Corporate Environmental Management
Professor Doug Cerf—Spring 2010
Corporate Environmental Management (ESM 281)
Spring 2010
“Whether you believe you can, or whether you believe you can’t, you are absolutely right.
Henry Ford
The world we have created today as a result of our thinking thus far has problems which can
not be solved by thinking the way we thought when we created them.……. Albert Einstein
Increasingly companies will sell solutions to the world’s environmental problems.
Stuart Hart
Miss a little, miss a lot. …………….Mike and Mike in the morning, ESPN radio.
Instructor:
Dr. Doug Cerf
http://www.cob.calpoly.edu/faculty/dcerf.html
Phone: 805-756-2871
Email: dcerf@calpoly.edu
Office hours: by appointment in BH 3408.
Course Objective
Corporate Environmental Management specialization students will be able to use business
frameworks, concepts, cases and tools to support corporate environmental management and
performance. This involves corporate strategy and corporate culture being aligned with
supporting environmental performance. It also involves the use of sound business models and
tools to support these initiatives.
Class Time and Location
Fridays 2:00-4:50, Bren Hall 1424. Exceptions: no class 5/21, 5/24 (Monday) 3:30-6:20, 5/28
(Friday before Memorial Day), 10-12:50 Bren Hall 1510
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Course requirements
Case analysis (individual)
Case analysis (team)
Class Participation (discussion of case analysis)
Mini-project presentation
Total
25%
50%
10%
15%
100%
Required Reading (see course schedule below for details)
Harvard cases (the cases are listed in the schedule below)
See “course” entitled Corporate Environmental Management Spring 2010 on Harvard Business
school site at: http://cb.hbsp.harvard.edu/cb/access/5883856
The case method
The case method is used almost every class period in this course.
If you would like to read about learning through the case method please see Harvard Business
School note #376-241. You might also be interested in how to discuss a case, which is available
as a Harvard Business School Press Chapter, product number 2450BC. If you would like to
purchase these items (optional) they are in a separate “Harvard” course at the following link
(cost $8): http://cb.hbsp.harvard.edu/cb/access/5941598
All the cases are listed under the Harvard course entitled, “Corporate Environmental
Management Spring 2010.” The link to this course is listed above in the Required Reading
section. Each Harvard case costs $3.95. The total approximate cost for the cases and the
articles for this class is $40-50 (paid directly to Harvard).
The goal is for students to be ACTIVELY involved in case discussions. This is an essential
aspect to learning from cases. Active involvement significantly increases student learning.
If the course schedule (below) requires an executive summary the following are possible items to
include to support your analysis (if appropriate), (1) the issues in the case, (2) answers to the case
questions (the case questions follow the course schedule in this syllabus), (3) recommended
solution to the case and (4) lessons learned. Each section of the executive summary should be
labeled accordingly. Generally, executive summaries should include computations in excel
spread sheets in the appendices. If the instructions require a half page executive summary to go
with your computational analysis this will be your recommendation and lessons learned.
Guidelines for establishing teams
Permanent teams will be used for case analysis and presentations. Permanent teams (4 people)
will be set up during the first class meeting. At the end of the term you will be given the
opportunity to evaluate the other members of your permanent team (form attached at the end of
this syllabus).
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Corporate Environmental Management
Professor Doug Cerf—Spring 2010
Class Participation
Because a good portion of the learning takes place in class, I expect you to attend all classes and
participate in class discussions. This is an essential element of this class. The amount that you
learn in class is highly correlated with your involvement in class discussions. I do not believe in
over use of lecturing (“learn by listening.”) Tell me and I'll forget, show me and I might
remember. But INVOLVE me and I will understand.
Class participation will comprise 10% of your final grade. Participation points can not be made
up. Much of the learning takes place in class. If you attend class and you are silently involved
you will get 70% of the points for participation for that class session. If you miss class, you get
50% credit for participation for that class (to avoid distortion of the average participation score).
