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14.1: The Environment

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    Learning Objectives
    1. Consider damage done to the environment in a business context.
    2. Delineate major legal responses to concerns about the environment.


    Cancun, Mexico, is paradise: warm climate, Caribbean water, white sand beaches, stunning landscapes, coral reefs, and a unique lagoon. You can sunbathe, snorkel, parasail, shoot around on jet skis, and drink Corona without getting carded.

    Hordes of vacationers fill the narrow, hotel-lined peninsula—so many that the cars on the one main street snarl in traffic jams running the length of the tourist kilometers. It’s a jarring contrast: on one side the placid beaches (until the jet skis get geared up), and on the other there’s the single road about a hundred yards inland. Horns scream, oil-burning cars and trucks belch pollution, tourists fume. Cancun’s problem is that it can’t handle its own success. There’s not enough room for roads behind the hotels just like there’s not enough beach in front to keep the noisy jet skiers segregated from those who want to take in the sun and sea quietly.

    The environment hasn’t been able to bear the success either. According to a report,

    The tourist industry extensively damaged the lagoon, obliterated sand dunes, led to the extinction of varying species of animals and fish, and destroyed the rainforest which surrounds Cancun. The construction of 120 hotels in 20 years has also endangered breeding areas for marine turtles, as well as causing large numbers of fish and shellfish to be depleted or disappear just offshore. “Cancun Tourism,” TED, Trade & Environment Database, case no. 86, accessed June 8, 2011,

    For all its natural beauty, environmentally, Cancun is an ugly place. Those parts of the natural world that most tourists don’t see (the lagoon, the nearby forest, the fish life near shore) have been sacrificed so a few executives in suits can make money.

    From its inception, Cancun was a business. The Mexican government built an airport to fly people in, set up rules to draw investors, and made it (relatively) easy to build hotels on land that only a few coconut harvesters from the local plantation even knew about. From a business sense, it was a beautiful proposition: bring people to a place where they can be happy, provide new and more lucrative jobs for the locals, and build a mountain of profit (mainly for government insiders and friends) along the way.

    Everything went according to plan. Those who visit Cancun have a wonderful time (once they finally get down the road to their hotel). College students live it up during spring break, young couples take their children to play on the beach, older couples go down and remember that they do, in fact, love each other. So fish die, and people get jobs. Forests disappear, and people’s love is kindled. The important questions about business ethics and the environment are mostly located right at this balance and on these questions: how many trees may be sacrificed for human jobs? How many animal species can be traded for people to fall in love?

    What Is the Environment?

    Harm to the natural world is generally discussed under two terms: the environment and the ecosystem. The words’ meanings overlap, but one critical aspect of the term ecosystem is the idea of interrelation. An ecosystem is composed of living and nonliving elements that find a balance allowing for their continuation. The destruction of the rain forest around Cancun didn’t just put an end to some trees; it also jeopardized a broader web of life: birds that needed limbs for their nests disappeared when the trees did. Then, with the sturdy forest gone, Hurricane Gilbert swept through and wiped out much of the lower-level vegetation. Meanwhile, out in the sea, the disappearance of some small fish meant their predators had nothing to feed on and they too evaporated. What makes an ecosystem a system is the fact that the various parts all depend on each other, and damaging one element may also damage and destroy another or many others.

    In the sense that it’s a combination of interdependent elements, the tourist world in Cancun is no different from the surrounding natural world. As the traffic jams along the peninsula have grown, making it difficult for people to leave and get back to their hotels, the tourists have started migrating away, looking elsewhere for their vacation reservations. Of course Cancun isn’t going to disappear, but if you took that one road completely away, most everything else would go with it. So economic realities can resemble environmental ones: once a single part of a functioning system disappears, it’s hard to stop the effects from falling further down the line.

    What Kinds of Damage Can Be Done to the Environment?

