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How Green Was My Balance Sheet

Friday, September 1, 1995

Profit and the environment are supposed to be enemies. Remember that the next time you visit Yellowstone National Park, one of the crown jewels of the national park system and a popular attraction for tourists, backpackers, and amateur botanists, zoologists, and geologists. Yellowstone boasts some of the most breathtaking sights in all of North America. It also boasts an interesting capitalistic pedigree.

It was the Northern Pacific Railroad, a private corporation, that funded early expeditions to the Yellowstone region and helped establish the Yellowstone National Park in 1872. "Because it provided the main form of transportation to the region," report economists Terry Anderson and Donald Leal, "the railroad could profit from preservation of this scenic wonder and therefore had an incentive to preserve it." Many other Western parks were promoted and protected by private railroad and development companies for the same reason.

More recently, some private timber companies have found that, by exploring other uses of the forest lands they own, they can increase their profits. In International Paper's commercial forests in Texas, Louisiana, and Arkansas, company biologist Tom Bourland implemented a fee-based recreation program to make money from not harvesting trees. His program charged hunters for access and leased small tracts of land on which families could park their motor homes and enjoy the woods. After three years, International Paper saw its revenues from the program triple, constituting 25 percent of its total profits from the area. Since this valuable use of private land relied on beauty and diverse wildlife rather than ease of harvest, the company had an incentive to preserve habitat for white-tailed deer, wild turkey, fox, squirrel, quail, bald eagles, and red-cockaded woodpeckers.

Deseret Land and Livestock pursued a similar strategy when its cattle ranch fell on hard times. The firm's managers decided to invest in wildlife habitat, charging hunters for the right to hunt elk and other animals. Herds of elk and mule deer -- now a valuable commodity -- on Deseret land actually grew, and the company thrived. The 1,289-square-mile King Ranch in south Texas now makes 60 percent of its income from business activities other than cattle -- including revenues from hunters and nature lovers.

Within the corporate social-responsibility movement, there is no more important issue than environmentalism. Often, the call for corporate responsibility and the exhortation to "save the planet" from a host of environmental problems seem virtually to be the same thing. The firms most often honored for their responsibility -- such as the Body Shop, Patagonia, and Ben and Jerry's -- usually exhibit some sort of (highly publicized) commitment to environmental goals. "Corporations, because they are the dominant institution on the planet, must squarely face the social and environmental problems that afflict humankind," states Paul Hawken, a founder of Smith and Hawken catalog company. "How," he asks, "does business face the prospect that creating a profitable, growing company requires an intolerable abuse of the natural world?"

The notion that profit and ecology must be at loggerheads, and that businesses must place environmental obligations above economic ones, is but one viewpoint among social-responsibility advocates. A different notion, championed most famously by Vice President Al Gore, is that doing business in an "environmentally friendly" way is also to increase the profitability of firms. "We can prosper," he wrote in his book Earth in the Balance, "by leading the environmental revolution and producing for the world marketplace the new products and technologies that foster economic progress without environmental destruction."

When you think through the complex issue of corporate environmental responsibility, however, neither Hawken's "win-lose" proposition nor Gore's "win-win" proposition ultimately satisfies. Both have merit, but ignore the most important characteristic of environmental ethics: uncertainty. For Hawken, the fact that the world is headed for catastrophe is scarcely debatable. Only if you buy his apocalyptic predictions about overpopulation, global climate change, deforestation, and depletion of natural resources does his recipe for a low-growth, heavily regulated, "sustainable" economy make any sense.

In Gore's case, he makes no conceptual distinction between profiting from innovation and profiting from regulation. Throughout much of his book, he argues that governments should make environmental regulations more strict, repeating many of the doomsday scenarios of which Hawken is fond, but then concludes that American firms can make money designing technologies to meet the higher standards. This is no doubt true, but it ignores the firms -- actually shareholders, workers, and consumers -- who clearly lose when regulatory standards change.

Innovative compliance might reduce the cost of regulation, but it doesn't eliminate it. For example, a state might decide to require that only cars fueled by electric batteries will be sold within its borders. This might well lead to the development of better, cheaper electric cars, as firms struggle to capture as much as they can of the new automobile market, but that's not the only consideration. Under the mandate, consumers would lose access to the products they prefer. Some individuals and businesses would leave the state entirely. The resulting costs and dislocations would far exceed the environmental benefits of lower auto emissions, which are questionable in any event. (The generation of electricity for the cars, for example, would still produce some air or water pollution.)

