New Bottom Line Volume 14.9 – Real Time Regulation – A New Business and Policy Frontier

Wednesday, November 2, 2005

The familiar debate between environment and economics has shifted in recent years, as more companies find profit in sustainability initiatives; yet our regulatory systems remain a problem — an inadequate and burdensome patch on an industrial system still tied to the design failure that we call pollution.

It’s not that most businesses want to pollute. It’s that (1) pollution is taken for granted, as a normal part of doing business — although that changes quickly when businesses measure their ‘Non-Product Output’ (the emissions, effluents, wastes, tailings, etc. that can’t be sold, add no value, cost money to dispose of — and that constitute 94% of US material flows); and (2) regulatory compliance and reporting are all too often seen as slow and inflexible, with burdensome data management and filing requirements.

We now have the opportunity to replace our retrospective, paper-based, current regulatory systems with “Real Time Regulation” (RTR). The potential impact is large, and the role of electronics is indispensable.

Companies as diverse as GE, Wal-Mart, Virgin Group, Toyota, JetBlue, Dell, Progressive Insurance and Amazon are demonstrating the power of the “Real Time Enterprise” — instantly responsive, rapidly adaptable, constantly evolving to changing markets. Electrical utilities are experimenting with “real time pricing” to more effectively manage energy demand. The National Ecological Observatory Network (NEON) will measure ecological phenomena and the impact of regional extreme environmental events, such as forest fires and hurricanes, on ecosystem functions in surrounding regions and continent-wide — in real time at regional and continental scales.

The same approach can be applied to environmental regulation. The scale is large, but available and emerging electronic technologies now make it possible:

  • inexpensive sensors could monitor waste-water flows in real time;
  • remote laser sensing could track smokestack emissions;
  • molecular tagging could tie specific pollutants to their sources;
  • RFID tags could support chain-of-custody management;
  • wireless networks could feed data in real time to secure servers;
  • internal and external dashboards could enable managers, regulators and interested stakeholders to track trends and compare performance — driving the sort of pollution prevention competition that has resulted from publication of Toxic Release Inventory (TRI) data;
  • open information standards, using BXML or other standardized tagging systems, would enable researchers to analyze and add value to raw data streams.

Some businesses may be concerned about potential damage to competitiveness by disclosure of “proprietary” data. But anything that leaves a plant is no longer private. Release it to the commons, and the public has a right to know. Don’t want the public to know? Don’t emit. (No one would throw confidential financial records out on the street, and expect them to be private. Why should it be any different with chemicals that leave a factory — their private property — and find their way into my lungs — my private property? Any standard Confidentiality Agreement declares a duty to protect confidential data; if you emit it, you’re not protecting it.)

The potential payoffs are substantial:

  • less paperwork and less labor, reducing costs for both regulated companies and regulatory agencies;
  • more accurate data, available with less lag time from event to analysis;
  • more readily analyzable data, enabling managers and regulators to watch trends and catch exceedences and excursions quickly — and often automatically;
  • performance benchmarking that can drive continuous improvement from the ground up — since the existence of better performance is proof that it is possible.

It’s TRI, but in the blink of an eye — and it brings great potential internal value to “reporting” companies as well: more timely and more accurate information that can help optimize production processes, shorten response time, and eliminate Non-Product Output.

Some may say, “Better and more timely data isn’t environmental management; it’s just good management.” I say, “Exactly right. What’s your point? Let’s do it.”

In the words of Dupont CFO Gary Pfeiffer, “Environmental sustainability is an enormous business opportunity.” The electronics industry (assuming it can meet the rising environmental quality expectations of the European market, and deliver RTR tools through clean production and closed-loop, zero-waste “technical nutrient” systems) is well poised to harvest that opportunity.

(c) 2005 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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