There is a new era of global environmental factors that needs to be addressed via sound Corporate Environmental Management. Environmental problems are a key area of concern for the global community in the new 21st century. A sustainable global community is emerging that is geared toward preserving limited resources and the natural ecology, but to do so requires resource conservation and the reduction of environmental pollution loads across all human activities.
This text focuses on the emerging relationship between corporate management and the environment as a new era arrives on the scene, where environmental factors increasingly play a key role in corporate competition and generate a need for environmental assessments of companies. In this new era, the view of environmental problems has undergone a shift from localized industrial pollution to a broader realization of their collective impact on global environmental problems.
The industrial pollution problems that afflicted industrial nations were recognized in the 1960s. In most industrial nations, strong campaigns were undertaken to identify the source of pollution and the damage caused.
In many cases, the source and dangers could be traced to specific businesses and specific actions. Programs were swiftly implemented that satisfactorily dealt with the situation via “end-of-pipe” regulations that restricted emissions of air and water pollutants from factories. In the process, industrialized nations have increasingly shifted their emphasis from direct end-ofpipe regulations on industrial pollution to more market-oriented measures that encourage creative solutions to reducing environmental loads and costs (short-term and long-term).
End-of-pipe regulations required companies to comply with emission standards for gases, water, and noise emanating from production sites.
Companies complied with the legal emission standards by installing treatment facilities for gas and water emissions. However, the controls were viewed as being problematic because they restricted operations and increased costs. As such, pollution controls did little to encourage corporate competition to resolve environmental problems on a grander scale.
However, in the 1980s with the recognition of the dire long-term impacts of global warming, acid rain, and the depletion of rain forests, environmental problems became global in scale. These newly recognized problems were not derived by end-of-pipe industrial pollution as much as from environmental loads being generated in the daily activities of businesses and individuals that when assessed individually seem small but in the aggregate have a huge regional and even global impact.
This new, more market-oriented regulatory approach to environmental problems is aimed toward encouraging companies to find creative solutions to their global impact by reducing carbon dioxide and other greenhouse gas emissions, curtailing household and corporate waste generation while actively promoting recycling, and introducing the PRTR (Pollutant Release and Transfer Register) system for reporting and registering potentially harmful emissions and transport of waste that attacks the problem on a large scale.
As part of this effort, green procurement initiatives were enacted that promoted purchases of environmentally friendly products. Also basic laws were developed to promote a recycling-oriented society and regulate the tracking of emission audits. In its totality, these efforts aimed at curbing emissions on the regional and global scale. These laws form the legal framework for waste management and recycling.
Another part of this new regulatory approach has been a growing trend to emphasize environmental considerations in the previously untouched product and service markets. Through packaging and recycling, consumers began sorting discarded packages into recycling categories (e.g., glass bottles, PET bottles, steel and aluminum cans, and paper packs). This sorting allowed municipal waste collectors to collect these packages separately and business operators the opportunity to retrieve and re-use them. A similar approach emerged regarding the recycling of industrial waste. The approach allowed initial recycling costs to be borne by businesses through prudent pricing passed to a degree to consumers.
Through laws and reorganized handling procedures, the cost of recycling packages was reduced to the point where it no longer internalized the societal costs and, as a side benefit, companies have begun adopting a longterm effort toward converting to lighter, more simple packages and reusable materials. Appliance recycling efforts (e.g., air conditioners, televisions, refrigerators, and washers) allow consumers to return discarded appliances to retailers, who then deliver the products to their respective manufacturers.
Consumers must pay the recycling costs, in this case at the time of return.
The fee is to help suppress excessive consumer consumption.
As time has passed, it has become increasingly clear that companies that adopt the most efficient recycling method enhance their price competitiveness, whereas those who recycle inefficiently suffer. Herein is found a fundamental enhancement from the end-of-pipe pollution regulations in the 1970s. The latter focused on environmental refund costs to comply with emission standards. Under the market approach, companies are encouraged to invest in ways that will differentiate their products and enhance competitiveness.
Energy conservation efforts invoke even tougher market principles to encourage companies to take creative steps in reducing energy consumption (and hence, carbon dioxide emissions). Key features include the setting of energy conservation standards for designated machines (automobiles, home appliances, and office automation equipment) base. Competition is increased, driving each company’s products to meet the standard set by the most energy-efficient product on the market.
Companies that fail to improve product performance are subject to increasing market-driven as well as regulatory-driven forces. Those companies who cannot (or will not) compete are ultimately forced to withdraw their products from the market. By compelling companies to meet the highest energy-saving standards on the market, the global legal market affects not only the competitiveness of products but strikes at the heart of overall corporate survival.
Pollutant release and transfer laws emerged in the industrial community worldwide, requiring companies to measure and report emissions for specified chemical substances released into the air, water, and soil, as well as wastes transferred offsite for treatment and disposal. The impact of this tracking is that companies are increasingly performing risk management of chemical substances—the cost of which is often quite substantial—and when recognized, induce efforts to reduce, mitigate, or eliminate.
The best policy is to avoid using any harmful or hard-to-manage chemicals but often this is unrealistic. Regardless, a system should be in place to minimize the generation of harmful chemical waste via manufacturing methods and processes, raw material selection, and product compositions.
This improvement will have significant implications not only in preventing direct contamination risk but in avoiding the risk of marketplace rejection or exclusion from customers and consequent competitive disadvantage.
Both the manufacturing and retail communities are increasingly recognizing the market power of green purchasing.
Green purchasing refers to the activity of purchasing products and services with the smallest environmental impact, thereby encouraging companies to become more environmentally responsive. The approach is based on the idea that “green consumers” use their purchasing power in the consumer market to reward businesses that actively engage in environmental issues and to prompt reluctant businesses to do more.
However, whereas there is increasing evidence of consumers’ awareness of green purchasing, it has been difficult to establish the degree to which green purchasing is having an impact at the consumer level. There is a surprisingly strong response to purchasing within corporate commitments that are trying to establish “green credentials.” To that end, the green purchasing movement has been rapidly growing among businesses, organizations, and government offices, thereby effectively promoting green markets. There is hope that this will increasingly shift market demand toward green products, thereby leading to lower prices. More progress has occurred as cost savings are increasingly identified through these “green procurement” efforts. Large assembly and processing companies are increasingly procuring raw materials and components meeting their environmental specifications. Markets are clearly becoming more selective regarding environmental factors. In the future, even more emphasis is expected in business-to-business green transactions.