Copyright 2009 Pearson Education, Inc.

publishing as Prentice Hall

Chapter 5
Ethics and the Environment
Multiple Choice Questions
Is It Just Me Or Is It Getting Hotter In Here?
1. In the Is It Just Me scenario, which company is the focus of the scenario?
a. Exxon
b. BP
c. Shell
d. Chevron
Difficulty: Easy Page 82
a
2. In the Is It Just Me scenario, what is Exxons primary contribution to reduce global
warming?
a. Investing in alternative fuels
b. Investing in more efficient engines
c. Investing in more efficient refining processes
d. Selling the oil that is used to help operate wind turbines
Difficulty: Moderate Page 82
d
3. In the Is It Just Me scenario, which oil company made the largest investment in
alternative fuels?
a. Exxon
b. BP
c. Shell
d. Chevron
Difficulty: Moderate Page 82
c
4. In the Is It Just Me scenario, when Lee Raymond retired as CEO of Exxon, what was
the value of his retirement package?
a. $20 million
b. $50 million
c. $200 million
d. $400 million
Difficulty: Difficult Page 82
d

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The Tragedy Of the Commons

5. What is the tragedy of the commons?
a. common mistakes are made all the time pertaining to environmental issues
b. it is difficult to obtain a common commitment on any environmental issue
c. free unrestricted access to any resource will ultimately ruin the resource
d. common stakeholders do not always agree with the solution to an environmental issue
Difficulty: Easy Page 83
c
6. Which historical philosopher established the basic tenet of the tragedy of the
commons?
a. Plato
b. Aristotle
c. Socrates
d. Kant
Difficulty: Difficult Page 83
b
7. Which modern author presents the current interpretation of the tragedy of the
commons?
a. Garrett Hardin
b. John Elkington
c. Milton Friedman
d. Edward Freeman
Difficulty: Difficult Page 83
a
8. What example is given in the textbook to demonstrate the tragedy of the commons?
a. building near an ocean
b. using more energy than is needed
c. cows grazing on land
d. continue to plant the same crops without rotating them
Difficulty: Moderate Page 83
c
9. The tragedy of the commons refutes whose theory?
a. John Stuart Mill
b. Adam Smith
c. Jeremy Bentham
d. Henry Sidgwick
Difficulty: Difficult Page 83
b

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Natural Environment As A Stakeholder

10. If the natural environment is considered a stakeholder, a stakeholder would be defined
as:
a. any individual that has a vested interest in the firm
b. any individual that has a financial interest in the firm
c. any entity that has a vested interest in the firm
d. any special interest group that has a vested interest in the firm
Difficulty: Easy Page 83
c

Natural Environment As A Competitive Advantage

11. Which of the following is a Generic Competitive Environmental Strategy?
a. Ecoeffectiveness
b. Ecoimprovement
c. Ecoefficiency
d. Ecoperformance
Difficulty: Easy Page 84
c
12. Which Competitive Environmental Strategy focuses on low cost competitive
advantage and organizational process competitive focus?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Moderate Page 84
a
13. Which Competitive Environmental Strategy focuses on differentiation competitive
advantage and organizational processes competitive focus?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Moderate Page 84
b
14. Which Competitive Environmental Strategy focuses on low cost competitive
advantage and products and services competitive focus?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Easy Page 84
c

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15. Which Competitive Environmental Strategy focuses on differentiation competitive

advantage and products and services competitive focus?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Moderate Page 84
d
16. Which Competitive Environmental Strategy recommends having ISO 14000
certification?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Difficult Page 85
b
17. Which Competitive Environmental Strategy recommends focusing on ecodesign?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Difficult Page 85
a
18. Which Competitive Environmental Strategy corresponds with Timberland putting an
environmental nutrition label on the boxes of their shoes?
a. Ecoefficiency
b. Beyond Compliance Leadership
c. Environmental Cost Leadership
d. Ecobranding
Difficulty: Difficult Page 86
d

Voluntary Environmental Compliance

19. Which of the following was not recommended for a firm to implement from a
voluntary environmental compliance perspective?
a. Publish an annual report
b. Implement a system to reduce toxic chemical use
c. Implement a system to reduce sustainable products
d. Ensure that the same environmental standards are consistent globally
Difficulty: Easy Page 87
c

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The Cost of Noncompliance

20. In 2005, which company had the largest penalty ever levied by the EPA?
a. Exxon
b. Union Carbide
c. DuPont
d. General Electric
Difficulty: Difficult Page 87
c
21. In 2005, what was the total fined levied on DuPont for hiding the dangers of one of its
chemicals?
a. $5.5 million
b. $10.5 million
c. $14.5 million
d. $16.5 million
Difficulty: Difficult Page 87
d

