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MGMT 302
Brian Gamgort
Paper 2
Due: 11/26/14
Waste Management, Inc.: Clean Business Practice in a Dirty Industry
For the majority of people the final destination of their waste is a mystery.
There is a complete separation between society, where waste is “produced”, and
where it is taken after it has been deemed unusable and placed in a designated bag
or bin. Everyone understands that waste is either recycled or sent to a landfill, but
most have never seen one of these facilities in-person and truly understand the
mass scale of waste production in our country. What is “out of sight and out of mind”
for the population is actually an entire industry: the industry of waste management.
While the waste industry is considered very dirty, both physically and ethically,
Waste Management, Inc. prides itself on being an extremely moral company. Waste
Management has established its presence as one of the top ethical companies in the
world with awards such as making Ethisphere Magazine’s “List of World’s Most
Ethical Companies” for 7 straight years and multiple “Best Place to Work” awards
from organizations such as the Human Rights Campaign (WM Awards). Things were
not always this way, however, as Waste Management has had to rise back up from a
corporate accounting scandal in 1998 that destroyed the stock value. Through this
recovery and their current business practices, Waste Management, Inc. has become
an interesting study in the topic of business ethics.
The United States solid waste collection industry is a $43.3 billion industry
consisting of approximately 27,028 organizations (Repa, The U.S. Solid Waste
Industry: How Big is It?) that handled 251 million tons of trash in 2012 (EPA 2012
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Municipal Solid Waste Report). Solid waste is defined as non-hazardous waste and
can be household, commercial, construction, or business. The industry is split
between three sectors: public sector waste facilities, privately held companies, and
publically held companies. Public sector waste facilities consist of municipalities
that are funded by taxpayers and established by local governments, while private
companies are either privately held or publicly traded on the stock market. Out of
the entirety of the waste management industry 56% of entities were public and
44% were private, with privately held companies making up 99.8% of all private
sector waste companies. Although publically held waste companies like Waste
Management make up such a miniscule amount of total waste companies, they
account for approximately $20.6 billion, 47%, of the total revenue generated from
the solid waste industry and handle 40% of all solid waste that is recycled,
landfilled, or incinerated (Repa, The U.S. Solid Waste Industry: How Big is It?).
Waste Management is the largest environmental solutions company in North
America with the largest network of landfills, recycling centers, and transfer stations
in the industry (WM About Us). Specifically, Waste Management has 264 active solid
waste landfills, 114 recycling centers, 310 transfer stations, over 43,500 employees,
and more than 20 million customers which include households, organizations, and
municipalities. Waste Management made $13.6 billion in revenue in 2012 (WM
2012 Sustainability Report) and had $13.98 billion in sales in 2013, approximately
$3.5 billion more than their biggest competitor Republic Services, Inc. (WM
Competitive Landscape, Hoover’s). Waste Management is listed on the New York
Stock Exchange and currently their stock is worth $48.66 per share, with an overall
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rise in value of 6.43% over the past year and 44.96% over the past five years (WM,
Yahoo! Finance). The company also paid out $604 million to shareholders in
dividends in 2010 (WM 2010 Annual Report).
Waste Management’s corporate mission is “to maximize resource value,
while minimizing – and eliminating – environmental impact so that both our
economy and our environment can thrive,” (WM Company Profile) which is
displayed in its four fields of business- waste collection, landfilling, recycling, and
renewable energy production. In terms of recycling, Waste Management is the
largest recycler in North America with almost 14 tons of material recycled last year.
Waste Management’s has worked to improve the recycling process by making it
more efficient and easier for customers, and it has done this by expanding their use
of “Single-stream recycling” which makes sorting by recyclable a task done in the
recycling facility rather than by the customers. This switch has resulted in at least
40% more recyclables being collected (WM How We ThinkGreen).
In addition to recycling, Waste Management creates value from their landfills
and waste that can not be recycled by using them to produce energy. There are two
methods of energy production that Waste Management employs in their landfill
practices: Waste-to-energy and Landfill-Gas-to-energy (LFGTE). In the Waste-toenergy process, Waste Management inspects trash and then directly burns it in
order to power a turbine generator and create electricity. This process destroys
most of the waste, and what is left if small amount of ash that is sorted for recyclable
materials and then put in a landfill (WM Follow the Waste Stream). From the Wasteto-energy process Waste Management can generate enough electricity to power
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750,000 homes. While this process does create emissions, the EPA has approved
that this process has less of an environmental impact that most electricity sources
(WM How We ThinkGreen).