    Nature is one of nature’s great adversaries. Hurricanes sweeping up through the Caribbean and along the Eastern Seaboard of the United States wipe out entire ecosystems. Moving inland, warm winters in northern states like Minnesota can allow some species including deer to reproduce at very high rates, meaning that the next winter, when conditions return to normal, all available food is eaten rapidly at winter’s onset, and subsequent losses to starvation are massive and extend up the food chain to wolves and bears. Lengthening the timeline, age-long periods of warming and cooling cause desertification and ice ages that put ends to giant swaths of habitats and multitudes of species.

    While it’s true that damaging the natural world’s ecosystems is one of nature’s great specialties, evidence also indicates that the human contribution to environmental change has been growing quickly. It’s impossible to measure everything that has been done, or compare the world today with what would have been had humans never evolved (or never created an industrialized economy), but one way to get a sense of the kind of transformations human activity may be imposing on the environment comes from extinction rates: the speed at which species are disappearing because they no longer find a habitable place to flourish. According to some studies, the current rate of extinction is around a thousand times higher than the one derived from examinations of the fossil record, which is to say, before the time parts of the natural world were being severely trashed by developments like those lining the coast of Cancun, Mexico. Kent Holsinger, “Patterns of Biological Extinction,” lecture notes, University of Connecticut, August 31, 2009, accessed June 8, 2011,

    In an economics and business context, the kinds of damage our industrialized lifestyles most extensively wreak include:

    • Air pollution
    • Water pollution
    • Soil pollution
    • Contamination associated with highly toxic materials
    • Resource depletion

    Air pollution is the emission of harmful chemicals and particulate matter into the air. Photochemical smog—better known simply as smog—is a cocktail of gases and particles reacting with sunlight to make visible and poisonous clouds. Car exhaust is a major contributor to this kind of pollution, so smog can concentrate in urban centers where traffic jams are constant. In Mexico City on bad days, the smog is so thick it can be hard to see more than ten blocks down a straight street. Because the urban core is nestled in a mountain valley that blocks out the wind, pollutants don’t blow away as they do in many places; they get entirely trapped. During the winter, a brown top forms above the skyline, blocking the view of the surrounding mountain peaks; the cloud is clearly visible from above to those arriving by plane. After landing, immediately upon exiting the airport into the streets, many visitors note their eyes tearing up and their throats drying out. In terms of direct bodily harm, Louisiana State University environmental chemist Barry Dellinger estimates that breathing the air in Mexico’s capital for a day is about the equivalent of smoking two packs of cigarettes. “Is Air Pollution Killing You?” Ivanhoe Newswire, May 2009, accessed June 8, 2011, This explains why, on the worst days, birds drop out of the air dead, and one longer-term human effect is increased risk of lung cancer.

    Greenhouse gasses, especially carbon dioxide released when oil and coal are burned, absorb and hold heat from the sun, preventing it from dissipating into space, and thereby creating a greenhouse effect, a general warming of the environment. Heat is, of course, necessary for life to exist on earth, but fears exist that the last century of industrialization has raised the levels measurably, and continuing industrial expansion will speed the process even more. Effects associated with the warming are significant and include:

    • Shifts in vegetation, in what grows where
    • Rising temperatures in lakes, rivers, and oceans, leading to changes in wildlife distribution
    • Flooding of coastal areas, where many of our cities are located (Cancun could be entirely flooded by only a small rise in the ocean’s water level.)

    Another group of chemicals, chlorofluorocarbons (CFCs), threaten to break down the ozone layer in the earth’s stratosphere. Currently, that layer blocks harmful ultraviolet radiation from getting through to the earth’s surface where it could cause skin cancer and disrupt ocean life. Effective international treaties have limited (though not eliminated) CFC emissions.

    Coal-burning plants—many of which produce electricity—release sulfur compounds into the air, which later mix into water vapor and rain down as sulfuric acid, commonly known as acid rain. Lakes see their pH level changed with subsequent effects on vegetation and fish. Soil may also be poisoned.

