University of California at Sant

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University of California at Sant ...

    University of California at Santa Barbara

    Donald Bren School of Environmental Science and


    ESM 210: Business and the Environment

    Fall, 2008

Instructor: Professor Gary Libecap (4412 Bren Hall)

    Class Lecture: MW 11:00-12:15 (Bren 1414).

     Discussion M 3:00-3:50 (Bren 1424)

     Discussion M 4:00-4:50 (Bren 1424)

     Discussion W 8:30-9:20 (Bren 1424)

    Prof. Libecap’s office hours: MW 2:00-3:00 and by appointment. Email:, phone 893-8611

    Teaching Assistant: Trevor O’Grady Office hours: by appointment.


Course Overview and Objectives: Private firms are the major producers and deliverers

    of goods and services in a market economy. They are the largest employers; largest

    sources of research and development in applied knowledge; and largest outlets for

    investment. As such, they play a critical role in addressing environmental and natural

    resource issues. As Masters of Environmental Science and Management Bren graduates

    will work within, work with, or regulate firms as employees, as members of NGOs and

    other groups, and as government officials. Accordingly, it is important to understand

    them and their position in the environment.

The following topics will be covered in the class:

    a) the Firmdefinition, history, structure, organization, objectives, products,

    activities, stakeholders. We are interested in how these factors influence firm

    positions on environmental and resource issues.

    b) Industry Structure and its impact on firm behavior. We will address how

    competitive conditions, including price elasticity (sensitivity) of demand and

    globalization, influence firm environmental actions.

    c) Macroeconomic Conditions and the Firm. We will examine business cycles and

    how income elasticity (sensitivity) of demand affects firm positions regarding

    introduction of green products, adoption of new technologies that may have

    environmental benefits.

    d) Externalities and Public Goods. These are the environmental and natural

    resource problems that are especially challenging to firms because they do not


    capture many of the benefits or costs involved. We will address these issues and

    discuss how some of the social benefits and costs might be internalized.

    e) the Debate over Social Responsibility of Business. There are many issues and

    ways of addressing how firms respond to social, economic, and political

    pressures. We will explore them.

    f) Firm responses to environmental and resource problems through product

    differentiation strategies. We will examine the conditions where it may pay to

    be green through new or altered product offerings.

    g) Firm responses to environmental and resource problems through innovation,

    supply chain management, life cycle analysis, and cost control. We will explore

    how environmental concerns and changing commodity prices may influence

    firm investment decisions and operations.

    h) Firm/Policy interface. We will summarize policy options to address externalities

    (air pollution, GHG emissions) and open access problems (fisheries, aquifers)

    and explore industry reactions both in molding and responding to policies. The

    major areas covered are tax and regulatory constraints on inputs and outputs and

    market-oriented options, such as use of property rights regimes including

    tradable emission permits, individual transferable quotas and water rights.

The lectures will cover basic concepts and the discussion sessions will go over problems

    and readings that illustrate key concepts. By taking the course, students will better

    understand the factors affecting firm responses to the environment and resource problems,

    how to work with firms as a leaders to explore strategies for providing environmental and

    resource benefits while at the same time being responsive to key constituencies and

    constraints facing the organization.

Announcements. From time to time I will need to send an email to everyone in

    class. We have created a listserv for the class. Please make sure to subscribe using the

    following link:

    Readings. Most readings will be available either through required materials, reserve

    reading, or via downloads.

    Assignments. Students will be organized into teams to work on environmental and

    natural resource problems and be ready to turn in and present their findings in the

    discussion classes. Grading will be based on team assessments 50%, individual

    participation in discussion groups, 20%, and final exam 30%. All assignments are due

    on the date shown on the syllabus before class as electronic files sent to Trevor

    O’Grady ( Honor Code and Joint Work. Each student is responsible for his or her own work within the team.

Text Books.

    Required: Bruce Hay, Robert Stavins, and Richard H.K. Vietor, eds, Environmental

    Protection and the Social Responsibility of Firms, 2005, Resources for the Future, paper.

    Andrew J. Hoffman, Competitive Environmental Strategy, 2000, Island Press.


    Optional for later in the term: Andrew J. Hoffman, Carbon Strategies: How Leading Companies Are Reducing their Climate Change Footprint, 2007, University of Michigan Press, available through, etc.

