Bond University

ePublications@bond
Corporate Governance eJournal Faculty of Law

6-14-2012

Environmental Corporate Social Responsibility

and the Carbon Economy: A Case for CSR, the
Triple Bottom Line and Obliquity
Sabina Medarevic
Bond University, sabinamedarevic@[Link]

Follow this and additional works at: [Link]

Recommended Citation
Sabina Medarevic. (2012) "Environmental Corporate Social Responsibility and the Carbon
Economy: A Case for CSR, the Triple Bottom Line and Obliquity" ,, .

[Link]

This Journal Article is brought to you by the Faculty of Law at ePublications@bond. It has been accepted for inclusion in Corporate Governance
eJournal by an authorized administrator of ePublications@bond. For more information, please contact Bond University's Repository Coordinator.
Environmental Corporate Social Responsibility and the Carbon
Economy: A Case for CSR, the Triple Bottom Line and Obliquity
Abstract
Expenditure in pursuit of the goals of Corporate Social Responsibility (CSR) is increasingly compatible with
profit-maximisation. The benefits of adopting CSR can have significant advantages for both shareholders and
the environment, particularly when undertaken voluntarily. But another factor in favour of CSR is the oblique
pressures brought to bear from a sense of moral obligation, a more ethical approach, sweeping into
boardrooms. Obliquity may achieve even more than direct measures.

Keywords
Corporate Social Responsibility, environment, Carbon Tax, obliquity

This journal article is available at ePublications@bond: [Link]

 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY
AND THE CARBON ECONOMY:
A CASE FOR CSR, THE TRIPLE BOTTOM LINE AND
OBLIQUITY

Sabina Medarevic ∗

Expenditure in pursuit of the goals of Corporate Social Responsibility (CSR)

is increasingly compatible with profit-maximisation. The benefits of adopting
CSR can have significant advantages for both shareholders and the
environment, particularly when undertaken voluntarily. But another factor in
favour of CSR is the oblique pressures brought to bear from a sense of moral
obligation, a more ethical approach, sweeping into boardrooms. Obliquity
may achieve even more than direct measures.

I INTRODUCTION
In 1970, the 20th century’s most prominent economist, Milton Friedman, famously
stated, ‘the social responsibility of business is to increase profits’. 1 Companies, along
with the directors who run them, and the marketplace, are there to make money for
the shareholders – who are sometimes inaccurately called the ‘owners’. 2 All decisions
made by company directors should be in the interest of benefiting those who have
invested in the company. This is the ‘shareholder primacy theory’. We can argue,
instead, that the goal of business should and can aim to maximise returns and strive
for sustainability. Indeed, to continue with the ‘shareholder primacy theory’ is to risk
long-term profitability given the finite supply of resources on which these companies
rely. This article argues the case for voluntary uptake of CSR principles based on
both financial and environmental goals.

II CSR, SUSTAINABILITY AND THE ENVIRONMENT

The primary resources on which businesses rely for energy are finite. They will run
out. At the current rate of consumption, statisticians have calculated that the world
has approximately 15,637 days worth of oil, 152,234 days of coal and 61,064 days of

∗ Teaching Fellow, Bond University, Faculty of Law. The author gratefully acknowledges the
assistance of Professor Jim Corkery.
1 Milton Friedman, ‘The Social Responsibility of Business is to Increase its Profits’, The New York Times
Magazine (New York), 13 September 1970.
2 The shareholders are really not the owners of the company; they own shares or stock in the
company. Like human beings, companies own themselves. Thus the shareholders are not the
‘principals’ in the corporate equation; the company itself is the principal, and the directors are the
agents. This is the reality. Often we say things that defy this reality. For example, we sometimes say
that directors owe their duties to the company and to the shareholders. Strictly-speaking, they do
not owe duties to the shareholders (unless a statute creates such a duty, of course).
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

gas remaining. 3 As primary resources are depleted so too is their profitability. Of

course, once these resources are exhausted, the current cycle of industry will stall. If
business cannot be conducted one way, something needs to change. However, if this
process is carelessly abused, accountability for environmental devastation will not
exist.
CSR is a commitment by businesses to consider, not just the shareholders of an
enterprise, but the interests of all stakeholders impacted by its activities. These
include the employees, the consumers and suppliers of the business, the community
in which it operates, and the environment. This article particularly focuses on the
environmental implications of adopting CSR.
CSR contemplates more than pure legal obligations imposed by statute. The
commitment is a holistic approach to business that, in light of the state of the
environment, attempts to address more than the financial bottom-line. CSR is
predicated on the belief that going about ‘business as usual’ is simply not
sustainable.
The global environmental movement, recognising this risk, highlights the rapid rate
at which industry is depleting the environment and thus threatening the prosperity
of business in the long-term, in an attempt to encourage companies to amend their
current business practices and incorporate CSR.
The implications of carrying on ‘business as usual’ and failing to incorporate CSR
might include the development of a second market place, where the environmental
repercussions of our industries are traded. In effect, this would create a carbon
economy in which industries’ harmful environmental practices are tolerated, for a
price.