    Air pollution is the most immediate form of environmental poison for most of us, but not the only significant one. In China, more than 25 percent of surface water is too polluted for swimming or fishing. “More than 25% of China’s Surface Water Contaminated,” China Daily, July 26, 2010, accessed June 8, 2011,

    Some of those lakes may have been ruined in the same way as Onondaga Lake near Syracuse, New York. Over a century ago, resorts were built and a fish hatchery flourished on one side of the long lake. The other side received waste flushed by the surrounding cities and factories. Problems began around 1900 when the fish hatchery could no longer reproduce fish. Soon after, it was necessary to ban ice harvesting from the lake. In 1940, swimming was banned because of dangerous bacteria, and in 1970, fishing had to be stopped because of mercury and PCB contamination. The lake was effectively dead. To cite one example, a single chemical company dumped eighty tons of mercury into the water during its run on the coast. Recently, the New York state health department loosened restrictions slightly, and people are advised that they may once again eat fish caught in the lake. Just as long as it’s not more than one per month. Those who do eat more risk breakdown of their nervous system, collapse of their liver, and teeth falling out. The Upstate Freshwater Institute Onondaga Lake page, October 22, 2010, accessed June 8, 2011,; “2010–2011 Health Advisories: Chemicals in Sportfish and Game,” New York State Department of Health, 2011, accessed June 8, 2011,

    Like liquid poisons, solid waste can be dangerous. Paper bags degrade fairly rapidly and cleanly, but plastic containers remain where they’re left into the indefinite future. The metal of a battery tossed into a landfill will break down eventually, but not before dripping out poisons including cadmium. Cadmium weakens the bones in low doses and, if exposure is high, causes death.

    At the industrial waste extreme, there are toxins so poisonous they require special packaging to prevent even minimal exposure more or less forever. The waste from nuclear power plants qualifies. So noxious are the spent fuel rods that it’s a matter of national debate in America and elsewhere as to where they should be stored. When the Chernobyl nuclear plant broke open in 1986, it emitted a radioactive cloud that killed hundreds and forced the permanent evacuation of the closest town, Pripyat. Area wildlife destruction would require an entire book to document, but as a single example, the surrounding pine forest turned red and died after absorbing the radiation storm.

    Finally, all the environmental damage listed so far has resulted from ruinous substance additions to natural ecosystems, but environmental damage also runs in the other direction as depletion. Our cars and factories are sapping the earth of its petroleum reserves. Minerals, including copper, are being mined toward the point where it will become too expensive to continue digging the small amount that remains from the ground. The United Nations estimates that fifty thousand square miles of forest are disappearing each year, lost to logging, conversion to agriculture, fuel wood collection by rural poor, and forest fires. Rhett A. Butler, “World Deforestation Rates and Forest Cover Statistics, 2000–2005,”, November 16, 2005, accessed June 8, 2011, Of course, most of those tree losses can be replanted. On the other hand, species that are driven out of existence can’t be brought back. As already noted, current rates of extinction are running far above “background extinction” rates, which is an approximation of how many species would disappear each year were the rules of nature left unperturbed.

    Conclusion. Technically, there’s no such thing as preserving the environment because left to its own devices the natural world does an excellent job of wreaking havoc on itself. Disruptions including floods, combined with wildlife battling for territory and food sources, all that continually sweeps away parts of nature and makes room for new species and ecosystems. Still, changes wrought by the natural world tend to be gradual and balanced, and the worry is that our industrialized lifestyle has become so powerful that nature, at least in certain areas, will no longer be able to compensate and restore any kind of balance. That concerns has led to both legal efforts, and ethical arguments, in favor of protecting the environment.

    The Law

    Legal efforts to protect the environment in the United States intensified between 1960 and 1970. The Environmental Protection Agency (EPA) was established in 1970 to monitor and report on the state of the environment while establishing and enforcing specific regulations. Well known to most car buyers as the providers of the mile-per-gallon estimates displayed on the window sticker, the EPA is a large agency and employs a workforce compatible with its mission, including scientists, legal staffers, and communications experts.

