Chapter 09 Business and Environmental Sustainability

Chapter 09
Business and Environmental Sustainability

Multiple Choice Questions

16. The Triple Bottom Line approach involves measuring business success of sustainable
businesses and sustainable economic development in terms of:
a. economic, legal, and environmental sustainability.
b. economic, ethical, and environmental sustainability.
c. economic, legal, and competitive sustainability.
d. legal, competitive, and environmental sustainability.
Answer: b
Difficulty: Easy
Learning Objective: 09-01
Topic: Introduction
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 478
Feedback: Sustainable business and sustainable economic development seek to create new
ways of doing business in which business success is measured in terms of economic, ethical,
and environmental sustainability, often called the Triple Bottom Line approach.
17. Knowing what the future must be, creative businesses then look backwards to the present
and determine what must be done to arrive at that future. This process is known as:
a. backward integration.
b. forecasting.
c. forward integration.
d. backcasting.
Answer: d
Difficulty: Easy
Learning Objective: 09-01
Topic: Introduction
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 479
Feedback: Backcasting examines what the future will be when we emerge through the funnel.
Knowing what the future must be, creative businesses then look backwards to the present and
determine what must be done to arrive at that future.
18. Which of the following is true of the conservation movement?
a. It advocated that the natural world should not be used as a capital resource.
b. It regarded natural resources as being able to provide an inexhaustible supply of material.
c. It recommended a more restrained and prudent approach to the natural world.
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Chapter 09 Business and Environmental Sustainability

d. It argued against the natural world being used to provide indirect benefits.
Answer: c
Difficulty: Easy
Learning Objective: 09-02
Topic: Business Ethics and Environmental Values
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 481
Feedback: The conservation movement, the first phase of modern environmentalism,
advocated a restrained and prudent approach to the natural world.
19. The conservation movement:
a. regarded natural resources as being able to provide an inexhaustible supply of material.
b. advocated that the natural world should not be used as a capital resource.
c. argued that the natural world was valued as a resource, providing humans with both direct
benefits and indirect benefits.
d. believed that business does not good reasons for conserving natural resources.
Answer: c
Difficulty: Medium
Learning Objective: 09-02
Topic: Business Ethics and Environmental Values
Blooms Taxonomy: Remember
AACSB: Analytic; Ethics
Page: 481
Feedback: The conservation movement argued that the natural world was valued as a
resource, providing humans with both direct benefits and indirect benefits.
20. Reminiscent of the _____ tradition, it is suggested that some animals have the cognitive
capacity to possess a conscious life of their own and people have a duty not to treat these
animals as mere objects and means to their own ends.
a. Kantian
b. virtue ethic
c. neoclassical
d. social web
Answer: a
Difficulty: Medium
Learning Objective: 09-02
Topic: Business Ethics and Environmental Values
Blooms Taxonomy: Remember
AACSB: Analytic; Ethics
Page: 483
Feedback: A second approach argues that at least some animals have the cognitive capacity to
possess a conscious life of their own. Reminiscent of the Kantian ethical tradition, this view
asserts that we have a duty not to treat these animals as mere objects and means to our own
ends.

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Chapter 09 Business and Environmental Sustainability

21. Which of the following is true of a market-based approach to resolving environmental

challenges?
a. It is critical of the narrow, philanthropic view of corporate social responsibility (CSR).
b. It asserts that limited resources should not be distributed in the market.
c. It suggests that environmental problems deserve economic solutions.
d. It conveys that resources are infinite and fungible.
Answer: c
Difficulty: Easy
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: Defenders of the market approach contend that environmental problems are
economic problems that deserve economic solutions.
22. Which of the following is involved in environmental problems according to the marketbased approach to resolving environmental challenges?
a. Lack of knowledge of producing renewable resources
b. Inability of businesses to produce and sell limited resources
c. Lack of use of appropriate substitutes for limited resources
d. Allocation and distribution of limited resources
Answer: d
Difficulty: Medium
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: Defenders of the market-based approach contend that environmental problems are
economic problems that deserve economic solutions. Fundamentally, environmental problems
involve the allocation and distribution of limited resources.
23. Which of the following was suggested by William Baxter?
a. An optimal level of pollution can be achieved through competitive markets.
b. Society can strive for pure air and water at a very low cost.
c. From a strict market economic perspective, resources are infinite.
d. All resources can be replaced by substitutes.
Answer: a
Difficulty: Medium
Learning Objective: 09-04
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: William Baxter argued that there is an optimal level of pollution that would best

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Chapter 09 Business and Environmental Sustainability

serve societys interests. This optimal level is best attained, according to Baxter, by leaving it
to a competitive market.
24. In economic terms, all resources:
a. are infinite because they can be replaced by substitutes.
b. are distributed fairly by the government.
c. can be made available everywhere.
d. are distributed efficiently in the market.
Answer: a
Difficulty: Medium
Learning Objective: 09-04
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 484
Feedback: In economic terms, all resources can be replaced by substitutes, and in this sense
resources are infinite.
25. Which of the following explains the statement All resources are fungible?
a. It means that all resources can be regulated by the government.
b. It means that all resources can be replaced by substitutes.
c. It means that all resources cannot be duplicated.
d. It means that all resources cannot be recycled and reused.
Answer: b
Difficulty: Easy
Learning Objective: 09-04
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: In economic terms, all resources are fungible. They can be replaced by
substitutes, and in this sense resources are infinite.
26. Which of the following is true about the market-based approach to environmental
responsibility?
a. Market failure occurs when no markets exist to create a price for important social goods.
b. Free market exchanges can guarantee optimal results for addressing issues related to
externalities.
c. The market-based approach always ensures that what is good and rational for a collection
of individuals is also good and rational for a society.
d. Markets can be very successful if important ethical and policy questions and policy
decisions are left solely to the outcome of individual decisions.
Answer: a
Difficulty: Medium
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach

