The document discusses different perspectives on the relationship between business and the environment. Several experts were interviewed and offered the following views:
- Win-win solutions that benefit both the environment and business's financial interests should be the goal, but are rare in practice. Regulations often impose real costs on companies to force them to address environmental externalities.
- Flexible, market-based policy instruments can help reduce costs of environmental regulations for businesses while still achieving policy goals. Farsighted companies that anticipate future market and social trends have been able to adapt successfully to changing environmental standards.
- Effective corporate environmental management systems are needed to take advantage of opportunities created by flexible government policies to continuously improve performance in a cost-effective
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The Challenge of Going Green-
1.
2. The traditional view has been that addressing environmental issues poses a dilemma for
managers: either help the environment at the expense of business or harm the business
while protecting the environment.
However, a new perspective suggests a reconciliation of environmental and economic
concerns. In this approach, being environmentally friendly is not just a cost of doing
business but a driver of innovation, new market opportunities, and wealth creation.
The idea is that by redesigning products to use fewer harmful materials, businesses can
cut manufacturing costs and save on inventory.
“Ten experts assess both viewpoints and offer their comments.
Should “win-win” solutions should be the foundation of a company’s
environmental strategy?”
3. Richard A. Clarke is Chairman and Chief Executive Officer, Pacific Gas and Electric
Company, San Francisco, California.
There is a narrow focus on going beyond compliance in reducing industrial pollution,
advocating for a broader approach that involves fundamental changes in products, services,
and business strategies. An example from Pacific Gas and Electric, where energy-efficient
systems in a federal building resulted in significant cost savings and environmental benefits.
The call is for a farsighted program with innovative solutions that address environmental
challenges comprehensively, removing barriers, providing incentives, and integrating
various policies to support mutual economic, environmental, and industrial goals.
“We need a farsighted program and innovative, creative solutions to
address the environmental challenge. We need a comprehensive, forward-
looking approach in which current barriers and disincentives are removed”
4. Robert N. Stavins is Associate Professor of Public Policy, John F. Kennedy School of
Government, Harvard University, Cambridge, Massachusetts.
Over the past 25 years, the United States has spent over $1 trillion on addressing
environmental threats from commercial activities. During this period, the country has
shifted from a trade balance to a chronic trade deficit.
Many believe that environmental regulations have negatively impacted the
competitiveness of U.S. industry, leading to decreased exports, increased imports, and a
shift of manufacturing capacity overseas, especially in pollution-intensive industries.
The conventional wisdom suggests that environmental regulations impose significant
costs on private industry, slowing productivity growth.
“To address this, policymakers should establish environmental priorities
based on a careful balance of benefits and costs, aiming to reduce these
costs through flexible and cost-effective policy instruments, including
market-based approaches.”
5. Joan L. Bavaria is President, Franklin Research & Development Corporation; and Co-
Chair and CEO, Coalition for Environmentally Responsible Economies (CERES), Boston,
Massachusetts.
The concept of win-win, suggesting that environmental expenditures can benefit both
businesses and the environment, is often seen as an economic miracle. However,
skepticism arises, as it's acknowledged that such situations are rare. While some
companies may profit from higher environmental standards or government regulations,
this occurs under specific circumstances.
Making products for environmentally conscious consumers, for example, has limitations
and potential drawbacks. The motivation for companies to adopt higher standards is
often defensive, driven by rising disposal costs, tougher legal liabilities, and the fear of
pollution-related consequences.
“Companies in some industries must challenge their reason for being, or
their core competencies. Is an oil company in the oil business long term,
or in the fuel business, or in the energy business?”
6. Frances Cairncross is Environment Editor, The Economist, London, England.
Win-win is a wonderful concept. It implies that economic oxymoron, a free lunch. No
wonder politicians and chief executives long to be told that environmental expenditures
are good for business.
Sometimes it is in the commercial interests of the company’s shareholders to adopt
higher environmental standards. Sometimes, too, companies make money because
governments tighten environmental regulations. But those results occur in rather special
circumstances. It may be in a company’s commercial interest to raise its standards mainly
for defensive reasons. In most countries, the cost of disposing of toxic waste has been
rising; the legal liabilities for pollution have become tougher; and companies are
increasingly at risk of liability for past contamination. Fear, not greed, has driven most
corporate environmental policies.
