New Bottom Line Volume 3.25 – Environmental Management in the New Newtonian Age

December 27, 1994

In a time of bold Republican pronouncements, and timid Democrat ripostes, one item high on the Republican agenda is a dramatic approach to regulatory “reform”–essentially freezing all federal rulemaking, with environmental regulations an obvious target.

Even those who disagree with the Republican political agenda might admit that yanking the chain of a bureaucracy that operates with minimal feedback systems could be a Good Thing (although Vice President Gore would claim that his “Reinventing Government” program is a more reasoned approach to those concerns). But the meat axe adds to the uncertainty.

It’s ironic, since what businesspeople want most from regulatory systems is timeliness and certainty. Gingrich’s approach may in fact reduce certainty–at least for the 1995 session of Congress–and may in the long run reduce timeliness of the regulatory process as well.

What’s a business to do about environmental regulation and management, the face of the Republican “revolution” of 1994? Businesspeople face three choices:

  • Do only what you’re forced to do, and get away with what you can–an obviously irresponsible approach, and fortunately one relatively few businesses will choose (at least as long as regulatory systems remain in place).
  • Do the best you can on the least you can, to minimally comply with regulations–probably the most common choice, but a shortsighted one.
  • Go beyond compliance by following a different logic–the logic of the quality and efficiency intrinsic to your business–which ironically, is the most conservative choice.

A commitment to quality and efficiency is both a risk mitigation and a cost mitigation strategy.

It mitigates risk because it positions your company for success–and market access–whether regulatory standards loosen, stiffen, or stay the same. It mitigates costs because, as Philip Crosby wrote 15 years ago, “Quality is Free.”

It’s a business strategy that parallels Warren Buffet’s highly successful investment strategy. You could try to read the microtrends, and trade actively trying to ride the wiggles in the stock market–and you might do well, if that’s all you do. Or you could buy long term value and hold it for the long term, which is the kind of bet you should be making on your own company. (If your company isn’t worthy of that long-term play, your first job is to make it worthy. As Lee Iacocca used to say in his Chrysler commercials: “You either lead, follow or get out of the way.”)

The long term trend is constrained by physical reality–like the regenerative capacity of the earth’s living systems, on which all human activity ultimately depends. It’s also constrained by widely and deeply held public concern–by both customers and employees–about the environment. The 1994 vote may have been a vote against the Democratic party, but it’s little more than propaganda and political posturing to claim that it was a vote against environmental quality. People clearly want government to function more efficiently, but the certainly did not vote to dismantle environmental protect, food safety and other critical checks and balances of modern life.

If the Republicans are really interested in reform, they might take their own “free-market” rhetoric seriously, and start by cutting subsidies for grazing and mining on public lands, and the $32 billion of Federal energy subsidies to oil, coal and nuclear energy, (88% of our energy subsidies, according to Alliance to Save Energy).

Even conservative humorist P.J. O’Rourke, arguing in the New York Times recently for a free-market approach to environmental concerns–“The price system,” he says, “is the only way in which large numbers of independent people can tell each other who wants what and how much they want of it”–seems to recognize that an inescapable alternative to less regulation is more accurate pricing. “We can also get money from people who screw up the environment. Say chlorofluorocarbons destroy the ozone layer, as some scientists (but not all) think. So we can charge users a big fee… then manufacturers will have an incentive to reduce C.F.C. emissions and to find substitutes for them in their products.”

In fact, defenders of property rights, who often attack environmental regulation as an illegal “taking” of value, may find the environmental coin has two sides. The E-Wire news service reported in December that “A recent jury verdict [in Canton, Ohio] awarding $6.7 million to property owners near a hazardous-waste dump establishes that companies can be held responsible for a drop in real estate values because of negligent disposal, according to a lawyer for the property owners.”

Property rights, it seems, don’t just suggest freedom from regulation–they suggest freedom from having your property–or your body–polluted by someone else’s property. It’s just one more example of the challenge faced by Mr. Gingrich and his new Republican majority–to demonstrate whether they will deregulate to make the economy safe for the super-rich or to level the playing field in a honest free market that reflects the real world.

(c) 1994 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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