Economics and environment never mix. Green initiative imposes significant costs on companies which in turn impair productivity, drop competitiveness and shrink the balance sheet. The winner could even be a pollutant counter part. Some argue helping the environment means hurting the business. There are others who disagree. To them,both business and environment can win in this new world. They consider going green provides a new market opportunity.
Does the truth lie somewhere between?
Introduction
Markets react adversely when companies report bad earnings or even miss their quarterly estimates marginally as in case of Amazon whose first-quarter performance of 2022 missed narrowly leading to a drop of 10 % in stock price and this phenomenon is observed in other companies as well. One of the reasons for this behaviour by the market is uncertainty in future performance of the company especially in the short run as per research reports Amazon’s plastic waste soars by a third during pandemic, Oceana report finds and the burning of plastics releases toxic gases like dioxins, furans, mercury and polychlorinated biphenyls (better known as BCPs) into the atmosphere. When a particular quarter’s results are as per expectations of the market,the management concentrates on improving the next quarter results (both top and bottom line) by cutting all corners to regain the trust of investors thereby ignoring long term implications especially on environment and its impact the climate change.
Environmentally responsible companies are major polluters
As per the researchers, large companies which are environmentally responsible and with long-term focus on environmental sustainability are the greatest polluters in the process of chasing short term gains to be relevant in the market when they are likely to miss the quarterly targets and are known to cut corners to serve their short-term financial goals.
Does stock-market short-termism a valid reason behind climate change?
As per research reports , the Stock-market short-termism can induce two problems
- The pressure on companies to focus extensively on quarterly earnings can impact the customers, employees, and the environment since short-term operations can harm economies and ultimately the societies suffer.
- It is normally perceived that corporations indulge in shortchange themselves as they buy back their own stock by using their cash and ignore long term growth prospects by investing in new factories and R & D
Neither the company nor the stock traders think of climate issues as they concentrate on what is to be achieved today.It’s profit pressure that pushes firms to pollute ignoring their climate footprints
Small companies contribute their might
Energy use either directly or indirectly is one of the largest contributor for carbon footprint which is the measurement of the total greenhouse gasses produced by a company’s actions, such as industrial production or heating and air conditioning by small businesses as it needs energy to power and heat their premises. Being small businesses, cutting costs is essential to survive both in short and long run and the managers miss the long view of reducing the carbon foot print as they procure energy by all means irrespective of the consequences. In addition to energy, transportation is another area for carbon emissions among small businesses as these businesses use company cars or employee vehicles to conduct business apart from the commuters who use public transport to reach their offices. Around 30 million small businesses in the U.S. contribute their might to carbon emissions, energy resource consumption, and waste production
Are large corporations left behind?
As per researchers, 100 of the largest companies across the world (majority in US and Europe) are responsible for around 71% of all global emissions, These are those companies which cut their corners for short term target achievement. The top three ranking for plastics pollution goes to Coca-Cola Company, PepsiCo and Unilever according to Break Free From Plastic global Brand Audit report. One of the research findings is that the companies with strong environment track record have higher propensity to pollute in such a period when there is a close call
The conclusion
When a company, its managers and executives are focused on achieving the short term, they lose sight of long-term goals and one of the victim is the environment.
Learners’ Opportunity
Environmental leaders have distinct values and behaviours. You can cultivate these @ICFAI Online MBA program. For more details check our @https://online.ifheindia.org/
Discussion Question
Business success, environment or both. Tell us your preference? Why?
Key Words
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Source Article
1. Myth, Stock Market short termism, Mark J. Roe – Project Syndicate.org
2. Comparing the carbon accounting of small business to large corporations, Green Business Bureau –
3. Jacob Thomas & X Frank Zang, Short-Term Earnings Goals Drive More Pollution