Will a quality approach to public policy improve environmental management

Questions and Answers

WILL A QUALITY APPROACH TO PUBLIC POLICY IMPROVE ENVIRONMENTAL MANAGEMENT

Lynn Johannson

olicy is not a term that has a standard meaning. Corporate policies are intended to represent the principles, creeds, and beliefs that guide the philosophical and ethical basis for

management’s conduct. Until 1950, corporate policy statements in quality programs were

rare. Initially policies were developed only when government con- tracts demanded them. Early policies tended not to focus on external customers or public concerns.

A number of powerful forces surfaced making published quality policies important:

International competition in quality, resulting in large shifts of market share and trade balances. A “population explosion” of consumer products An erosion of traditional manufacturers’ defenses in matters of safety and product liability The emergence of very complex automated systems Consumer movements to combat misleading claims A growing invasion by government regulation into areas not previously of concern (product labeling, integrity of guarantee, etc.) A public awakening to the problems of pollution, many of which have their origin in manufacturing operations

All of the above factors can lead to a reduction in profitability. Public policy for environmental concerns developed from the

public trust doctrine. It essentially holds that the natural resources of a country are “held in trust” for the benefit of the people. Any injury to these resources by any party is therefore subject to action by the body responsible for this public trust, traditionally government.

When select minorities felt that a particular aspect of the environment was being ignored, NGOs (nongovernmental organizations) were formed to publicize the issue. Government, spurred on by public outcry, reacted in the public good and created public policies to preserve the trust.

What policy tools exist for protecting natural resources? Twelve

Lynn Johannson is the director of E2 Management Corporation in Georgetown, Ontario.

SUMMER 1993 TOTAL QUALITY ENVIRONMENTAL MANAGEMENT 465

LYNN JOHANNSON

policy instruments have been outlined in the recent annual report of the United Nations Environment Programme.' Their choice is influ- enced by local factors, the type of pollutant to be controlled or the resource to be conserved. These instruments move from administra- tive fiat to market oriented items. The options include:

Prohibition, e.g., harvesting of endangered species, dumping of some toxics or contaminants into an ecosystem. Regulation, e.g., of phosphorus concentrations in sewage effluent to control eutrophication; land-use zoning. Directgovernment intervention to modifi some ecosystemic feature, e.g., building dams to create lakes. Grants and tux incentives, e.g., to industry for installing pollution control equipment or to a municipality to accept solid wastes. Buy-back programs, e.g., government purchase of flood-prone land. Liability for compensation, e.g., U.S. Superfund provisions. Compulsory insurance, e.g., to compensate the victims of pollution for damages. Effluent charges, e.g., fees for waste disposal scaled according to the direct cost of treatment or to the indirect cost associated with deleterious impacts on a receiving ecosystem; effluent charges may be incorporated in delayed pollution control charges. Resource rent, e.g., tax or charge on harvesters of a resource in order to recover a fair return for the owners (all the people) of the resource, and also to foster efficient use of the resource by discouraging over-capitalization. Manugementofthe demand, e.g., through rate structures involv- ing marginal cost pricing and/or peak responsibility to improve overall efficiency of use and to foster conservation. Transferable development rights, e.g., incentives to industry to develop in designated areas. Transferable individual quotas, e.g., rights to emit specific quantities of pollutants or to harvest specific quantities of fish or wildlife.

Of these twelve options, regulations have received the most attention. This has led to a challenge for governments to enforce and industry to meet the regulatory requirements. Asea Brown Boveri (ABB) presented a graphic synopsis outlining the current U.S. federal regulatory maze (see Exhibit 1). It is difficult to see this as an effective or efficient way to manage environmental issues.

What are some of the results of a focus on regulatory measures? The Center for the Study of American Business analyzed the 1993 federal regulatory budget.2 It reported that EPA now accounts for a seventh of the staff and one-third of the entire federal regulatory structure. A

466 TOTAL QUALKY ENVIRONMENTAL MANAGEMENT SUMMER 1993

QUESTIONS AND ANSWERS

~ ~ ~ ~ - ~~~

Exhibit 1: U.S. Federal Regulatory Maze

focus on compliance between 1970 and 1990 cost Americans $1.4 trillion. EPA projects that compliance will cost Americans another $1.6 trillion in the 1990s.

Forbes interviewed Yale law professor E. Donald Elliott, now EPA general c o ~ n s e l . ~ He reflected on prospective costs and benefits: “I’ve come around to the view that you just can’t get there from here using these kinds of techniques.”