Gore, in other words, is essentially arguing that it's worth building a better mousetrap, regardless of how many mice you think may be actually running around in your house. But what if the more pressing problem you face in your home is termite infestation? Then the mousetrap doesn't help you.

In a different sense, though, Gore is on exactly the right track in charting a course for corporate responsibility on environmental matters. Corporations are not governments. They are not charities. They are unlikely to be successful if they pursue the same sorts of strategies that governments and philanthropic organizations use to protect wildlife habitats and promote clean air and water, such as setting and enforcing standards of health and safety for the public. Corporate America's unique contribution to solving real environmental problems will come from innovation -- finding new ways to produce goods and services, package and deliver them to consumers, and dispose of or recycle the wastes generated by their own production or by consumption.

Pollution and Profits

Corporate innovation in the pollution-reduction area is already widespread. The "Pollution Prevention Pays" program begun by Minnesota-based 3M in 1975 has reduced the company's emissions by more than a billion pounds while saving $500 million.

"At our company, we view a good portion of the environmental problems most talked about today as symptoms of an underlying disease," said 3M chairman Livio D. DeSimone. "That disease is waste -- the wasteful and inefficient utilization of our resources."

Similarly, Dow Chemical and Westinghouse have implemented waste reduction strategies that have saved millions of dollars since the mid-1980s. One Westinghouse plant in Puerto Rico reduced "dragout" -- the contamination accidentally spread as chemicals flow from one tank to another -- by 75 percent by shaking the tank to remove solids before releasing the chemical on to the next tank. Chevron saved $10 million in waste disposal costs and reduced hazardous waste by 60 percent in the first three years of its "Save Money and Reduce Toxics" (SMART) program.

Over the past few decades, timber companies have found that "sustainable-yield forestry" -- including preventing fires, spraying for pests, and quickly replanting harvested areas -- produces less waste and higher profits while also preserving habitat for wildlife. In addition, they have reformed their manufacturing processes, for example by using leftovers from lumbering to make paper pulp and to generate steam for paper mills. International Paper saved about $100 million in disposal expenses between 1988 and 1995 by recycling and reusing its manufacturing wastes.

To be successful both at saving money and "saving the planet," however, corporate waste-reduction programs can't be based on rhetoric or ideology or guesswork about what is or isn't environmentally friendly. One of the greatest myths propagated by the corporate social-responsibility movement is that the most environmentally friendly way to produce goods and services is already known, and that all corporate executives need do is embrace the environmental ethic. This is untrue. Often, the consequences of corporate decisions are ambiguous in terms of overall affect on species, health, air, and water quality, and the global environment. In some cases, the very practices advocated by environmental activists harm the environment.

Consider the historical example of the automobile. Given the attention paid to air pollution and oil spills, one might believe that the environment would be better off if cars had never been invented and mass-produced for widespread use. But such a judgment would be hasty. Although cars created a new source of air pollution, they also virtually eliminated one of the oldest sources of air and water pollution known to man: animal dung.

A horse, for instance, produces about 45 pounds of manure each day. In American cities before the advent of automobiles, massive amounts of horse manure collected daily on streets, sidewalks, and public property. The resulting mess fouled the air, and contaminated water and food. It had to be collected and dumped or buried, often at great expense. And the horses died. In the late 19th century, New York City had to dispose of some 15,000 dead horses a year. Sometimes this difficult task wasn't performed as quickly as it should have been, resulting in outbreaks of disease.

In 1885, a British writer described London in the supposedly pristine days before the car. "It is a vast stagnant swamp, which no man dare enter, since death would be his inevitable fate. There exhales from this oozy mass so fatal a vapor that no animal can endure it. The black water bears a greenish-brown floating scum, which forever bubbles up from the putrid mud of the bottom. . . . It is dead."

Fred Smith, the president of the Competitive Enterprise Institute, in Washington, D.C., and a former environmental regulator, notes that the automobile swept away many of these environmental problems. Besides reducing the need to deal with horse and draught-animal wastes and corpses, the car "encouraged developments that reduce air pollution," he observed in Reason magazine. Before the automobile, most urban homes and businesses were heated with coal, an extremely dirty source of energy that spewed sulfur dioxide, particulates, and toxic ash into the air. As the demand for gasoline stimulated oil exploration, heating oil and natural gas became cheaper and more readily available.