Examples of Environmental Commitments

22. Which of the following is not a reason why Johnson & Johnson has adopted a policy
on climate friendly energy?
a. reduce operating costs
b. helps meet legal obligations
c. improve the environment
d. enhance their competitive advantage
Difficulty: Difficult Page 89
d

Employees As Environmental Stakeholders

23. Which of the following is not an environmental initiative that could be generated by
any employee within a firm?
a. policies for reuse and recycling
b. policies for hazardous substance reduction
c. policies for environmental training
d. policies for reduction of resources and energy use
Difficulty: Difficult Page 89
c
24. The employees of which company in the Netherlands developed their own waste
reduction and recycling program?
a. Philips
b. Nestle
c. GE Plastics
d. Ford Europe
Difficulty: Difficult Page 90
c

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25. The employees of which company in Finland developed a cleaner diesel fuel?
a. Shell
b. BP
c. Nestl
d. Finoil
Difficulty: Difficult Page 90
c

NGOs As Environmental Stakeholders

26. Which author established the modern environmental movement?
a. Al Gore
b. Rachel Carson
c. Jimmy Carter
d. Garrett Hardin
Difficulty: Easy Page 90
b
27. Which book established the modern environmental movement?
a. The Tragedy of the Commons
b. Silent Spring
c. Inconvenient Truth
d. The Benefits of Triple Bottom Line Reporting
Difficulty: Moderate Page 90
b
28. Which environmental group has the slogan When the last tree is cut, the last river
poisoned, and the last fish dead, we will discover that we cant eat money?
a. Sierra Club
b. Greenpeace
c. Environmental Defense Fund
d. Friends of the Earth
Difficulty: Moderate Page 90
b
29. Which environmental group has the largest membership in the United States?
a. Sierra Club
b. Greenpeace
c. Environmental Defense Fund
d. Friends of the Earth
Difficulty: Moderate Page 90
a
30. What year was the first Earth Day celebration?
a. 1970
b. 1977
c. 1980
d. 1982
Difficulty: Difficult Page 90
a

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31. Which environmental group was formed to address the issue of the pesticide DDT?
a. Sierra Club
b. Greenpeace
c. Environmental Defense Fund
d. Friends of the Earth
Difficulty: Moderate Page 91
c
32. Which environmental group has economists, engineers, computer analysts and
various PhDs on its staff?
a. Sierra Club
b. Greenpeace
c. Environmental Defense Fund
d. Friends of the Earth
Difficulty: Difficult Page 91
c
33. Which environmental group identifies environmental accounting tricks that firms may
play?
a. Sierra Club
b. Greenpeace
c. Environmental Defense Fund
d. Friends of the Earth
Difficulty: Moderate Page 91
d

Communicating the Firms Environmental Commitment to Its Stakeholders

34. Stanwick and Stanwick found that:
a. There was a positive relationship between a firms environmental disclosures and
financial performance.
b. There was a negative relationship between a firms environmental disclosures and
financial performance.
c. There was no significant relationship between a firms environmental disclosures and
financial performance.
d. There was not enough data to determine the relationship between a firms
environmental disclosures and financial performance.
Difficulty: Easy Page 91
a

35. Stanwick and Stanwick found that:

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a. firms with a low level of financial performance had the highest incidences of
environmental policies.
b. firms with a medium level of financial performance had the highest incidences of
environmental policies.
c. firms with a high level of financial performance had the highest incidences of
environmental policies.
d. they could not determine a relationship between level of financial performance and
incidences of environmental policies.
Difficulty: Moderate Page 92
b

Government Regulations
36. Which of the following government regulations is the oldest?
a. National Environmental Policy Act
b Clean Air Act
c. Clean Water Act
d. Clean Ground Act
Difficulty: Difficult Page 92
c
37. What was the first government regulation that protected the general public from
environmental problems?
a. Federal Food Drug, and Cosmetic Act
b. Resource Conservation and Recovery Act
c. Safe Drinking Water Act
d. Resource Recovery Act
Difficulty: Difficult Page 92
a

Environmental Accounting Issues

38. Which of the following accounting rules relates to environmental liabilities?
a. FAS 1 Accounting for Liabilities
b. FAS 5- Accounting for Contingencies
c. FAS 7 Accounting for Reserves
d. FAS 8 Accounting for Environmental Investment
Difficulty: Difficult Page 94

Environmental Justice
39. What does NIMBY stand for?
a. New Independent Management BuyIn Yield
b. Not In My Back Yard
c. Negative Image Maintenance Bonus Yield
d, No Initiative, Management By Young Views
Difficulty: Easy Page 94
b
40. The systematic equal allocation of environmental benefits and burdens is called:
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a. environnemental equity
b. environnemental balance
c. environnemental justice
d. environmental cost/benefit
Difficulty: Easy Page 94

