In 1989, the Coalition for Environmentally Responsible Economies (CERES) was formed. Its purpose is to encourage the corporate sector to assume full responsibility for the environmental consequences of its actions. The coalition is composed of environmental and social interest groups, such as Friends of the Earth, Union of Concerned Scientists, and the Natural Resources Defense Council, and investment groups like the Social Investment Forum (SIF), which is a nonprofit association concerned with socially responsible investing, and Winslow Management Company, which is dedicated to green investing. To accomplish its goal, CERES embarked on a plan to draft a pledge document through which private firms would commit to environmental objectives. The membership collaborated to define specific standards to which signatories of the compact would be held accountable. Biodiversity, sustainable development, and pollution prevention were among the issues considered for the final document. Ultimately, the group settled on a set of 10 guidelines, originally called the “ValdezPrinciples,” after the infamous March 1989 Alaskan oil spill, and now known simply as the CERES Principles.

The next step was critical. The CERES membership invited thousands of corporations to sign the environmental pledge. Working with institutional investors and firms that collectively control trillions of dollars in assets, one might expect that CERES’ financial clout would be effective in garnering corporate participation. Despite a strong effort, however, the corporate response has been limited. As of 2011, just over 80 companies have formally joined the ranks of CERES companies.

1.         ( 5 points) Visit the CERES Web site at www.ceres.org, and review the CERES Principles. Identify at least one principle with which compliance may be difficult to measure. Discuss briefly.

2.         ( 5 points) At the CERES Web site, find and review the current list of CERES Network Companies. Identify any three that are Fortune 500 firms. Using economic theory, discuss the incentives that likely prompted these large companies to endorse the CERES principles.

3.         ( 10 points) Based on your careful assessment of the ten CERES principles and other relevant information at the CERES Web site, discuss possible reasons why the corporate sector response to this effort has not been greater based on the limited number of endorsing firms worldwide. If you were employed by CERES or by one of its members, how might you create incentives to gain a larger number of corporate endorsers?

Sources: Coalition for Environmentally Responsible Economies (CERES) (2011a, 2011b); CERES (1989), as reported in the Canadian Institute of Chartered Accountants (1992), Table 2.1, pp. 7-8; Parrish (February 4, 1994); Ohnuma (March/April 1990).