Did the inventors and early manufacturers of the automobile perceive its potential environmental benefits? Have General Motors, Ford, and Chrysler been run by environmental activists for the past half-century? Hardly. Their environmental records are mixed. Nor have all the environmental problems created by the human need for transportation and fuel been "solved" -- particularly in those unique areas, such as southern California, where topography and climate make auto emissions, regardless of how numerous their source, a continuing problem. The automobile example shows only that economic decisions, motivated by an insatiable demand for higher productivity, lower costs, and bigger profit margins, can have unforeseen benefits for third parties and the environment.

It's Not Easy Being Green

One problem for corporate managers is that years of apocalyptic rhetoric and breathless media coverage have created environmental illiteracy among many Americans, including potential consumers and employees. When McDonald's first began to research whether its plastic "clamshell" hamburger boxes posed a significant waste-disposal problem, company scientists came to the conclusion that paper wrappers would actually be harder to recycle. But in a well-publicized 1990 decision, the restaurant chain nevertheless switched to paper.

The reason wasn't sound environmental policymaking, but public relations. A letter-writing campaign organized by environmental activists and teachers had schoolchildren across the country telling their favorite fast-food outlet (and their parents) that they wanted paper rather than plastic to "save the planet." McDonald's complied. Subsequently, a study in Science concluded that the plastic alternative was less environmentally harmful, once all the relevant costs -- such as the energy expended to make the paper wrappings -- were factored in.

Not only did McDonald's appear to make the environmentally "wrong" decision, but the company also nipped a promising business venture in the bud. Before the paper-packaging decision was announced, Dow Chemical and seven other plastic manufacturers had formed the National Polystyrene Recycling Company to recycle polystyrene from 450 McDonald's restaurants. The switch to paper nixed the deal, which would have advanced plastics recycling.

The effect of corporate decisions on the environment are, in other words, extremely difficult to predict with accuracy. Corporations pursuing profit have as much chance of generating environmental benefits as regulators or environmental activists do -- particularly when they are faced with prices for waste disposal that are as close to cost as possible.

For natural resources over which property rights are relatively easy to establish, such as oil, minerals, or timber, prices serve as an early-warning signal to companies about scarcity. If the price is rising, that suggests more demand for the resource than can be met by available supply. Companies then have a financial incentive either to find new supplies or to reduce its need by developing alternatives or ferreting out waste. This market process amounts to a sort of ongoing environment research project seeking an answer to this question: What is the most efficient and least resource-depleting method of producing the goods and services people need?

A good example of how this process works can be found in the development by Bristol-Myers-Squibb of a new way to make Taxol, a treatment for ovarian and breast cancer. Taxol had been made from the bark of the endangered Pacific yew tree, but the process killed the tree. Responding to the mounting cost of obtaining Pacific yew bark, the company found a way to make Taxol from the needles and twigs of the more common Himalayan yew tree, thus assuring a continued supply of Taxol while reducing the need to harvest the endangered species.

For resources over which property rights haven't been established, either because of technical difficulty or because of bad public-policy decisions, the pricing system doesn't work as well. When governments relieve corporations of the need for pay the full cost of disposing of waste, for example, by operating and subsidizing waste collection, landfills, incinerators, and recycling programs, they reduce the incentive for those corporations to find alternative methods that produce less waste.

Environmental Surprises

Some ecological benefits come from surprising places. Man-made pesticides and the companies that produce them, for example, are often reviled for the risks they supposedly pose to humans and habitats. But according to Dennis Avery, the director of global food issues for the Hudson Institute, the Herculean efforts by American companies and researchers to make farming more productive -- by introducing insecticides, herbicides, crop-breeding, and genetic engineering -- have reduced the need for farmland in the United States and other countries. Besides lowering the real price and improving the quality of the foods consumers buy, this happy result has had the side-effect of protecting forests and other sensitive habitats from being cleared for agriculture. "Today's typical environmentalist worries about how many spiders and pigweeds survive in an acre of monoculture corn without giving environmental credit for the millions of organisms thriving on the two acres that didn't have to be plowed because we tripled crop yields," Avery comments.