Both government and business show indications that change is near. International business entities are recognizing that policy development must incorporate relationships not only with governments, but the broader public, including NGOs. Business leaders are closing the traditional distance between enterprise and the public and government. Business is advocating active involvement in the development of public policy.

Who in the business community is taking a lead? One initiative emanates from the International Chamber of Commerce. Its Business Charter for Sustainable Development outlines globally accepted principles. Principle 14, for example, encourages corporations

to contribute to the development of public policy and to business, governmental and intergovernmental programs and educational initiatives that will enhance environmental awareness and protection. (A full listing of the charter appears in Exhibit 2.)

Will a Quality Approach to Public Policy Improve Environmental Management?

The first respondent to our survey is Dennis Durrant, special

SUMMER 1993 TOTAL Q u m ENVIRONMENTAL MANAGEMENT 467

Exhibit 2: International Chamber of Commerce Business Charter for Sustainable Development

The Charter was developed to stimulate enterprises around the world to improve their environmental performance. Approximately 1,OOO companies have declared their support as signatories since its introduc- tion in April 1991.

The aims of the Charter are threefold:

to stimulate enterprises to commit themselves to continued improvement in their business performance; to provide common guidance on environmental management to all types of business and enterprises around the world, and to aid them in developing their own policies and programs; to demonstrate to governments and society that business is taking its environmental responsibilities seriously by helping to reduce the pressures on governments to over-legislate thereby strengthening the voice of business in public policy debates.

1. Corporate priority To recognize environmental management as among the highest corporate priorities and as a key

determinant to sustainable development; to establish policies, programmes and practices for conducting operations in an environmentally sound manner.

2. Integrated management

management in all its functions. To integrate these policies, programmes and practices into each business as an essential element of

3. Process of improvement To continue to improve corporate policies, programmes and environmental performance, taking into

account technical developments, scientific understanding, consumer needs and community expectations, with legal requirements as a starting point; and to apply the same environmental criteria internationally.

4. Employee education

manner. To educate, train and motivate employees to conduct their activities in an environmentally responsible

5. Prior assessment

a facility or leaving a site. To assess environmental impacts before starting a new activity or project and before decommissioning

6. Products and services To develop and provide products or services that have no undue environmental impact and are safe in

their intended use, that are efficient in their consumption of energy and natural resources, and that can be recycled, reused, or disposed of safely.

7. Customer advice To advise, and where relevant educate, customers, distributors and the public in the safe use,

transportation, storage and disposal of products provided; and to apply similar considerations to the provision of services.

8. Facilities and operations To develop, design and operate facilities and conduct activities taking into consideration the efficient

use of energy and materials, the sustainable use of renewable resources, the minimization of adverse environmental impact and waste generation, and the safe and responsible disposal of residual wastes.

468 TOTAL QUALITY ENVIRONMENTAL MANAGEMENT SUMMER 1993

QUFSTIONS AND ANSWERS

9. Research To conduct or support research on the environmental impacts of raw materials, products, processes,

emissions and wastes associated with the enterprise and on the means of minimizing such adverse impacts.

10. Precautionary approach To modify the manufacture, marketing or use of products or services or the conduct of activities,

consistent with scientific and technical understanding, to prevent serious or irreversible environmental degradation.

11. Contractors and suppliers To promote the adoption of these principles by contractors acting on behalf of the enterprise,

encouraging and, where appropriate, requiring improvements in their practices to make them consistent with those of the enterprise; and to encourage the wider adoption of these principles by suppliers.

12. Emergency preparedness To develop and maintain, where significant hazards exist, emergency preparedness plans in conjunc-

tion with emergency services, relevant authorities and the local community, recognizing potential transboundary impacts.

13. Transfer of technology

throughout the industrial and public sectors. To contribute to the transfer of environmentally sound technology and management methods

14. Contributing to the common effort

programmes and educational initiatives that will enhance environmental awareness and protection. To contribute to the development of public policy and to business, governmental and intergovernmental

15. Openness to concerns To foster openness and dialogue with employees and the public, anticipating and responding to their

concerns about the potential hazards, wastes or services, including those of transboundary or global significance.

16. Compliance and reporting To measure environmental performance; to conduct regular environmental audits and assessments of

compliance with company requirements, legal requirements and these principles; and periodically to provide appropriate information to the Board of Directors, shareholders, employees, the authorities and the public.

