Environmental Policy for Business

Martin Perry

• Publisher: Business Expert Press
• Year: 2015
• eBook ISBN: 9781606496718
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

In the context of the worldwide concern with the sustainability of current forms of development, business managers are being required to engage with environmental policy more creatively than in the past. At the broadest level, business managers are being advised to embrace regulation as a source of competitive advantage rather than viewing it simply as a compliance cost and administrative burden. Irrespective of whether managers accept that "going beyond compliance" is a stimulus for innovation, business managers frequently face a policy environment in which choices need to be made over how policy agendas should be responded to. Contemporary policy approaches may mandate demonstration of best practice, without de ning what constitutes best practice or use policy approaches that give the option of "paying for pollution" or investing in clean technology. Frequently, the argument is made that there are reputational gains to being a first mover and putting the organization ahead of regulation, but the implication can be considerable upfront investment for uncertain returns. Against this context, this book provides a guide to the new world of environmental regulation for managers within business and students with a particular interest in understanding how environmental regulation works.

Chapter 1

Environmental Policy: Government and Business Agendas

In the broadest sense, policy can be thought of as the set of principles and intentions used to guide decision making.¹ This is a useful interpretation as it draws attention to the way people as well as organizations make policy-informed decisions and how policy exists when action is not taken as well as when positive decisions to change behavior are taken. Nonetheless, this book focuses on perhaps a more generally understood interpretation of policy: initiatives designed by government agencies intending to achieve specific ends through efforts enshrined in public policy programs. These deliberate efforts are by and large responses to issues that are deemed sufficiently serious to justify efforts to curb individual and organizational behaviors that would occur otherwise in the absence of the policy intervention, typically with goals and objectives to be achieved over a specified time frame. Environmental policy as discussed in this book is concerned with the principles and intentions of policy programs that aim to protect and enhance the state of the physical environment and natural ecosystems. This encompasses a wide range of concerns, including the designation of national parks, wildlife protection, standards governing air and water quality, and the controls placed on individual land users. The particular interest is in environmental policy as it affects the contemporary concern with sustainability and that is directly concerned with engineering changes in business behavior.

Sustainability is the idea that today’s population should limit its use of resources to that which at least ensures that future populations inherit a world of no lesser quality and environmental abundance.² Sustainability has modified the scope of environmental policy in at least three ways. First, it has broadened the issues to which policy is applied by increasing the efforts to address the so-called global commons or those aspects of the environment that are shared between all parts of the world or at least among large numbers of nations.³ Efforts to control the emissions of carbon dioxide and other gases associated with climate change are a prime reflection of this, together with international efforts to control a previously unrestricted activity (releasing greenhouse gases into the environment). Second, it has encouraged environmental issues to be addressed in a more integrated fashion than they once were. This is partly captured by the idea of transferring control efforts from the end-of-the-pipeline to their ultimate source in the way goods and services are designed, distributed, and disposed of. It is reflected in such concepts as life cycle analysis, enterprise thinking, and ecoeffectiveness.⁴ Third, being associated with what some have called “third wave environmentalism,”⁵ sustainability has changed the extent to which the environment is presented as a limiting factor on business. In the 1970s, the environment was presented as placing a “limit to growth” that required business and people to modify their behavior in fundamental ways or risk massive upheaval as the limits of resource availability were reached. With sustainability, the message is that green growth is possible by shifting away from a dependence on resource-intensive technologies and limiting the use of nonrenewable resources in favor of clean technology, renewable sources of energy, smart networks, and related innovations. The broad claim is that with green growth it should be possible to decouple growth in income per capita from environmental performance.⁶

The issues of sustainability and public policy have become closely intertwined. The extent to which businesses have accepted a need to address their environmental performance is connected to the perceived cost and difficulty in doing it. A traditional view of how business has thought about their environmental responsibilities is that they are “a nuisance, or at least an impediment to profit … a set of conditions that impede, rather than facilitate, the accumulation of wealth.”⁷ The contemporary view emphasizes how environmental performance can be a business opportunity that offers a “win–win” outcome rather than a constraint on profit. Various mechanisms have been suggested that link good environmental performance to rewards in the market place, including the following⁸:

• Cost reduction: investment that reduces environmental impacts by cutting resource consumption and emissions per unit of output simultaneously raises production efficiency. This is sometimes referred to as ecoefficiency, the process of reducing the amount of environmental resources used to produce a product and service.⁹

• Increased revenue: addressing environmental performance can stimulate innovation and improvements in products and services that increase market share or create new demand.

