Management: The Environment:
Environmental Issues and Crisis Management*
By Professor Emeritus Akira Ishikawa
Former Dean, GSIPEB
Research Fellow, ICC Institute,
Doctoral Program Chair
[Editor’s Note: * This chapter is adapted from the article
in Annals of Crisis Management Research, No. 10, May 2002, pp. 1–5. – JP]
Dr. Hideo Itokawa, an authority on rocketry who passed away in 1999, predicted in his last book, Would the Human Race Be Annihilated in the 21st Century!? (1994), that “Humankind is destined to be wiped off from the face of the earth within 50 years, just like mammoths in the past.” In order to avoid this catastrophe, he proposed what is called “Population Theory” — a theory of propagating altruistic love instead of egotistical love. Unfortunately, he passed away before his theory was completed.
While somewhat more optimistic
than Dr. Itokawa’s theory, Dr. Junichi Nishizawa, recipient of the Order of Culture
and president of
Next Eighty Years, in February 2000. The nucleus of this book is that while it is predicted that it will take another 150 years for carbon dioxide concentrations to reach the lethal 3% level where people will suffocate to death, as methane hydrate, which had been stable at the bottom of the sea, is becoming more and more unstable, it is highly likely that this will trigger the “Devil’s Cycle” of methane and carbon dioxide, considerably escalating carbon dioxide concentration.
Therefore, it is not so erroneous a prediction to say that humankind will be exterminated in about 80 years from now. Dr. Lester Brown, director of the Worldwatch Institute — a
renowned American environmental think-tank — reports that the atmospheric carbon dioxide level has now reached the highest level in the past 150,000 years, and that most of the 232 species of primates that are closest to human beings among the mammalia are on the brink of extinction. Furthermore approximately 10,000 people are starving to death everyday on earth, and about one billion people who live on the sterile lands in the African and Asian continents are barely surviving day-to-day.
The Herald Tribune published a summary of the IPCC panel’s 1,000-page report on climate change on January 23, 2001. Well over 500 specialists and professionals were involved in drawing up this report. It is generally considered to be the most comprehensive analysis and evaluation of the earth’s climate change situation. Notably, the report gave 5.8 degrees Celsius as the highest average temperature in 100 years from now, which is considerably higher than the 3.5 degrees Celsius given in a previous analysis. Consequently, sea levels are predicted to rise as high as 90 meters, which would not be so different from sea levels of 100 million years ago. The climate change in the next 100 years is likely to entail far graver consequences than that of the past 10,000 years, which may constitute a strong basis for the theories of humankind’s imminent extinction that are mentioned above.
In the face of such grave environmental issues, effective crisis management is needed urgently as never before, on a global scale.
2. Public Hazard Issues and Environmental Risk
We become aware of the fact that environmental issues have arisen when corporate activities, especially manufacturing and the fruit of their activities — products — harm our lives, properties, and health, and when our living conditions deteriorate.
When such environmental issues emerge, companies are liable for the damage, which constitutes environmental risk for them. Moreover, if the soil is polluted to the extent that groundwater is contaminated in violation of the environmental laws, the offending companies bear the risk of being liable to administrative penalties or criminal charges, even if there is no actual damage to the community.
As environmental laws become more stringent, companies’ environmental risks become higher, and they have to make bigger investments in preventative measures. Quite a few corporations have gone bankrupt because they could not afford to secure funds for preventative measures and litigation risks.
What is notable here is that the term” environmental issues” refers to two different phenomena both before and after the mid-1980s. Until the early 1980s, the principal offenders of environmental issues were mainly private companies; “environmental issues” meant pollution problems caused by corporate activities. Therefore, their causes were easy to identify, and they could be dealt with as local problems.
After the late 1980s, however, environmental issues became a serious matter of survival for the entire planet. Apart from industrial and urban pollution problems, other complex global issues such as global warming, ozone depletion, destruction of forests, desertification, acid rain and marine pollution came to pose serious threats to our survival. When we say “environmental issues,” therefore, it is not a simple, local matter for a single company or conglomerates, but for the entire country, the entire world, and the entire eco-system. Unless we take fundamental measures on these levels, environmental issues will not be solved.
3. Crisis Management Regulations for Global Environmental Issues
In this section, we will examine major cases of crisis management from the perspective of global environmental issues.
3.1. Events relating to global warming
1988: The Intergovernmental Panel on Climate Change (IPCC) was established, co-sponsored by the United Nations Environment Program and World Meteorological Organization.
1994: At the United Nations
Conference on Environment and Development (UNCED), the United Nations Framework
Convention on Climate Change (UNFCCC) was signed by 163 countries including
1995: The first UNFCCC
Conference of Parties (COP1) was held in
1997: 161 countries
participated in COP3 in
1998: At COP4 held in
3.2. Events relating to the ozone depletion
1985: The Vienna Convention for
the Protection of the Ozone Layer was adopted in
1989: The Helsinki Declaration was adopted at the first conference of the parties to the Montreal Protocol; it called for phase-out of CFCs and halons by 2000, tightening the timetable agreed upon in the Montreal Protocol.