Actually, reducing the price and improving the quality of agricultural produce has had its own salutary effects on human health. Throughout human history, most people in most societies have had little to eat. Starvation has until recently been the typical state of much of the Earth's population. Only within the past century, and especially since the early 1900s, has agricultural productivity increased rapidly enough to guarantee a plentiful supply of food at affordable prices in developed countries. Much of this productivity is due to the invention and production of agricultural chemicals and the development of new farming practices by American entrepreneurs. Even today, herbicides and pesticides make fruits and vegetables cheaper and more attractive. One study by Texas A&M University researchers found that without pesticides, potato yields would drop 50 percent, orange yields by 55 percent, and corn yields by 78 percent. Prices for these commodities would rise tremendously without pesticides.

Companies introducing these agricultural innovations have clearly advanced the interests of their shareholders, too. The Monsanto Co., founded in 1901 to produce saccharin in competition with German firms, has since diversified into chemicals, fibers, plastics, and pharmaceuticals. Two of its most profitable products for the past 30 years have been the popular herbicides Lasso (introduced in 1969) and Roundup (1973), one of the best-selling agricultural products of all time. Monsanto continues to introduce new products to increase agricultural productivity, such as Posilac, which boosts milk production in cows and reduces per-unit consumption of feed grains.

Plastic Pleasures

If anything symbolizes the irresponsible corporation in the minds of many theorists, it is the manufacturer of that epitome of 20th-century wastefulness, plastic. Typically made from oil, a nonrenewable resource, plastic has come to represent everything that is wrong with American commercial life and our "throwaway culture." But is plastic really a significant environmental problem? Does it provide no benefits to human health and safety or the environment that need to be weighed?

William Rathje, a professor of archeology at the University of Arizona, has spent years studying solid-waste disposal patterns. His excavations of landfills have found that plastics make up about 7 percent by weight and 16 percent by volume of the typical landfill -- much less than paper or yard waste. Polystyrene plastic, used in drinking cups and those "clamshell" hamburger containers McDonald's abandoned, makes up only 1 percent of landfill volume. Fast-food packaging amounts to no more than one-third of 1 percent. Of course, environmentalists fault plastic for much more than taking up space in landfills. They point out that plastic manufacturing relies on extracting and transporting oil. But since less than 2 percent of the world's petroleum is used to produce petrochemicals of all kinds, from fertilizers to plastics, the impact on oil consumption of using plastic to make consumer products is negligible.

Consider, on the other hand, the benefits of plastic. Even something as banal as plastic wrap has been a tremendous boon for Americans' health and safety. A hundred years ago, grocery stores had little in the way of prepackaged foods. At the turn of the century, paper packaging began to enter food retailing, but it had limitations. Meat, for example, was still often shipped in the form of whole carcasses only 50 years ago. Consumers would request particular cuts of meat from butchers, who kept carcasses until they were all sold or completely spoiled. The meat was expensive, particularly because butchers spent so much time carving it.

During the 1950s, however, the advent of plastic packaging began to change food delivery. Dow Chemical of Midland, Michigan, was an industry leader, not only in supplying plastic products to businesses but also by introducing its first major consumer product, Saran Wrap, in 1953. Plastic packaging allowed grocers to sell smaller portions at lower prices, and consumers to store food more efficiently and effectively. One study estimates that the modern system of packaging lowers the price of beef by about 40 cents a pound, while improving its quality.

Furthermore, the use of plastic and other types of packaging for foods seems to have reduced, not increased, total household waste. When Rathje took his garbage-archeology team to Mexico City in 1990, they found that the average household there discarded 40 percent more refuse each day than the average U.S. household, because Mexicans ate more whole fruits and vegetables and thus had more rinds, peels, and other food debris. In America, food processors sell prepackaged fruits and vegetables in cans, bags, or microwaveable plastic containers. From an environmental standpoint, this has the effect of accumulating the food debris in a central location, thus making it easier to dispose of in the form of compost, animal feed, and other products.

Today, the American plastics industry is one of the most innovative in the world. By finding new ways to manufacture, package, and store products that cost less, last longer, require fewer resources, and reduce harm to the environment, the industry is constantly improving the way we live. Since World War II, innovations in the manufacture, design, and use of plastics have yielded tremendous benefits for the public in terms of safety, health, economy, and quality of life. Consider these examples:

· Plastic tubing made possible the first disposable, ready-to-use hypodermic needles. Initially introduced for combat use in the 1940s, the disposable needle soon made it possible to conduct safe and effective mass inoculations against disease in America and throughout the world.