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Chapter 09 Business and Environmental Sustainability

Blooms Taxonomy: Understand

AACSB: Analytic
Page: 485
Feedback: Market failure occurs when no markets exist to create a price for important social
goods.
27. Which of the following ways can lead market failure to serious environmental harm?
a. Creating abundant markets to create a price for important social goods
b. Making no distinction between individual decisions and group consequences
c. Inexistence of externalities in the economic exchange system
d. Assigning property rights to unowned goods
Answer: b
Difficulty: Medium
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 485
Feedback: Market failures can lead to serious environmental harm if no distinction is made
between individual decisions and group consequences.
28. Which of the following causes inadequacy in ad hoc attemptsinternalizing external
costs and assigning property rights to unowned goods such as wild speciesto repair market
failures?
a. The backcasting problem
b. The fungibility problem
c. The biomimicry problem
d. The first-generation problem
Answer: d
Difficulty: Medium
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 486
Feedback: Internalizing external costs and assigning property rights to unowned goods such
as wild species are two responses to market failures. But there are good reasons for thinking
that such ad hoc attempts to repair market failures are environmentally inadequate. One
important reason is what has been called the first-generation problem. That is, we learn
about market failures and thereby prevent harms in the future only by sacrificing the first
generation as a means of gaining this information.
29. Markets can work to prevent harm only through information supplied by the existence of
market failures. This is better known as the:
a. biomimicry effect.
b. backcasting problem.

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Chapter 09 Business and Environmental Sustainability

c. first-generation problem.
d. primary market effect.
Answer: c
Difficulty: Easy
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 486
Feedback: Markets can work to prevent harm only through information supplied by the
existence of market failures. This is known as the first generation problem.
30. Before environmental legislation was enacted, the primary legal avenue open for
addressing environmental concerns was:
a. tort law.
b. international law.
c. public law.
d. criminal law.
Answer: a
Difficulty: Easy
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 486
Feedback: Much of the most significant environmental legislation in the United States was
enacted during the 1970s. Before this legislation was enacted, the primary legal avenue open
for addressing environmental concerns was tort law.
31. Which of the following is true about the regulatory approach to environmental challenges?
a. It overestimates the influence that business can have on establishing the law.
b. The government established regulatory standards to offer compensation after the
occurrence of pollution or any other environmental harm.
c. It shifted the burden from those threatened with harm to those who would cause the harm.
d. This approach ensures that business does not pursue any financial opportunities that cause
harm to the environment.
Answer: c
Difficulty: Easy
Learning Objective: 09-06
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 488
Feedback: The environmental regulation enacted during the 1970s established standards that
effectively shifted the burden from those threatened with harm to those who would cause the
harm. This is not a problem associated with the regulatory approach but one of the changes

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Chapter 09 Business and Environmental Sustainability

that occurred after it was enacted.

32. Which of the following is a problem associated with the regulatory approach to
environmental challenges?
a. The regulatory model assumes that economic growth is environmentally and ethically
benign.
b. If people rely on the law to protect the environment, environmental protection will extend
beyond the law.
c. Business passively responds to consumer desires and consumers are unaffected by the
messages that business conveys.
c. National regulations are the only means to effectively address international environmental
challenges.
Answer: a
Difficulty: Easy
Learning Objective: 09-06
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 488
Feedback: The most troubling problem from an environmental standpoint is that the
regulatory model assumes that economic growth is environmentally and ethically benign.
33. Which of the following is true about the concept of sustainable development and
sustainable business practice?
a. It suggests a radically new vision for integrating financial and environmental goals,
compared to the growth model that preceded it.
b. According to this concept, only individuals who can prove that they had been harmed by
pollution can raise legal challenges.
c. According to this concept, an economic solution to compensation should be offered for the
harm only after the harm has been done.
d. It focuses only on the costs that businesses incur in pursuing environmental goals.
Answer: a
Difficulty: Easy
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 488-489
Feedback: The concept of sustainable development and sustainable business practice suggests
a radically new vision for integrating financial and environmental goals, compared to the
growth model that preceded it.
34. The three goals of sustainable development that include economic, environmental, and
ethical sustainability are referred to as the:
a. tripartite goals.
b. three pillars of sustainability.

