Intersection of economic and environmental goals of sustainable development initiatives

Abstract

Abstract There is growing interest in integration of sustainability into business planning decisions under a sustainable development framework. Environmental accounting methodologies for collection, measurement, and disclosure of financial and environmental impacts of strategic and operational managerial decisions are developed and utilized by business entities worldwide for effective management of both organizational and operational environmental protection policies. At the operational level, while extant literature has primarily focused on managerial decision making under different voluntary and regulatory emission pricing schemes, the intersection of economic (monetary) and environmental impact (non-monetary/physical) dimensions of sustainable development goals has received scant attention. This paper examines the intersection of the environmental and economic goals of sustainable development initiatives of a focal firm, which is engaged in the primary activities of production and/or transportation and storage of a single product within a forward supply chain. This paper assumes the presence of a responsive “green market ” through modeling of consumer awareness and response induced by the firms' environmental footprint disclosures. Through quantitative modeling approach, normative conclusions are derived on the compatibility of economic and environmental goals of sustainable development initiative. The results indicate the presence of convergence, divergence, and avoidance decision zones in balancing the environmental and economical goals of the firm's sustainable development for production and storage efficiency. The paper explicitly establishes the boundaries of the operational zones within the domain of the firm's environmental reduction and operational efficiency efforts. The results demonstrate that the efficacy of voluntary or regulated emission reduction targets depends on the firm's existing environmental and operational cost structures, and hence emission reduction targets must be well planned to avoid adverse environmental impact or operational inefficiencies. Furthermore, it is demonstrated that in a green responsive market, there may exist critical emission reduction thresholds below which the economic and environmental benefits of sustainable development initiatives diverge.