Through the LFGTE process, Waste Management is creating energy for both
distribution and company use. Waste Management collects the methane gas that
leaks out of their landfills to use as fuel (WM Follow the Waste Stream). Some of the
gas is distributed to electricity generating plants as an alternative fuel source in
order to generate electricity. This methane gas is not just an alternative, it also has
reduced atmospheric pollution compared to standard energy fuels such as coal (WM
How We ThinkGreen). Waste Management has also developed technology that will
allow them to use this landfill methane to fuel their transportation and collection
vehicles in the near future (WM Renewable Energy). By utilizing society’s waste that
would otherwise rot, Waste Management has found a beneficial use for nonrecyclable waste and expanded itself into a new industry as the business looks
towards the future.
Waste Management has established ethicality in their business practices by
clearly stating their values, corporate objectives, and the roles of all of their
stakeholders in how they function. Waste Management has made it a priority to
keep all of their stakeholders in mind during regular activity, including their
employees, customers, communities, the environment, and their shareholders.
Waste Management views employees as being collective responsible for the
company’s success, describes customers as “the reason we have a business”, works
to be a partner to local communities, conducts business in a manner that still
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protects the environment, and values keeping respect and trust with shareholders
who “own our business” by providing accurate financial information (WM Code of
Conduct). Waste Management’s company values that are the foundation of their
practices are honesty, accountability, safety, professionalism, respect, inclusion,
diversity, and employee engagement. As a company the three objectives are “to
create an environment where employees understand standards of ethical conduct
and abide by those standards”, “to allow employees to confidentially or
anonymously communicate breaches in ethical or inclusive behavior without fear of
retribution, and “to supply training to educate employees on Waste Management
standards of and commitment to ethical conduct, diversity, and inclusion” (WM
Ethics).
The only dark spot of this otherwise extremely ethical company was an
accounting scandal in 1998. Waste Management and Arthur Andersen, Waste
Management’s accounting firm, were accused of issuing false and misleading audit
reports from 1993 to 1996 which raised company earnings by more than $1 billion.
In response to these misleading audits Waste Management stock dropped from $56
to $13. The company also settled a class-action lawsuit for $457 million, cleared its
top management, and sold some non-core subsidiaries that were acquired during a
period of rapid expansion (Waste Management settles suit, CNN Money).
Deontological ethics focuses on the connection of duty and morality.
Immanuel Kant believed in universal, moral law that should guide and justify human
actions. There are moral duties, or obligations, that people or organizations have
which can justify their actions as “duty for duty’s sake.” As a result of this, actions
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are morally judged based upon the character of the action itself, not the end result
or final product (Deontology Ethics, Britannica). The “intended ends and intended
means” are the criteria of which morality is judged (Deontological Ethics, Stanford
Encyclopedia of Philosophy). There are also different levels of duties, going from
minimum to maximum, for corporations. The mandatory, minimum duty for a
corporation is to not deprive anyone of their inalienable rights, including the right to
ownership of property and physical security. A maximum duty is anything beyond
that which is not required, but is “praiseworthy” to do (Rights in the Global Market,
Donaldson). For a company that has spread themselves over so many fields there is
one ultimate question: does Waste Management fulfill or go beyond their minimum
duty?
One argument could be that Waste Management’s duty is to protect the
environment, which is indirectly protecting all of their stakeholders. Waste
Management’s minimum duty’s towards protecting the environment is to make sure
that they are not infringing on people’s basic rights through their business. One
primary example would be neglecting all of the environmental consequences of
their business, which could threaten people’s right to physical security by creating
environmental hazards for the homes and communities around Waste Management
facilities. Waste Management fulfills this minimum duty through its dedication
towards conducting business in a manner that protects, and even improves, the
quality of life for people that live in these communities (WM Code of Conduct).
Waste Management goes above this minimum and performs a maximum duty as
well by working to make the organization as environmentally-friendly as possible,
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and by helping their customers and business partners do the same. Landfilling and
recycling have huge impacts on the future of the environment, with one process
being much better for the environment than the other. Despite being a company
based upon the business of waste, Waste Management partners with organizations
and communities to help them achieve their green goals, even if the goal includes
“zero waste” (WM About Us). For Waste Management the focus is not on how the
organization can continue its current business, it is on shaping the company
towards the cleaner and more environmentally-friendly future that they envision.