The instructor’s responsibilities are to: (1) select the materials that are appropriate for the
class learning objectives, (2) facilitate class discussion, (3) clarify (4) facilitate in class activities,
and (5) provide a roadmap of where we have been, where we are, and where we are going.
The student’s responsibilities are to: (1) participate proactively in class discussions and
activities, (2) read and prepare the assigned material prior to class.
The course schedule begins on the next page.
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Corporate Environmental Management
Professor Doug Cerf—Spring 2010
Schedule—
Most of the cases and articles listed below are available on our Harvard course. The case
questions follow the course schedule in this syllabus.
The “Harvard” course that includes these materials is entitled “Corporate Environmental
Management Spring 2010 on Harvard Business school site at:
http://cb.hbsp.harvard.edu/cb/access/5883856
Topic/Course Materials
April
2
(#1)
Assignments
Financial Statement Framework
Class Introduction,
Introduction to learning from case analysis
Three common financial statements,
Balance Sheet, Income Statement and
Statement of Cash Flows
Basic Financial Statement Case: Maria
Hernandez & Associates (Harvard Case #
902401)
External Financial Reporting of
Sustainable Business Practices
Discussion of recording Goodwill. Do
financial statements include assets that
represent the potential future value of
sustainable business practices? “It appears
that the assets that really count are the ones
that accountants can’t count—Yet.”
Corporate Environmental Management
Case Example
Page 4
Please review Maria Hernandez case before
class; we will prepare the case as an in-class
exercise. You should make your best attempt
at completing the questions at the end of the
case. I prefer that you make your attempt
based on your prior knowledge as opposed to
following a process. The answers to the
questions should include but not be limited to a
Statement of Cash Flows for the pre-operating
period (prior to July 1). For the period July
through August your answer to the question
should include all three statements, Statement
of Cash Flows, Statement of Income and
Balance Sheet (Statement of Financial
Position). The solution to this case will not be
collected.
Class lecture and discussion. Prepare the short
Goodwill assignment question posted on the
Bren site. This assignment question will not be
collected.
We will cover the Wal-Mart case over (parts
of) three class periods. Please skim the entire
case and be prepared to discuss Wal-Mart’s
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Corporate Environmental Management
Professor Doug Cerf—Spring 2010
strengths and weaknesses that will allow or
Wal-Mart’s Sustainability Strategy (Stanford prevent them from succeeding in this endeavor.
Case# OIT-71, available from Harvard).
Each permanent team pick one of the following
Begin discussion of how Wal-Mart tackled
Sustainable value networks (electronics,
the corporate strategy initiative to reduce the seafood, textiles) to be the basis for answering
environmental impact of their business.
the questions for the second class meeting.
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Corporate Environmental Management
April
9
(#2)
Professor Doug Cerf—Spring 2010
Stakeholder Analysis Models, Corporate
Environmental Strategy, Environmental
Assets and Liabilities in the Financial
Statement Framework.
Model(s) for Stakeholder Analysis. Use the
Wal-Mart case as the basis to implement the
stakeholder model(s).
Class lecture and discussion. We will do a
stakeholder analysis of three key Wal-Mart
stakeholders: suppliers, environmental
organizations and customers.
Stakeholder Analysis Tool; Product #
808161
Corporate Environmental Management
Case Example
Wal-Mart’s Sustainability Strategy
(continued)
External Financial Reporting of
Contingent Environmental Liabilities (in
the annual report or 10K)
Contingent Environmental Liabilities:
Purity Oil Sales Case (AICPA Professor
Practitioner Case Program). The case is
posted on the ESM 281 course site.
In your permanent teams, please prepare
written answers to questions 1-3 and 5. We
will do question 4 at the next class meeting.
The answer to these questions will be collected
at the end of the class period and should not
exceed 2 pages.
Purity Oil Sales Case (AICPA Professor
Practitioner Case Program). See assignment
below (just after the end of the schedule). Do
not try to answer the questions at the end of the
case. Each permanent team, prepare Purity Oil
sales liability disclosure grid. The PDF of the
grid is posted on the ESM 281 site. Please turn
in your team’s grid at the end of class with
your team number at the top. Please attach a
half page justification of your choices on the
grid.
