Killing With Kindness.

Bush will only weaken companies by exempting them from environmental standards.

One of the biggest challenges President George W. Bush is facing in the early stages of his presidency concerns energy and the environment. How can his administration protect the environment and at the same time keep U.S. businesses competitive in the global economy? The answer to this vexing question may lie in an approach that was outlined during an Oval Office meeting in which I participated almost ten years ago.

At that time, a group of executives from international companies, which had formed the Business Council for Sustainable Development, was invited to the White House. We were there to present to the first President Bush a report that we had prepared for the 1992 Rio Earth Summit on ways in which business could contribute more towards sustainable human progress. Our report explained how business could produce more goods and services with less waste and pollution, and how we could be better "corporate citizens." We asked governments for appropriate "framework conditions."

In that meeting, predominantly with the Council's U.S. members--companies such as 3M, Alcoa, Browning-Ferris, Chevron, Dow, and Dupont--President Bush started out merely polite, but slowly became very interested.

He eventually took me into the Oval Office for a private chat and essentially made an interesting confession. In his long political career, he said, he had met with lots of business groups, but they usually came to ask for favors: protection here, a subsidy or a special deal there. He asked me to explain how we could lobby him with what he considered solutions, while others lobbied him with problems.

I said it was simple. He had mostly been hearing from the uncompetitive companies, those who needed help. That day, in contrast, he heard from the competitive U.S. companies, those that did not need to lobby, those that were too busy making profits to lobby government.

Apparently the forty-first President did not pass on to his son the can-do spirit displayed by those U.S. business leaders of ten years ago. Or perhaps the current president is still being lobbied only by uncompetitive companies.

History shows that the worst thing a business-friendly government--such as the current Bush administration--can do is to go easy on business. Britain, for example, once had a world-famous car industry, but successive governments required little of these companies. They failed to compete globally and by now have largely vanished.

Subsidized steel-makers, shipbuilders, and airlines offer other examples of uncompetitive companies killed by government kindness. Allowing excessive pollution, whether [CO.sub.2] or arsenic, is a form of subsidy.

Professor Michael Porter of Harvard University has shown that countries with the most efficient environmental management regimes are also among the most competitive, and recent rankings of countries' competitiveness continue to bear this out. The United States will not continue to compete successfully in a carbon-constrained world unless it becomes a more efficient energy user. This is a simple fact--and one, I believe, that is increasingly shared by business leaders in the United States as well.

Some may argue that U.S. companies are far more competitive today--to the point of dominating their international competition--than they were in the late 1980's and early 1990's. Especially at a time when U.S. companies are facing comparatively less pressure from abroad, it seems only logical that the U.S. administration would not go easy on them by relaxing environmental standards at home.

On the positive side, the World Business Council for Sustainable Development has now grown to 150 members, of which forty companies are based in North America. But few of the suggested framework conditions we had asked for before the Rio Summit almost a decade ago have been implemented. Specifically, we suggested that environmental damage should not be subsidized by governments and that the prices of goods--whether fish or fuel or pollution rights--ought better to reflect their real costs.

In our view, it would be wise to tax bad things like pollution instead of good things like jobs. If the trading of pollution permits were more widely used, this would encourage business to use its creativity constantly to improve.

As the tenth anniversary of the Rio Summit approaches in 2002, regardless of the present-day politicking, the planet has little progress to show. Surely, the recent actions announced by the new Bush administration have been cause for concern around the globe. It is hard to achieve progress on an issue where the United States essentially seems to have opted for stalling. Still, we are hopeful.

We essentially see a business-friendly administration. Being friendly, the Bush team will not want to offer companies small favors that discourage their efficiency and creativity. It will want to set tougher enabling conditions which will make these companies, and the United States, ever more competitive. It will want to encourage business-like, international solutions to climate change rather than complain about how little the poorest countries are doing.

There will be another summit on environment and development next year, one in which this administration will want to take the lead. To get ideas on how to do this, President Bush may want to listen to the companies that are too busy being successful to come and ask for favors.

Stephan Schmidheiny is Founder and Honorary Chairman of the World Business Council for Sustainable Development, based in Switzerland.