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Chapter 09 Business and Environmental Sustainability

c. three pronged charter.

d. shoulders of sustainability.
Answer: b
Difficulty: Easy
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489
Feedback: These three goals, economic, environmental, and ethical sustainability, are often
referred to as the three pillars of sustainability.
35. Which of the following was charged with developing recommendations for paths toward
economic and social development that would not achieve short-term economic growth at the
expense of long-term environmental and economic sustainability?
a. The Bluewash Commission
b. The Binding Commission
c. The Barentsburg Commission
d. The Brundtland Commission
Answer: d
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489
Feedback: The Brundtland Commission was charged with developing recommendations for
paths toward economic and social development that would not achieve short-term economic
growth at the expense of long-term environmental and economic sustainability.
36. Which of the following is true of the Brundtland Commission?
a. It was named as the Brundtland Commission after the place in Norway, where the summit
was conducted for the first time.
b. It was charged with developing recommendations for paths toward economic and social
development at the expense of underdeveloped and developing countries.
c. It defined sustainable development as development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.
d. It criticized the report from the United Nations World Commission on Environment and
Development published in 1987.
Answer: c
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489

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Chapter 09 Business and Environmental Sustainability

Feedback: The Brundtland Commission offered what has become the standard definition of
sustainable development. Sustainable development is development that meets the needs of the
present without compromising the ability of future generations to meet their own needs.
37. Which of the following models does not differentiate natural resources from the other
factors of production and does not explain the origin of resources?
a. The circular flow model
b. The triple bottom line model
c. The bilinear model
d. The sustainability model
Answer: a
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 491
Feedback: The circular flow model does not differentiate natural resources from the other
factors of production. This model does not explain the origin of resources.
38. Which of the following is true of the circular flow model?
a. It differentiates natural resources from the other factors of production.
b. It suggests that to keep up with the economy, the population must grow.
c. It treats economic growth as both the solution to all social ills and also as boundless.
d. It argues that the economy cannot grow indefinitely.
Answer: c
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 491
Feedback: An observation of the circular flow model is that it treats economic growth as both
the solution to all social ills and also as boundless.
39. The possibility that the economy cannot grow indefinitely is simply not part of the:
a. three pillars of sustainability approach.
b. circular flow model.
c. triple bottom line approach.
d. bilinear model.
Answer: b
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic

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Chapter 09 Business and Environmental Sustainability

Page: 491
Feedback: An observation about the circular flow model is that it treats economic growth as
both the solution to all social ills and also as boundless. To keep up with population growth,
the economy must grow. To provide for a higher standard of living, the economy must grow.
To alleviate poverty, hunger, and disease, the economy must grow. The possibility that the
economy cannot grow indefinitely is simply not part of this model.
40. According to economist Herman Daly, neoclassical economics, with its emphasis on
economic growth as the goal of economic policy will inevitably fail to meet these challenges:
a. if it suggests that the population of the world needs to be controlled.
b. unless it recognizes that the economy is but a subsystem within earths biosphere.
c. unless it recognizes that resources are infinite.
d. if it focuses on recycling and reusing the by-products of the production process.
Answer: b
Difficulty: Hard
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 491
Feedback: Daly argues that neoclassical economics, with its emphasis on economic growth as
the goal of economic policy, will inevitably fail to meet these challenges unless it recognizes
that the economy is but a subsystem within earths biosphere.
41. According to the _____ law of thermodynamics (the conservation of matter/energy),
neither matter nor energy can truly be created, it can only be transferred from one form to
another.
a. first
b. second
c. third
d. fourth
Answer: a
Difficulty: Hard
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 491
Feedback: The sustainable model recognizes that the economy exists within a finite biosphere
that encompasses a band around the earth that is little more than a few miles wide. From the
first law of thermodynamics (the conservation of matter/energy), we recognize that neither
matter nor energy can truly be created, it can only be transferred from one form to another.
42. The model of economy, in consistency with the second law of thermodynamics, implies
that:
a. the amount of re-usable products decreases with an increase in production.

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Chapter 09 Business and Environmental Sustainability

b. the economy exists beyond a finite biosphere.

c. wastes are not produced at each stage of economic activity.
d. the amount of usable energy decreases over time.
Answer: d
Difficulty: Hard
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 491-492
Feedback: The model of the economy (or Economic System) as a subset of the biosphere (or
Ecosystem) differs from the circular flow model is several ways. Energy is lost at every stage
of economic activity. Consistent with the second law of thermodynamics (entropy increased
within a closed system), the amount of usable energy decreases over time.
43. Over the long term, resources and energy cannot be used, nor waste produced, at rates at
which the biosphere cannot replace or absorb them without jeopardizing its ability to sustain
life. These are what Herman Daly calls the:
a. economic limitations.
b. backcasting effect.
c. biophysical limits to growth.
d. un-expandable boundaries.
Answer: c
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 492
Feedback: Over the long term, resources and energy cannot be used, nor waste produced, at
rates at which the biosphere cannot replace or absorb them without jeopardizing its ability to
sustain (human) life. These are what Daly calls the biophysical limits to growth.
44. Which of the following is true of the sustainability model in terms of environmental
responsibilities?
a. Sustainability need not be a long-term strategy.
b. The huge unmet market potential among the worlds developing economies
can only be met in sustainable ways.
c. Sustainable practices lead to reduced cost savings.
d. Firms that follow sustainable practices lose competitive advantage.
Answer: b
Difficulty: Medium
Learning Objective: 09-08
Topic: The Business Case for a Sustainable Economy
Blooms Taxonomy: Understand
AACSB: Analytic

