Reframing the debate.

The Reason Foundation examines proactive options

Recently, an official with EnviroPlastics, which processes recycled plastics, opined, "We need a bill with |recycling-content~ standards high enough to create a demand for our product and the business environment in which we can succeed."

Another firm, Brandt Manufacturing Systems, maker of a colored coating for clear glass bottles, is pushing for bans of colored glass. The firm's long-term plans call for national and international efforts "at all levels for interest in legislation of one-color glass."

Their public rationale? This would make recycling easier, avoiding problems associated with mixed glass colors in the waste stream. Bans on colored glass, not incidentally, could also boost demand for glass coatings.

Erstwhile foes of environmental legislation, many business lobbyists now see potential for greenbacks in green regulations. They see such regulations as an opportunity to gain market share, secure profits, and shift cost burdens onto competitors, or simply drive them out of business altogether.

In economic jargon, these firms are opting for a "rent-seeking" strategy--a corporate strategy that tries to exploit legislative efforts in order to up profits--usually at the expense of potential competitors--foreign or domestic.

There is nothing altogether new in this sort of strategy--although it may be relatively new in the world of environmental politics. But it is a risky strategy; one that pins hopes for economic success on the volatile, promiscuous world of politics rather than on good old-fashioned efforts to compete in the marketplace by improved productivity and aggressive marketing.

Rent-seeking is a risky strategy; it also usually results in bad policy--protectionism of the few along with reductions in choices or increased costs for consumers.

But private firms, both big and small, do need some strategy as they face increased legislative pressures to remedy environmental problems. The upsurge in environmental regulations in the 1980s--both locally and nationally (following a brief respite during the Reagan era) has left industry beleaguered and confused. Nowhere has that beleaguerment been more pronounced than among California businesses.

We all know the numbers, more or less. California's Council on Competitiveness reported that some 330,000 jobs left the state last year. Moving van companies report sending more loads out of the state than are coming into California.

Not all of this trend can be attributed to environmental regulations. But the state's Commerce Department reported in 1990 that 62 percent of manufacturing companies in California said "streamlining environmental regulations" is imperative for the state.

On the other hand, environmental problems are real, especially since, in the world of business, consumer perceptions are reality. Businesses, in California and elsewhere, face a dilemma: how to be a "good citizen"--one that meets consumer expectations for a cleaner environment--while remaining profitable.

The answer has two components: what do companies do internally with their products and processes to address environmental concerns? And what do they do in the political arena, in legislative debates and policy processes?

Consider this second question. Private firms have three basic strategic options. They can take the "Fight and Deny" approach; they can "Capitulate and Negotiate." Or they can take a "Proactive" approach. Two proactive options are possible--the "Rent-seeking Strategy," or the "Paradigm-shift" (change-the framework-of-the-debate) strategy.

"Fight and Deny" is the vintage approach, the approach embraced in the '60s and on into the '70s. The strategy goes something like this: we don't really have any problem, or, if we do, addressing the problem will cripple the economy, so we can't afford to do anything about it.

The strategy failed. Industry did not stave off significant regulatory endeavors such as the first Clean Air Act, the Clean Water Act, the Endangered Species Act, the Resource Conservation and Recovery Act, and Superfund. Spending on these and other measures have totaled over $1 trillion since 1970, with costs by 1992 reaching perhaps $72 billion for one year alone.

It's not just the costs alone that matter, but how they've been spent. Some 85 percent of Superfund dollars are going to lawyers, not to direct clean-up efforts. The new Clean Air Act, according to Paul Portney at Resources for the Future, could carry a price tag $15 billion higher than the resulting benefits.

"Fight and Deny" did not stop regulations; it may have helped set the stage for some ill-conceived regulations. More important, industry gave itself a black eye in the process of fighting these regulatory efforts.

Among other results, industry lost credibility. A 1992 survey of consumers, asked whose claims about the environment they are most likely to believe, showed only a small percent having any faith in industry pronouncements.

Humbled by this experience, some private firms began by the '80s to revise their strategy. They moved into what Frank Popov at Dow Chemical has called the "dialogue" phase. Essentially, in this strategy, companies accept the definition of our environmental problems and the regulatory means for addressing those problems proposed by environmental interest groups. They accept the notion, for example, that we are "running out of landfill space," as our central solid waste problem. All debate then centers on questions such as just how much recycling and recycled content will be mandated.

