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‘Voluntary’ Business Environmental Management David Ervin Professor, Environmental Studies Coordinator, Academic Sustainability Programs Portland State.

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Presentation on theme: "‘Voluntary’ Business Environmental Management David Ervin Professor, Environmental Studies Coordinator, Academic Sustainability Programs Portland State."— Presentation transcript:

1 ‘Voluntary’ Business Environmental Management David Ervin Professor, Environmental Studies Coordinator, Academic Sustainability Programs Portland State University

2 © 2006 Portland State University Outline Why is ‘green business’ growing? What are the motivations? – Preliminary results from Oregon survey What are the costs of going green? What roles can the public sector play to foster ‘voluntary’ environmental action? Take home messages

3 © 2006 Portland State University Why is ‘green business’ growing? Pollution problems persist and the public generally wants a cleaner environment. Government ‘command-and-control’ and ‘technology-design’ approaches are not solving some problems, e.g., nonpoint. Business compliance and government enforcement costs have increased sharply and have the potential to go much higher.

4 © 2006 Portland State University Why is ‘green business’ growing? Some environmental groups see the limits of using legislation and the courts and now favor more collaborative approaches. Firms involved in global commerce see rewards for being green (ISO 14001). Net effect – More responsibility for environmental management is shifting to business firms and NGOs.

5 © 2006 Portland State University 1. Mitigate and preempt environmental regulations Lower compliance costs Reduce or avoid noncompliance penalties Decrease transaction and administrative costs, i.e., reduce the ‘hassle’ factor Anticipate or preempt stricter future regulations Studies show stronger regulations induce more ‘voluntary’ green business action.

6 © 2006 Portland State University For your facility, please indicate the priority of complying with current government environmental regulations in encouraging environmental management in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1253.831.344.010.008 Manufacturing2054.231.21 Transportation794.281.17 Accommodation1343.941.19 Total5434.081.24 * Scale: 1 = no priority, 5 = great priority

7 © 2006 Portland State University For your facility, please indicate the priority of being better prepared for meeting anticipated environmental regulations in encouraging environmental management in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1232.911.396.47<0.001 Manufacturing2013.421.32 Transportation793.661.35 Accommodation1273.101.36 Total5303.261.37 * Scale: 1 = no priority, 5 = great priority

8 © 2006 Portland State University 2. Reduce waste and cost, and improve productivity Foster product and process innovations through systems improvements (Michael Porter et al) – Dow’s “Waste Reduction Always Pays” – Xerox’s “Env. Leadership Program” Anecdotal cases; lack comprehensive data Larger firms and firms with older equipment or higher R&D are more likely to take pollution prevention action.

9 © 2006 Portland State University Please indicate the extent to which ‘Environmentally friendly actions can reduce costs’ has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev. FSig. Construction1202.721.4712.1<0.001 Manufacturing2002.901.39 Transportation792.951.42 Accommodation1313.691.35 Total5303.061.45 * Scale: 1 = no influence, 5 = great influence

10 © 2006 Portland State University Please indicate the percentage of your facility’s annual revenue spent on environmental management for the 2003 and 2004 calendar years. SectorNMean % Annual Revenue Std. Dev. FSig. Construction1251.901.412.270.080 Manufacturing1942.291.52 Transportation792.111.21 Accommodation1282.321.62 Total5262.181.49

11 © 2006 Portland State University 3. Serve ‘green’ markets Green consumer markets are growing, e.g., organic foods, recycled paper, but are still small. Some supply chain markets are greening. Little evidence of consumer impact to date; firms closer to retail more affected. Investor pressures exert significant effects. An increasing number of investors are screening for firms with ‘acceptable’ environmental programs or performance.

12 © 2006 Portland State University Please indicate the extent that customer desire for environmentally friendly products and services has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1293.111.466.28<0.001 Manufacturing1982.821.36 Transportation772.391.45 Accommodation1373.161.31 Total5412.911.4 * Scale: 1 = no influence, 5 = great influence

13 © 2006 Portland State University Please indicate the extent that customer willingness to pay higher prices for environmentally friendly products and services has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1302.721.406.23<0.001 Manufacturing1902.251.28 Transportation792.001.29 Accommodation1252.501.27 Total5242.391.33 * Scale: 1 = no influence, 5 = great influence

14 © 2006 Portland State University For your facility, please indicate the priority of satisfying investor (owner) desires to reduce environmental risks and liabilities in encouraging environmental management in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1283.091.494.390.005 Manufacturing2013.571.38 Transportation793.711.46 Accommodation1353.281.43 Total5433.411.45 * Scale: 1 = no priority, 5 = great priority

15 © 2006 Portland State University 4. Improved stakeholder risk management Financial, e.g., lending institutions Stakeholders, e.g., labor, local groups, NGOs interested in siting and operations. Legislative, e.g., maintaining ‘maximum social license’ to operate. Some evidence that firms are responsive to community stakeholder pressures.

