Assignment:
In our discussion of alternative objectives of firm decision-making, we expanded the profit motive to consider the goal of sustainability. As part of the motivation for studying the economics of sustainability, we identified (a) the proliferation of definitions and uses of the term, (b) increasing recognition of sustainability concerns on the part of the business community, as evidenced by increasing rates of voluntary sustainability reporting, and (c) a growing concern among consumers regarding the sustainability characteristics of the products they purchase and use.
While at the macroeconomic level the concern over sustainability provides a unique objective for government and society, namely the objective of optimal scale, at the microeconomic level sustainability provides an objective that is unique, but related to, the more traditional and ubiquitous objective of profit maximization. Some actions may further one objective at the expense of the other while others may pay a double dividend, promoting sustainability while increasing profits.
This spring's written assignment builds upon this discussion. You will be conducting a case study on a firm, or perhaps a specific product of a firm (whichever seems appropriate), that is actively promoting/concerned with the sustainability of their operations. While I leave the object of your case study open for you to choose, I advise choosing either (i) a firm that is currently engaging in corporate sustainability reporting or (ii) a product whose producer claims to be a ‘sustainable' or ‘green' product.
The first step in this assignment will therefore be to choose a company or product to analyze. Excellent starting points include: the Global Reporting Initiative's (GRI) database of sustainability reports, https://database.globalreporting.org/;; the certified clients list of SCS, https://www.scsglobalservices.com/green-product-certification; or the database of sustainability reports found at https://www.sustainability-reports.com/annual-reports/. Of course, there are many other ways to choose a product or firm, but these are useful starting points.
This assignment asks you to identify three actions taken by the firm you have chosen that affect the sustainability of their operations. For each action, you will discuss how it affects the objective of sustainability and, using the perspectives on profit-maximization developed in our class, relate those actions to the firm's pursuit of profits. Details on expectations are provided below.
Expectations and Deliverables
The case study will take the form of a short, formal writeup. The following questions should be addressed:
1) What is the company and what do they do? Provide some background into what the company produces, where they operate, etc.
2) What is the structure of the market that the company primarily participates in? Define the market in which the company participates. Some companies may participate in many distinct markets. If this is the case, discuss the market that you consider to be the primary market in which the firm participates. As part of this discussion, use the tools we developed in class to make a claim about what type of market this is. I suggest you use the concentration ratio as your guide.
3) Analyze three actions taken by the firm that affect the objective of sustainability? At least one of these actions should relate to environmental sustainability and at least one should relate to social responsibility. For each action, explain how it affects the environment and/or society, and how those impacts contribute to or detract from the objective of sustainability. Then interpret each action's impact on the firm's profits. Is it a profit-maximizing action? Does it negatively impact the firm's profits? Explain and, where possible, use the tools and ideas that we have developed in class to back up your discussion.
4) Conclude by discussing what appears to be the firm's motivation behind their actions. Comment on whether their concern over sustainability appears to stem from (a) demands from investors and other stakeholders, (b) profit maximization and cost minimization opportunities, such as tapping into ‘green' segments of the market or reducing waste and increasing efficiency, or (c) some internal motivation of the company's owners and/or management, potentially evidenced by the origins or mission of the organization. Explain.
Please address these four issues for the firm of your choosing over a recent time period. I leave a lot of flexibility regarding the company and time period under analysis. Submit a typed write-up through the link on Blackboard, complete with any and all references that are appropriate. The final product should be anywhere between 3 and 10 pages, depending upon how much information is available. Grading will be based upon the degree to which you address the four issues above and how well you relate the firm's activities to the concepts of profits and sustainability - full credit requires a thoughtful and thorough discussion of each.