Note: There is no cost to becoming a signatory of the ICC Charter. In Canada contact the ICC office at:

Canadian Secretariat ICC/BIAC 50 O’Connor Street, Suite 101 1 Ottawa, Ontario, Canada K1P 6L2 Phone: 613-230-5462 Fax: 613-230-7097

In the United States contact: ICC: c/o United States Council for International Business 1212 Avenue of the Americas New York, NY 10036-1689 Phone: 212-354-4480 Fax: 212-575-03327

SUMMER 1993 TOTAL QUALITY ENVIRONMENTAL MANAGEMENT 469

LYNN JOHANNWN

advisor, National Office of Pollution Prevention in the Conservation and Protection Service of Environment Canada.

“There is a need to combine environmental and quality management to more effectively address both corporate and public policy concerns and opportunities about the environment. The Canadian federal government is combining these through a ‘mix’ of regulatory and non-regulatory approaches, with emphasis on pollution prevention.

“Canada has an environmental action plan known as the ‘Green Plan,’ which is unique. Its principal goals are to: ensure that citizens today and tomorrow have the clean air, water, and land essential to sustaining human health and the environment; secure for the current and future generations a safe and healthy environment, and a sound and prosperous economy.

“The Green Plan is supported by over 100 initiatives, with funding through to 1996. It has already established what its measurable goals are. These include:

Better decision-making through partnerships

New and better science

More and better environmental information for better decision-making

New market-based approaches for protection with more effective laws, regulations and enforcement, and An environmentally literate society--citizens equipped with the knowledge, skills, and values for action-in short, ‘Envi- ronmen tal Citizenship.’

“The concept of TQEM is not new to federal departments, agencies and Crown corporations. However, its application to our own operations is. In this sense we are progressing along with industry-as partners. Like industry we have limited capital and human resources. This reinforces the need to rethink and evolve realistic up-grades, improved inspection and maintenance practices, and replace existing stock-in-inventory with assets featuring new environmental charac- teristics.

“An Environmental Purchasing Panel, consisting of industry rep- resentatives, promotes environmentally sensitive purchasing, encourages improvements on products and services and supports information exchange on how to leverage these improvements.

“An important feature of the Green Plan is that the environment is not being treated as a separate exercise or as an isolated federal program. It is supporting a coordinated effort among federal departments and agencies based upon environmental need, common sense (what is fiscally do-able), and realistic time frames.

“Of specific interest to industry is the use of non-regulatory approaches such as voluntary industry action, and the promotion of ‘Environmental Citizenship’ among communities, organizations and


QUESTIONS AND ANSWERS

individuals.” (Exhibit 3 outlines a strategic framework for the prevention, control, and remediation of pollution.)

“In September 1991 our Minister of the Environment, the Honourable Jean Charest, set up a national multi-stakeholder group, called ARET (Accelerated Reduction or Elimination of Toxics). ARET seeks to find new and effective ways to reduce the exposure of people and of the environment to toxic releases. ARET’s work builds on the initiative of the New Directions Group, a consortium of industry and environmental NGO leaders. ARET works on improved decision- making, toxic substance selection criteria, short term do-able actions and communications.

“To maintain changes and improved performance, the federal government recognizes the need to change management practices across government. This is facilitated by the Code of Environmental Stewardship-another Green Plan initiative.

“Where industry is concerned, Environment Canada has teamed up with Industry Science and Technology (ISTC) to develop a more unified federal position on a variety of issues to improve industry’s

Exhibit 3: A Framework for Prevention, Control, and Remediation of Pollution

~~. ...

-..

. - -1

§UMMER 1993 TOTAL Q u m ENV~ONMENTAL MANAGEMENT 471

LYNN JOHANNSON

totd performance and competitiveness, while protecting the environment.

“Economic change, fiscal restraint and increased accountability are forcing organizations to be increasingly innovative, and to integrate new approaches to their everyday activity. Industry can be part of the transformation by being less externallydirected by regulation, and more internally-motivated to make voluntary commitments, to stretch, to improve its environmental performance. This means chang- ing the management paradigm.

“It is advisable to let all your stakeholders know what your company is doing. Share your improvements-your success stories- with us and your investors, employees, suppliers and the community in which you operate. We support and encourage improved corporate reporting and disclosure. This will lead Canadians, who have taken on the challenge of sustainable development, to have a competitive advantage at home and abroad, both now and in the future.”

Ted Donahue, Earthwise Our second respondent is Ted Donahue, president of Earthwise,

Inc. Earthwise is a Connecticut-based environmental marketing and strategic planning group.