1992: ODS-control measures were further tightened; the ban was accelerated by four years and specified CFCs and specified halons, along with three other ODSs, were to be eliminated by 1996.
3.3. Events relating to acid rain
1979: Acid rain is caused by sulfur oxides and nitrogen oxides in long-distance, cross-border air pollution. Therefore, the Convention on Long-Range Transboundary Air Pollution was concluded, with the United Nations Economic Commission for Europe (UNECE) as its principal body, though initially the issue was raised by OECD.
1985: The next phase was
emission reduction of each pollutant. Firstly, the Protocol on the Reduction of
Sulfur Emissions was concluded in
1988: Secondly, the Protocol on
the Control of Nitrogen Oxides was concluded in
1995: It was discovered that
one of the causes for acid rain in
3.4. Events relating to forest destruction
1992: “The Statement of Principles for Sustainable Management of Forests” was adopted at the United Nations Conference on Environment and Development (UNCED). This statement presented principles for various methods of sustainable management of forests; however, it was not a treaty.
Of special note is the fact
that the equatorial countries’ national policies, regional development,
urbanization, and wood exportation greatly influence tropical forests.
Incidentally, the International Tropical Timber Organization (ITTO) is one of the institutes that are deeply involved in tropical forest management.
3.5. Events related to wild animals
1971: In order to preserve
valuable wetlands, 77 countries adopted the “Convention on Wetlands of
International Importance, Especially as Waterfowl Habitat” in
1973: Given that an
international treaty was absolutely necessary for protection of wild animals, particularly
the rare species, 120 countries including
1992: At the Earth Summit, 163
2008: COP9 for the Convention
on Biological Diversity was held in
4. Global Warming Regulations
At the Kyoto Conference on
Prevention of Global Warming held from December 1–10 in 1997, a standard
proposal for the reduction target of CO2 emissions was submitted by each
country. According to this proposal, reduction targets of 0% by the
On December 8, while
Agreement over the reduction
targets was barely achieved at COP3, and it left many unresolved issues. COP4
was held in
Reportedly, the main reason for
this decision was that the Bush administration, in valuing the energy
industry’s support, decided that the
An unofficial ministerial
meeting was held in
It was left undecided whether
the Protocol should enter into force without the
Conferences of the Parties to the United Nations Framework Convention on Climate Change still take place every year. In addition, since COP11 in 2005 when the first Meeting of the Parties to the Kyoto Protocol (MOP) took place, COP and MOP have been held together annually.
More than 10,000 delegates from
180 countries gathered together for COP13 in 2007. On December 3, 2007,
COP14 took place in
UN Secretary-General that
future COPs should be held at summit-level by the world leaders, including the
President-Elect of the
COP15, held in
5. Corporate Responsibility for Global Environmental Issues
It is clear that environmental issues today have become grave, global matters, not merely local pollution incidents. It goes without saying that corporations need to comply with the Basic Environment Law and the Environment Impact Assessment Law, enacted respectively in 1993 and 1997. Companies should make systematic and proactive efforts to achieve the goal of “zero emissions,” so that their social responsibilities can be fulfilled.
Of special importance are the following: (1) reducing environmental impacts, (2) achieving “zero emissions” and thorough recycling of resources, and (3) reforming accounting standards for environmental budgets.
5.1. Reducing environmental impacts
In the case of the
In order to quantify environmental impacts, it is necessary to classify and define environmental costs. According to the United States Environmental Protection Agency (EPA), environmental costs are divided into Direct Costs, Hidden Costs, Contingent Costs (penalties, fines, future liabilities), and Less Tangible Costs. Lowering, or eliminating these costs leads to reduction of environmental impacts.
Furthermore, in order to reduce environmental impacts, all environmental loads involved in the entire lifecycle of products and their packages must be minimized. This includes environmental loads in procurement of raw materials, production, distribution, sales, consumption, and disposal. We need to develop a process that reduces the amounts of solid, liquid and gas wastes that are released into the atmosphere, underground, and into the sea, minimizes pollutants, and releases eco-friendly substances instead.
5.2. Achieving “zero emissions” and thorough recycling of resources
To meet such needs, many companies are engaged in efforts to achieve zero emissions and a thorough recycling system.
For example, Fuji Xerox has adopted a scheme of inverse manufacturing, where by re-use and recycling are taken into consideration at the level of product development. As many as 130 design requirements such as ease of dismantling, use of common parts, and selection of materials are listed in the “Recycle-Oriented Product Design Guidelines,” drawn up by its engineers. The company’s subsidiaries and subcontractors are also given “Guidelines on Procurement for Recycling” to ensure that the recycling-oriented production system is strictly adhered to, as well as “Guidelines on Green Procurement” to reduce the amount of potentially damaging chemical substances in their products.
