G202 3/6

Exam Information

• Review sheet is available on Canvas.

• Check individual exam arrangements before the exam on Thursday next week.

• EAS accommodations are closed for exam two but can be arranged for exam three.

Levi Strauss Case Analysis

• Levi Strauss is known for its progressive brand, advocating for social issues like racial and LGBTQ justice.

• However, the company has also contributed to pollution through garment production outsourcing.

• Greenpeace pressured Levi Strauss for environmentally friendly practices due to their history with pollution.

• The challenge is whether to collaborate with Greenpeace on setting an industry standard for zero discharged hazardous chemicals (ZDHC).

• The CEO's responsibility is primarily to ensure profit and serve customers, which complicates ethical decisions regarding environmental actions.

Decision-Making Framework

• Levi Strauss is pressured by Greenpeace to spearhead ZDHC but must balance business profitability.

• Game Theory: The decision is evaluated with strategic considerations.

• Levi Strauss must assess whether competitors will cooperate in adopting ZDHC standards.

• There's potential financial risk of voluntarily adopting these standards that might lower profit margins.

• Companies face a dilemma between ethical commitments and financial gain.

• Incentive to Cheat: Without government regulation, there’s temptation to claim compliance without actual practice.

Industry Dynamics

• The ZDHC goal is a voluntary commitment; success depends on collective industry action.

• Failure to achieve cooperation leads to potential reputational damage and financial risks.

• Levi Strauss engaged in significant efforts to create industry synergy, including meeting with other companies.

Environmental Taxes in Canada

• Canada implemented a carbon tax regime aiming to reduce greenhouse gas emissions, a model this contrasts with the U.S., where such policies are less prominent.

• Carbon Tax Details:

  • Federal carbon tax began at $20/tonne, increasing to $80/tonne by April 1 and slated for annual rises to $170/tonne by 2030.

  • Provinces can vary in their carbon pricing structures, affecting rebate eligibility.

Carbon Tax Impacts

• The carbon tax is designed to make fossil fuel use more expensive, encouraging a shift to greener alternatives.

• British Columbia and some territories implemented their own systems before the federal standard.

• Rebates: The government aims to offset tax impact on households by rebates, particularly targeting low and middle-income families.

  • Example: Families in Alberta can receive rebates like $450 every three months.

• Analysis shows that while lower and middle-income households generally benefit, wealthier individuals may financially lose out.

Economic Considerations

• The carbon tax has been criticized for potentially harming productivity in some sectors, notably oil and gas.

• Environmental benefits must be weighed against economic drawbacks in affected industries.

• Questions arise about whether the U.S. should adopt similar policies, with considerations of competitive dynamics and economic impacts on American businesses.

Trading Pollution Permits

• Pollution Permits Concept: Companies can trade pollution permits to allow for more market efficiency in controlling emissions.

  • Firms that can reduce pollution more easily will sell their permits to those facing higher costs to reduce pollution.

• A flexible trading system can lead to overall cost savings and incentivization for greener technology adoption.

• Regulatory Framework: Policymakers can set the initial allocation and market structure of permits to encourage participation in emission reductions without compromising operational profitability.

Summary Activity

• Learning Outcomes: Emphasized the integration of game theory and economic principles in corporate decision-making related to environmental accountability and sustainability efforts.

Exam Information

• Review sheet is available on Canvas.

• Students should check individual exam arrangements before the exam scheduled for Thursday next week.

• EAS accommodations for exam two are currently closed but can be arranged for exam three, ensuring students have the needed resources for success.

Levi Strauss Case Analysis

• Company Background: Levi Strauss is recognized for its progressive stance, advocating for various social issues such as racial justice and LGBTQ rights, positioning it as a socially responsible brand.

• Environmental Concerns: Despite its positive social contributions, Levi Strauss has faced challenges due to pollution stemming from garment production outsourcing.

• Activism by Greenpeace: The brand has been pressured by Greenpeace, a prominent environmental organization, to adopt more sustainable practices due to its historical impact on the environment.

• Ethical Dilemma: The company is currently faced with a challenge regarding whether to collaborate with Greenpeace to establish an industry standard for Zero Discharge of Hazardous Chemicals (ZDHC). This poses ethical questions in balancing profitability with corporate responsibility.

• CEO's Role: The CEO's primary responsibility is to ensure company profitability while fulfilling customer needs, complicating the decision-making process regarding environmental responsibility.

Decision-Making Framework

• Pressure from Greenpeace: Greenpeace is advocating for Levi Strauss to take the lead on ZDHC.

• Financial Considerations: Levi Strauss must weigh the potential financial risks involved in adopting ZDHC standards against the profitability of the company.

• Game Theory Analysis: The situation involves strategic decision-making, where Levi Strauss must consider how competitors in the industry will respond to the adoption of ZDHC standards.

• Ethics vs. Profit: Companies face a dilemma where ethical commitments to sustainable practices may conflict with financial gain, creating tension in corporate decision-making.

• Risk of Non-compliance: Without government regulations to enforce compliance, there exists a temptation for companies to falsely claim adherence to ZDHC standards without enacting meaningful changes.

Industry Dynamics

• Nature of ZDHC: The ZDHC goal relies on voluntary commitments from industries, making collective action critical for success.

• Consequences of Non-cooperation: Failure to rally support could lead to reputational damage and significant financial risks for Levi Strauss.

• Collaboration Efforts: To foster industry synergy, Levi Strauss has engaged in significant efforts, including meetings and collaborations with other industry players.

Environmental Taxes in Canada

• Carbon Tax Regime: Canada has implemented a carbon tax aimed at reducing greenhouse gas emissions, contrasting with the less stringent policies in the U.S.

• Details of the Carbon Tax:

  • The federal carbon tax initiated at $20 per tonne, increasing to $80 per tonne by April 1, and slated to rise annually to $170 per tonne by 2030.

  • Individual provinces may develop varying carbon pricing structures impacting rebate eligibility for households.

Carbon Tax Impacts

• Encouraging Green Alternatives: The purpose of the carbon tax is to make fossil fuel use more expensive, thus promoting a shift to greener energy alternatives.

• Provincial Variation: British Columbia and other territories adopted their systems pre-dating the federal carbon tax, showing decentralized approaches to carbon pricing.

• Rebate Programs: The Canadian government aims to provide rebates to mitigate tax impacts on households, particularly focusing on low and middle-income families. For example, families in Alberta may receive rebates of $450 every three months.

• Impact Analysis: The evaluation of the carbon tax indicates that lower and middle-income households tend to benefit, whereas wealthier individuals may experience financial setbacks due to increased costs.

Economic Considerations

• Productivity Concerns: The carbon tax has faced criticism for potentially hindering productivity, notably in the oil and gas sector.

• Balancing Benefits and Drawbacks: There is an ongoing debate about weighing the environmental advantages against economic challenges faced by affected industries.

• U.S. Policy Consideration: Discussions continue regarding the potential for the U.S. to adopt similar environmental policies, considering competitive dynamics and economic ramifications for American businesses.

Trading Pollution Permits

• Concept Overview: Pollution permits enable companies to trade their allowed emissions, with the goal of increasing market efficiency in reducing pollution levels.

• Market Dynamics: Firms that can achieve pollution reductions more easily can sell their excess permits to companies facing higher costs for compliance, creating a financial incentive to innovate.

• Regulatory Framework: Policymakers can influence the initial allocation and market framework of pollution permits to encourage participation without jeopardizing industry profitability.

Summary Activity

• Learning Outcomes: The notes emphasize the importance of integrating game theory and economic principles into corporate decision-making, particularly concerning environmental accountability and sustainability efforts.