Benefits of CSR in business—and obliquity in goals

There are clear benefits to integrating CSR into business - both financial and
environmental. The overt focus may be the financial gains from pursuing CSR,
however the oblique outcome will be one of sustainability. Obliquity 4 is attractive,
for it can provide a means of decreasing detrimental environmental effects without
demanding direct action. The integration of CSR into business will help make
businesses globally aware of the issues and the needs of the environment, obliquely
affecting every industrial decision and promoting the development of substitute
energy sources. By incorporating business practices that thoughtfully consider the
effect on the environment, finite natural resources will be stretched further.

3 Worldometers, Worldometers: Real World Statistics, (7 December 2011) <[Link]

info/>.
4 An astronomical term, ‘obliquity’ describes the angle of tilt of the earth's axis of rotation. It has also
come to mean that, to achieve something, it may be best not to chase it directly. Maybe you can
achieve more indirectly. Obliquity: Why our goals are best achieved indirectly by John Kay (Penguin
2011) argues that the happiest people are not always those who set out ‘to be happy’. So, too, the
cleanest country may not be the one that legislates directly to demand cleanliness, but the one for
whom this outcome is an indirect benefit of other cleverly-chosen goals.
2
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

So what are the commercial benefits to integrating CSR into business, that would
allow this obliquity in environmental goals to infuse even the most singularly profit-
focused businesses?
A sustainable relationship with consumers is one key advantage. CSR reflects trends
in consumerism. Consumers are progressively better educated about the plight the
environment is facing. The general population appreciates the role it must take to
slow down the rate of decline. As a result, consumers are ‘ethically consuming’ –
deliberately purchasing products that consider the impact on the environment (along
with the impact their choices will have on the people and places from which such
products are derived). This includes anything from the cars they drive, to the
detergents they use. As a result, through a CSR-friendly image, businesses can
encourage and build on loyalty to an eco-friendly brand. Such an image would need
to accurately reflect the company’s decision-making record. The Corporate
Responsibility Index encourages companies to divulge their CSR record in order to
be benchmarked against others. 5 Companies stand to improve their public image by
improving their CSR records.
Incorporating CSR into business practices promotes efficiency. By eliminating waste,
whether it is through recycling or innovation, 6 enterprises can simultaneously benefit
the environment and lower the cost of production, in turn improving profit margins.
While the argument for CSR is strongest when it gives rise to immediate commercial
benefits such as savings and increased profits, implementing CSR practices often
bears an initial cost. The question then becomes: what makes CSR worthwhile?
In the long-term, aspiring to be more efficient promotes a culture of competition.
Competitors striving for efficiency gains will naturally promote a climate of
innovation, allowing for new technologies to emerge. Increased efficiency also
promotes a more sustainable business model, and that attracts a more satisfied
workforce, furthering the long-term sustainability of a business. 7
Taking on the obligation to limit the damage inflicted on the environment also
decreases the likelihood of government regulation. By going beyond what is legally
required at the present time, businesses that support initiatives benefitting the
environment are less likely to be adversely impacted by any legislation that is
introduced in the future. This means they reduce the risk of consequences for non-
compliance and we begin to witness gradual transitions that are self-motivated
rather than dictated by changes in law.

5 Corporate Responsibility Index (date of last access) <[Link]

6 For example, Anheuser-Busch made small adjustments to the manufacturing process of its beer cans.
Busch now saves 21 million pounds of metal per year by trimming an eighth of an inch off the
diameter of its beer cans without reducing the volume of beer in the can (Paul Hawken, Amory
Lovins and Hunter Lovins, Natural Capitalism: Creating a New Type of Industrial Revolution (Rocky
Mountain Institute, 2000).
7 Atle Blomgren, ‘Does Corporate Social Responsibility Influence Profit Margins? A Case of Executive
Perceptions’ (2010) 18(5) Corporate Social Responsibility and Environment Management,
<[Link]
3
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

Finally, implementing CSR practices would ensure that the same goal of carbon
taxing or pricing is ultimately achieved, without the additional fiscal burden of a
new tax.