Environmental Sustainability
41. The ability of an organization to protect the use of future resources is called:
a. environmental proactiveness
b. environmental sustainability
c. environmental protection
d. environmental responsibility
Difficulty: Easy Page 95
b
42. Based on Grafe-Buckens and Beloe, which of the following is not a major component
of sustainability
a. a system to ensure the sustainable management of the earths natural resources
b. the development of social and institutional structures that would support sustainable
management
c. changes in the legal framework to support sustainability
d. changes in the economic framework to support sustainability
Difficulty: Difficult Page 95
c
43. In the Major Challenges to Sustainability Table, what would be an example of
depletion for developed economies?
a. deforestation
b. soil loss
c. insufficient reuse and recycling
d. overuse of water for irrigation
Difficulty: Difficult Page 96
c
44. In the Major Challenges to Sustainability Table, what would be an example of
poverty of a survival economy?
a. urban and minority unemployment
b. lack of skilled workers
c. population growth
d. income equality
Difficulty: Difficult Page 96
c

45. In the Major Challenges to Sustainability Table, what would be an example of

pollution for emerging economies?

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a. dung and wood burning

b use of toxic materials
c. lack of sewage treatment
d greenhouse gases
Difficulty: Difficult Page 96

The Triple Bottom Line

46. The triple bottom line call also is described as:
a. Population, Pollution, Profit
b. People, Planet, Profit
c. Prevention Protection Population
d. Pollution Population Planet
Difficulty: Moderate Page 96
b
47. 3BL stands for :
a. 3 below level
b. triple bottom line
c. 3 times the business legislation
d. business leverage cubed
Difficulty: Easy Page 96
b
48. The three factors that relate to the triple bottom line are:
a. social, ethical, environmental
b. ethical environmental, financial
c. social environmental financial
d. stakeholder environmental financial
Difficulty: Easy Page 96
c

Equator Principles
49. Equator Principles address:
a. social and environmental issues when financial institutions consider project financing
b. the principles used to help countries along the equator with global warming
c. the principles used by developed countries to help survival economies
d. the principles used by governments to develop global warming solutions
Difficulty: Moderate Page 96
a

50. Which of the following is not a member of the Equator Principles Financial
Institutions?
a. Barclays
b Crdit Suisse

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c. Bank of America
d. Citigroup
Difficulty: Difficult Page 97

Ethics and Climate Change

51. The Greenhouse Gas Effect is:
a. As Greenhouse Gases increase, more heat is trapped in Earths atmosphere
b. As Greenhouse Gases increase, it replaces oxygen in the air
c. Is completely man made since there are no natural Greenhouse Gases
d. Not proven yet to impact the climate
Difficulty: Easy Page 97
a
52. Which of the following is not a Greenhouse Gas?
a. Mthane
b. Nitrous Oxide
c. Hydroflurocarbons
d. Carbon Monoxide
Difficulty: Difficult Page 98
d
53. What is the Kyoto Treaty?
a. a treaty for countries to use alternative fuels
b. a treaty focusing on environmental sustainability
c. a treaty to reduce the level of Greenhouse Gases
d. a treaty for countries to use more nuclear power
Difficulty: Easy Page 98
c
54. From a GDP perspective which country would receive the largest negative impact if
the levels of Carbon Dioxide were to double from 2002 to 2050?
a. United States
b. European Union
c. Former Soviet
d. China
Difficulty: Difficult Page 98
d

55. From a cost (in billions of dollars) perspective which country would receive the
largest negative impact if the levels of Carbon Dioxide were to double from 2002 to
2050?
a. United States
b. European Union
c. Former Soviet

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d. China
Difficulty: Difficult Page 98

Climate Change As A Strategic Option

56. In the Strategic Options for Climate Change Table, what would be considered an
internal company innovation?
a. product development
b. new product/market combinations
c. process improvement
d. internal transfer of emission reductions
Difficulty: Difficult Page 100
c
57. In the Strategic Options for Climate Change Table, what would be considered a
horizontal beyond the supply chain compensation?
a. internal transfer of emission reductions
b. acquisition of emission credits
c. product development
d. process development
Difficulty: Difficult Page 100
b

True/False Questions
58. In the Is It Just Me scenario, Exxon showed their strong commitment to
environmental sustainability.
a. True
b. False
Difficulty: Easy Page 82
59. In the Is It Just Me scenario, Shell showed their strong commitment to
environmental sustainability.
a. True
b. False
Difficulty: Easy Page 82
60. In the Is It Just Me scenario, BP showed their strong commitment to environmental
sustainability.
a. True
b. False
Difficulty: Moderate Page 82
61. The concept of the Tragedy of the Commons can be traced back to Aristotle.
a. True
b. False.
Difficulty: Moderate Page 83