16 © 2006 Portland State University Please indicate the extent that environmental interest groups’ perception that environmental protection is a critical issue has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev. FSig. Construction1282.091.181.910.127 Manufacturing1992.381.30 Transportation772.141.21 Accommodation1302.361.25 Total5342.271.25 * Scale: 1 = no influence, 5 = great influence

17 © 2006 Portland State University For your facility, please indicate the priority of satisfying lenders’ desires to reduce environmental risks and liabilities in encouraging environmental management in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1232.261.442.130.096 Manufacturing1882.341.37 Transportation742.721.50 Accommodation1192.551.43 Total5042.421.43 * Scale: 1 = no priority, 5 = great priority

18 © 2006 Portland State University 5. Respond to technical or financial assistance Public agencies and private organizations offer funds, training, information, etc. Examples: EPA Performance Track, Oregon Dept. of Energy, Zero Waste Alliance Could become a dominant approach for nonpoint pollution problems because of the difficulty of monitoring sources. Evidence shows significant effects for agriculture if targeted appropriately.

19 © 2006 Portland State University 6. Manage competitors ‘First-mover’ firms gain a competitive advantage when public environmental standards rise. – Dupont gained advantage in phasing out CFC’s and offering new substitute. Innovative companies redefine markets in ways that disadvantage competitors – Xerox’s toner cartridge takeback program. Little formal analysis

20 © 2006 Portland State University Please indicate the extent that ‘Improving environmental performance helps us keep up with competitors’ has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev.F Sig. Construction1252.551.392.85 0.037 Manufacturing2032.601.34 Transportation742.281.38 Accommodation1382.851.39 Total5402.611.38 * Scale: 1 = no influence, 5 = great influence

21 © 2006 Portland State University Please indicate the extent that ‘Environmentally friendly actions result in product or process innovations’ has influenced environmental management at your facility in the last 5 years. SectorNMean*Std. Dev.FSig. Construction1242.281.223.780.011 Manufacturing2002.611.30 Transportation712.321.31 Accommodation1322.761.31 Total5272.531.30 * Scale: 1 = no influence, 5 = great influence

22 © 2006 Portland State University 7. The ‘CEO Effect’ CEO leads improved environmental performance for personal and strategic business reasons. – Ray Anderson, Interface – John Emrick, Norm Thompson – David Yudkin, Hot Lips Pizza May be more feasible for privately held firms since they do not face stock market pressures. Lots of individual stories, but little study of the influence on broader industry.

23 © 2006 Portland State University For your facility, please indicate the extent of agreement or disagreement with ‘Facility upper management believes it has moral responsibility to protect the environment.’ SectorNMean*Std. Dev.FSig. Construction1284.050.986.20<0.00 1 Manufacturing2074.460.82 Transportation794.370.89 Accommodation1304.190.95 Total5444.290.91 * Scale: 1 = strongly disagree, 5 = strongly agree

24 © 2006 Portland State University For your facility, please indicate the extent of agreement or disagreement with ‘Facility upper management supports protecting the environment even if substantial costs are incurred.’ SectorNMean*Std. Dev.FSig. Construction1273.031.229.93<0.001 Manufacturing2083.721.07 Transportation753.451.11 Accommodation1303.341.17 Total5403.431.16 * Scale: 1 = strongly disagree, 5 = strongly agree

25 © 2006 Portland State University Costs of Going Green It Depends! Short term – Reallocate labor to reduce environmental effect – Purchase less toxic but more expensive inputs – Disrupt normal operating processes Longer run – Retraining of labor and management – Invest in new equipment – Develop new supplier and customer networks

26 © 2006 Portland State University Public Sector Roles to Support Green Business 1. Set clear environmental performance targets and enforce compliance. 2. Grant flexibility for firms to innovate low cost ways to meet the targets, e.g., trading. 3. Deliver education and technical assistance to reduce adjustment costs. 4. Foster market institutional innovations where appropriate, e.g., 3 rd party certification schemes. 5. Stimulate R&D for technologies that meet environmental and economic criteria.

27 © 2006 Portland State University Take Home Messages 1. Environmental regulations are a critical factor in motivating pollution prevention. 2. Investor pressures appear to be the broadest market influence on green business (to date). 3. The best strategy for a firm to green or prevent pollution depends on its resource, market and regulatory conditions – There is no silver bullet approach!

28 © 2006 Portland State University

29 General Observations 22 % of responding facilities are owned by a parent company. 13% of responding facilities are owned by multinational corporations. 10% are publicly traded, 88% are privately held, and 2% responded “other”. 21% have R&D departments, either at the facility or at the parent firm. 46% sell directly into retail markets.

30 © 2006 Portland State University General Observations cont’d The most frequently reported number of close competitors was 10 followed by 5 (ranged from 0- 1000). Nearly 8% of the sample reported no close competitors, and one facility reported 1000! 291 facilities were not inspected by any environmental agency in 2004. Of those inspected, manufacturing facilities were inspected far more often than any other sector. Manufacturing facilities were inspected 222 times, Accommodation facilities 84 times, Transport facilities 53 times, and Construction facilities 50 times.

31 © 2006 Portland State University General Observations cont’d Although the total number of inspections reported was 409 inspections, only 23 penalties, sanctions, or lawsuits were levied. Therefore, roughly 94.4% of the time, an inspection did not result in an infraction. The most often reported age bracket for upper management was 41-50, followed by 51-60. Proportionally, accommodation appears to have slightly younger management, reporting most often that upper management is 21-40 years old.


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