Is CSR improving the bottom line?

Powerful CSR and a good financial bottom line can co-exist. If one accepts that
having no CSR decreases profits in the long run, then the reverse may be true. But
how can a business be sure that investing in CSR will improve the bottom line?
Causality is unclear. It may be that the research shows such a connection between
profitability and CSR because only profitable industries can afford to invest in CSR. 8
The research tying CSR to improving a company’s profits is still inconclusive. 9 What
is certain is that CSR does improve the ‘triple bottom line’. This concept looks
beyond shareholder primacy, assessing how well the company serves the interests of
the society and the environment, alongside the shareholders. It considers how the
company affects its employee recruitment, retention and motivation, learning and
innovation, reputation management, risk profile and risk management,
competitiveness and market positioning, operational efficiency, investor relations
and access to capital, and licences to operate. 10 The ultimate goal is long-term,
prosperous sustainability - not immediate profit.
Members of the Corporations and Financial Services Division of the Australian
Treasury comment: 11
In 2006, both the Parliamentary Joint Committee on Corporations and Financial
Services and the Corporations and Markets Advisory Committee released reports
examining the extent to which Australian companies should adopt corporate social
responsibility. The reports concluded that corporate social responsibility can be an
important means for companies to manage non-financial risks and maximise their
long-term financial value.
[A] well managed company will generally see it as being in its own commercial
interests, in terms of enhancing corporate value or opportunity, or managing risks to
its business, to asses and, where appropriate, respond to the impact of its activities on
the environmental and social context in which it operates. Companies that fail to do
so appropriately may jeopardise their commercial future (CAMAC 2006).
Companies that embrace the concept of corporate responsibility are realising that the
long-term financial interests of a company are not ‘mutually exclusive’ with acting
fairly in the interests of stakeholders (other than shareholders) (PJC 2006).

8 Andrew A King and Michael J Lenox, ‘Does It Really Pay to be Green: The Empirical Study of Firm
Environmental and Financial Performance’ (2001) 5(1) Journal of Industrial Ecology 105.
9 Blomgren, above n 9.
10 Matthew Brine, Rebecca Brown and Greg Hackett, ‘Corporate social responsibility and financial
performance in the Australian context’ (date of last access), Australian Treasury.
<[Link]
11 Ibid.
4
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

Taking on CSR – pull don’t push

CSR can be implemented by a business without government intervention, yet it often
is undertaken through consumer pressure. This self-motivated approach can often be
less unsettling than changes imposed by legislation. Here, CSR is proposed as a part
of the core business operations of a company, rather than a separate ‘add on’,
distinguishing it from corporate philanthropy, which may be funded out of
operations that are damaging to the communities in which business is conducted. 12
However, governments are increasingly regulating the impacts that businesses have
on the environment themselves, while simultaneously enacting legislation that
directly or indirectly mandates minimum CSR standards required for businesses to
operate. Instead of waiting for such government action, businesses should consider
adopting CSR by considering their product’s entire life cycle. This means taking into
account not only how to get the product into the consumers’ hands and the related
environmental impact, but also how the product will be used, and, ultimately,
disposed of. 13 By considering how the product will end its life, the business can then
implement more sustainable means of production as well as developing a method of
minimising their carbon footprint. This is done by counteracting any damaging
impact the production process may have with a system that helps to nullify it. 14
By incorporating CSR to this extent, a business will take responsibility for its impact
on the environment and the future. If every business did the same, the exhaustion of
the non-renewable resources would be thwarted.

Carbon tax – domestic and global

Greenhouse gases, such as carbon dioxide, have been proven to deplete the ozone
layer and cause global warming. Global warming is alleged to cause catastrophic
environmental events like larger storms, expanding deserts and the melting of the
polar ice caps, resulting in rising sea levels—events that are of special relevance to
the Australian population. Theories and predictions relating to global warming are
still debated, with sceptics mounting strong criticisms about the scientific
methodology and rigour of the environmental majority. That debate is not pursued
here. This article assumes such research could be valid. Therefore, if the danger of
ignoring such predictions is greater than the cost of actions to cure or alleviate the
problem, it may justify spending.
The processes of industries, particularly the burning of fossil fuels for energy, result
in the release of carbon dioxide as a by-product, contributing to the problem of
global warming. Depleting non-renewable resources, for example by cutting down
trees, also exacerbates the problem because trees might otherwise counteract the