Asset Retirement Obligation
Class lecture and discussion. Prepare the short
Asset Retirement Obligation assignment
question posted on the Bren site. This
assignment question will not be collected.
Mini-Project topic selection
Each team will select a mini-project
presentation and a presentation date from the
options listed after this schedule. The options
are, (1) Sustainability reporting, (2) Green
house gas inventories, (3) Management
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Professor Doug Cerf—Spring 2010
strategy and tools to green a business and (4)
Socially responsible investing. There will be
one or two mini-project presentation per week
beginning week 4.
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Corporate Environmental Management
April
16
(#3)
Professor Doug Cerf—Spring 2010
Environmental Strategy, Financial
Analysis of an Environmental Cleanup
Corporate Environmental Management
Case Example
Wal-Mart’s Sustainability Strategy
Team presentation of Wal-Mart’s
environmental strategy “game changer”
In your permanent teams, please prepare an
answer to questions 4. The answer will be
presented to the class in the form of a 5-10
minute presentation. Please submit a one page
description and support for your game changer
as explained in question 4. The class will
identify the top two game changers and prepare
an implementation plan for Wal-Mart.
Wal-Mart Epilogue
Discuss the game changer released by WalMart since the end of the case.
Chesterfield Municipal Landfill Case. The
case is posted on the ESM 281 course site.
Individually, please prepare the questions 1-5
for this case to be turned in via email by
midnight Wednesday, April 21st (please
prepare a draft for class discussion on April
16th). Please put the course number in the
subject line of the email. Include a spreadsheet
workbook and management recommendation
(half page) that explicitly explains which
generation will pay for the landfill cleanup
under your recommendation. Your spreadsheet
workbook should include computations to
support your specific recommendation.
Firm Financial Performance Metrics
Brief discussion of Citigroup, Exxon, Apple
and Amazon. Common market indicators
(Beta, PE ratio etc.)
Class lecture and discussion, no preparation
required
Cash Flow Tools
Cash flow model, present and future value,
annuity, NPV, IRR, amortization tables.
Class lecture and discussion, no preparation
required
Impact of environmental risk and cost of
carbon on security prices.
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Professor Doug Cerf—Spring 2010
The rest of the schedule will be posted shortly
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Case Study Questions
Wal-Mart’s Sustainability Strategy (Stanford Case# OIT-71, available from Harvard)
1. Given the fact that Wal-Mart’s customers generally are unwilling to pay a premium for
environmentally friendly products, how is the company deriving business value from its
sustainability strategy, or if not, how can it ensure that it does?
2. Imagine that you are Andy Ruben or Tyler Elm, evaluating the progress of the
electronics, seafood and textiles networks. Which networks have been most successful?
What factors explain the success (or lack of success) of these networks?
3. How is Wal-Mart motivating its suppliers to share information about and continuously
reduce the environmental impacts of products and processes? How can the company
stimulate the development of disruptive, breakthrough innovations?
4. For the network to which you have been assigned, propose one new “game changer” or
innovation project not described in the case. To support your proposal, outline the
environmental benefits, the business value and/or profit opportunity for Wal-Mart, the
greatest challenges in implementation, and how Wal-Mart could overcome them.
(optional) Looking beyond your assigned network, what other game changer or
innovation project would you propose for Wal-Mart? Each team should prepare to make
a 5 minute presentation of their answer to this question.
5. As evidenced by Exhibit 12, Wal-Mart’s sustainability strategy has generally been very
profitable. However, two initiatives described in the case benefit society and the
environment, but apparently decrease Wal-Mart’s profits. Identify those two initiatives
and imagine that you are their internal champion. How would you justify pursuing those
initiatives?