    Two copies of these three will be in the Periodicals room


    Date Topic Readings Assignments

    Lecture 1: The Firm-- Teams of 4 or so students each Each student is to describe

    Definition, Structure, will be formed based on his or her experience with Organization, experience by Oct 1. firmseconomics, business Monday, Objectives, Activities, Lecture materials and education, work and submit Sept 29, and Stake Holders as background reading are on the to Trevor O’Grady via Lecture 1 they influence course website: PPTs ESM email. Teams will be positions regarding the 210, Fall 2008; Lecture 1; organized so members have environment and Business Concepts1; Profit a mix of backgrounds.

    natural resource Maximization1; Market1; problems. GNPSegments1 Discussion sessions will

    focus on Lecture1 Lecture 1: The Firm--

    conceptsfirm structure Definition, Structure,

    and organization and Organization, We will complete Lecture 1

    discuss the role of profit Objectives, Activities, on firm definition,

    maximization. and Stake Holders as organization, and structure.

    A. Overall lecture concepts. they influence Lecture materials on Website:

    B. Why is profit positions regarding the PPT lecture 2, Hoffman Wednesday, maximization essential environment and Drivers, Hoffman NGOa, October 1, for firms? natural resource NGOb. Read Hoffman, Lectures 1, 2 C. How can it conflict with problems. Lecture 2: Chapters 1-6.

    environmental and The FirmProfit Research teams will be

    natural resource goals? objectives, drivers of formed and projects began.

    D. How might these two be environmental action Lecture 2 materials on course

    meshed? and market conditions webpage.

     that shape the



Discussion sessions will

    focus on lecture concepts

    and the material in

    Hoffman, Chapters 1-6.

    A. Overall lecture


    B. Are any of the

    drivers likely to be

    more important?

    C. If so, under what


    D. Alliances between

    firms and NGOs. Assignment 1:

    Student teams will be

    organized. They will begin

    research on assessing why

    Toyota and General Motors

    have had very different

    records with regard to Lecture 2 The FirmWe will continue discussion

    introduction of hybrid cars. Profit objectives, of the drivers of

    A. What are the firm Monday, drivers of environmental action and the

    structures? October 6, environmental action role of industry structure on

    B. What is their size? Lectures 2 and market conditions firm actions regarding the

    C. Where are their that shape the environment.

    major markets? response.

    D. What marketing

    decisions have led to

    their position

    regarding hybrids?

    E. What input supply

    conditions have led

    to their position

    regarding hybrids?

    F. What environmental

    drivers are

    influencing them?

Research will be done using

    web sources. Be sure to

    document sources. The

    analysis is to include the

    concepts in lectures 1-3. Send five page PowerPoint assessments l to Trevor

    O’Grady via email by Monday, Oct 13, 8:00am. 5 Teams will be prepared to present their analyses for 8-10 minutes each. Be sure to

    use the notes section of ppt

    to include additional

    Lecture 2 The Firm

    Profit objectives,

    drivers of

    environmental action We will complete discussion and market conditions of market structure factors that that shape the influence firm behavior response. regarding the environment in Lecture 2 and turn to Lecture Lecture 3 3 on macro economic Macroeconomic Wednesday, conditions, income and wealth Conditions, the Firm, October 8, on firm incentives for and the Environment. lectures 2, 3 responding to environmental We will then turn to problems. macro economic Lecture3, US Pollution, conditions, income and Consumption, Business wealth on firm Cycles. incentives for responding to



    Lecture 3


    Conditions, the Firm,

    and the Environment. We will complete material on We will then turn to macro economic conditions macro economic that affect firm responses to conditions, income and environmental problems in wealth on firm Lecture 3 and turn to Lecture Monday, incentives for 4. Read Garrett Hardin, “The October 13, responding to Assignment 1 due 8am Tragedy of the Commons,” Lectures3, 4 environmental Monday. Science, 162, December 13, problems. 1968, available online via Lecture 4: Presentations in discussion Pegasus. Also, lecture 4 Externalities and groups. materials on course webpage. Public Goods. The Fundamental Problem

    of the Environment

    and Open Access


    Lecture 4: We will complete the

    Wednesday, Externalities and discussion of Lecture 4,

    October 15, Public Goods. The Externalities and Public

    Lecture 4 Fundamental Problem Goods and the Firm Response

    of the Environment to Environmental Problems.


    and Open Access


    Complete Lecture 4. Lecture Discussion groups will

    5. Readings: Hay, Stavins, focus on the Tragedy of the

    and Vietor: Overview, Part I, Commons and Firm

    the Legal Perspective. Read responses to environmental

    also, “Do It Right,” and natural resource

    Economist, January 17, 2008, problems and the Social

    on the course webpage. Skim Responsibility of Business

    also CSR in Review of debate.