Nissan Motor, on the other hand, has developed various clean technologies in order to create zero-emission vehicles. Nissan Sentra CA is a fruit of these technologies; it received an award for its clean technologies from the California Environmental Protection Agency — the only gasoline-fueled car to qualify as a Zero-Emissions Vehicle.
These clean technologies were
further developed for Nissan Bluebird Sylphy, a mass-produced car model for the
domestic market, which qualified as an ultralow-emissions vehicle (ULEV) in
Meanwhile, Chubu Electric Power is endeavoring to establish a reactor fuel cycle by re-using uranium and plutonium obtained from used fuel. If this technology is established, it will be possible to generate energy that is usable for over 1,000 years.
5.3. Reforming accounting standards for environmental budgets
The Financial Accounting Standards Board (FASB) sets down the following accounting standards for environmental issues:
SFAS 5: Accounting for Contingencies: accounting methods for contingencies, which take probability and degree of estimableness into consideration.
SFAS Interpretation 14: disclosure of the minimum amount in cases where reasonable estimation of the amount of a loss is not possible.
By the Emerging Issues Task Force (EITF):
89–13: Accounting for the Cost of Asbestos Removal (related to the Asbestos Material Ban on manufacture, importation, processing, and distribution of asbestos-containing products that the US Environmental Protection Agency issued in 1989, effective until 1993, based on the 1976 Toxic Substances Control Act).
90–8: Capitalization of Costs to Treat Environmental Contamination.
93–5: Accounting for
Environmental Liabilities. By the American
96–1: Environmental Remediation Liabilities. As for Regulation S-X, the US Securities and Exchange Commission (SEC) demands disclosure of total potential environmental costs, and analysis and disclosure of serious effects, serious concerns, disputes, and undecided matters of administrative accountability, and anticipated trends and events in relation to environmental laws such as Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, and Superfund Act.
In assessing corporate activities and accomplishments in terms of social and psychological risk, pollution risk, economic risk, and benefits ascribable to financial institutions, investors and consumers, what is crucial is quantitative financial analysis — in particular, cost-performance analysis and cost-effectiveness analysis. As a reference,
Table 3 reproduces part of IBM Japan’s financial statements related to environmental issues.
The more solid accounting standards are, the more easily account statements of corporations, industries and even nations can be compared, which will enhance reliability. In that sense, if we are to have healthy environmental accounting, we must first establish accounting standards that are widely acceptable on a global scale. If these standards prompt disclosure of environmental activities, they will help companies improve their environmental information assessment systems, while benefiting investors and users in environmental investment management. Thus, the society as a whole will be enriched and
quality of life enhanced.
The Japan Environment Agency (now the Ministry of Environment) published “A Draft Guideline for Measuring and Announcing Environmental Costs” in March 1999.
According to this guideline, the costs of environmental conservation are classified as
(1) Direct costs for reducing environmental impacts;
(2) Indirect costs for reducing environmental impacts;
(3) Costs for reducing environmental impacts involved in usage and disposal of manufactured and distributed products;
(4) Research and development costs for reducing environmental impacts;
(5) Social costs for reducing environmental impacts;
(6) Other costs related to environmental conservation.
While costs are comparatively measurable, in general, it is not easy to measure benefits, effectiveness, and contribution. Commonly used concepts include savings effects, reduction effects, and opportunity costs such as cost avoidance. Even with such concepts, however, direct effects may be measured, but indirect effects or ripple effects are likely to be overlooked.
In this chapter, we first discussed environmental risks such as pollution problems, and then examined crisis management regulations for global environmental issues of global warming, ozone depletion, acid rain, forest destruction, and loss of biodiversity.
Following that, we reviewed the recent situation of global warming regulations, speculating briefly on the future trends, and discussed the difficulties involved in negotiating international treaties. Then, in relation to corporate responsibility in environmental issues, we focused on the three topics of reducing environmental impacts, achieving zero emissions and a thorough recycling system, and improving accounting standards for solving environmental issues.
Now that environmental issues have spread worldwide, crisis management needs to be on a global, macro level; yet, it must be meticulously attended to on a local, micro level too. It is hoped that crisis management for environmental issues is managed on both levels harmoniously, and that a good environmental protection system will be constructed to sustain the growth and welfare of individuals, companies, nations, and the world as a whole.
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Ishikawa, Akira and Hiroshi Furuta, “Information Systems for Environmental Accounting,” Kankyo Shinbunsha (Environment Newspaper), 2000.
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Itokawa, Hideo, Would the Human Race Be Annihilated in the 21st Century!?, Tokuma Shoten, 1994.
Nemoto, Kazuyasu, An Introduction to Environmental Risk Management, Hakuto Shobo, 1999.
Nishizawa, Junichi et al., Humankind Will Become Extinct in the Next Eighty Years, Toyo Keizai Shinpo, 2000.
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