Managing Environmental IssuesManaging Environmental Issues

Role of Government Costs and Benefits of Environmental Regulation The Greening of Management Environmental Management as a Competitive Advantage

ChapterChapter

12

Major areas of environmental regulationMajor 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 lawsLeading 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 lawsLeading 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 lawsLeading 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 lawsLeading 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

SuperfundSuperfund

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 approachesAlternative policy approaches

Environmental standardsStandard allowable levels of various pollutants are established by legislation or regulatory action.

Environmental-quality standard Emission standard

Market-based mechanismsBased 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)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 Advantages and disadvantages of alternative policy approaches to reducing pollutionpolicy approaches to reducing pollution

Figure 12.2a

Policy Approach Advantages Disadvantages

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 Advantages and disadvantages of alternative policy approaches to reducing pollutionpolicy approaches to reducing pollution

Figure 12.2b

Policy Approach Advantages Disadvantages

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 behaviorEncourages 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 2000.

Job loss in some particularly polluting industries.

Competitiveness of some capital-intensive, “dirty” industries impaired.

Benefits Emissions of nearly all pollutants

have dropped since 1970. 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 Stages of corporate environmental responsibilityresponsibility

Clean technologyBusinesses develop innovative, new technologies that support sustainability.

Product stewardshipManagers focus on all environmental impacts associated with the full life-cycle of a product.

Pollution preventionFocuses on minimizing or eliminating waste before it is created.

Environmental management in practiceEnvironmental 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 Environmental management as a competitive advantageadvantage

Cost savingsCompanies that reduce pollution and hazardous waste, reuse or recycle materials, and operate with greater energy efficiency can reap significant cost savings.

Product differentiationCompanies 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 innovationTechnological innovation can lead to imaginative new methods for reducing pollution and increasing efficiency.

Strategic planningCompanies that cultivate a vision of sustainability must adopt sophisticated strategic planning techniques.