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Economic+Models+of+Sustainable+Prod+_+Mfg,+June+2010 - 1...

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1 Department of MS&E June 19, 2010 Management Science and Engineering Terman Building, Stanford University, Stanford, CA 94305-4026 Economic Models for Environmental and Business Sustainability in Product Development and Manufacturing Robert C. Carlson, Dariush Rafinejad 1 ABSTRACT The current mode of economic activities has led the world to a potential environmental catastrophe. Government attempts to balance business and environmental sustainabilities by enacting regulations in reaction to environmental, health and safety mishaps have largely failed. Here we discuss the economic/legal/social context within which decisions regarding products and processes have been made to understand why the sustainability balance has not been achieved. We review four models from the literature which propose frameworks for sustainable development to see how the conditions in each would drive business decisions. We posit that a new economy model of distributed capitalism is required to achieve the desired sustainability balance. Key Words: Sustainable Development, Economic Models, Environmental Laws and Regulations, Sustainable Products and Manufacturing 1 Tel.: 1-650-269-9944; E-mails: [email protected] ; [email protected]
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2 1. Introduction Over the past several decades, major global corporations and manufacturers of products have gone through multiple evolutionary phases in their outlooks toward environmental sustainability. These companies have generally evolved through stages of no-concern, to pollution-control, to pollution- prevention, and to resource efficiency maximization in lockstep with governmental regulations. However, the adoption of sustainable development as an imperative strategic vision is often lacking in the industrial enterprises. Although the issues of environmental and business sustainability have been addressed by several leading scholars, usually either environmental or business sustainability has been focused on to the detriment of the other. For example, some scholars have argued that the environmental strategy of a firm must be solely based on its shareholder value growth objectives (Reinhardt, 1998). Common goods such as the environment are in the domain of governmental responsibility and could be protected through legal action. Some advocate “progressive” governmental regulations each as a coordinating force that would integrate the interrelated environmental factors and would balance the common-good with the good of business (Porter & van der Linde, 1995). They argue that strict governmental regulations promote technological innovation in sustainable products and manufacturing and encourage competitiveness. Some believe that regulations impede economic growth and should be avoided at all costs. They suggest removing the burden of regulations and allowing free market forces to resolve obstacles to business sustainability. “Enviro-capitalists”, if allowed to prosper free from the yoke of regulations,
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