1. Managing Environmental Issues
CHAPTER 12
Managing Environmental Issues
McGraw-Hill/Irwin
Copyright © The McGraw-Hill Companies, All Rights Reserved.

2. Ch. 12: Key Learning Objectives
Knowing the main features of environmental laws in the United States and other nations
Understanding the advantages and disadvantages of different regulatory approaches
Assessing the costs and benefits of environmental regulation
Defining an ecologically sustainable organization and the stages through which firms progress as they become more sustainable
Understanding how businesses can best manage environmental issues
Analyzing how effective environmental management makes firms more competitive
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3. Role of Government
In many nations government regulates business activity in order to protect the environment
By setting common standards, governments can take cost of pollution control out of competition
Governments can also provide economic incentives and offer systems for resolving disputes

4. U.S. Environmental Regulation
Environmental Protection Agency (EPA), main agency charged with pollution control, was established in 1970
Major areas of regulation
Air pollution
Water pollution
Land pollution

5. 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
Special issue: Acid Rain (see Exhibit 12.A)
Water pollution
Occurs when more wastes are dumped into waterways than can be naturally diluted and carried away

6. Major Areas of Environmental Regulation
Land pollution
The contamination of land by both solid and hazardous waste
Movement for environmental justice – efforts to prevent overexposure to hazardous risks in disadvantaged communities
Superfund or CERCLA legislation passed in 198
Established fund to clean up the most dangerous toxic waste sites in the U.S.
Of 1,200 sites put on National Priority List, by 2006 only 309 of them had been cleaned
As many of 10,000 other sites might need clean-up
Program is regarded as public policy failure

7. Alternative Policy Approaches
Environmental standards
Standard allowable levels of various pollutants are established by legislation or regulatory action
Also called command-and-control
Can be environmental-quality standard or 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
Tradable permits - allows businesses to buy and sell the right to pollute
Emissions charges or fees
Government incentives

8. Alternative Policy Approaches
Information disclosure
The government encourages companies to pollute less by publishing information about the amount of pollutants individual companies emit each year
Also called regulation by publicity or regulation by embarrassment
Civil and criminal enforcement
The threat of fines or even prison can be an effective deterrent to corporate outlaws who would otherwise degrade the environment
European regulators have actively pursued environmental criminals
U.S. Sentencing Commission has established guidelines for sentencing environmental wrongdoers

9. Advantages and Disadvantages of Alternative Policy Approaches to Reducing Pollution
Figure 12.2

10. Costs and Benefits of Environmental Regulation
Figure 12.3

11. Greening of Management
Environmental regulations establish minimum standards for environmental performance
Many firms are now voluntarily moving beyond compliance to improve environmental performance in all operational areas
This is referred to as the greening of management
Figure on next slide shows stages in greening
Three reasons companies take this path
Gain competitive advantage
Gain legitimacy
Moral commitment to ecological responsibility

12. 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

13. Ecologically Sustainable Organization
Companies that operate consistently with principles of sustainable development
Is an “ideal,” absolute standard against which real organizations can be measured
Some visionary companies are trying to achieve this
Supportive government policies and widespread movement among many businesses and other social institutions will be needed for ESO’s

14. Environmental Management in Practice
Organizational elements of many proactive green companies
Top management involvement in sustainability
Line manager involvement
Codes of environmental conduct
Cross-functional teams
Rewards and incentives
Track performance through environmental audits
Publish combined “sustainability reports” integrating social, economic and environmental performance

15. 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

16. Environmental Management as a Competitive Advantage
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