Another example of a maximum duty that Waste Management performs is by
providing dividends to their shareholders. As discussed in Lynn Stout’s The
Shareholder Value Myth, public companies have no obligation to provide dividends
for their shareholders. In regard to corporate governance, Waste Management
states that the company’s “primary objective is to maximize stockholder value” (WM
Company Profile). This objective, combined with Waste Management’s previous
corporate finance issue, sound like a setup for possible problems. As R. Edward
Freeman warns, a “Chief Financial Officer who worries only about paying dividends
to stockholders… is sure to be a prime candidate for unemployment through
takeover,” due to the common conflict between a focus on short-term results and
the probability of long-term success (Strategic Management: A Stakeholder
Approach, 9). However, Waste Management creates their financial success by
focusing on maintaining ethical business practices that establish long-term success.
Waste Management believes that in modern business “it’s not only about what you
achieve, but also how you go about achieving it,” and that the way to go about
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achieving success is by concentrating on doing the right thing, for the right reason,
at the right time (WM Code of Conduct). This corporate focus directly mirrors the
key principle of deontology: judging morality of actions based upon intention
instead of the final result.
From a deontological perspective, Waste Management, Inc. is a morally
sound corporation. Waste Management understands its role in a dirty, harmful
industry and is taking morally sound strides to better themselves, their business
partners, and the environment as a whole. While the company has fulfilled its
minimum duties by not depriving people of their natural-given rights through their
business practices, Waste Management has also gone above to perform the
maximum duties of improving the company in terms of sustainability and by
providing financial benefits for stockholders of the company in the form of
dividends. As one of the few publicly traded waste companies in the world, Waste
Management, Inc. was already in an extremely unique market position. By
combining this unique quality with their distinctive high moral standards and focus
on ethicality, Waste Management, Inc. has gone above and beyond to become a
model business that others should attempt to mirror.
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Works Cited
“About Us.” About Waste Management, Practices, Ethics, Leadership and History.
Waste Management, Web. 19 Nov. 2014.
Alexander, Larry. “Deontological Ethics.” Stanford University. Stanford University, 21
Nov. 2007. Web. 19 Nov. 2014.
"Awards." Waste Management. 2013. Web. 19 Nov. 2014.
Catanese, Joseph. “BUSINESS MANAGEMENT: Good Ethics Equals Good Business
Practice.” Waste360. 1 June 2000. Web. 19 Nov. 2014.
"Code of Conduct." Code of Conduct Policy. Waste Management, 2012. Web. 20 Nov.
2014.
"Deontological Ethics." Encyclopedia Britannica Online. Encyclopedia Britannic. Web.
20 Nov. 2014.
Donaldson, Thomas J. “Rights in the Global Market.” Multinational Corporate
Responsibility. 139-162. Print.
"Ethics." Waste Management. Waste Management, Inc. Web. 21 Nov. 2014.
Focus on Integrity and Inclusion (2010): Waste Management. 2010. Web.
"Follow the Waste Stream." Waste Management, Inc. Web.
Freeman, R. Edward. Strategic Management: A Stakeholder Approach. Boston:
Pitman, 1984. Print.
"How We Think Green." Waste Management, Inc. Web. 21 Nov. 2014.
Hird, Myra J. “Waste, Landfills, and an Environmental Ethic of Vulnerability.” Ethics
and the Environment 18.1 (2013): 105-124. Web.
MSW Fact Sheet 2012. EPA. U.S. Environmental Agency. Web. 19 Nov. 2014.
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Repa, Edward W. "U.S. Solid Waste Industry, The: How Big Is It?" Waste360. 1 Dec.
2001. Web. 21 Nov. 2014.
"Waste Management 2010 Annual Report." Waste Management 2010 Annual Report.
2010. Web. 20 Nov. 2014.
"Waste Management Careers - Real Jobs. Real Green." YouTube. YouTube, 1 Sept.
2011. Web. 21 Nov. 2014.
“Waste Management, Inc. Competitive Landscape.” Hoover’s. Web. 19 Nov. 2014.
"Waste Management, Inc." Yahoo! Finance. 20 Nov. 2014. Web. 20 Nov. 2014.
"Waste Management Settles Suit." CNNMoney. Cable News Network, 7 Nov. 2001.
Web. 20 Nov. 2014.
Appendix
(http://waste360.com/mag/waste_us_solid_waste)
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(http://www.wm.com/sustainability/pdfs/2013_Sustainability_Report_Update.pdf)