. If for instance
they consider setting up the recycling plant in Awayland, they should also consider the health
costs to the local communities and thus should as well be willing to pay for their care and
improve the facilities capacities. This will enable them to handle any complication that might
arise from handling the waste products. EMI should liaise with the local authorities in the nation
that the plant will be located to ensure that health facilities are adequate.
Thus, the decision is more than just an economic decision, but also a moral, ethical and
environmental question. A correct decision will be the one that will address all the needs under
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considerations. The company should also consider outsourcing the recycling role to a third party
that specializes with recycling. A third party organization may have the expertise and experience
that will allow them to accomplish the task without breaching the environmental laws.
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Business Ethics
Case Analysis Worksheet
Who is making the decision?
Whose interests should be considered?
Decision-maker? Owners? Customers? Employees? Suppliers? Local community? Global
community? Future generations? The non-human environment?
Ethical Considerations
1. Self-interest: Psychological or ethical egoism? Cooperation dilemmas?
2. Direct Utilitarianism: Aggregation? Maximization? Happiness? Pleasure/pain? Preferencesatisfaction? Informed preferences? Willingness to pay? Financial cost-benefit analysis?
3. Indirect Utilitarianism: Rules? Policies? Regulations? Rights or virtues that maximize
happiness?
4. General Rights and Duties: Property rights? Self-ownership Rights? Liberties? Autonomy
rights? Human Rights? Privacy rights? Kantian duties? Harm principle?
5. Specific Rights and Duties: Contracts? Promises? Legitimate expectations? Fiduciary Duties?
6. Justice: Retributive? Compensatory? Formal, fair, and structural equality of opportunity?
Marginal contribution? Libertarian? Indirect utilitarian? Equality of resources or welfare?
Difference principle?
7. Virtue Ethics: Individual virtues/vices? Obligations of community membership? Corporate
character?
8. Care Ethics: Relationships? Responsibilities?
Who is morally accountable?
Causal responsibility? Shared responsibility? Excusing conditions? “Ought” implies “can”?
Do any ethical considerations conflict?
Are any of them especially strong or weak?
What further information is needed?
What are the alternatives?
What is the best decision and why?
…
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