Managing Environmental Issues Role of Government Costs and Benefits of Environmental Regulation The Greening of Management Environmental Management as a Competitive Advantage Chapter 12

Major areas of environmental regulation Air pollution Occurs when more pollutants are emitted into the atmosphere than can safely be absorbed and diluted by natural processes. Water pollution Occurs when more wastes are dumped into waterways than can be naturally diluted and carried away. Land pollution The contamination of land by both solid and hazardous waste.

Leading U.S. environmental protection laws National Environmental Policy Act (1969) Created Council on Environmental Quality to oversee quality of the nation’s environment. Clean Air Act (1970) Established national air quality standards and timetables. Water Pollution Control Act (1972) Established national goals and timetables on pesticide use. Pesticide Control Act (1972) Required registration of and restrictions on pesticide use. Figure 12.1a

Leading U.S. environmental protection laws Endangered Species Act (1973) Conserved species of animals and plants whose survival was threatened or endangered. Safe Drinking Water Act (1974 & 1996) Authorized national standards for drinking water. Hazardous Materials Transport Act (1974) Regulated shipment of hazardous materials. Resource Conservation and Recovery Act (1976) Regulated hazardous materials from production to disposal. Figure 12.1b

Leading U.S. environmental protection laws Toxic Substances Control Act (1976) Established national policy to regulate, restrict, and, if necessary, ban toxic chemicals. Clean Air Act amendments (1977) Revised air standards. Comprehensive Environmental Response Compensation and Liability Act (1980 & 1986) Established Superfund and procedures to clean up hazardous waste sites. Clean Water Act amendments (1987) Authorized funds for sewage treatment plants and waterways cleanup. Figure 12.1c

Leading U.S. environmental protection laws Clean Air Act amendments (1990) Required cuts in urban smog, acid rain, greenhouse gas emissions; promoted alternative fuels. Pollution Prevention Act (1990) Provided guidelines, training, and incentives to prevent or reduce pollution at the source. Oil Pollution Act (1990) Strengthened EPA’s ability to prevent and respond to catastrophic oil spills. Chemical Safety Information, Site Security, and Fuels Regulatory Relief Act (1999) Set standards for the storage of flammable chemicals and fuels. Figure 12.1d

Superfund Passed in 1980, this law established a fund, supported primarily by a tax on petroleum and chemical companies that were presumed to have created a disproportionate share of toxic wastes. EPA established a National Priority List of the most dangerous toxic sites—about 1,200 so far. As many as 10,000 other sites may need to be cleaned up. Although cleanup was well under way at almost all sites by 2003, only about a fifth of the total had been removed from the list. Entire cleanup could cost as much as $1 trillion. Comprehensive Environmental Response, Compensation, and Liability Act

Alternative policy approaches Environmental standards Standard allowable levels of various pollutants are established by legislation or regulatory action. Environmental-quality standard Emission standard Market-based mechanisms Based on the idea that the market is a better control than extensive standards that specify precisely what companies must do. Allow businesses to buy and sell the right to pollute. Emissions charges or fees Government incentives

Alternative policy approaches (continued) Information disclosure Regulation by publicity The government encourages companies to pollute less by publishing information about the amount of pollutants individual companies emit each year. Civil and criminal enforcement The threat of prison can be an effective deterrent to corporate outlaws who would otherwise degrade the environment. U.S. Sentencing Commission has established guidelines for sentencing environmental wrongdoers.

Advantages and disadvantages of alternative policy approaches to reducing pollution Figure 12.2a Policy ApproachAdvantagesDisadvantages Environmental standards Enforceable in the courts Compliance mandatory Across-the-board standards not equally relevant to all businesses Requires large regulatory apparatus Older, less efficient plants may be forced to close Tradable allowances Gives businesses more flexibility Achieves goals at a lower overall cost Saves jobs by allowing some less efficient plants to stay open Permits the government and private organizations to buy allowances to take them off the market Gives business a license to pollute Allowance are hard to set May cause regional imbalances in pollution levels Enforcement is difficult

Advantages and disadvantages of alternative policy approaches to reducing pollution Figure 12.2b Policy ApproachAdvantagesDisadvantages Emissions fees and taxes Taxes bad behavior (pollution) rather than good behavior (profits) Fees hard to set Taxes may be too low to curb pollution Government incentives Rewards environmentally responsible behavior Encourages companies to exceed minimum standards Incentives may not be strong enough to curb pollution Information disclosure Government spends little on enforcement Companies able to reduce pollution in the most cost- effective way Does not motivate all companies

Figure 12.3 The cost of pollution control in the United States Source: Environmental Investments: The Cost of a Clean Environment (Washington, DC: EPA, 1990)

Figure 12.4 Costs and benefits of environmental regulation Costs $160 billion a year spent by business and individuals in the United States by Job loss in some particularly polluting industries. Competitiveness of some capital- intensive, “dirty” industries impaired. Benefits Emissions of nearly all pollutants have dropped since Air and water quality improved, some toxic waste sites cleaned; improved health; natural beauty preserved or enhanced. Growth of other industries, such as environmental products and services, tourism, and fishing.

Stages of corporate environmental responsibility Clean technology Businesses develop innovative, new technologies that support sustainability. Product stewardship Managers focus on all environmental impacts associated with the full life-cycle of a product. Pollution prevention Focuses on minimizing or eliminating waste before it is created.

Environmental management in practice Proactive green companies share the following elements: Top management involvement to sustainability Line manager involvement Codes of environmental conduct Cross-functional teams Rewards and incentives

Environmental management as a competitive advantage Cost savings Companies that reduce pollution and hazardous waste, reuse or recycle materials, and operate with greater energy efficiency can reap significant cost savings. Product differentiation Companies that develop a reputation for environmental excellence and that produce and deliver products and services with concern for their sustainability can attract environmentally aware customers. Technological innovation Technological innovation can lead to imaginative new methods for reducing pollution and increasing efficiency. Strategic planning Companies that cultivate a vision of sustainability must adopt sophisticated strategic planning techniques.