12 Ibid.
13 HP owns massive e-waste recycling plants, where enormous shredders and granulators reduce four
million pounds of computer detritus each month to bite-sized chunks - the first step in reclaiming
not just steel and plastic but also toxic chemicals like mercury and even some precious metals. HP
will take back any brand of equipment; its own machines are 100 percent recyclable.
14 HP, Starbucks, Continental Airlines, Suncor and Tesco frequently make top 10 lists of companies
that have implemented recycling systems that curb the damage of their manufacturing processes.
5
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

carbon dioxide by converting it into oxygen, a gas that is not harmful. Such harmful
actions could, if the research is correct, put the Australian population at greater risk.
Businesses have, thus far, proven unwilling to bear the cost of actions to cure or
alleviate the problem. Therefore, to make businesses responsible for the carbon they
release into the atmosphere, the government has intervened: proposing, debating
and eventually implementing a tax or price on carbon. A carbon tax, as its name
suggests, taxes the carbon released into the atmosphere. The more carbon (and thus
the more environmental detriment), the more tax is collected. To minimise the tax
payable, businesses may seek out ways to minimise the carbon their processes emit.
As a cost-saving measure, this would reduce the carbon emissions and help slow
down (and eventually stop, if the tax was severe enough), the detrimental effects
such emissions cause. The government’s decision to adopt a carbon tax is an indirect
way of forcing environmental CSR on business—it is a financial pressure to do good
environmentally—which falls short of legislating specific provisions in relation to
CSR, as was done in the UK. 15
Further, the tax collected on a national level could then be used to fund initiatives
that promote innovation in technologies that would deviate from processes of
production that rely on expelling carbon into the atmosphere. 16 These new
technologies would be more environmentally sound and would, in turn, reduce the
dependence on fossil fuels, slowing down the rate of their depletion.
The mining sector in Australia has called the tax ‘doomsday’, arguing that the tax
will close coal mines, risk thousands of jobs in a nation with increasing
unemployment, raise power bills and hurt international competitiveness. 17 Resource
industries that would be most impacted by this tax could adapt, minimising the costs
of this tax in two ways: first, they could change operations entirely, moving away
from non-renewable to renewable means; or second, they could amend existing
practices to ensure that carbon emissions are minimised. ExxonMobil and its CEO
have, in the past, denied responsibility for any detrimental environmental effects and
stressed that their role was to maximise profits for their shareholders. Their business
was in oil and they had no business in exploring or fostering alternatives since these
were less profitable. In June 2012, in their Corporate Citizen Report of 2011, the
company reported a change of tune - investing $440M into improving energy
efficiency, reducing flaring and reducing greenhouse gas emissions.18 After a long
resistance, it appears the biggest offender is reconsidering.

15 Section 172 of Companies Act 2006 (UK) provides that directors have an obligation to consider
stakeholders in the decision-making processes for the success of the company. Amongst the more
traditional ‘shareholder primacy’ considerations, there is a specific recognition of the need to
consider the long term consequences of any decision (s 172(1)(a)), the interests of employees (s
172(1)(b)) and the impact of the company’s operations on the community and environment
(s172(1)(d)).
16 Jim Corkery, ‘A Carbon Tax – Onwards’ (2009) 19(1) Revenue Law Journal.
17 Sam Favate, ‘Australia Moves Closer to Carbon Tax; A Familiar Debate Rages’ on Law Blog – Wall
Street Journal (12 October 2011) <[Link]
carbon-tax-a-familiar-debate-rages>.
18 Exxon Mobil, Corporate Citizenship Report 2011, June 2012 <[Link]
/Files/news_pub_ccr2011.pdf>.
6
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

In addition to minimising the costs of such a change, companies could look to the
commercial benefits. Tax concessions for adopting these new technologies would
make the switch more attractive. Businesses that are seen to be taking responsibility
for their own carbon emissions would be afforded these tax concessions, with the
costs being ultimately born by the consumers.
Such economic motivation to minimise business costs stands to benefit the
environment by reducing the emission of greenhouse gases such as carbon dioxide.
Given the reluctance of businesses to spend money on this problem voluntarily, the
government took action to improve their businesses and resource technologies in the
long-term:
[C]arbon emissions [must] be taxed to some extent (with no taxation, coal and gas-
fired electricity still look[s] cheaper). At heart, putting a price on carbon is a political
decision which will be taken and accepted to the extent people accept that they have
a responsibility towards future generations and show a willingness to bear (some of
the) cost for highly diffuse externalities. Someone will pay for all that carbon in the
atmosphere, we just don't know who or when exactly; putting a price on carbon is a
collective way to acknowledge that cost and integrate it to current modes of power
production. 19

