Chapter
12
Managing Environmental Issues

Role of Government
 Costs and Benefits of Environmental Regulation
 The Greening of Management
 Environmental Management as a Competitive Advantage
Major areas of environmental regulation
Air pollution
 Occurs when more pollutants are emitted into the atmosphere
than can safely be absorbed and diluted by natural processes.
Water pollution
 Occurs when more wastes are dumped into waterways than can
be naturally diluted and carried away.
Land pollution
 The contamination of land by both solid and hazardous waste.
Figure 12.1a
Leading U.S. environmental protection laws
National Environmental Policy Act (1969)
Created Council on Environmental Quality to oversee quality of the nation’s
environment.
Clean Air Act (1970)
Established national air quality standards and timetables.
Water Pollution Control Act (1972)
Established national goals and timetables on pesticide use.
Pesticide Control Act (1972)
Required registration of and restrictions on pesticide use.
Figure 12.1b
Leading U.S. environmental protection laws
Endangered Species Act (1973)
Conserved species of animals and plants whose survival was threatened or
endangered.
Safe Drinking Water Act (1974 & 1996)
Authorized national standards for drinking water.
Hazardous Materials Transport Act (1974)
Regulated shipment of hazardous materials.
Resource Conservation and Recovery Act (1976)
Regulated hazardous materials from production to disposal.
Figure 12.1c
Leading U.S. environmental protection laws
Toxic Substances Control Act (1976)
Established national policy to regulate, restrict, and, if necessary, ban toxic
chemicals.
Clean Air Act amendments (1977)
Revised air standards.
Comprehensive Environmental Response Compensation and
Liability Act (1980 & 1986)
Established Superfund and procedures to clean up hazardous waste sites.
Clean Water Act amendments (1987)
Authorized funds for sewage treatment plants and waterways cleanup.
Figure 12.1d
Leading U.S. environmental protection laws
Clean Air Act amendments (1990)
Required cuts in urban smog, acid rain, greenhouse gas emissions; promoted
alternative fuels.
Pollution Prevention Act (1990)
Provided guidelines, training, and incentives to prevent or reduce pollution at
the source.
Oil Pollution Act (1990)
Strengthened EPA’s ability to prevent and respond to catastrophic oil spills.
Chemical Safety Information, Site Security, and Fuels Regulatory
Relief Act (1999)
Set standards for the storage of flammable chemicals and fuels.
Superfund
Comprehensive Environmental Response,
Compensation, and Liability Act





Passed in 1980, this law established a fund, supported primarily by
a tax on petroleum and chemical companies that were presumed to
have created a disproportionate share of toxic wastes.
EPA established a National Priority List of the most dangerous
toxic sites—about 1,200 so far.
As many as 10,000 other sites may need to be cleaned up.
Although cleanup was well under way at almost all sites by 2003,
only about a fifth of the total had been removed from the list.
Entire cleanup could cost as much as $1 trillion.
Alternative policy approaches
Environmental standards


Standard allowable levels of various pollutants are established by legislation
or regulatory action.
Environmental-quality standard
Emission standard
Market-based mechanisms



Based on the idea that the market is a better control than extensive standards
that specify precisely what companies must do.
Allow businesses to buy and sell the right to pollute.
Emissions charges or fees
Government incentives
Alternative policy approaches (continued)
Information disclosure


Regulation by publicity
The government encourages companies to pollute less by publishing
information about the amount of pollutants individual companies emit each
year.
Civil and criminal enforcement


The threat of prison can be an effective deterrent to corporate outlaws who
would otherwise degrade the environment.
U.S. Sentencing Commission has established guidelines for sentencing
environmental wrongdoers.
Figure 12.2a
Advantages and disadvantages of alternative
policy approaches to reducing pollution
Policy Approach
Advantages
Disadvantages
Environmental
standards

Enforceable in the courts
 Compliance mandatory
 Across-the-board
Tradable
allowances
 Gives
 Gives
businesses more flexibility
 Achieves goals at a lower overall
cost
 Saves jobs by allowing some less
efficient plants to stay open
 Permits the government and
private organizations to buy
allowances to take them off the
market
standards not equally
relevant to all businesses
 Requires large regulatory
apparatus
 Older, less efficient plants
may be forced to close
business a license to
pollute
 Allowance are hard to set
 May cause regional
imbalances in pollution
levels
 Enforcement is difficult
Figure 12.2b
Advantages and disadvantages of alternative
policy approaches to reducing pollution
Policy Approach
Advantages
Disadvantages
Emissions fees and taxes
 Taxes bad

Government incentives
Rewards
environmentally
responsible behavior
Encourages companies to
exceed minimum standards
 Incentives may
Information disclosure
 Government
 Does
behavior
(pollution) rather than
good behavior (profits)
spends little
on enforcement
 Companies able to reduce
pollution in the most costeffective way
Fees hard to set
 Taxes may be too low to
curb pollution
not be
strong enough to curb
pollution
not motivate all
companies
Figure 12.3
The cost of pollution control in the United States
Source: Environmental Investments: The Cost of a Clean Environment (Washington, DC: EPA, 1990)
Figure 12.4
Costs and benefits of environmental regulation
Costs
Benefits


$160 billion a year spent by
business and individuals in the
United States by 2000.
 Job loss in some particularly
polluting industries.
 Competitiveness of some capitalintensive, “dirty” industries
impaired.


Emissions of nearly all pollutants
have dropped since 1970.
Air and water quality improved,
some toxic waste sites cleaned;
improved health; natural beauty
preserved or enhanced.
Growth of other industries, such as
environmental products and
services, tourism, and fishing.
Stages of corporate environmental
responsibility
Clean technology
Businesses develop innovative, new technologies that
support sustainability.
Product stewardship
Managers focus on all environmental impacts
associated with the full life-cycle of a product.
Pollution prevention
Focuses on minimizing or eliminating waste before it is
created.
Environmental management in practice
Proactive green companies share the following elements:
 Top management involvement to sustainability
 Line manager involvement
 Codes of environmental conduct
 Cross-functional teams
 Rewards and incentives
Environmental management as a competitive
advantage
Cost savings
Companies that reduce pollution and hazardous waste, reuse or recycle
materials, and operate with greater energy efficiency can reap significant cost
savings.
Product differentiation
Companies that develop a reputation for environmental excellence and that
produce and deliver products and services with concern for their sustainability
can attract environmentally aware customers.
Technological innovation
Technological innovation can lead to imaginative new methods for reducing
pollution and increasing efficiency.
Strategic planning
Companies that cultivate a vision of sustainability must adopt sophisticated
strategic planning techniques.