“It is not surprising that tougher environmental standards impose costs
on companies. The aim of such standards, after all, is to force polluters to
internalize costs previously inflicted on society.”
7. Bruce Smart is Senior Fellow, World Resources Institute, Washington, D.C.
It’s not easy being green. But it’s also not easy anticipating markets, technologies, or
social trends. Management is a difficult profession, and the environment is becoming an
increasingly important component in decision making.
Nor is a new, unsettling variable such as the environment unprecedented. Imagine the
consternation of nineteenth-century industrialists faced with child labor laws or the
dismay of their successors contemplating the new income tax, the Securities and
Exchange Commission, and the Wagner Act, all of which dramatically altered their costs
and changed their business practices. In such circumstances, farsighted and nimble
companies prosper and laggards decline. Such is the way of a dynamic economic system.
Policymakers must recognize that environmental resources are often owned “in common”
or not “owned” at all, and are therefore not priced or underpriced to those who use
them.
“The goal is an environmental protocol that is friendly to both business
and society.”
8. Johan Piet is Professor, Institute of Environmental Control Science, University of
Amsterdam, The Netherlands.
The environmental value of products will be weighed against financial value and
consumer preferences, necessitating a vision of sustainability for executives. The survival
of "win-win" companies is crucial, but not all such ideas will succeed, requiring managers
to adopt a methodology for discovering solutions that yield the greatest benefits.
“Only win-win companies will survive, but that does not mean that all
win-win ideas will be successful. Managers need a methodology for
discovering solutions that yield the greatest benefits.”
The Pollution Prevention Pays (PPP) program has been very popular in the Netherlands in
recent years. A methodology called PRISMA was developed to trace prevention options.
Most savings could be realized by increasing efficiency. Also, in our experience, the most
extensive environmental benefits could be attained at only high costs.
Objections to PPP include: it measures benefits in terms of cash flow, not environmental
impact; it doesn’t account for all environmental issues; and improvements may not
continue if they are costly.
9. Richard P. Wells is Vice President and Director, Corporate Environmental Consulting, Abt
Associates, Inc., Cambridge, Massachusetts.
Flexible government regulations can create opportunities for environmental initiatives,
but effective corporate management systems must leverage them. Traditionally,
regulations focused on the imbalance between private and social costs. Initiatives like the
Toxics Release Inventory and the EPA's 33/50 Program aim to provide better information
for corporate decision-making. Greater flexibility allows industries to craft more cost-
effective initiatives, as seen in DuPont's analysis, which found that internally generated
environmental initiatives are three times as cost-effective on average compared to those
responding to government regulations.
“The key to maintaining continuous environmental improvement is
management, not technology. Cost-effective technologies will emerge so
long as management systems identify, prioritize, and evaluate
environmental opportunities.”
10. Rob Gray is the Matthew Professor of Accounting and Information Systems, Director,
Centre for Social and Environmental Accounting Research, University of Dundee,
Dundee, Scotland.
In Europe and North America, companies are responding to voluntary, semi-voluntary,
and legislative pressures to align with market trends. Initiatives like voluntary
environmental reporting and supplier-chain audits, along with various European Union
programs, create challenges and expenses for businesses aiming to meet environmental
standards. The idea that business can sustain itself while continuing with current
practices seems questionable, and whether this is viewed as a cost or benefit, threat or
opportunity, depends on one's perspective. The call is made to move beyond the rhetoric
of win-win situations for the sake of both business and the environment.
“The case for business continuing as it is and being sustainable looks very
thin. Whether that is a cost or a benefit, a threat or an opportunity,
depends on your point of view.”
11. Kurt Fischer and Johan Schot are, respectively, U.S. Coordinator and European
Coordinator, Greening of Industry Network, University of Twente, Enschede, The
Netherlands.
The integration of environmental factors into business strategy is seen as a complex and
innovative process. Three crucial elements are highlighted: first, businesses must find
ways to produce economically valuable goods and services while significantly reducing
their ecological impact. New standards for environmental efficiency, extending beyond
shareholder value, need to be established, measuring progress based on value added for
each unit of ecological cost. This involves absolute as well as relative performance to
ensure sustainability within the Earth's limits.
“Companies must develop new relationships with employees,
environmental groups, customers, the public at large, and governments.
Such relationships will widen the scope of accountability and
involvement of all parties in a learning process.”