This "capitulate/negotiate" option has come to be the strategy of choice for many companies. It allows them, they assume, to build their "good citizen" image while still protecting the bottom line.

Take an example here in California. Throughout the '70s and early '80s, many environmental interest groups held two views about waste: goods are over packaged, and recycling--especially of beverage containers--could save resources, reduce litter, and reduce waste. Their answer to these problems? A bottle bill, a bill to require deposits on some beverage containers to encourage consumers to return them at redemption centers for recycling.

In the '70s the beverage industry fought this legislation, spending many millions in the process. By the mid-'80s, however, a few companies broke ranks with the fight and opted to negotiate a solution with state legislators. The result for Californians? AB2020, a labyrinthine bill--with multiple, yearly amendments--that charges a processing fee on beverage container manufacturers that is, in theory, based on the difference between the scrap value of the container and the costs of recycling it.

Was this negotiated conclusion to the bottle bill debate a gain for California consumers, industry, and the environment? Probably not. Yes, recycling rates have surged. But the bill, according to industry representatives, will likely drive some plastic container manufacturers right out of California. And the bill gives no incentives to some recyclers to find ways of reducing their costs.

At the federal level, the "Capitulate/Negotiate" strategy has come to dominate the policy process. One business lobbyist, justifying support for recycled content legislation, remarked that this was the only way for industry to be "a player" in the policy debate.

As the Resource Conservation and Recovery Act dialogue unfolded in 1991 and 1992, for example, many companies battled over exemptions from proposed packaging laws, or for lower recycled content requirements. They devoted their efforts to tinkering at the margins, not to questioning whether the basic premises of the legislation made sense.

Certainly, the legislative processes--in Sacramento and Washington--encourage this kind of approach. Lobbyists, who work on a variety of issues, have to maintain good relations with their counterparts on legislators' staffs. That means negotiating. It means working with legislators on proposed bills, not coming forward with wholesale different alternatives.

In fact, companies have been poorly suited to devising legislative responses based on independent analysis of a problem and its potential solutions. Companies are reactive. They react only after someone else has defined a problem and proposed a legislative remedy. But reactive responses limit companies to strategies based on denial--the traditional approach--or strategies based on negotiating over a preset agenda.

There is an alternative, and some companies, acutely aware that somehow they are losing a battle of ideas--a battle about the role of science and economics in setting policy priorities, a battle about preserving market institutions in their broadest sense--have stepped forward with attempts to reshape environmental policy debates.

The Council on Plastic Packaging and the Environment, a coalition of plastic manufacturers and users, has been holding a series of forums to explore what the solid waste problem is--not as framed by advocates of vigorous recycling, but based on their own analysis of the waste problem. And they have attempted to craft policy ideas out of this reexamination of the issue.

In effect, multiple businesses in Southern California are groping in a similar way for better air pollution policies. They are exploring the prospects of market-oriented approaches, such as congestion pricing and tradable permits, rather than simply battling any new emission reduction regulation.

These efforts are not the same as "Capitulate and Negotiate," and they are not the same as "Fight and Deny." Companies can acknowledge that we have a waste management problem, or an air emissions problem, or a water pollution problem. That does not mean they must embrace the notion that we are running out of landfill space, that zero air or water emissions is ultimately the appropriate goal for environmental policy, or that a particular set of regulations is the appropriate remedy.

But this is a tough strategy. There is a fine line between "fight and deny" and "reframing the debate." Sometimes reframing the debate requires rejecting some basic icons of environmental interest groups--icons that assume that all recycling makes sense, or that all toxics should be eliminated, for example.

Reframing the debate requires going beyond a challenge of the current agenda to proposing alternative policy ideas--not an easy task in a world of competing businesses. As Peter Coors of Coors Brewing Company noted in a recent speech, "the problem is that everyone has an agenda." Recalling Ben Franklin, he cautioned, however, that companies can "Hang together or you're going to hang separately."

Hanging together requires having a framework of analysis that asks. What is good policy? For most companies, by contrast, their first question is, what is good for my company.

As corporations evolve their strategies on environmental policy, the key challenge will be whether they can find ways of merging these two questions into a single set of answers.

Lynn Scarlett is Vice President, Research, for Reason Foundation, a non-profit, non-partisan public policy research organization.