Clarkson Lumber (Harvard Case # 297028)
Clarkson Lumber Case questions:
1. Why has this profitable company had to borrow more and more money from the bank?
2. Does rapid sales growth always result in a need for substantial external finance?
3. How has Mr. Clarkson met the financing needs during 1993-1995? Has the financial
strength of Clarkson Lumber increased or deteriorated?
4. How attractive is it to take trade discounts?
5. Will a credit line of $750,000 be sufficient to meet the company’s needs in 1996 if it
takes the trade discounts?
6. What will happen to Clarkson’s financing needs beyond 1996? What would have to
occur for the borrowing need to decline?
7. How rapidly can Clarkson Lumber grow without further deterioration in its balance sheet
leverage, assuming no new equity issues and continuation of its policy to pay no
dividends?
8. Would you, as Mr. Dodge, agree to lend Clarkson the money needed?
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9. What are the alternatives open to Mr. Clarkson if Mr. Dodge refuses his request for an
increased credit line?
10. What would you be willing to pay, as an outside investor, for a 30% ownership interest in
Clarkson Lumber?
11. What would you do as Mr. Clarkson?
Wilkerson (Harvard Case # 101092)
1. What is the competitive situation faced by Wilkerson?
2. Given some of the apparent problems with Wilkerson’s cost system, should executives
abandon overhead allocation to products entirely by adopting a contribution margin
approach in which manufacturing overhead is treated as a period expense? Contribution
margin is price less direct costs (labor, materials). Why or why not?
3. How does Wilkerson’s existing cost system operate? Develop a diagram to show how
costs flow from factory expense accounts to products.
4. Develop and diagram an activity based costing model using the information in the case.
Provide your best estimates about the cost and profitability of Wilkerson’s three product
lines. What difference does your cost assignment have on reported product costs and
profitability? What causes shifts in cost and profitability?
5. Based on your analysis for Question #4, what actions might Wilkerson’s management
team consider to improve the company’s profitability?
6. What concerns, if any, do you have with the cost estimates you prepared in the answer to
Question #4? What other information or analysis would you want for better cost and
profitability estimates?
7. Wilkerson has been compensating salespersons with commissions on their gross sales
volumes (less returns). Parker wonders whether the company should change the
incentive system.
UBS Climate Change, Harvard Case #707-511
1. Which of the four options should Suter support?
2. If UBS decides to adopt any one of the four options, do you recommend reducing the
company’s own energy consumption or should UBS buy carbon offsets? If you prefer
the later, is your recommendation to invest in CERs, ERUs or VERs?
Patagonia, Harvard Case# 703035
1.
2.
3.
4.
Evaluate Patagonia’s strategy
How important to Patagonia’s strategy is its environmental position?
How fast can Patagonia grow? How fast should it grow?
How would Patagonia’s strategy differ if the company were publicly held?
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Global Climate Change and BP Harvard Case# # 708026
1. Why did BP make the voluntary pledges it did? How does BP expect to get rewarded for
those pledges?
2. How do you think they will be rewarded?
3. How do you think other oil firms will react? How does BP want them to react?
Zipcar: Refining the Business Model Harvard Case# 804060
1. Evaluate this potential venture and the progress that Chase has made.
2. What is the business model, and how has it changed between December 1999 and May
2000? What do the data from actual operations in September say about how the business
model is playing out in practice? Does this data give you comfort or concern?
3. What actions should Chase take as a result of the September operating results?
4. What is the strongest argument Chase could make to a potential investor about the
attractiveness of the venture? What, specifically, should her elevator pitch be at the
Springboard forum?
"Purity Oil Sales- Superfund Site, A Case on Accounting for Environmental Matters."
American Institute of Certified Public Accountants Case 94-04
General question/theme: Methodology for external corporate reporting under uncertainty when
the uncertainty comes from a multiple sources and changes over time. The sources of
uncertainty are the existence of a liability and the measurability of the liability.
Complete the table entitled “Purity disclosure grid” (marked page 26 and posted on the Bren
course site). The questions on page 9-10 require technical accounting knowledge and should not
be attempted.