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Chapter 09 Business and Environmental Sustainability

Page: 493
Feedback: The huge unmet market potential among the worlds developing economies can
only be met in sustainable ways.
45. Which of the following is true of the sustainability model in terms of environmental
responsibilities?
a. Sustainability reduces competitive advantage.
b. Sustainability is not a prudent long-term strategy.
c. Sustainability is a good risk management strategy.
d. Sustainability leads to reduced cost-savings.
Answer: c
Difficulty: Medium
Learning Objective: 09-08
Topic: The Business Case for a Sustainable Economy
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 494
Feedback: Sustainability is a good risk management strategy. Refusing to move toward
sustainability offers many downsides that innovative firms will avoid.
46. Estimates suggest that with present technologies, businesses can readily achieve at least a
fourfold increase in efficiency, and perhaps as much as a tenfold increase. This can be
achieved through the first principle of sustainability known as:
a. biomimicry.
b. eco-efficiency.
c. the cradle-to-cradle responsibility.
d. the take-make-waste model.
Answer: b
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 494-495
Feedback: Eco-efficiency has long been a part of the environmental movement. Doing more
with less has been an environmental guideline for decades. Some estimates suggest that with
present technologies alone, business could readily achieve at least a fourfold increase in
efficiency and perhaps as much as a tenfold increase. The first principle of sustainability is
sometimes known as eco-efficiency.
47. Which of the following recommends cycling the waste of one activity into the resource of
another?
a. The biomimicry principle
b. The cradle-to-grave model
c. The cradle-to-cradle model
d. The eco- efficiency principle

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Chapter 09 Business and Environmental Sustainability

Answer: a
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: In an ideal situation, the waste of one firm becomes the resource of another, and
such synergies can create eco-industrial parks. Just as biological processes such as
photosynthesis cycle the waste of one activity into the resource of another, this principle is
often referred to as biomimicry.
48. Closed-loop production seeks to integrate what is presently waste, back into production.
In an ideal situation, the waste of one firm becomes the resource of another, and such
synergies can create eco-industrial parks. This principle is often referred to as:
a. biomimicry.
b. eco-efficiency.
c. biosynergy.
d. backcast.
Answer: a
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: Closed-loop production seeks to integrate what is presently waste back into
production. In an ideal situation, the waste of one firm becomes the resource of another, and
such synergies can create eco-industrial parks. Just as biological processes such as
photosynthesis cycle the waste of one activity into the resource of another, this principle is
often referred to as biomimicry.
49. Which of the following suggests that a business takes resources, makes products out of
them, and discards whatever is left over?
a. The cradle-to-grave model
b. The take-make-waste approach
c. The Cradle-to-cradle model
d. The eco-efficiency principle
Answer: b
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495

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Chapter 09 Business and Environmental Sustainability

Feedback: The evolution of business strategy toward biomimicry can be understood along a
continuum. The earliest phase has been described as take-make-waste. Business takes
resources, makes products out of them, and discards whatever is left over.
50. Which of the following holds that a business is responsible for the entire life of its
products, including the ultimate disposal even after the sale?
a. The cradle-to-grave model
b. The take-make-waste appoach
c. The cradle-to-cradle model
d. The eco-efficiency principle
Answer: a
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: The cradle to grave or life-cycle model holds that a business is responsible for
the entire life of its products, including the ultimate disposal even after the sale.
51. Cradle-to-grave and cradle-to-cradle responsibilities are part of the _____ sustainable
business principle.
a. eco-efficiency
b. backcasting
c. biomimicry
d. take-make-waste
Answer: c
Difficulty: Medium
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 499-500
Feedback: The evolution of business strategy toward biomimicry can be understood along a
continuum. The earliest phase has been described as take-make-waste. Business takes
resources, makes products out of them, and discards whatever is left over. A second phase
envisions business taking responsibility for its products from cradle to grave. A third phase
has been described as the cradle-to-cradle responsibility, which holds that a business should
be responsible for incorporating the end results of its products back into the productive cycle.
52. Which of the following would hold a business liable for groundwater contamination
caused by its products even years after they had been buried in a landfill?
a. Backcast model
b. Eco-efficiency model
c. Take-make-waste model
d. Cradle-to-grave model

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Chapter 09 Business and Environmental Sustainability

Answer: d
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: Cradle-to-grave or life-cycle responsibility holds that a business is responsible for
the entire life of its products, including the ultimate disposal even after the sale. Thus, for
example, a cradle-to-grave model would hold a business liable for groundwater contamination
caused by its products even years after they had been buried in a landfill.
53. Which of the following holds that a business should be responsible for incorporating the
end results of its products back into the productive cycle?
a. Backcasting
b. Cradle-to-cradle
c. Take-make-waste
d. Cradle-to-grave
Answer: b
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: Cradle-to-cradle responsibility holds that a business should be responsible for
incorporating the end results of its products back into the productive cycle.
54. Which of the following responsibilities entail an incentive to redesign products so that
they can be recycled efficiently and easily?
a. Cradle-to-grave
b. Backcasting
c. Cradle-to-cradle
d. Eco-efficiency
Answer: c
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: Cradle-to-cradle responsibility holds that a business should be responsible for
incorporating the end results of its products back into the productive cycle. This
responsibility, in turn, would create incentives to redesign products so that they could be
recycled efficiently and easily.