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62. The Tragedy of the Commons supports Adam Smiths invisible hand theory.
a. True
b. False
Difficulty: Moderate Page 83
63. Ecoeffectiveness is a Generic Competitive Environmental Strategy.
a. True
b. False
Difficulty: Moderate Page 84
64. Organizational Processes is one of the categories to develop Generic Competitive
Environmental Strategies.
a. True
b. False
Difficulty: Easy Page 84
65. In 2005, DuPont received the largest fine ever levied by the EPA.
a. True
b. False
Difficulty: Moderate Page 87
66. The Sierra Club is the largest environmental group in the world
a. True
b. False
Difficulty: Easy Page 90
67. Greenpeace has over 4 million members.
a. True
b. False
Difficulty: Moderate Page 90
68. The Silent Spring was written to address the issue of pesticides
a. True
b. False
Difficulty: Easy Page 90

69. Greenpeace was formed in response to the issue of using pesticides in the
environment.
a. True
b. False
Difficulty: Easy Page 90

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70. The Clean Air Act was the first piece of legislation in the United States to protect the
general public from environmental problems.
a. True
b. False
Difficulty: Moderate Page 92
71. Environmental sustainability is best represented by NIMBY.
a. True
b. False
Difficulty: Easy Page 94
72. Equator principles address environmental issues in the food service industry.
a. True
b. False
Difficulty: Moderate Page 96
73. Methane is a Greenhouse Gas.
a. True
b. False
Difficulty: Moderate Page 98

Short Answer Questions

74. Why is the natural environment such an important ethical issue?
The natural environmental is an important ethical issue for two major reasons. The first
major reason is the impact the environment has on stakeholders. If a firm has a negative
impact on the environment it could result in not only the stakeholders not having their
needs met, but could result in permanent damage to stakeholders. If toxic material is
leaked into the ground or billions of pollution participles are released into the area, it
could impact the health of the members of the local community and could even ultimately
lead to the death of many members in the local community.
The second major ethical issue related to the natural environment is sustainability. If
firms do not think of resource allocation from a long term perspective, they will use the
resources at a quicker pace than they can be replaced. This could have a negative
financial impact of the firm and could negatively impact employees, investors, customers,
suppliers, and the local community.
75. How do you determine whether a community has been faced with
environmental injustice?
There could certainly be some subjective measures into the negative short term and long
term impacts a specific facility has in the neighborhood. However, when the costs
outweigh the environmental benefits of the facility, it could be concluded that
environmental injustice has taken place. NIMBY is an effective concept with the

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assumption that the neighborhood has the coordinating power to try to block negative
environmental investments in the local community, As a result, in another level of
environmental justice, those neighborhoods that have the resources to establish a
protection campaign and threaten legal action if necessary have higher odds of winning
the blockage of a facility which would result in a negative environmental impact.
Therefore, the neighborhoods that do not have the resources to mount an effective
campaign will have these negative impact environmental facilities placed in their own
backyards.
76. Is Al Gore the correct person to spearhead the environmental movement?
The simple answer is yes since he is the most recognized celebrity to warn against
global warming. After winning an Academy Award and the sharing in the Nobel Peace
Prize, people listen to what Al Gore has to say about global warming. However, he
certainly had a major misstep when the energy consumption in his house was released to
the public. When you become the spokesman of a particular cause, you need to make sure
that your message can not be challenged. His message was challenged for a while based
on his actions not corresponding with his words. It would have been better for Mr. Gore
to have ordered the re-fitting of his house so that it would be more energy efficient. This
would have been an effective ending to the Inconvenient Truth movie.
77. Can profitability and environmental sustainability co-exist?
Yes, they can co-exist and they better co-exist. It is the responsibility of the firms to
address the long term environmental sustainability and climate change issues. One
question that needs to be asked is why do cars continue to use technology that was
patented in 1806 by Francois Isaac de Rivaz.1 As a result, society is using technology that
is over 200 years old. You can ask your class if there is any other technology that is used
to such extent globally that is two centuries old and results in a negative impact on the
environment. Therefore, alternative fuels and alternative engine designs are long overdue.
At the time of this writing, a barrel of oil is over $110. As a result, these should be
considered environmental opportunities instead of environmental costs. In order for a
firm to survive in the long term, it must focus on both profit and environmental
sustainability.

http://en.wikipedia.org/wiki/Internal_combustion_engine

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