SUSTAINABILITY MANAGEMENT

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MGMT8420 Sec11: SUSTAINABILITY MANAGEMENT FINAL COURSE ASSIGNMENTAnswer 1: Our carbon footprint has continued to have grave implications for the climate. From the melting of icecaps to the erratic ... weather patterns leading to droughts and floods, all these have threatened business operations on a global scale in one way or the other. The agricultural industry is a good example of how climate change poses a threat to business. In 2010, high nighttime temperatures affected cornfields across the US, and in 2012, winter warming that caused premature budding led to the loss of USD 220 million of Michigan Cherries ("Climate Impacts on Agriculture and Food Supply | US EPA", 2020). Drastic changes in the weather lead to a sequence of events that result in the loss of millions by farmers, manufacturing industries, and even the farm transporters. Businesses that are dependent on a good harvest suffer and are at risk of closure or bankruptcy. Hurricane Katrina remains the largest global insurance loss in the insurance industry, with an estimated USD 41.1 billion paid out in insurance damages (Hartwig & Wilkinson, 2010). Floods and hurricanes are some of the worst natural disasters caused by climate change. The significant damages paid out by insurance companies after Hurricane Katrina threatened the stability of several insurers. The level of property damage and businesses swept away was also substantial and threatened several business operations. Natural disasters have brought their fair share of opportunities for business as well. Due to the frequency of natural catastrophes, the National Flood Insurance Program (NFIP)begun a reinsurance program in 2016 that saw private reinsurers receive some business to help NFIP put itself in a better position to manage losses ("Spotlight on: Flood insurance | III", 2020). The NFIP also increased its pricing to cushion themselves in case of loss. Increased public awareness about flood risk has also seen private insurers increase their revenues. Companies such as KKR & Co. Inc., a private equity firm, have taken climate change as a profiteering scheme by positioning themselves in the right way to make profitable bets on what commodities might soon be scarce. In January 2013, they bought 25% of Nephila Capital that trades weather derivatives (HYDE, 2020). In the wake of such disasters, some companies are turning a profit and anchoring their position to leverage more. Answer 2: Simon Kuznets developed the GDP concept in the manufacturing age and failed to be a wholesome measure of economic success in the modern world. It simply measures a snapshot of a countries economic size and growth. GDP does not consider income generated from illegal activities; informal businesses, or in other words, the underground economy, are difficult to account for in GDP. The vastness of the underground economy varies from country to country and failing to account for this income is one flaw of GDP. Goods and services produced for private consumption are not included in GDP calculation since it is difficult to track the monetary value output of such products andservices. As a result, countries with more subsistence farming have their GDP understated compared to countries with less subsistence production. GDP is more quantity oriented than quality focused. In case the quality produced by a country has increased without the consumer incurring the inflation cost, GDP does not account for this. GDP fails to factor important strides in quality in a modern world that has seen technology advance and improve the quality of products. As an alternative to GDP, Net Factor Income from Abroad (NFIA) measures what a country has earned over a period from other countries. NFIA promotes local production and enlightens a country on areas of production they can improve on to better their earnings from other countries. Specializing in certain products that generate more NFIA could increase a country’s GDP as well as promote development in the sector. NFIA also gives the provision for a country to raise its GDP by earning from multinational companies that have their headquarters based in their country, reporting huge earnings [Show More]

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