75 Should the environment be considered a stakeholder?

Our definition of a stakeholder was “anyone who most would agree is significantly affected (positively or negatively) by the decision of the company, and who in turn has the potential to affect the company.” Should the environment be considered a stakeholder?

Most people would likely agree that companies are significantly affected by the environment in which they operate. This is true both for companies that deal with the environment as part of their core business (such as food producers, loggers, or construction companies), and for other businesses, through those business’s other stakeholders. For example, a company may find it hard to recruit employees to an area with significant environmental concerns, or easier to recruit employees to an area with ample outdoor recreation. Or, local communities affected by a company’s operations may respond in substantial ways to degradation of their local environment. The film Erin Brockovich dramatizes the story  of a legal battle against a company for contaminating groundwater in a local community which resulted in medical problems for community members. The company paid out $333 million in settlement among the community member plaintiffs. Most people would also likely agree that a company affects the environment! Again, this is true for both companies dealing with resource extraction, as well as companies who affect the environment through their supply chain, purchasing, office location, and other decisions.

The notion that the environment should be treated as a stakeholder like a person is relatively new. But given the prominence of the environmental movement worldwide, no well-managed business today should be conducted without an awareness of the tenuous balance between the health of the environment and corporate profits. It is quite simply good business practice for executives to be aware that their enterprise’s long-term sustainability, and indeed its profitability, depend greatly on their safeguarding the natural environment. Ignoring this interrelationship between business and the environment not only elicits public condemnation and the attention of lawmakers who listen to their constituents, but it also risks destroying the viability of the companies themselves. Virtually all businesses depend on natural resources in one way or another.