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Chapter 09 Business and Environmental Sustainability

55. Which of the following is true of a service-based economy?

a. A service-based economy tends to the consumers demand for clothes cleaning, floor
covering, illumination, entertainment, and so forth.
b. A service-based economy interprets consumer demand as a demand for washing machines,
carpets, lights, consumer electronics, and so forth.
c. A service-based economy weakens the production efficiencies.
d. A service-based economy increases material and energy costs significantly.
Answer: a
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 496
Feedback: A service-based economy interprets consumer demand as a demand for services
for clothes cleaning, floor covering, illumination, entertainment, cool air, transportation, word
processing, and so forth.
Fill in the Blank Questions
56. The _____ movement made the case that business had good reasons for conserving natural
resources, reasons that paralleled the rationale to conserve financial resources.
Answer: conservation
Difficulty: Easy
Learning Objective: 09-02
Topic: Business Ethics and Environmental Values
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 481
Feedback: Conservationists, supporters of the conservation movement, the first phase of
modern environmentalism, made the case that business had good reasons for conserving
natural resources, reasons that paralleled the rationale to conserve financial resources.
57. A _____ approach to resolving environmental challenges suggests that environmental
problems are economic problems that deserve economic solutions.
Answer: market-based
Difficulty: Easy
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: Defenders of the market approach contend that environmental problems are
economic problems that deserve economic solutions.

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Chapter 09 Business and Environmental Sustainability

58. In economic terms, all resources are _____, that is, they can be replaced by substitutes,
and in this sense resources are infinite.
Answer: fungible
Difficulty: Easy
Learning Objective: 09-04
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
Feedback: In economic terms, all resources are fungible. They can be replaced by
substitutes, and in this sense resources are infinite.
59. Before environmental legislation was enacted, the primary legal avenue open for
addressing environmental concerns was _____ law.
Answer: tort
Difficulty: Easy
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 486
Feedback: Much of the most significant environmental legislation in the United States was
enacted during the 1970s. Before environmental legislation was enacted, the primary legal
avenue open for addressing environmental concerns was tort law.
60. The concept of sustainable development can be traced to a 1987 report from the United
Nations World Commission on Environment and Development (WCED), more commonly
known as the _____ Commission.
Answer: Brundtland
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489
Feedback: The concept of sustainable development can be traced to a 1987 report from the
United Nations World Commission on Environment and Development (WCED), more
commonly known as the Brundtland Commission, named for its chair, Gro Harlem
Brundtland.
61. The _____ model does not differentiate natural resources from the other factors of
production.
Answer: circular flow
Difficulty: Easy
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach

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Chapter 09 Business and Environmental Sustainability

Blooms Taxonomy: Remember

AACSB: Analytic
Page: 491
Feedback: The circular flow model does not differentiate natural resources from the other
factors of production.
62. While the regulatory and compliance model tends to interpret environmental
responsibilities as constraints upon business, the _____ model is more forward looking and
may present business with greater opportunities than burdens.
Answer: sustainability
Difficulty: Easy
Learning Objective: 09-08
Topic: The Business Case for a Sustainable Economy
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 492
Feedback: While the regulatory and compliance model tends to interpret environmental
responsibilities as constraints upon business, the sustainability model is more forward looking
and may present business with greater opportunities than burdens.
63. The ultimate goal of _____ is to eliminate waste altogether rather than reducing it.
Answer: biomimicry
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: The ultimate goal of biomimicry is to eliminate waste altogether rather than
reducing it.
64. The _____ responsibility holds that a business should be responsible for incorporating the
end results of its products back into the productive cycle.
Answer: cradle-to-cradle
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 495
Feedback: Cradle-to-cradle responsibility holds that a business should be responsible for
incorporating the end results of its products back into the productive cycle. This
responsibility, in turn, would create incentives to redesign products so that they could be
recycled efficiently and easily.
65. A _____ economy interprets consumer demand as a demand for servicesfor clothes

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Chapter 09 Business and Environmental Sustainability

cleaning, floor covering, illumination, entertainment, cool air, transportation, word

processing, and so forth.
Answer: service-based
Difficulty: Easy
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 496
Feedback: A service-based economy interprets consumer demand as a demand for services
for clothes cleaning, floor covering, illumination, entertainment, cool air, transportation, word
processing, and so forth.
Essay Questions
66. Explain how business understands the opportunities available in the age of sustainability.
Answer: The environmental research and consulting group The Natural Step uses an image of
a funnel, with two converging lines, to help business understand the opportunities available in
the age of sustainability. The resources necessary to sustain life are on a downward slope.
While there is disagreement about the angle of the slope, there is widespread consensus that
available resources are in decline. The second line represents aggregate worldwide demand,
accounting for both population growth and the increasing demand of consumerist lifestyles.
Barring an environmental catastrophe, many but not all industries will emerge through the
narrowing funnel into an era of sustainable living.
Difficulty: Medium
Learning Objective: 09-01
Topic: Introduction
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 478-479
67. Elaborate on the conservation movement.
Answer: By the late 19th century, humans came to recognize the self-interested reasons for
protecting the natural environment. The conservation movement, the first phase of modern
environmentalism, advocated a more restrained and prudent approach to the natural world.
From this perspective, the natural world was still valued as a resource, providing humans with
both direct benefits (air, water, food), and indirect benefits (the goods and services produced
by business). Conservationists argued against the exploitation of natural resources as if they
could provide an inexhaustible supply of material. They made the case that business had good
reasons for conserving natural resources, reasons that paralleled the rationale to conserve
financial resources. The natural world, like capital, had the productive capacity to produce
long-term income but only if managed and used prudently.
Besides the self-interested reasons to protect human life and health, the natural environment is
essential and valuable for many other reasons. Often, these other values conflict with the more
direct instrumental value that comes from treating the natural world as a resource. The beauty