    Other important legal milestones in the field of environmental protection include:

    • The Clean Air Act of 1963 and its many amendments regulate emissions from industrial plants and monitor air quality. One measure extends to citizens the right to sue companies for damages if they aren’t complying with existing regulations: it effectively citizenizes law enforcement in this area of environmental protection.
    • The Clean Water Act, along with other, related legislation, regulates the quality of water in the geographic world (lakes and rivers), as well as the water we drink and use for industrial purposes. Chemical composition is important, and temperature also. Thermal pollution occurs when factories pour heated water back into natural waterways at a rate sufficient to affect the ecosystem.
    • The Wilderness Act, along with other legislation, establishes areas of land as protected from development. Some zones, including the Boundary Waters Canoe Area in northern Minnesota, are reserved for minimal human interaction (no motors are allowed); other areas are more accessible. All wilderness and national park areas are regulated to protect natural ecosystems.
    • The Endangered Species Act and related measures take steps to ensure the survival of species pressed to near extinction, especially by human intrusion. One example is the bald eagle. Subjected to hunting, loss of habitat, and poisoning by the pesticide DDT (which caused eagle eggs to crack prematurely), a once common species was reduced to only a few hundred pairs in the lower forty-eight states. Placed on the endangered species list in 1967, penalties for hunting were increased significantly. Also, DDT was banned, and subsequently the eagle made a strong comeback. It is no longer listed as endangered.
    • The National Environmental Policy Act of 1969 requires that an environmental impact statement be prepared for many major projects. The word environment in this case means not only the natural world but also the human one. When a new building is erected in a busy downtown, the environmental impact statement reports on the effect the building will have on both the natural world (how much new air pollution will be released from increased traffic, how much water will be necessary for the building’s plumbing, how much electricity will be used to keep the place cool in the summer) and also the civilized one (whether there’s enough parking in the area for all the cars that will arrive, whether nearby highways can handle the traffic and similar). Staying with the natural factors, the statement should consider impacts—positive and negative—on the local ecosystem as well as strategies for minimizing those impacts and some consideration of alternatives to the project. The writing and evaluation of these statements can become sites of conflict between developers on one side and environmental protection organizations on the other.

    Two major additional points about legal approaches to the natural world should be added. First, they can be expensive; nearly all environmental protection laws impose costs on business and, consequently, make life for everyone more costly. When developers of downtown buildings have to create a budget for their environmental impact statements, the expenses get passed on to the people who buy condos in the building. There’s no doubt that banning the pesticide DDT was good for the eagle, but it made farming—and therefore the food we eat—more expensive. Further, clean water and air stipulations don’t only affect consumers by making products more expensive; the environmental responsibility also costs Americans jobs every time a factory gets moved to China or some other relatively low-regulation country. Of course, it’s also true that, as noted earlier, around 25 percent of China’s surface water is poisonous, but for laid-off workers in the States, it may be hard to worry so much about that.

    Second, these American laws, regulations, and agencies don’t make a bit of difference in Cancun, Mexico. Even though Cancun and America wash back and forth over each other (Cancun’s hotels were constructed, chiefly, to host American visitors), the rights and responsibilities of legal dominion over the environment stop and start at places where people need to show their passports. This is representative of a larger reality: more than most issues in business ethics, arguments pitting economic and human interests against the natural world are international in nature. The greenhouse gases emitted by cars caught in Cancun traffic are no different, as far as the earth is concerned, from those gases produced along clogged Los Angeles freeways.

    Key Takeaways

    • Ecosystems are natural webs of life in which the parts depend on each other for their continued survival.
    • In a business context, the major types of pollution include air, water, soil, and contamination associated with highly toxic materials.
    • Resource depletion is a type of environmental damage.
    • Numerous laws regulate the condition and use of the environment in the United States.
    Exercise \(\PageIndex{1}\)
    1. What is an example of an ecosystem?
    2. Explain one way that an ecosystem can resemble an economic system.
    3. What are some effects of smog?
    4. What’s an environmental impact statement?
    5. Why are the business ethics of the environment more international in nature than many other subjects?

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