Course Syllabus

Business Environmental Management Economics Economics 434/534 and ESR 434/534 Spring 2010 Tues. & Thurs. 4-5:50 pm Cramer Hall 287

Instructor: Professor David E. Ervin Office: Cramer 241M Office Hours: Wednesdays, 10:30 am-12 noon or by appointment Phone: 503.725.3935 Email: [email protected]

Description: Examine the motivations, benefits, costs and risks that affect the decisions of firms to ‘voluntarily’ adopt environmental management and sustainability programs. Analyze case studies of companies and evidence from surveys and economic analyses. Evaluate public and private policy options that foster business environmental management that also provides public goods. Texts: 1. Forest Reinhardt. Down to Earth: Applying Business Principles to Environmental Management. Harvard Business School Press, 2000 (hereafter Reinhardt). 2. B. Hay, R. Stavins and R. Vietor, eds.. Environmental Protection and the Social Responsibility of Firms Resources for the Future, 2005 (hereafter HSV) Blackboard: http://www.psuonline.pdx.edu/info.php?page=51 (click on Login to Blackboard) Prerequisite: Students are responsible for knowing basic concepts and analytical approaches used in microeconomic principles related to firm behavior, such as supply, costs of production, consumer demand, and market and pricing models. The relevant material can be obtained from any standard economic principles textbook or from on-line sources such as http://www.econweb.com/sub/ to master the required material. Major Objectives -- Students who complete this course will develop: 1. An understanding of the environmental, social, personal and economic factors that drive ‘voluntary’ business environmental/sustainability management strategies; 2. An understanding of the economic and business management theories of how business firms make environmental management decisions;

3. An understanding of the evidence on the adoption and use of ‘voluntary’ business environmental management practices and performance; 4. An exposure to the environmental management strategies and programs of selected firms; 5. An understanding of the shifting roles of government and non-governmental organizations in business environmental management, and; 6. Skills in analyzing the economics of an organization’s environmental management or sustainability program, and writing a professional report or making professional presentation of the analysis and findings. Class Outline I. The Environment and Sustainability as a Business Problem and an Economic Opportunity (weeks 1-2) A. Introduction to the Environment as a Business Problem and Social Responsibility • Reinhardt, chapter 1 • HSV, chapter 1 • Makower, “The State of Green Business 2010 (blackboard electronic reading) B.

Potential Motivations for ‘Voluntary’ Business Environmental Management • Ervin, D. “An Introduction to the Economics of ‘Voluntary’ Business Environmental Management” (blackboard electronic reading; read to stylized model) • Portney, P. “Corporate Social Responsibility: An Economic and Public Policy Perspective,” HVS, pp.107-131.

C. Environmental Management and Economic Competitiveness • Porter, M. and C. van der Linde. 1995 “Toward a New Conception of the Environment-Competitiveness Relationship.” Journal of Economic Perspectives, vol. 9 (4), 97-118. (blackboard electronic reading) • Palmer, K., W. Oates, and P. Portney. 1995. “Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm.” Journal of Economic Perspectives. vol. 9 (4), 119-132. (blackboard electronic reading) • Aigner, D. “Does Corporate Social Responsibility Have to Be Unprofitable,” HVS, pp. 132-136. • Esty, D. “Reconceptualizing Corporate Social Responsibility,” HVS, pp. 137-144. Supplementary readings: • Alpay, E., S.T. Buccola, and J. Kerkvliet. “Productivity Growth and Environmental Regulation in Mexican and U.S. Food Manufacturing.” American Journal of Agricultural Economics 84 (November 2002): 887 - 901.

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Esty, D. C. and A. S. Winston, 2006. Green to gold: How smart companies use environmental strategy to innovate, create value, and build competitive advantage. New Haven, Yale University Press. (library reserve) Hart, S. and M. Milstein. 2003 “Creating Sustainable Value,” Academy of Management Executive 17(2): 56-69 (blackboard electronic reading) Bansal, P. and K. Roth. 2000 “Why Companies Go Green: A Model of Ecological Responsiveness.” Academy of Management Journal 43(4): 717-736. (blackboard electronic reading) Ervin, D. and F. Casey 2001 “Green Business Rising.” Choices Third Quarter: 34-37 (handout) Hart, S. and C. Christensen. 2002. “The Great Leap: Driving Innovation from the Base of the Pyramid,” MIT Sloan Management Review: 51-56 (blackboard electronic reading) Videras, J. and A. Alberini. 2000. “The Appeal of Voluntary Environmental Programs: Which Firms Participate and Why?” Contemporary Economic Policy 18(4): 449-461. (electronic library reserve) Esty, D. and M. Porter 1998. “Industrial Ecology and Competitiveness: Strategic Implications for the Firm.” Journal of Industrial Ecology 2(1): 35-43. (blackboard electronic reading) Lyon, T. and J. Maxwell. 2004. Corporate environmentalism and public policy. Cambridge, UK ; New York : Cambridge University Press (library reserve).