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Chapter 09 Business and Environmental Sustainability

and grandeur of the natural world provide great aesthetic and inspirational value. Many
people view the natural world as a manifestation of religious and spiritual values. Parts of the
natural world can have symbolic value, historical value, and such diverse psychological
values as serenity and exhilaration. These values can clearly conflict with the use of the earth
itself as a resource to physically, as opposed to spiritually, sustain those who live on it.
Difficulty: Hard
Learning Objective: 09-02
Topic: Business Ethics and Environmental Values
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 481
68. Discuss the market-based approach to resolving environmental challenges.
Answer: A market-based approach to resolving environmental challenges is reminiscent of the
narrow, economic view of corporate social responsibility (CSR). Defenders of this market
approach contend that environmental problems are economic problems that deserve economic
solutions. Fundamentally, environmental problems involve the allocation and distribution of
limited resources. Whether we are concerned with the allocation of scarce nonrenewable
resources such as gas and oil, or with the earths capacity to absorb industrial by-products
such as CO2 or PCBs, efficient markets can address environmental challenges.
Difficulty: Hard
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 484
69. What is an optimal level of pollution?
Answer: In his well-known book, People or Penguins: The Case for Optimal Pollution,
William Baxter argued that there is an optimal level of pollution that would best serve
societys interests. This optimal level is best attained, according to Baxter, by leaving it to a
competitive market. Denying that there is any natural or objective standard for clean air or
water (as this view would deny there is an objective state of perfect health), Baxter begins
with a goal of safe air and water quality, and translates this goal to a matter of balancing
risks and benefits. A more reasonable approach is to aim for air and water quality that is safe
enough to breathe and drink without costing too much. This balance, the optimal level of
pollution, can be achieved through competitive markets.
Difficulty: Medium
Learning Objective: 09-04
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 484
70. Discuss the challenges associated with the efficient market approach to environmental
responsibilities.

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Chapter 09 Business and Environmental Sustainability

Answer: A variety of market failures involving environmental issues point to the inadequacy
of market solutions. Since the costs of such things as air pollution, groundwater
contamination and depletion, soil erosion, and nuclear waste disposal are typically borne by
parties external to the economic exchange (e.g., people downwind, neighbors, and future
generations), free market exchanges cannot guarantee optimal results.
A second type of market failure occurs when no markets exist to create a price for important
social goods. Endangered species, scenic vistas, rare plants and animals, and biodiversity are
just some environmental goods that typically are not traded on open markets. Public goods
such as clean air and ocean fisheries also have no established market price. With no
established exchange value, the market approach cannot even pretend to achieve its own goals
of efficiently meeting consumer demand. Markets alone fail to guarantee that such important
public goods are preserved and protected.
A third way in which market failures can lead to serious environmental harm involves a
distinction between individual decisions and group consequences. We can miss important
ethical and policy questions if we leave policy decisions solely to the outcome of individual
decisions. Because these are important ethical questions, and because they remain unasked
from within market transactions, we must conclude that markets are incomplete (at best) in
their approach to the overall social good.
There are good reasons for thinking that such ad hoc attempts to repair market failures are
environmentally inadequate. One important reason is what has been called the first-generation
problem. Markets can work to prevent harm only through information supplied by the
existence of market failures. That is, we learn about market failures and thereby prevent
harms in the future only by sacrificing the first generation as a means of gaining this
information. When public policy involves irreplaceable public goods such as endangered
species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill
advised.
Difficulty: Hard
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 485-486
71. What do defenders of the market approach to environmental responsibilities state about
the ability of economic markets to achieve a sound environmental policy? Discuss if their
responses are environmentally adequate.
Answer: Defenders of a narrow economic view of corporate social responsibility have
responses to the challenges associated with market failures. Internalizing external costs and
assigning property rights to unowned goods such as wild species are two responses to market
failures. But there are good reasons for thinking that such ad hoc attempts to repair market
failures are environmentally inadequate. One important reason is what has been called the
first-generation problem. Markets can work to prevent harm only through information
supplied by the existence of market failures. Only when fish populations in the North Atlantic
collapsed, for example, did we learn that free and open competition among the worlds fishing
industry for unowned public goods failed to prevent the decimation of cod, swordfish,
Atlantic salmon, and lobster populations. That is, we learn about market failures and thereby

