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The ecological imperative for business.

Business leaders must have their companies participate fully in the resolution of the complex environmental issues facing our world society.

Over the past two decades, environmental considerations have become an increasingly important aspect of doing business. Whether business is confronted with the curtailment of emissions, the remediation of waste sites, or the production of products attuned to today's "greener" tastes, the environment presents significant competitive opportunities, as well as challenges, to companies in most industries. Today, sensible environmental stewardship is totally consistent with good business practices, while environmental neglect invites unacceptable risk.

Responsible executives recognize this and incorporate environmental considerations into their corporate cultures and business planning. They act to ensure that their products and services are positioned to respond to the public's environmental concerns and needs. And -- of equal importance -- they are participating in the public debate over environmental policies.

The very nature of our business has put Texaco and its industry in the forefront of many high-profile environmental issues. As a result, we have had extensive experience in the environmental area and have been involved with significant research on the issues, confirming our belief that the people of the world can enjoy both a clean environment and a rising standard of living. But such a positive result is only possible if society allocates its human, material, and capital resources carefully and intelligently, and if the importance of economic growth as a benefit to the environment is understood. It is such growth that provides the resources and investment needed to support a clean environment. One only has to look at much of the underdeveloped world and the former Soviet Bloc, which suffer the poorest environments today, for proof.

Unfortunately, this connection between economic growth and the capacity for positive environmental actions is not fully understood by much of the public, or even by many government and opinion leaders. And business has not done as much as it should to explain this connection, too often leaving the field to those with little or no science or economics behind their positions who say, "Just send the bill to business, they'll pay, you don't have to."

This has contributed to the mushrooming of environmental spending in the United States, often without the expected environmental improvement. The U.S. Environmental Protection Agency (EPA) estimates that direct costs of pollution control in the U.S. reached roughly $125 billion in 1992, and will exceed $185 billion by the year 2000. Unfortunately, as is becoming well documented, too much of this money has been wasted on huge, costly mistakes that have produced negligible benefits.

The Superfund is perhaps the most widely documented example. It was created by Congress in 1980 to clean up several hundred toxic waste sites around the nation over five years, at a cost estimated to be $1.4 billion. Now, 13 years later, the program has grown to monstrous proportions. The EPA has identified some 30,000 sites to be cleaned up. Yet, to date, only a few more than 100 sites have been cleaned fully, while spending -- currently at $14 billion -- has reached 10 times that originally budgeted. And even the EPA admits that upward of 50% of total dollars spent has gone to fees for lawyers, consultants, and administrative costs. Estimates of the ultimate cost of this program have run as high as $100 billion to $700 billion. The inherent unfairness of many of the provisions of the Act, plus the failure to determine appropriate remediation standards, are what caused this twist.

As a nation, we must recognize that our financial resources are finite, while society's demands on them are growing exponentially. Clearly, we cannot afford to do everything we would like to do, all at once -- if at all. We must set priorities and we must make hard choices and make them based on good science and rigorous cost-benefit analysis.

How Business Can Help

Allocating finite resources is what we in business do and is an area where we can render an important service to society. We already have faced the need to marshal diverse resources in pursuit of environmental goals by bringing discipline and realism to our business decisions. We should be able to input this experience to the policymaking process. We have many of the facts to help focus discussion on cost-benefit analysis of proposed, and enacted, environmental laws and rules. We can help legislators and policymakers set priorities and make prudent decisions based on cost-benefit analysis for workable solutions. We also can input the capital and scientific knowledge needed to find those workable solutions, while creating the wealth and jobs needed to sustain and raise the nation's standard of living.

Because business knows how to harness the flee-market system to unleash the creative powers of the human brain, we should work to ensure that the resolution of environmental issues is based on informed public preference, expressed in the marketplace, and not on command-and-control procedures, dictated by regulations issued under often unclear and emotion-charged legislation.

Valuable Contributions

Thus far, even the limited participation of business in the process of setting environmental policy has produced some notable successes. A joint research program by the automobile and oil industries, initiated by Texaco, has made valuable contributions to the scientific fact base for environmental improvements in engines and fuels and established beyond reasonable challenges the cleanliness of fuels and engines being put in the market today.

In another very constructive effort, in 1992, oil industry leaders worked with industry, government, and environmental leaders of goodwill to work out a moderately reformulated gasoline at an acceptable price, to meet the first phase of the 1990 Clean Air Act Amendments.