• Better risk profile: a proactive stance toward environmental performance can reduce the exposure to incidents that may lead to legal prosecutions and a loss of reputation. They can help ensure the business is ahead of community expectations and so ensure a business is well positioned to adjust to any changes in the standards set by regulatory agencies.

• Enhanced reputation: beyond positive customer reaction, businesses can gain from being viewed as better places to work and better businesses to invest in than those which do not show commitment to minimizing their environmental footprint. For businesses acting as subcontractors and suppliers to businesses reliant on the performance of their supply chain, demonstrating environmental responsibility can be a prerequisite for doing business.

On the basis of these types of benefits, it has been argued that there is a business case for being a responsible business that includes sustainability in its “bottom line.” If this were true it would suggest that there ought to be little need for new environmental policy, or at least that environmental policy need not be onerous or rigid in its implementation as the existence of a business case implies market processes will promote a transition toward more sustainable forms of economic activity. A limitation is that sustainability can only be judged for an economy as a whole or perhaps even for the planet as a whole.¹⁰ Resource efficiency projects can make good business sense for an individual enterprise and reduce environmental impacts per unit of output, but the sustainability of the economy as a whole is not necessarily advanced by these actions. Measures taken by an individual enterprise are potentially negated by what other enterprises do and by the overall level of demand in the economy. Nonetheless, as progress toward sustainability relies on sustainable business practices being adopted, it is still relevant to examine evidence claiming to show the business case for sustainability. In practice, there is much uncertainty around how far and how smoothly business is becoming more sustainable than it was.

Questioning Business Case Sustainability

Case studies of high profile companies such as Dow Chemicals, Unilever, and Wal-Mart and of individual industries appear to show how environmental and business performances can be linked.¹¹ Companies increasing their reliance on environmentally certified raw materials, working with suppliers to reduce packaging or extending their production of “environmentally friendly” consumer items such as energy-efficient light bulbs are at the same time shown to be reaping considerable financial and competitive advantage. Companies are doubtless making the changes reported and individual projects may offer business advantages, but this type of evidence has four key limitations.

First, it tends to consider microprojects going on within a larger business and may not evaluate whether the business as a whole is becoming any more sustainable. Peter Dauvergne and Jane Lister have documented the efforts being made by some of the world’s largest consumer goods businesses and identified that this can be viewed as a positive move toward sustainability when the immediate actions alone are considered.¹² For example, they show how companies such as Coca Cola, Ikea, McDonald’s, and Walmart are helping their suppliers reduce waste, save packaging, increase their use of recycled materials, and generally lessen their environmental impacts. Nonetheless, they doubt this brings a net benefit for the environment as the motive of companies is ultimately about securing their own business growth and market dominance. What Dauvergne and Lister call “ecobusiness” are simultaneously getting their suppliers to meet sometimes ambitious sustainability targets while they themselves are aggressively marketing products such as disposable nappies, soft drinks, bottled water, and toiletries to new consumers around the world. The overall net impact is less sustainability as consumers are encouraged to purchase goods that variously displace more sustainable alternatives, facilitate unnecessary consumption, increase the overall use of resources, shift the incidence of environmental demands (for example, less cost for some goods means more income to purchase other goods) or some combination of these impacts. Similarly, whitewear manufacturers appear to demonstrate the business case for sustainability with their shift away from using ozone-depleting refrigerants (carboflurocarbons or CFCs) and their development of energy-saving refrigerators until note is taken of how these savings helped whitewear companies encourage consumers to buy more refrigerators and freezers with more storage capacity than was possible earlier.¹³ Environmental gains identified in the per unit of food stored are nullified by the continuing growth in the total volume of refrigerator and freezer space in use.

Second, using the terms introduced above, the distinction between ecoefficiency (or, simply defined, “use less”) and ecoeffectiveness (“do more good”) needs to be considered.¹⁴ Much of the effort going on at best involves ecoefficiency: this aims to improve the proportion between environmental resource usage and output for existing products and processes. The limitation is that efficiency impacts are subject to rebound effects that nullify any environmental gains. Reductions in car emissions, for example, can be neutralized by increases in vehicle ownership and car usage. This feedback mechanism has been labeled the “dilemma of the N curve.”¹⁵ Ecoefficiency centers around approaches such as reduce, reuse, and recycle that may enhance the ability to do more with less, but this...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright
• Contents
• Preface
• Chapter 1: Environmental Policy: Government and Business Agendas
• Chapter 2: Good Regulation
• Chapter 3: Information as Regulation
• Chapter 4: Emission Trading
• Chapter 5: Administering Regulation
• Chapter 6: Implications for Managers
• References
• Index