“TQEM as a business discipline is very new and still very much regarded with skepticism and distrust by many businesses in America. Business as a whole still views environmental protection as an insidi- ous and costly exercise by government to infringe on corporate profits and national prosperity. Also, the passage of legislation at the federal and state levels over the last twenty years to safeguard our environment has proven costly and burdensome to American business.

“Nevertheless, American business is and has always been respon- sive to its customers; and for many companies, the customer has begun to demand changes in business practices which are considered to be detrimental to the environment or the public safety. This public concern is most evident on global environmental issues for which there are no easy or readily actionable answers by any single govern- men t or private citizen.

“To compensate for this, legislators in the U.S. and Canada have begun to devise and pass legislation which ‘empowers’ the public to participate in some fashion with the protection of the environment, e.g., packaging and waste disposal legislation. The passage of the Clean Air Act in 1991 and the anticipated renewal of RCRA legislation in the Congress this year have very significant business costs associated with compliance and reporting.

“Whether Democratic or Republican, administrations in Wash- ington have continued to increase rather than decrease the level of regulatory oversight on business practices which have a direct impact on the environment. This is not anticipated to abate with the new Clinton administration in power. Importantly, environmental activ- ists have become increasingly sophisticated and politically astute in


QUES~ONS AND ANSWERS

legislative corridors offering compelling arguments to key decision makers. Business must find a way to work with rather than against these initiatives.

“American business today has the choice of finding a way to become an integral part of the solution or to continue to conduct its business ‘as usual.’ If it should ignore the trends in public concern over our environment, and is unable to find a common ground with NGOs to resolve outstanding conflicts, it will find itself with more costs and a growing handicap in competing globally for its goods and services.

“There is no question in my mind that TQEM is the key with which business can begin to rebuild its credibility and influence among legislators who formulate environmental regulations; and the public at large who have a deep-seated distrust of business in this regard. It is also a way to improve ’team building’ and to empower employees to make a positive difference for which they can take pride of association with their local communities.

“Finally, TQEM as a process will reap both short term and long term financial benefits to the corporation. It can build safeguards into the planning process to avoid and/or significantly reduce compliance costs. It can also provide an immediate impact to the bottom line with source reduction initiatives as well as more efficient use of energy requirements. Business must begin to understand that responsible environmental management is not an obstacle but the means by which business can increase productivity and reduce costs to compete more effectively in world markets.”

F i n a l Comments Environmental control has largely been driven by legislation.

“Investments,“ that is, the EPA’s $1.4 trillion, have been made to meet a minimum standard set by regulation. Command and control is expensive. It has high transaction costs, and it requires tremendous amounts of information.

Total quality environmental management provides a number of benefits.

It will allow organizations to continuously improve with measured results. TQEM will help you determine root causes and work with policy makers to implement the most appropriate policy mechanisms based on facts. You can demonstrate these improvements and share the results at the negotiating table when .dealing with policy makers. It will bring your company closer to one of your customers- the government. TQEM allows you to deal with government in a positive process. You can use the results of your corporate environmental performance to gain competitive advantage.

SUMMER 1993 TOTAL Q u m ENVIRO”TAL MANAGEMENT 473

LYNN JOHANNSON

474

I believe TQEM will also assist in supporting other policy options, such as grants and tax incentives, and management of the demand. In today’s economy not only does your organization have to be effective and efficient, governments must actively pursue options that produce the best results with minimal strain on the public purse. TQEM has the potential to establish a win-win-win scenario for the public, government, and you.

Many thanks to Dennis, Ted, and Donna Sparling of ABB for sharing ideas.

Do you have a question for TQEM’s Q&A? Please send your questions to Total Quality Environmental Management, Executive Enterprises Publication Co., Inc., 22 West 21st Street, New York, NY 10010. + Notes

1. Hall. 1992.

The World Environment 1972-1 992, Two decades ofchallenge. London: Chapman &

2. Source: Melinda Warren and James Lis, Regulatory Standstill: Analysis of the 1993 Federal Regulatory Budget, Center for the Study of American Business, Washington University, St. Louis.

3. Peter Brimelow and LeslieSpencer, “You Can’t Get There From Here,”Forbes, July 6, 1992, pp. 59-64.

TOTAL Q u m ENVIRONMENTAL MANAGEMENT SUMMER 1993

Documents

Will a quality approach to public policy improve environmental management