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Globalization of the Environment explaining recent trends, evaluating the current situation in terms of opportunities/threats to International Business, and tensions between stakeholders.
Globalization implies a rising interdependence amid economies and societies through cross country flows of information, ideas, technologies, goods and services, capital and finance and lastly the people. It is very important to highlight in the beginning that it is not only the globalization which has an impact on the environment but environment also impacts the pace, direction and quality of globalization. Globalization can have both positive as well as negative effects on the environment because it can exacerbate the environmental problems and provide new means and measures for addressing them too (Jobes, 2003; Speth, 2003). It is a mixed bag where it creates new opportunities for cooperation and interdependence but also gives rise to new issues and provides a basis for tensions in terms of International business and its stakeholders (Dua and Esty, 1997). There is a need of effective international scale governance to minimize the environmental harms (Nordstrom and Vaughan 1999).
The international Trade has grown faster than the world output which indicates that there is gowing trade intensity of the global economy. The world total merchandise trade grew at an average of 6% annually during the period of 1950 to 1994 where the global output grew at an average of 4% annually during the same period. During this period of 45 years the world merchandise output grew 5.5 times as compared to world merchandise trade which grew by more than 14 times which has certainly intensified the trade globally (WTO, 1995). There are few studies on trade liberalization and environment degradation done. Repetto in 2003 attempted such a comparison and accomplished that there is no a priori case for giving trade policy a priority over environmental policy. The trade liberalization provides efficiency gains were estimated ranging from 1% to 2% in efficient economies and GDP of 3% to 4% in distorted economies. The cost of controlling Environmental issues range from 1% to 2% of GDP and 3% to 5% of GDP with sloppy environmental policies.
The current situation is not so severe that it cannot be preserved but it's time to manage it effectively and efficiently that our future generations have this world to live. The governments are becoming very strict when environmental concerns raises but there is a need to understand the whole situation in context of individual, stakeholders, society, company, government, trade & economic growth and last but not least our climate, environment and the world as a whole.
Stakeholders are 'all those people and institutions who have an interest in the successful design, implementation and sustainability of the Business (Howlett and Nagu, 1997). The environmental regulations framework poses a serious threat to its stakeholders as one government can be very strict and other very lax in terms of environment concerns but in today's world, the natural environment should be the Primary Stakeholder for an organization in every country.
The main concern is between organizations and the natural environment, the natural environment's lack of human attributes, the reliance of business on the natural environment, the capability of Freeman's (1984) 'can affect or is affected by' criterion and the need to look is hitherto. 'One thing has become very which is climate change which touches every sphere of life...' (Waller-Hunter, 2004)
For ex: Hurricane Katrina not only caused disastrous and extraordinary damage to ENO's electric and gas facilities, but it also resulted in the loss of most of ENO's customers, an exceptional incidence in the U.S. Utility Industry (DOE, 2005a, p. 1).
World Economic Forum and Davos, 2010.
The World Economic Forum (WEF) is an independent and a nonprofit foundation which has its wings internationally Geneva and possibly best known for its meetings in Davos, Switzerland every year which assembles and helps in reuniting the top business and political leaders, chosen intellectuals and journalists to focus on the key issues of global concern. Their motto is 'entrepreneurship in the global public interest'. They want sustainable development and aims to be the leading organization which provides a basis to build and energize communities to improve the state of the world. The WEF is funded by its 1000 of global enterprise which have more than five billion dollars in turnover.
WEF 2010, Davos
The theme of WEF 2010 is Rethink, Redesign and Rebuild for our own sake and for the sake of future we must do nothing less to better the state of the world. We have to Rethink that the economy built on speculations cannot last forever like the Financial crisis. We have to Redesign our measures and take simple real steps towards substantive change. We have Rebuild the developing nations by generously helping them and make their own choices freely use their natural resources and land to the best.
Critically assessing the contribution of 'Davos 2010'- Environment factors of Globalization and other initiatives which may also have an effect.