Adopting a carbon tax is a legal matter. Not following ‘rules’ has repercussions in
law. Perhaps that is what the Kyoto Protocol (intended to curb carbon emissions
worldwide) was lacking—consequences for non-compliance. This was recently
recognised at the UN Summit on Climate Change in Durban. Although reluctant,
even China and India folded to the pressures of the international majority in
agreeing to be bound by measures to minimise carbon emissions.
The carbon tax concept is by no means a new one. Finland introduced the world’s
first in 1990. 20 Since then, Sweden, Norway, Denmark, Costa Rica, Switzerland,
Ireland and India have followed suit. Other countries, such as France and Taiwan,
have had heated debate over introducing one. In North America, certain US states
(Maryland, Colorado and California) and Canadian provinces (Quebec, British
Columbia and Alberta) have also introduced carbon taxes. Other nations have
favoured an Emissions Trading Scheme (such as most EU member countries). 21 It
may be that some schemes will prove more effective and some less effective – but
that is a matter for other discussion. Nevertheless, the various approaches do show a
global recognition, at government level, of the role oblique measures have to play in
protecting the environment as a stakeholder.
The argument follows: had Australia not implemented and collected the tax itself,
other countries, particularly those of the EU, would have gained the advantage by
enforcing their own laws and policies for carbon tax. In 2012, for example, Qantas

19 ‘Exxon Mobil, A view to 2040’ <[Link]

20 Anonymous, ‘Factbox: Carbon taxes around the world (4 March 2012), Special Broadcasting Service
<[Link]
21 Department of Climate Change and Energy Efficiency, ‘Global action – Facts and fiction’ (4 March
2012), Australian Government <[Link]
[Link]>.
7
 ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY

airfares would have increased because of a 15% penalty imposed by the EU on

carrier countries that have not implemented a carbon tax. 22 Oblique pressure from
the EU worked it appears, even in relation to environmental goals, in other countries.

CONCLUSION
The heaviest emitter of carbon pollution is China—about 20% of the world’s carbon
pollution. But, per capita, Australia’s emissions are more than four times those of
China. And, in the last 15 years, despite the prophecies of doom, China has reduced
its carbon pollution per unit of GDP more quickly than any large economy. 23 The
country’s save-the-planet ethic is behind the drive, just as it is in Japan and now in
Australia. There, of course, is government stricture and legislation, too —supporting
and enhancing this general demeanour of environmental concern and its strong
oblique influence.
The US is cataloguing greenhouse gas emissions from the most powerful emitters,
providing a statistical base for targets for reductions of emissions. In early 2012,
Obama’s administration announced an online tool for making public the greenhouse
gas emissions of 29 different industrial categories.
Being the largest energy user in the US, the federal administration there has accepted
the target of a 28% reduction in carbon emissions by 2020, along with a 13% target
reduction in indirect emissions, for example, the carbon cost of commuting to work.
They reckon this will save $11 billion dollars in energy costs and unconsumed
millions of barrels of oil. The Obama administration has seen almost a doubling of
renewable energy generation from geothermal, wind and solar sources since 2008.
Despite the controversy surrounding the introduction of a carbon tax or price in
Australia, its implementation will address an environmental problem while being
aligned with CSR in a manner that could make businesses more, not less, profitable
and sustainable.
Corporate responsibility towards the environment is absorbed and honed through
publicity and education, the influence of educated trends, and a core concern for the
continued liveability of the environment – oblique rather than direct pressures. With
CSR — specifically carbon reduction — weighing on the corporate mind, the many
decisions of the corporate body may be incrementally tailored to the needs of the
environment and the instincts for preservation of our way of life. In market-speak,
the direct and indirect costs of carbon need to outweigh the profits of pollution, in
the corporate subconscious. That is where victory will be won against carbon and
any other pollution.

22 John Birmingham, ‘No Carbon Tax? Europe Will Make Us Pay Instead’, Sydney Morning Herald
(online) (31 May 2011 <[Link]
[Link]>.
23 JA, ‘A Deal in Durban’, The Economist (online) 11 December 2001 <[Link]
blogs/newsbook/2011/12/climate-change-0>.
8