In the top section of the table use the certainty/probability ranking described at the bottom of the
page. In the middle section use the codes described at the bottom of the page to rate the amount
of information available. Finally, in the bottom section of the table, use a check mark to identify
the level of disclosure that in your judgment is appropriate for each year.
Provide annotations to each section of the table explaining your initial rankings/ratings and any
changes to those rankings over the years. Please attach a half page justification of your choices
on the grid.
The class will be divided into two groups for discussion of this case. One group will have a bias
for early/increased disclosure (similar to the Securities and Exchange Commission) and the other
group will have a bias against early/increased disclosure (corporate controller (not always)). The
groups will debate the merits of the degree of disclosure at each stage of Chevron’s involvement.
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Professor Doug Cerf—Spring 2010
Group Assignments: FOR –odd numbered teams
AGAINST—even number teams
Sustainability Reporting—Mini-Project
The focus of this project is on sustainable reporting as opposed to sustainable performance.
Selected permanent teams should identify a current sustainability report. Following are
instructions below on how to find a report. Please pick a report from a country and an industry
that interests your team.
The goal of this project is to obtain a solid understanding of:
 The scope of the report (what portion of the entity is included in the report, GRI calls this
the reporting boundary)
 The geographic scope of the report
 The degree to which the sustainability report is integrated with the company’s annual
financial report (some companies have fully integrated their sustainability report with
their financial report)
 Does the report include the impact of outsourced activities (if applicable)?
 The sustainable categories addressed in the report,
 The metrics used in measuring performance,
 Reporting methods,
 Assurance services used,
 Effectiveness of the report. Does the report appear to be “green wash?” Green wash is a
term that is used to describe the actions of a company, government, or other organization
which advertises positive environmental practices while acting in the opposite way.
Wikipedia, 10/29/07). To answer this question, compare the reporting of a particular
item in the sustainability report (example: climate change) with media reports on this
issue for this firm.
The best way I have found to identify a sustainability report that is likely to meet the interests of
the team is to search the Global Reporting initiative web site at: http://www.globalreporting.org/
or the CERES organization at http://www.ceres.org/sustreporting/
Use the Global Reporting Initiative guidelines to assist you in evaluating the reports. The
deliverable for this project is a 15 minute presentation to the class. This project does not include
a written component.
Teams should decide on the firm that will be the basis of their sustainability reporting project
prior to meeting #3. Please email me dcerf@calpoly.edu the team number and the name of the
firm that will be the basis for your project. Please include the url of the link to the company’s
sustainability report. I expect that I will honor all the team’s choices. Please select a company
with a “hard” component to their business. In other words, a pure service business may not be an
appropriate selection.
Please email your presentation to dcerf@calpoly.edu prior to the presentation.
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Assignment guidelines for Acid Rain Case
General question/theme: Cap and Trade model; Regulatory response analysis. Prepare
financial analysis to determine the appropriate method to conform to the acid rain provisions of
the 1990 amendments to the Clean Air Act.
Determine the least cost alternative for the Southern Co. to conform with the acid rain provisions
to the 1990 amendments of the Clean Air Act. Use standard Capital Budgeting (Net present
Value (NPV)) analysis. NPV analysis is described in most introductory managerial accounting
and introductory corporate finance textbooks. Use incremental/marginal analysis. In other
words, exclude any cash flows that will exist in all options. Specifically, you may exclude total
revenue, operating expenses and the cost of high sulfur coal. I have posted a spreadsheet
workbook entitled “acidrn starter spreadsheet.xls” that should go a long way to get you started.
It has a suggested layout for the spreadsheet as well as some of the data has been inserted. You
may elect to use another layout. Please prepare the analysis for the following options:
Option: 1 Burn High Sulfur Coal without Scrubbers; Purchase Allowances (Burn n’ Buy)
Option 2: Burn High Sulfur Coal with Scrubbers; Sell Allowance (Scrub n’ Sell)
Option 3: Low Sulfur;
Prepare recommendation to Southern Company Management. The recommendation should
include at a minimum:
 the qualitative (NPV analysis) for the three options mentioned above.