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Chapter 09 Business and Environmental Sustainability

prevent harms in the future only by sacrificing the first generation as a means of gaining
this information. When public policy involves irreplaceable public goods such as endangered
species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill
advised.
Difficulty: Medium
Learning Objective: 09-05
Topic: Business Environmental Responsibility: The Market Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 486
72. List the various laws related to governmental regulation of the environment. Describe the
method of addressing environmental concerns prior to the establishment of laws.
Answer: Governmental regulations were seen as a better way to respond to environmental
problems, compared to unregulated markets. Much of the most significant environmental
legislation in the United States was enacted during the 1970s. The Clean Air Act of 1970
(amended and renewed in 1977), Federal Water Pollution Act of 1972 (amended and renewed
as the Clean Water Act of 1977), and the Endangered Species Act of 1973 were part of this
national consensus for addressing environmental problems. Each law was originally enacted
by a Democratic Congress and signed into law by a Republican president. These laws share a
common approach to environmental issues.
Before this legislation was enacted, the primary legal avenue open for addressing
environmental concerns was tort law. Only individuals who could prove that they had been
harmed by pollution could raise legal challenges to air and water pollution. That legal
approach placed the burden on the person who was harmed and, at best, offered compensation
for the harm only after the fact. Except for the incentive provided by the threat of
compensation, U.S. policy did little to prevent the pollution in the first place. Absent any
proof of negligence, public policy was content to let the market decide environmental policy.
Because endangered species themselves had no legal standing, direct harm to plant and
animal life was of no legal concern and previous policies did little to prevent harm to plant
and animal life.
Difficulty: Hard
Learning Objective: 09-03
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 486
73. Describe the challenges associated with the regulatory approach to environmental
concerns.
Answer: Several problems suggest that the regulatory approach to environmental concerns
will prove inadequate over the long term. First, it underestimates the influence that business
can have in establishing the law. The Corporate Automotive Fuel Efficiency (CAFE)
standards provide a good example of how this can occur. A reasonable account of this law
suggests that the public very clearly expressed a political goal of improving air quality by
improving automobile fuel efficiency goals (and thereby reducing automobile emissions).

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Chapter 09 Business and Environmental Sustainability

However, the automobile industry was able to use its lobbying influence to exempt light
trucks and SUVs from these standards.
Second, this approach also underestimates the ability of business to influence consumer
choice. To conclude that business fulfills its environmental responsibility when it responds to
the environmental demands of consumers is to underestimate the role that business can play in
shaping public opinion. The best example would be the advertising industry. Assuming that
business is not going to stop advertising its products or lobbying government, this model of
corporate environmental responsibility is likely to prove inadequate for protecting the natural
environment.
Further, if we rely on the law to protect the environment, environmental protection will extend
only as far as the law extends. Yet, most environmental issues, pollution problems especially,
do not respect legal jurisdictions. Similarly, national regulations will be ineffective for
international environmental challenges.
Finally, and perhaps most troubling from an environmental standpoint, this regulatory model
assumes that economic growth is environmentally and ethically benign. Regulations establish
side constraints on businesss pursuit of profits and, as long as they remain within those
constraints, accept as ethically legitimate whatever road to profitability management chooses.
Difficulty: Hard
Learning Objective: 09-06
Topic: Business Environmental Responsibility: The Regulatory Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 487-488
74. Why was the Brundtland Commission formed?
Answer: The concept of sustainable development can be traced to a 1987 report from the
United Nations World Commission on Environment and Development (WCED), more
commonly known as the Brundtland Commission, named for its chair, Gro Harlem
Brundtland. The commission was charged with developing recommendations for paths toward
economic and social development that would not achieve short-term economic growth at the
expense of long-term environmental and economic sustainability. The Brundtland
Commission offered what has become the standard definition of sustainable development.
Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489
75. Describe Herman Dalys concepts of sustainable development and the circular flow
model.
Answer: Economist Herman Daly has been among the leading thinkers who have advocated
an innovative approach to economic theory based on the concept of sustainable development.
Daly makes a convincing case for an understanding of economic development that transcends

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Chapter 09 Business and Environmental Sustainability

the more common standard of economic growth. Unless we make significant changes in our
understanding of economic activity, unless quite literally we change the way we do business,
we will fail to meet some very basic ethical and environmental obligations. According to
Daly, we need a major paradigm shift in how we understand economic activity.
We can begin with the standard understanding of economic activity and economic growth
found in almost every economics textbook. What is sometimes called the circular flow
model explains the nature of economic transactions in terms of a flow of resources from
businesses to households and back again.
Two aspects of this circular flow model are worth noting. First, it does not differentiate
natural resources from the other factors of production. This model does not explain the origin
of resources. They are simply owned by households from which they, like labor, capital, and
entrepreneurial skill, can be sold to business. Services can be provided in many ways and by
substituting different factors of production. In Simons terms, resources can therefore be
treated as infinite.
A second observation is that this model treats economic growth as both the solution to all
social ills and also as boundless. To keep up with population growth, the economy must grow.
To provide for a higher standard of living, the economy must grow. To alleviate poverty,
hunger, and disease, the economy must grow. The possibility that the economy cannot grow
indefinitely is simply not part of this model.
Difficulty: Hard
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 489-490
76. Explain Herman Dalys economic system model also known as the sustainable model.
Answer: First, the sustainable model recognizes that the economy exists within a finite
biosphere that encompasses a band around the earth that is little more than a few miles wide.
From the first law of thermodynamics (the conservation of matter/energy), we recognize that
neither matter nor energy can truly be created, it can only be transferred from one form to
another. Second, energy is lost at every stage of economic activity. Consistent with the second
law of thermodynamics (entropy increased within a closed system), the amount of usable
energy decreases over time. Waste energy is continuously leaving the economic system and
thus new low-entropy energy must constantly flow into the system. Third, this model no
longer treats natural resources as an undifferentiated and unexplained factor of production
emerging from households. Finally, it recognizes that wastes are produced at each stage of
economic activity and these wastes are dumped back into the biosphere.
Difficulty: Medium
Learning Objective: 09-07
Topic: Business Environmental Responsibilities: The Sustainability Approach
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 491-492
77. Briefly describe the reasons supporting the practice of sustainability within businesses.