The 'Davos 2010' which aims at the Global Redesign Initiative that focuses on transforming ideas into actionable solutions, drawing on the multi stakeholder resources of the WEF. The Davos 2010 has rethink 'Trade and Climate' change and expresses that there is a need of multilateral efforts that can increase International Trade and also help in reducing Carbon emissions. They felt that the trade and Climate agreements should be aligned in such a manner that it becomes an important driver for trade and low carbon growth instead of carbon becoming the cause of trade conflicts (WEF, 2010). For Ex: The energy demand for the world is projected to increase at 40% over the next 20 years and most of it of course in the developing economies in the non OECD and the challenge is how we can provide that in a way that the energy is available to consumed and eliminate the mismatch between where energy is produced and consumed, it can dramatically reduce the pollution hence the environment can be preserved and the energy is also sustainable. The industry can survive and serve its customers in the aggressive climate change policy regulation conceived that is the concentration of CO2 to 450 parts per million, hydrocarbons will still represent around 80% of the energy mix in the next 20 years.
The growth and development should be sustainable to trade and environment both as in the case of India and China which are not willing to reduce carbon footprints at the expense of their growth, so there is a need to invest in providing new technologies and infrastructure to emerging countries to develop sustainable in both ways. The government should not mandate the technologies in growing economies but they should set targets to achieve by entrepreneurs by improving existing designs or through innovation. The five technology pioneers at Davos, 2010 involved in green technology solutions like eSolar's which aims to produce unsubsidized electricity that can compete in the market with fossil fuel generated power. The Bio Fuel Box is a company which builds and operates treatment plants that separate oil, grease and fats from waste and from it produces a fuel that can be used as a standard diesel. This patented separation process uses temperature and pressure instead of chemicals.
The Industrial green revolution is needed and the government should encourage the growth of green technologies and carbon markets. The new business models are need of an hour for aviation industry as it contributes to 30% of the total volume of carbon emissions which is allowable. Telepresence is the new generation videoconferencing technology that allows the businesses to have meetings in a realistic 3D experience which will surely reduce the travel. Denser cities should be made with effective business model that reduces its carbon footprint and interestingly reduces the obesity rate.
Davos 2010 is proved to be a further step towards sustainability by forcing companies and researchers to think more innovatively and generating new ideas that can be transformed into reality by introducing new business model, new technologies, support of the government and better alignment among company's stakeholders and with government too can lead this world a better place to live in the future.
IB recommendations to Governments & Companies
The International Business should adopt the energy efficiency which is the most effective strategy for shifting quickly the carbon profile of major economies is to level the application of best available technologies. For ex: The energy efficiency gains accounts for over 50% of the abatement potential in its 450 ppm policy scenario (World Energy Outlook, 2008).
The Investment in developing countries towards their infrastructure and energy production is necessary as 74% of the energy infrastructure has yet to be built which will be needed by 2030. As these investments would be mainly in emerging countries particularly India and China.
There should be generally accepted reporting framework for the organizations to do comparative analysis and assessing the impact of trade on environment the as shareholders and managers are constrained to assess carbon related risks, the financial markets are unable to internalize the vital facet of environmental sustainability in the allocation of capital.
After the great debacle of financial crisis, we should not only concentrate only on revival but also focus on doing it effectively and efficiently in ecological manner that the growth never comes in the way of sacrificing our ecological system. The government should adopt their policies which are user friendly and sustainable in the long run that is beneficial for our environment. The carbon footprints can be further reduced by introducing new technologies and improving the old sophisticated ways as well, this can be done by providing infrastructure to the developing economies namely India and China as they will be the future market and obviously produce more carbon in the long run, so we should come forward and focus on that thing which we will tackle by generating new ideas and implementing them into actions and by adopting better and more sophisticated business model to decrease carbon footprints and save our climate and environment as a whole. The international trade should not exacerbate the climate condition in the host country but it should construct innovative ideas which they can implement by introducing advanced technologies to reduce carbon footprints and this is possible only when government actively deploy rules and regulations which are beneficial to both trade and environment, they can do by providing infrastructure and doing Research & development and providing new technologies to companies. The environment should be the primary stakeholder in the company as it is important factor for the human race of the future generation; it should be involved in all decision making process because excluding the natural environment as a stakeholder has been described as a serious omission, because of the importance of the resource and economic inputs it provides to business (Starik, 1994, 1995).
Speth, James Gustave, ed. 2003. Worlds Apart: Globalization and the Environment. Washington, D.C.: Island Press.
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