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Environmental Ethics: Bernie Madoff’s Pyramid Scheme Is an Important Lesson

Mention “unethical business practices” and no doubt Bernie Madoff comes to mind, who bilked investors of $18 billion in a pyramid scheme prosecutors called the largest fraud in US history. But perhaps we should also consider the Fukushima Daiichi nuclear crisis from an ethical standpoint. An independent fact-finding commission convened by the Japanese government called the 2011 meltdowns “a preventable disaster” that involved “government-industry collusion.” This suggests that the worst nuclear disaster since Chernobyl was sadly also an ethical failure.

It’s easy to see how these incidents connect environmental ethics to business practices, and are a lesson for all corporations right now. And in fact, environmental ethical concerns held the top spot on the agenda at this month’s meeting of UNESCO’s World Commission on the Ethics of Scientific Knowledge and Technology (COMEST) in Paris, where topics included global imperatives to head off climate change and conserve water. So the commission is sending the message that we need to expect more from businesses when it comes to protecting the environment.

This helps us see a parallel between fiscal fraud and environmental transgressions. No one doubts that Bernie Madoff’s book-cooking was unethical, but conducting business in a way that degrades the environment is its own kind of pyramid scheme, built on the risky delusion that we have unlimited resources, and waste and pollution costs can be kept off the books indefinitely.

Fortunately, the ethical trend line is positive — especially in education. Business schools have begun expanding their ethics curricula beyond financial malfeasance to incorporate environmental issues, according to research by the Aspen Institute, whose biannual “Beyond Gray Pinstripes” report ranks MBA programs according to how well they integrate social and environmental issues. And the good news is that the number of schools requiring students to take a business ethics course has increased from 34 percent in 2001 to 79 percent in 2011.

America’s top business programs were among the first to make the shift, including Harvard Business School (HBS) where “Leadership and Corporate Accountability” is a required course. But those lessons don’t always transfer from the classroom to the boardroom, according to Lynn Paine, a HBS professor and co-founder of the School’s Leadership and Corporate Accountability Group.

“If you’re thinking about your quarterly financial performance target, it can be challenging to also be focused on reducing your water footprint or meeting your greenhouse gas emissions targets,” Paine told me. Yet environmental challenges — like supply chains — are global in nature, which makes them inherently difficult for government entities to influence, even through multi-national entities and treaties. The worldwide nature of many corporations, on the other hand, gives them inherent and enormous power ­– and responsibility.

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