LAWYERS WEEKLY - August 16, 1993
CORPORATE ENVIRONMENTAL POLICY
COMING UP 'GREEN' ON THE BOTTOM LINE
By James P. DeMaria
Few events in modern American industrial history have given
corporations cause to reassess themselves and their activities as much
as the proliferation
of environmental law and regulation has during the past three decades. The
complex and voluminous federal and state legislation, which sought to address
the country's increased understanding of environmental ills and the swell
of social activism of the 1960s, also sounded the death knell for corporate "business
as usual," regardless of a company's industry or size.
Many corporations have sought to capitalize on this wave
of environmental consciousness by actively projecting a public image as
a "green company".
For some, the strategy has been accomplished by marketing efforts which call
attention to a company's development of consumer goods that are less toxic,
are sold in reduced and biodegradable packaging, are recyclable or are otherwise "environmentally
friendly." Other companies have focused their attention on marketing
the environmentally sensitive aspects of their business activities, ranging
from the development of good-neighbor policies to company-wide pledges of
In short, the concept of "greenness," when applied to corporations,
has traditionally been perceived by the public as the definitional equivalent
of "environmentally moral." Marketing efforts aimed at achieving
that distinction have been rooted in the notion that consumers, when given
the choice, will direct their business toward companies seen to share the
public's concern for the integrity of the environment. Create a public image
and increased sales will follow.
Beyond Public Relations
Forward-thinking companies, however, have begun to recognize
that a successful corporate environment policy has little in common with
the marketing of an
environmentally responsible public image. While outwardly projecting a "green" public
image may produce shore-term gains, the greatest achievements are being realized
by corporations that understand the link between future long-term vitality
and the effective management of their internal environmental affairs. The
concept of becoming "green" within, a notion that has been emerging
in corporate culture in recent years, is based upon the premise that the
development of a successful corporate-wide policy of environmental awareness
can result in positive, far-reaching effects on a company's business beyond
marketing and consumer sales.
While the forging of corporate environmental policies is
hardly novel, surprisingly few corporations have grasped the mind-set that
provides the underpinnings
of successful environmental management. For those who have, a distinction
is drawn between the "greening" of in-house policy and the marketing
of a "green" public image.
First, unlike "green" marketing strategies, environmental
awareness in corporate management policy is not a function of public perception.
it is a corporate-wide recognition that the expanding scope of environmental
law and regulation has, for all practical purposes, reached the realm of
basic, every day corporate decisions in the same way that companies regularly
consider issues such as corporate finance or shareholder relations.
Second, successful corporate environmental policies are not
rooted in "environmental
morality." While corporate ethics may provide a robust topic for seminars
and business theorists, it has limits in its application to corporate environmental
policy on the manufacturing floor. To begin with, "environmental morality" is
as subjective as any other ethical inquiry. As such, the notion of what constitutes
sound environmental management from an ethical standpoint is likely to differ
from division to division, facility to facility and from employee to employee.
Moreover, since corporations are, by nature, creatures of profit, environmental
management needs to make sense from a business standpoint in order to survive
within the organization.
Environmental Management As A Business Tool.
What do corporations that successfully manage environmental affairs know
that other companies have yet to learn? Quite simply, that an effective,
pro-active corporate approach to environmental management can have a profoundly
positive effect on a company's bottom line.
Many companies believe that they are effectively dealing
with environmental issues within their organization by simply working to
liabilities. To their credit, they have at least recognized that the drain
in financial resource and manpower associated with the liabilities for non-compliance
can affect their company's vitality and can divert the organizations' energy
away from achieving its goals. In a larger sense, however, simply responding
to the "command and control" nature of environmental law is just
the beginning of a sound, well-reasoned corporate strategy.
The idea of promoting "green" within an organization
is more than minimizing liability; it is seeking to generate increased
profit from passing
everyday corporate decisions through a prism of environmental inquiries and
uncovering the opportunities for growth in ways that may be less obvious.
Environmental Policy On The Manufacturing Floor.
Take for example the area of materials use and water generation
in the manufacturing process. Because most environmental laws and regulations
focus on "end-of-the-pipe-line" management
of wastes and are only beginning to address the issue of waste minimization,
many companies end their compliance inquiries by complying with the mandates
of waste disposal laws.
Forward-thinking companies, however, are reassessing their manufacturing
operations to find new and innovative ways of minimizing their use of toxic
chemicals and reducing the amount of waste generated by their processes.
Those efforts are often paying handsome rewards.
To begin with, these companies are enjoying the benefit of reducing hazardous
waste disposal costs and thereby, ultimately cutting operating costs. Whether
by investing in systems to recycle wastes or by redesigning process operations
to increase the ratio of finished products to wastes generated, some companies
are recouping initial investments in as early as one or two years.
In addition, many companies are gaining the benefit of taking their operations
out of the regulatory loop altogether by reducing the volume of manufacturing
by-products to below regulatory thresholds. In doing so, these companies
are limiting the manpower and resources needed to obtain costly permits or
to comply with time-consuming reporting requirements.
At the front end, companies committed to toxic use reduction are realizing
the advantages of engineering harmful chemicals out of their manufacturing
processes. Use of more benign feedstock, for instance, eliminates toxic spills
and limits worker exposure which, in turn, fosters measurable benefits in
areas ranging from controlling absenteeism to reducing workers' compensation
insurance costs to enhancing labor relations.
Taken as a whole, these measures to reduce toxic use and to minimize waster,
when made part of a pro-active corporate environmental policy, enhance a
company's bottom line by decreasing operating costs and increasing profits
from more competitive pricing for goods and services waste.
