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Seize the moment.

Strong environmental performance can be turned into competitive advantage, and the U.S. can reap economic, environmental, and geopolitical benefits.

After nearly 25 years of increasing government regulation, the nation enjoys a cleaner, safer environment, but that progress came at great cost, and major challenges remain. To address those challenges responsibly and efficiently in the future, we need to find ways to merge economic and environmental goals.

For years, the trade-offs between economic growth and environmental protection have polarized the debate and hindered progress. The future will be shaped by a recognition that economic and environmental forces react in more complex ways. A growing number of business executives worldwide are demonstrating that we can have both economic growth and a cleaner, safer environment. Common sense suggests that sound policies promote both simultaneously.

Corporate America faces a range of important opportunities in this new symbiosis of environment and economy. Through strategies emphasizing pollution prevention, partnerships with conservationists, and global leadership, businesses can protect the environment even as they strengthen their competitive position.

Today, a movement is underway to gain economic efficiencies by preventing pollution before it occurs rather than cleaning it up after the fact. Corporations can increase profit margins by reducing wastes, increasing energy efficiency, and implementing environmentally friendly management practices.

Since the 1970s, pollution control has been the most common approach to cleaning our environment. The U.S. will spend an estimated $130 billion on environmental protection in 1992, putting us among the world leaders in the share of national income spent on pollution control (about 2%).

However, control technologies often do not eliminate pollutants but, rather, transfer it -- for example, from smokestack gases to scrubber sludge that must be dumped elsewhere. By contrast, prevention techniques, such as elimination of toxic inputs or reusing or recycling materials, can prevent emissions altogether. Prevention cuts the costs of regulatory compliance, not to mention litigation; community relations are also improved.

Many leaders of the prevention movement have adopted an institutional ethic called Quality Environmental Management (QEM), a close relation of the Total Quality Management (TQM) ethic. Just as defect prevention is more cost effective than "find and fix," pollution prevention is better than cleanup. TQM requires a rigorous analysis of production processes, identifying opportunities to cut costs and improve quality. Through a similar process of self-analysis, companies can find ways to improve environmental performance while reducing costs.

Corporations including Dow, Chevron, Procter & Gamble, AT&T, Ford, General Electric, Monsanto, and others are aggressively preventing pollution. An early leader of the movement, 3M Co., since 1975, has eliminated over 500,000 tons of air, water, and solid waste pollutants as well as 1.6 billion gallons of waste water, largely through cost-effective changes in production processes. In so doing, 3M has saved itself $537 million -- resources that are better directed toward productive purposes. Dow's QEM techniques have reduced total air emissions from U.S. plants by more than 50% since 1985. Process changes at one plant in Louisiana saved the company $18 million in reduced disposal and raw materials costs.

Energy Efficiency

A related step in the right direction is improving the efficiency of energy use. The amount of energy needed to produce one dollar of U.S. GNP has already fallen 27% since 1973. However, more efficient motors, building systems, and other equipment have been developed in the last decade, enabling companies that use them to cut operating costs. Energy efficiency allows electric utilities to postpone costly power plant construction while restraining emissions of sulfur dioxide, nitrogen oxide, carbon dioxide, and other pollutants.

At least 27 states have adopted or are considering plans to give utilities profit incentives to conserve energy while meeting growing energy demand. For example, using a variety of efficiency incentives, the world's largest electric utility, California's Pacific Gas and Electric (PG&E), in this decade has saved 1,300 megawatts of power and by so doing saved its customers $3.5 billion. In 1991 alone, PG&E's energy efficiency program resulted in $45 million profit. During the 1990s the company plans to meet 75% of its increased demand through efficiency improvements, displacing 2,500 megawatts of power, saving consumers $2.4 billion, and cutting 21 million tons of carbon dioxide emissions -- equivalent to the emission reductions from taking 2.5 million cars off the road.

Building Partnerships

Perhaps the most serious impediment to environmental progress is the diverse, seemingly irreconcilable interests of groups involved. In the past, government agencies, advocacy groups, communities, and corporations were usually at loggerheads. Today, astute managers from each sector are building partnerships to resolve or avoid these conflicts.