April guest speaker(s) To be announced II. Economic Analysis of Business Environmental Management (weeks 3 - 6) A. Models of Business Environmental Regulation and Voluntary Environmental Management • Ervin, D. “An Introduction to the Economics of ‘Voluntary’ Business Environmental Management” (Blackboard electronic reading; read stylized model). • Ervin D., J. Wu, M. Khanna, C. Jones, T. Wirkala, and P. Koss “Economic and Institutional Factors Affecting Business Environmental Management” Ecological Economics (Blackboard electronic reading) • Carpentier, C. and D. Ervin. 2002. “Business Approaches to AgriEnvironmental Management: Incentives, Constraints and Policy Issues” Organization for Economic Cooperation and Development, Paris. (Blackboard electronic reading) • Lyon, T. and J. Maxwell. 2008. “Corporate Social Responsibility and the Environment: A Theoretical Perspective” Review of Environmental

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Economics and Policy, vol. 2, issue 2, pp. 240–260 (Blackboard electronic reading) Portney, P. “Corporate Social Responsibility: An Economic and Public Policy Perspective,” HVS, pp.107-131. Reinhardt, F. “Environmental Protection and the Social Responsibility of Firms: Perspectives from the Business Literature,” HVS, pp. 151183. Ervin, D. “The New Economics of Green Business” (Blackboard electronic reading)

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Reviewing the Evidence on Voluntary’ Business Environmental Management and Performance • Alberini, A. and K. Segerson. 2002. “Assessing Voluntary Programs to Improve Environmental Quality.” Environmental and Resource Economics 22: 157-184 (Blackboard electronic reading). • Khanna, M. 2001. “Non-Mandatory Approaches to Environmental Protection: A Survey” Journal of Economic Surveys July 15(3): 291324(34). (Blackboard electronic reading). • Khanna, M., P. Koss, C. Jones, and D. Ervin, 2007. Motivations for voluntary environmental management. Policy Studies Journal 35(4): 751-772. (Blackboard electronic reading) • Lyon, T. and J. Maxwell. 2004. Corporate environmentalism and public policy. Cambridge, UK ; New York : Cambridge University Press (library reserve).

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Environmental Product Differentiation • Reinhardt, chapter 2 Managing Competitors • Reinhardt, chapter 3 Reducing Costs in the Firm • Reinhardt, chapter 4 Redefining Markets • Reinhardt, chapter 5 Managing Risk and Uncertainty • Reinhardt, chapter 6

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Supplementary readings on library reserve: • Khanna, M. and L. Damon. 1999. “EPA’s 33/50 Program: Impact on Toxic Releases and Economic Performance of Firms” Journal of Environmental Economics and Management 37, 1-25. (Blackboard electronic reading) • Khanna, M. and Anton, W.R.Q. 2002. “Corporate Environmental Management: Regulatory and Market Based Pressures,” Land Economics, 78(4): 539-558, November (Blackboard electronic reading).

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Lyon, T. and J. Maxwell. 2002. “Voluntary Approaches to Environmental Regulation: A Survey,” in Economic Institutions and Environmental Policy, M. Franzini and A. Nicita, eds. Ashgate (library reserve).

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Segerson, K. and N. Li. 1999. “Voluntary approaches to environmental protection.” Chapter 7 in The International Yearbook of Environmental and Resource Economics, 1999/2000. H. Folmer and T. Teitenberg, Eds. Cheltenham: Edward Elgar. (library reserve)

III. Government and Non-Profit Organization Roles (weeks 7-8) • Carpentier, C. and D. Ervin. “Business Approaches to Agri-Environmental Management: Incentives, Constraints and Policy Issues” Organization for Economic Cooperation and Development, Paris, July 2002. (blackboard electronic reading) • Other readings to be added Supplementary readings • Lyon, T. and J. Maxwell. 2004. “Preempting Uncertain Regulatory Threats.” JRS: 1-20 (Blackboard electronic reading) • Lyon, T. and J. Maxwell. 2004. “Greenwash: Corporate Environmental Behavior under the Threat of Audit.” JRS: 1-20 (Blackboard electronic reading) • Lyon, T. and J. Maxwell. 2004. “Astroturf: Interest Group Lobbying and Corporate Strategy,” Journal of Economics and Management Strategy 13(4): 561 – 597. (Blackboard electronic reading). IV. Future Business Environmental Management (week 9) A. Integrating Environment and Business Practice • Reinhardt, chapter 7 B. Business Environmental Management in the New Millennium • Reinhardt, chapter 8 • Vogel, “Opportunities for and Limitations of Corporate Environmentalism,” HVS, pp.197-202 • “Future Business Environmental Management” (Blackboard electronic reading) May guest speakers • To be announced V. Business Case Study Presentations (week 10) • Presentations of firm case analyses by students or student teams. Grading Date Graduates Quizzes & participation

Undergraduates 15%

15%

Mid-term Exam Presentation/Paper Final

May 11th June 1st and 3rd June 8th (15:30 – 17:20)

30% 25% 30%

25% 35% 25%

Important Notes 1. A request for an incomplete or withdrawal will be approved only if the student has earned a “C” or better at the time of the request. 2. Cheating on an examination, class paper or project will result in a failing grade for the examination, paper or project, and may result in a failing grade for the class or expulsion from the university.