Business Ethics

Case Study: Discuss the important ethical issues in this case. In your response examine the ethical issues in this case especially from the viewpoint of the consumer. In your response, please identify and evaluate the systems (if any) that were put into place to regulate the product, protect consumers, and ensure corporate compliance. Please use the text box of this journal link to enter your response (minimum 200 words) for the case study.

CASE STUDY 7.1 Hazardous Homes in Herculaneum

TWENTY FIVE MILES OR SO OUTSIDE OF St. Louis, Missouri, lies little Herculaneum, a town of only 3,500 people. Looming over the towns economy and the local environment is the Doe Run Companys lead smelter, which dates back to 1892 and is the largest in the United States. For decades, federal and state regulators have been after the company for polluting. In 1991, they required Doe Run to replace the contaminated topsoil in the gardens of about ninety houses in the vicinity of its smelter. In 2001, a study found that 24 percent of the children under six living within a mile of the companys plant had dangerously high levels of lead in their blood.

As a result, Doe Run agreed to clean up the site and started installing new pollution-control devices to prevent further con- tamination.97 In the meantime, however, environmental investigators found lead levels as high as 300,000 parts per million on a road used by the plants trucks. Because of the health hazard that lead contamination poses, the state put up signs warning residents of Herculaneum not to let children play outside, and the federal government helped out by advising people to alter their diets to resist lead poisoning (the gist: Dont drink tea but eat more liver, eggs, whole-grain bread, and ice cream). Not so surprisingly, many residents of Herculaneum found this sort of assistance insulting. Instead, they urged the federal government to step in, declare Herculaneum a Superfund cleanup site, and use federal funds to buy up the whole town. The Environmental Protection Agency (EPA), however, maintained that adding Herculaneum to the long list of places seeking a Superfund buyout would only delay a solution.

The EPA is right not to exaggerate the speed with which Superfund projects move. When Congress created Superfund in 1980, sponsors of the legislation believed that the program could mop up the nations worst toxic dumps and other danger-ously polluted sites within five years and do so for a relatively modest $1.6 billion, to be covered by sales taxes on chemical and petroleum-based products. Superfund was authorized to recover its costs from the polluters themselves and to use this money to pay for future cleanup efforts. In this way, Superfund would become self-financing, with industry, not the taxpayers, picking up the tab. But the hopes of Superfunds sponsors have yet to be realized. Congress has repeatedly had to pour money into the program to keep it going; there are continual complaints about inefficient, top-heavy administration, and to date only a portion of the countrys most environmentally damaged sites have been restored.

Moreover, Superfund has grown increasingly and stagger- ingly expensive. Its cleanup efforts have become mired in law- suits, with the resulting litigation costs climbing to the stars. The problem, many observers believe, goes back to the initial Superfund legislation, which permits the EPA to penalize com-panies for dumping and polluting that was not illegal at the time it occurred. In addition, it makes individual polluters liable for the entire cleanup costs of toxic sites that may have been used by many other firms. Corporations dislike these liability principles, and they find it less expensive to resist the EPA in court than to pay up. From the individual corporations perspective, says David Morell, a toxic removal consultant and an expert on Superfunds history, lawyers bills are still cheaper than pay- ing for an entire cleanup. And he adds: The longer you can stalland convince yourself that you may never have to pay at allthe more the legal fees seem like a bargain.

As a result, a flood of lawsuits has slowed Superfunds cleanup efforts to a crawl while the costs of those efforts have ballooned. The idea [behind Superfund], Morell says, was supposed to be shovels first and litigation later. Instead, it has become litigation first and shovels never. Many experts agree that Superfund has become a financial black hole. Legal fees, transaction costs, and administrative overhead associated with its cleanup projects are projected to exceed $200 billion.

Others put the bill as high as $2,000 per personpaid in price increases on countless everyday chemical and petroleum- based products. And this sum doesnt pay for the removal of hazardous wastes; it covers only litigation-related costs.

According to critics, Congress has done little to solve the problems with Superfund, except to keep digging deeper into the national coffers to keep it going. However, Congress did exempt small businesses from Superfund liability if they con- tributed only a relatively small amount of hazardous waste to a targeted site, and it required the EPA to consider a companys ability to pay when negotiating a settlement. For its part, the EPA contends that it is making good progress. It reports that 1,306 or close to three-quarters of the toxic waste sites designated as National Priorities List Sites have been cleaned up. Still, every day of delay increases the clean up costs as waste from untreated sites seeps into the ground water and increases the size of the polluted area. These sites are not like fine wine, John OConnor, director of the National Campaign Against Toxic Hazards, has explained. They get worse with age, and they get more difficult and costly to clean up.

Meanwhile, back in Herculaneum, Doe Runin accord with a plan drawn up with the state of Missouripurchased more than 130 local homes. Some of these were torn down; others were left vacant. The buyouts removed many young children from harms way, but they left many blocks of Herculaneum with an eerie ghost-town quality. Doe Run also removed contami- nated soil from an additional 700 properties, including nearby schools and parks, and it fenced off the area around the plant, posting it with warning signs about lead. Despite $12 million worth of environmental upgrades, however, the plant continued to regularly exceed legally permissible limits on lead emissions. (Herculaneum was one of only two places in the nation failing to meet federal air standards for lead.) In 2010, the company announced plans to introduce a new proprietary technology that would greatly reduce sulfur dioxide and lead emissions. In the end, though, Doe Run decided that doing so would not be financially viable in the current business climate and closed the smelter altogether on December 31, 2013, with about 75 of its 300 workers staying on through 2014 to wrap up some second- ary projects.

Besides the loss of jobs, the closure will have other lasting effects on the community. The company paid $500,000 a year in local taxes and funded scholarships and athletic events. In 2010 it had helped build a fire station and in 2012 a $6-million bridge. There were the negatives with the smelter, says school superintendent Stan Stratton. But they were always good partners. Kathleen Logan Smith of the Missouri Coalition for the Environment acknowledged the loss to the community, but said the quality of life will improve. For the folks living closest to the plant and the people who have endured lead dust on their streets, their lives are hopefully going to get better, she said. Theres an opportunity to re-envision what Herculaneum is and ought to be.