In addition to participating in the environmental policy debate, companies also can profit by building true environmental quality into their products and services. The market for so-called "green" products has been growing as consumers increasingly demonstrate their interest in goods made with recycled paper, reformulated laundry detergents, pump sprays instead of aerosols, and other products or modifications believed to protect the environment.

At Texaco, we have been meeting the demand for "green" products profitably. We have increased our production of oxygenates to help fulfill the additional demand for oxygenated and reformulated gasoline. We are collecting used motor oil and other lubricants, removing many of their waste elements, and reselling them for environmentally acceptable uses, such as bunker fuel to power ships. We have been vigorously expanding the number of our clean-burning, energy-saving, gas-fired cogeneration plants. They produce steam for oil production, refining, and other industrial uses, as well as electric power from the same fuel source. By mid-decade, these plants will be generating enough electricity to light and power more than four million homes.

We are also expanding the applications of our proprietary gasification process, which has been under development for many years, to meet today's environmental demands. Gasification uses a variety of pollution-potential fuels, such as coal, to create a synthesis gas. This process isolates and collects the pollutants while providing the gas, which burns cleanly, to produce electrical power or for use as feedstocks in manufacturing. The process can also create synthesis gas from waste products that are difficult to dispose of, including sewage sludge and used tires.

Clear and Strong

Perhaps the most important factor a company needs to thrive in today's environmental arena is a full commitment from the very top of the organization. This message must be clear, strong, repeated often, and confirm a seriousness of purpose.

In addition to doing precisely this, in 1989 Texaco formed an Environmental, Health and Safety Division, headed by a corporate vice president. This new unit brought together a number of already existing functions that had been scattered throughout our worldwide operations. It has an integral role in company operations, and a strong role in the enforcement of compliance.

Also, the Public Responsibility Committee of our board of directors is charged with reviewing and making recommendations to the full board regarding policies and procedures that affect the company's role as a responsible corporate citizen, including the programs managed by the Environmental, Health and Safety Division.

We now publish a biennial Environmental, Health and Safety Review. The latest issue was sent to stockholders, employees, customers, and suppliers. While we're proud that the publication won the prestigious Gold Quill Award of the International Association of Business Communicators, we're far more proud of the content, which documents our commitment and our progress.

We conduct a large number of environmental protection programs throughout the company, including random and selective environmental audits which cover more than 500 Texaco facilities worldwide, to ensure that they are complying with all laws and regulations. Again last year this effort was certified by Arthur D. Little Inc., a noted consulting firm specializing in environmental matters, as "one of the leading programs in the petroleum industry."

Texaco also was instrumental in developing, and has adopted, the Oil Industry Operating Guideline for Tropical Rainforests, which requires environmental impact assessments before oil and gas exploration and production operations begin, as well as continued monitoring through the life of the operation.

In addition, we are deploying technology developed in-house, and some adapted from outside, such as satellite imaging used before starting exploration to establish a baseline of existing conditions, vertical seismic profiling, and our proprietary technology for producing hydrogen from refinery waste gases, to make cleaner fuels.

Full Participation

In sum, Texaco operates from the premise that, as a nation, we can have both a clean environment and a better standard of living for ourselves and our children. But this will only be possible if more and more business leaders in the country and across the globe see that their companies participate fully in the resolution of the difficult and complex environmental issues facing our world society.

Particularly in a democratic system such as ours, it is vital that the people understand the issues, and insist that their representatives in government do also, so they can make the wisest decisions. When the American people have all the facts, their decisions are sound. I believe that we in business have an obligation and a wonderful, constructive opportunity to demonstrate to the American people the logic and justice of reasonable positions on environmental matters. That, in my view, is the essence of the ecological imperative for business.

Alfred C. DeCrane Jr. is Chairman and Chief Executive Officer of Texaco Inc. He joined the company in 1959 as an attorney. He was elected to Texaco's board in 1977, was named President in 1983, Chairman in 1987, and on April 1, 1993, was elected to his additional position as CEO. He serves on the boards of CIGNA Corp. and Dean, Witter, Discover & Co.
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Title Annotation:Leadership in Environmental Initiatives
Author:DeCrane, Alfred C., Jr.
Publication:Directors & Boards
Date:Sep 22, 1993
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