Environmental Policy In Acquisitions And Divestitures.
Another example of profiting from a pro-active approach toward corporate
environmental management policy is in the area of acquisitions and divestitures.
All to often, corporations tend to take a one-dimensional approach to acquiring
new facilities by focusing exclusively on issues of liability. They avoid
purchasing contaminated property solely out of fear of incurring cleanup
On the other hand, companies that have made the effort to fully understand
the nature of corporate liability under environmental law recognize that
there may be investment opportunities from purchasing contaminated facilities,
or at a minimum, that the existence of contamination does not, by itself,
make an otherwise desirable property unattractive.
In certain circumstances, contaminated facilities can be
purchased at "fire
sale" prices, which make funding and managing the cleanup a viable business
option. In other instances buyers may be able to obtain indemnification,
cleanup commitments or remediation funding from sellers that could make the
existence of contamination a minimal issue.
Conversely, if a corporation is looking to divest itself of facilities, its
previous record of effectively handling environmental issues at those sites
will go along way toward determining whether the properties can be sold at
full value. Moreover, a company's success in implementing a sound environmental
policy at a facility during its ownership will reduce or altogether eliminate
the need to be involved with continuing obligations at the site after it
These few examples are given to illustrate not only the benefits of incorporating
well-reasoned environmental management policies into corporate decision-making,
but also to highlight what is at stake for companies that do not. For corporations
that recognize that environmental affairs now pervade every aspect of business
agencies to corporate finance to energy and materials consumption---the opportunities
for stability and increased profits are readily available. For these companies,
the dividends derived from making awareness of environmental issues a corporate-wide
policy will provide rich returns on the investment.
Companies, however, that continue to ignore the prominence of environmental
issues in today's corporate landscape will continue to be painfully surprised
by it. They will continue to make poor business decisions, squander resources
and manpower, and be forced to react on a crisis-to-crisis basis.
Fashioning Corporate Policy From The Top Down.
While many of the aspects of successful corporate environmental policies
vary from company to company, there are some elements that are fundamental.
First and foremost is the necessity of establishing a company-wide commitment
to improve environmental management. From the board of directors down to
line employees, each member of the organization must be instilled with the
understanding that the way the corporation handles environmental issues has
a direct effect on competitiveness, profitability and success.
Starting at the top, executives at the highest levels must set the tone for
the entire organization by projecting a strong commitment to the development
and implementation of a well-thought out corporate environmental policy.
If the board of directors and upper management fail to recognize the need
to continually incorporate an environmental policy into everyday corporate
affairs, the program will fail and the company, as a whole, will inevitably
In some instances, corporations have brought together key players in the
organization to form an environmental issues committee to develop and oversee
corporate policy. Lawyers, technical staff, division heads or operations
managers, and even representative of the board of directors can provide the
appropriate mix of individuals with access to both the company's chief executives
and the manufacturing floor.
Aside from acting as a clearing house for the organization's environmental
practices and policies committee is also responsible for keeping the corporation
abreast of changes in law and regulation. If the corporation is not staffed
to accomplish this goal, outside counsel must be retained to act in that
As a functioning body, the environmental committee must turn environmental
issues into action. Oftentimes, the best ideas for managing environmental
problems or redesigning a manufacturing process come from employees working
in close proximity to the situation. The benefit of those ideas, however,
will be lost if employees begin to perceive that the environmental committee
is nothing more than a place where proposals go to die.
Systematic Environmental Management.
The second fundamental element of establishing a successful
corporate environmental policy is the creation of a system for standardizing
and the establishment of channels for its distribution. Terms of art such
as "release of hazardous materials into the environment," "deviation" from
corporate policy, and "violation" of law or a permit must each
have a consistent meaning when used throughout the organization. Similarly,
the manner in which incidents are logged, reported and analyzed must be standardized
to maximize the organization's ability to track information, recognize trends
and isolate problems.
The development of standardized terms and reporting techniques will be of
little value without an established system for insuring that information
reaches the appropriate decision-makers within the organization. In essence,
this requires that a corporation set up a chain of command for environmental
issues and that each link in the chain be responsible for moving the information
up to the next level and relaying solutions and policy decisions back down
through the ranks. Consistent breakdown in the system of communication will
have disastrous results.
Another key to managing environmental information is an organization's development
of a protocol for self-assessment. At minimum, this is a two-step process.
First, a company must gain a grasp of the corporation's current operating
status. This requires a thorough assessment of basics such as the scope of
permits, the requirements of regulations, and the special conditions imposed
by consent decrees or corrective action orders. Second, each facility or
division within the organization must develop a workable means of monitoring
The most efficient and cost-effective approach is to craft and implement
periodic facility audits under the oversight of environmental counsel so
that changes in legal requirements can be incorporated into the monitoring
Through these ideas set forth the essential foundation for a successful corporate environmental policy, they are not an exhaustive list of key elements or a complete blueprint for policy development. These ideas are provided, instead, to generate discussion within organizations about establishing or improving the quality of in-house environmental programs and to offer businesses a fresh way of thinking about environmental policy and its relationship to corporate vitality.
Change within an organization is never easy. Neither is the dispelling of long-standing assumptions about environmental law and its impact on business growth. But when corporations make the effort to recast their perceptions of the role that environmental matters play in their corporate affairs, they unlock a world of previously unseen possibilities that, in the long run, can make a company more efficient and more competitive.
Copyright © 2000 by DeMaria & Associates, P.C. All rights reserved.