A number of examples illustrate the trend: * Pacific Gas & Electric's energy efficiency program was developed in consultation with the Natural Resources Defense Council, formerly the utility's chief opponent in environmental litigation. * The President's Commission on Environmental Quality (PCEQ), composed of 25 private sector leaders, including corporate executives, environmentalists, educators, and philanthropists, implementing an action agenda to improve the environment in voluntary, economically sensible ways. A dozen cooperative projects are underway to prevent pollution, increase energy efficiency, conserve natural resources, promote international cooperation, and educate the public, especially with respect to water conservation and childhood lead poisoning. * Recently, McDonald's Corp. and the Environmental Defense Fund (EDF) joined in a Waste Reduction Task Force. In consultation with EDF, McDonald's implemented 42 source reduction, reuse, recycling, and composting initiatives that may reduce the fastfood chain's waste stream up to 80%. * The Nature Conservancy, a private group, has forged partnerships between local businesses, government, and conservation volunteers in many regions of the U.S., including central Texas, the Sacramento River Valley, and the Virginia coast, to ensure that human activity is compatible with environmental quality. * The Wildlife Habitat Enhancement Council, composed of more than 80 corporations, conservation groups, and wildlife consultants, has worked at more than 150 sites to enhance 150,000 acres of corporate lands in the U.S. and abroad.

By involving all parties, partnerships increase the likelihood of developing approaches that are both economically efficient and environmentally sound. They help promote goodwill and literacy in local communities, as parties step out of the courtroom and into the conference room.

Global Leadership

Environmental abuses revealed in the former Communist bloc, as well as those seen in other developing nations, make us painfully aware of the need to help those countries repair and avoid the kinds of mistakes we now know we made as we in the U.S. developed our economy. As a nation, we can promote economic growth and constructive international relations by strengthening our leadership in environmental goods and services and by accelerating technology development and cooperation.

As this is being written, delegations from over 150 nations are preparing to gather in Rio de Janeiro in June for the United Nations "Earth Summit." The summit's comprehensive agenda will spur efforts to transfer environmentally friendly technologies to poorer nations, and, in some cases, this will be accomplished through official foreign assistance. U.S. government agencies provided over $140 million in 1991 alone for technology cooperation related to global climate change concerns.

Other programs such as the U.S.-Asia Environmental Partnership and the East European Environmental Center will facilitate cooperation with those regions. But in the vast majority of cases, technology transfer will occur as a result of private sector activities.

In this regard, the market opportunities are already huge and growing. The U.S. Department of Commerce and the Organization for Economic Cooperation and Development (OECD) have both estimated that the global marketplace for environmentally friendly products was more than $200 billion in 1991, and growing by 5% to 6% annually. Most of that demand was filled by domestic suppliers, although the global export market was worth $30 billion. Of that, American companies supplied only $3 billion to the non-U.S. market. Clearly, if we could increase market share, and if the market grows as rapidly in developing countries as it has in the U.S., Europe, and Japan in the last 20 years, we could create thousands of high-skilled jobs and improve our balance of trade.

Many business leaders have demonstrated their eagerness to seize these opportunities through such initiatives as the Global Environmental Management Initiative (GEMI), a coalition of businesses dedicated to raising international standards of environmental management, and the Business Council for Sustainable Development (BCSD), a group of 48 industrialists from 20 countries organized two years ago to gather the views of the international business community for the Rio conference. Recently the BCSD released an important new report called "Changing Course," in which the Council coined the term "eco-efficient" to describe companies that produce ever more goods and services while reducing resource use and pollution.

The Results Are Conclusive

The evidence gleaned from our own national experience proves that strong environmental policies can coexist with a growing capitalist economy. Since 1970, air emissions of sulfur are down 26%, particulates are down 60%, and lead is basically out of the air, thanks to the phaseout of leaded gasoline. Rivers and lakes that were once open sewers, and several of which were literally aflame, are today largely fishable and swimmable.

These gains were achieved while the number of homes grew 30%, the number of vehicles grew 50%, and our economy overall grew by more than 50% in real terms. Millions of jobs were created and cleaner, more efficient technologies were phased in. Some industries facing strict environmental laws, including steel and chemicals, have increased exports and productivity while reducing emissions. That's not a bad record.

With policies that promote economic growth and innovative, efficient environmental solutions, that record of progress on two interdependent tracks can be extended. Strong environmental performance can be turned into competitive advantage and the U.S. can reap economic, environmental, and international political benefits.

Michael R. Deland was appointed by President Bush to be Chairman of the White House Council on Environmental Quality (CEQ) on August 1, 1989. In this capacity he serves as environmental adviser to the President as well as Director of the Office of Environmental Quality, which oversees the development of environmental policy, interagency coordination of environmetal quality programs, and environmental data acquisition and assessment. In addition, he is responsible for overseeing implementation of the National Environmental Policy Act. Prior to his appointment as CEQ Chairman, he was the New England Regional Administrator for the U.S. Environmental Protection Agency.
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Title Annotation:Meeting the Environmental Challenge; merging environmental and economic goals
Author:Deland, Michael R.
Publication:Directors & Boards
Date:Jun 22, 1992
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