 The recommendation should consider the sensitivity of the results to the assumptions
made about the price of the permits, the price of the coal and the cost of capital etc.
 Your recommendation should also consider a list, with explanations, of the qualitative
factors that were not included in the analysis.
 Please include a spreadsheet with the computations to support your decision and
assumptions.
 Each student should be prepared to discuss your management recommendation in class
Socially Responsible Investing Mini-Project
Student Presentations on Socially Responsible Investment Fund
Selected permanent teams should identify a socially responsible fund (or similar investment
vehicle). The goal of this project is to obtain an understanding of socially responsible funds
including the methodologies that are used in determining investment criteria. A detailed
explanation of the screening methods should be included. Each team should select a socially
responsible fund from http://www.socialinvest.org/ or other source. The deliverable for this
project is a 15 minute power point presentation to the class. This project does not include a
written component,
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Professor Doug Cerf—Spring 2010
Green house gas Mini-Project
The purpose of the Greenhouse gas mini-project is to calculate the GHG emissions for UCSB.
The results of the calculation should replicate the public report for UCSB posted on the
California Climate Action Registry web site: http://www.climateregistry.org/ . The raw
emissions data is available from USCB facilities (David McHale), phone: 893-2661.
The deliverable for this project is a presentation to the class of the application of the GHG
protocol and the calculation tools for the 22KV energy, 12KV energy and transportation
emission at UCSB. If appropriate, also include the degree to which measuring green house gas
emissions is consistent with the UCSB facilities master plan.
Greening a business Mini-Project
Selected permanent teams should identify a firm that has been successful in greening their
business. The purpose of this mini-project is to identify best practices used by a firm to green its
business. These practices should be either part of the company’s management strategy, culture
or tools. Possible types of strategies or tools are, but not limited to, the following: strategic
planning, measurement systems, business processes, marketing strategies, lines of business and
reporting methods.
The deliverable for this project is a 15 minute presentation to the class. This project does not
include a written component.
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Attachment: Group Evaluation
Course:
Name: _____________
This form requires you to assess members of your group, not including yourself, with respect to their participation
in the preparation and completion of group assignments. You will have 100 points to divide up among the group these values should reflect the percentage of participation by each group member. You are also asked to
assign a letter grade (A-superior contribution, B-good contribution, C-acceptable contribution, D-poor contribution,
F- no contribution) to each group member.
PLEASE BE OBJECTIVE IN YOUR EVALUATION AND JUDGE MEMBERS ON THEIR
CONTRIBUTION. REMEMBER, THESE EVALUATIONS WILL BE REFLECTED IN THE
CALCULATION OF FINAL GRADES! PLEASE NOTE THAT ALL GROUP MEMBERS MUST
SUBMIT AN EVALUATION FORM BEFORE ANY INDIVIDUAL FINAL COURSE GRADES CAN
BE ASSIGNED.
EXAMPLE: Person A appeared interested; however, after everything was said and done their
contribution was just acceptable. Person B was involved in the team analysis and discussions with a
consistently good contribution. Person C’s contribution was superior; they took the analysis to a high
level and was proactive.
NAME OF GROUP MEMBER
EVALUATION
LETTER GRADE
1. Person A
______15______
________C_______
2. Person B
______35_______
________B_______
3. Person C
______50_______
________A_______
NAME OF GROUP MEMBER
EVALUATION
LETTER GRADE
1.
_____________ __
_____________
2.
_____________ __
_____________
3.
_____________ __
_____________
Comments:
WERE ANY OF YOUR GROUP MEMBERS ABSENT FOR MEETINGS? IF SO, WHY?
ARE THERE ANY OTHER FACTS THAT I SHOULD BE AWARE OF CONCERNING GROUP
MEMBERS AND ACTIVITIES? CIRCLE YOUR CHOICE. Yes / No (If you had unequal
participation within your group please use the back of the sheet to provide me with an explanation of
unequal grade distributions).
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