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Making Business Sense of Environmental Compliance

Companies lose money because they treat pollution control and plant operations as separate concerns. In this article, the author outlines five strategic, cost-saving approaches involving the coordination of these two issues.

A truly integrated, holistic approach to environmental compliance and production concerns requires a plant-wide perspective that simultaneously reviews new regulations, plant operations, emerging technologies, changing markets, and fluctuations in product demand. In this type of holistic approach, the environment becomes a criterion for making business decisions, and business needs become criteria for making environmental decisions.

In most firms, the division of responsibilities among departments creates a rift between production and environmental considerations. But the author advises that managers must force themselves to make decisions differently. For example, using a holistic approach, a company might simulate plant operations, try out various financial models, and apply alternative cost-allocation methods to reveal a product's true environmental cost.

The author describes five cases that illustrate the use of integrated strategies to assess cost-effective compliance options. Four of the strategies are based on real-life enforcement cases in which noncompliance orientations either lost money or didn't realize the expected gains. The fifth strategy is a proactive, integrated approach that resulted in cost savings by eliminating the need for an entire pollution-prevention project.

To save production and compliance costs, managers and environmental engineers must collaboratively: (1) consider changing operations, (2) use delayed-expenditure models, (3) look for a confluence of problems and conditions (low productivity, availability of more-efficient technologies, imminent implementation of stringent regulations), (4) allocate environmental costs to products equitably, and (5) use a systems approach to view plant-wide operations as one unit.

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