    Environmental Economics and A. What are the Policy, 2 (2), Summer 2008, underlying problems

    Monday, Lecture 5, the Social 219-275, available on facing firms for

    October 20, Responsibility of Pegasus. internalizing public

    Lecture 4, 5 Business. Optional: Michael Porter and goods? Mark Kramer, “Strategy and B. What options are Society: The Link between available to capture Competitive Advantage and a portion of the Corporate Social social benefit? Responsibility,” Harvard C. What are the Business Review, December competing

    2006, 78-93, available on definitions of CSR? Pegasus. D. Which ones are

     likely to be aligned

     with the incentives

    of most stake


    E. What options do

    managers have

    regarding CSR?

    F. What are the trade

    offs of CSR?

    G. What is evidence Hay, Stavins, and Vietor: Part regarding CSR Wednesday, Lecture 5, the Social II, the Economics Perspective, October 22, Responsibility of Part III, The Business Assignment 2: Lecture 5 Business. Perspective. As preparation for debate, Student teams will prepare 5

    power point page arguments

    pro and 5 page con (10 page

    total) regarding an

    expansive view of the social

    responsibility of business

    (bullet points only) , due

    Monday Oct 27 for


    presentation on either side.

    Draw on Hay, Stavins,

    Vietor, as well as other

    materials using actual firm

    examples to make points.

    Teams that did not present

    in the Toyota/General

    Motors project will lead the

    debates with others added as

    necessary. Business for Social

    Responsibility and Pacific

    Institute: “At the Crest of a

    Waver: A Proactive Approach

    to Corporate Water Strategy.” Available at


    wave.pdf or on the course

    webpage. Other information is

    provided on water trends and

    business strategies is found at


    Monday, Lecture 6, Application Assignment 2 due 8am

    October 27, of CSR: Business and An overall assessment of Monday.

    Lecture 6 Water current views on climate change and its impact on the Discussion groups: Debate natural environment is found by teams over the pros and in “The Effects of Climate cons of CSR.

    Change on Agriculture, Land Resources, Water Resources,

    and Biodiversity in the United




    Lecture 7, the Lecture 6, Environmental Wednesday, Business Response, Product Differentiation. October 29, Environmental Product Altering Strategic Objectives, Lecture 7 Differentiation Hoffman, Chapter 7; Forest


    Reinhardt, “Environmental

    Product Differentiation”

    available from Pegasus.

    Lecture 7 continued: Discussion sessions will

    Environmental Product focus on lecture topics on

    Lecture 7, the Monday, Differentiation. Altering environmental product

    Business Response, November 3, Strategic Objectives, differentiation.

    Environmental Product Lecture 7 Hoffman, Chapter 7; Forest A. What three factors

    Differentiation Reinhardt, “Environmental are critical for

    Product Differentiation.” successful



    B. What market

    analysis must be


    C. What market

    structure must exist

    for the firm to

    successfully engage

    in such actions?

     Firm Responses: Assignment 3: Innovation, Supply Each team will incorporate Wednesday, Chain Management, Reinhardt’s strategy criteria November 5, Life Cycle into analyses of how Lecture 8 Presentation by Professor Assessment, Industrial General Electric as a large Roland Geyer. Ecology. multiproduct firm and

     Deckers as a smaller, more

    focused firm address environmental product

    differentiation. 5 page

    power point slides due to

    Trevor O’Grady by

    Monday Nov 10 at 8 am.


Lecture 9: In this lecture we

    will cover the basic issues of


    environmental and social

    corporate performance. We

    will address evaluation

    methods, available databases,

    and challenges. Readings:

    Levine D.I., Chatterji A.K. Assignment 3 due 8am 2006. "Breaking Down the

    Monday. Wall Of Codes: Evaluating Non-Financial Presentation of General Performance Measurement", Electric and Deckers’ California Management environmental strategies. Review Vol. 48, NO.2, available on Pegasus.

    Assignment 4: Students will evaluate the Flatz, Alois, 2002, "Corporate comparative environmental sustainability Financial Measurement of performance of three

    Indexes" in Monday, Environmental firms in two different sectors Environmental Performance November Performance, Lecture (Hewlett Packard, IBM, Intel or Measurement. The Global 10, Lecture 9 10 by Vered Doctori-Exxon Mobil,

    Report 2001-2002. Blass BP, Shell). Teams are required to World Economic Forum, ed. describe the criteria they choose Daniel Esty and Peter K. and why. Cornelius, 54-65. Teams will be assigned to the firms.

    You can Available on webpage use information from corporate environmental reports as well as Hussey, Dennis, Patrick public sources. Presentation power Kirsop, and Ronald Meissen, points due Monday, November 17th 2001, "Global 8 am to Trevor Reporting Initiative O'Grady. Guidelines: An Evaluation of Sustainable Development Metrics for

    Industry," Environmental

    Quality Management,

    1-20. Available on webpage.

Web sites for measurement




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