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Chapter 09 Business and Environmental Sustainability

Answer: First, sustainability is a prudent long-term strategy: business will need to adopt
sustainable practices to ensure long-term survival. Firms that fail to adapt to the converging
lines of decreasing availability of resources and increasing demand risk their own survival.
Second, the huge unmet market potential among the worlds developing economies can only
be met in sustainable ways. Enormous business opportunities exist in serving the billions of
people who need, and are demanding, economic goods and services. The base of the
economic pyramid represents the largest and fastest-growing economic market in human
history. Yet, the sheer size of these markets alone makes it impossible to meet this demand
with the environmentally damaging industrial practices. It is obvious that new sustainable
technologies and products will be required to meet these demands.
Third, significant cost savings can be achieved through sustainable practices. Business stands
to save significant costs in moves toward eco-efficiency. Savings on energy use and materials
will reduce not only environmental wastes, but spending wastes as well. Minimizing wastes
makes sense on financial grounds as well as on environmental grounds.
Fourth, competitive advantages exist for sustainable businesses. Firms that are ahead of the
sustainability curve will both have an advantage serving environmentally conscious
consumers and enjoy a competitive advantage attracting workers who will take pride and
satisfaction in working for progressive firms.
Finally, sustainability is a good risk management strategy. Refusing to move toward
sustainability offers many downsides that innovative firms will avoid. Avoiding future
government regulation is one obvious benefit. Avoiding legal liability for unsustainable
products is another potential benefit. Consumer boycotts of unsustainable firms are also a risk
to be avoided.
Difficulty: Hard
Learning Objective: 09-08
Topic: The Business Case for a Sustainable Economy
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 493-494
78. What are the general principles that will guide the movement of businesses toward
sustainability?
Answer: The precise implications of sustainability will differ for specific firms and industries,
but three general principles will guide the move toward sustainability. Firms and industries
must become more efficient in using natural resources; they should model their entire
production process on biological processes; and they should emphasize the production of
services rather than products.
Difficulty: Medium
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Remember
AACSB: Analytic
Page: 494
79. Explain with an example, how eco-efficiency can be implemented on an individual and a
business scale.

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Chapter 09 Business and Environmental Sustainability

Answer: Doing more with less has been an environmental guideline for decades. On an
individual scale, it is environmentally better to ride a bike than to ride in a bus, to ride in a
fuel-cell or hybrid-powered bus than in a diesel bus, to ride in a bus than to drive a personal
automobile, and to drive a hybrid car than an SUV. Likewise, business firms can improve
energy and materials efficiency in such things as lighting, building design, product design,
and distribution channels.
Difficulty: Medium
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 494-495
80. Explain the concept of eco-efficiency, biomimicry and cradle-to-cradle responsibility.
Answer: Eco-efficiency has long been a part of the environmental movement. Doing more
with less has been an environmental guideline for decades. Some estimates suggest that with
present technologies alone, business could readily achieve at least a fourfold increase in
efficiency and perhaps as much as a tenfold increase. Consider that a fourfold increase, called
Factor-Four in the sustainability literature, would make it possible to achieve double the
productivity from one-half the resource use.
Just as biological processes such as photosynthesis cycle the waste of one activity into the
resource of another, this principle is often referred to as biomimicry. The ultimate goal of
biomimicry is to eliminate waste altogether rather than reducing it. If we truly mimic
biological processes, the end result of one process (e.g., leaves and oxygen produced by
photosynthesis) is ultimately reused as the productive resources (e.g., soil and water) of
another process (plant growth) with only solar energy added. The evolution of business
strategy toward biomimicry can be understood along a continuum. The earliest phase has been
described as take-make-waste. Business takes resources, makes products out of them, and
discards whatever is left over. A second phase envisions business taking responsibility for its
products from cradle to grave. Sometimes referred to as life-cycle responsibility, this
approach has already found its way into both industrial and regulatory thinking.
Cradle-to-grave, or life-cycle, responsibility holds that a business is responsible for the entire
life of its products, including the ultimate disposal even after the sale. Cradle-to-cradle
responsibility extends this idea even further and holds that a business should be responsible
for incorporating the end results of its products back into the productive cycle. This
responsibility, in turn, would create incentives to redesign products so that they could be
recycled efficiently and easily.
Difficulty: Hard
Learning Objective: 09-09
Topic: Principles for a Sustainable Business
Blooms Taxonomy: Understand
AACSB: Analytic
Page: 494-495

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any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.