· In 1945, Earl Tupper introduced the first flexible plastic storage containers to replace glass, earthenware, and metal containers for storing food and other perishables. His product, Tupperware, vastly improved the freshness and quality of stored food.

· Plastic siphon tubing made mass irrigation possible in the 1940s and 1950s, thus contributing to the Green Revolution that increased agricultural productivity and eliminated famine in much of the world. In the 1960s, plastic pipes began to replace other forms of piping for water distribution and drainage, because they were lighter and easier to install and resisted corrosion better than alternatives.

· Plastic innovations during the past three decades by such companies as Phillips Petroleum, Union Carbide, and Shell Chemical have made possible such life-saving and life-enhancing products as artificial organs, comfortable prosthetics, body armor for law-enforcement personnel, unbreakable but light children's toys, and many automotive parts.

· Cheap, all-temperature performance, flame-retardant, high-impact-resistant plastic parts made the first home computers -- manufactured by Apple Computer and Tandy -- viable products.

Lingering environmental controversies such as the risks of dioxin -- which many view as a potent human carcinogen -- are being resolved by plastic designers who, just in the past few years, have developed products that reduce or eliminate these real or perceived environmental problems. GE Plastics, for example, developed a new flame-retardant product that doesn't produce dioxin and that is also easier to make and costs no more than the plastic it replaces. Apple Computer is using the product in its Macintosh line of personal computers. Waste-to-energy plants, which dispose of about 60,000 tons of refuse each day and supply electricity to nearly a million Americans, also employ a series of technologies that reduce dioxin emissions to almost immeasurable levels.

The Recycling Conundrum

An article of faith among environmental advocates is that recycling will help American business conserve natural resources and demonstrate its environmental responsibility. This assumption doesn't account for the potential costs, including environmental costs, of pursuing recycling regardless of whether it is truly profitable.

For example, curbside recycling programs usually require more collection trucks. That means more fuel consumption and engine emissions. Some recycling programs produce high volumes of wastewater and use large amounts of energy. When researchers have tried to examine every aspect of the recycling equation -- from energy use to production costs -- they have found that sometimes recycling makes sense from an economic and environmental standpoint, while other times it does not.

Aluminum cans are a clear example of a commercial package that should be recycled. It takes 10 percent less energy to recycle aluminum than it does to make it from mined bauxite. So aluminum recycling is profitable -- and commonplace. Steel is also relatively economical to recycle. Virtually all products made with steel contain at least 25 percent reclaimed steel. On the other hand, recycling fruit-juice containers probably doesn't make economic or ecological sense. Filling disposable cardboard boxes takes half as much energy as filling recyclable glass bottles. For a given beverage volume, transporting the empty glass bottles requires 15 times as many trucks as does transporting disposable boxes. Transporting the containers once they are filled also costs less when using disposable boxes. Juice boxes don't break like glass bottles can, they are easily packed or frozen, and they seem to encourage juice consumption among the young, with whom they have proven to be popular.

For some commodities, such as newsprint, it seems that the only way to make recycling profitable is to force manufacturers to use them. Many states have laws requiring that newspapers contain a certain percentage of recycled paper, thus artificially creating a demand for newsprint. Even mandates sometimes fail to make recycling work: In Germany, laws requiring plastics recycling have resulted in a glut of collected plastics with few economical uses. Advocates for such laws point out that market prices don't capture all the costs of alternatives to recycling. But prices nevertheless contain important information. When forest stocks become scarcer, for example, the price of virgin timber rises, thus making recyclables more attractive. Similarly, as long as landfills are run to at least break even, then as they fill up their tipping fees will rise, again encouraging diversion of waste products into recycling or reuse. These price mechanisms already exist to a significant degree, and yet paper and plastic recycling often makes no sense absent government mandates.

For corporate managers trying to make heads or tails of the economic and environmental issues surrounding recycling, the answer may well be to trust an imperfect system of market prices over an even more imperfect attempt to guess at the ecological impact of various waste-reduction and recycling strategies. In everyday decisionmaking, this means weighing costs and benefits while maximizing shareholder return.

Ford saved millions in 1994 when it converted several components of its automobiles into 100 percent recycled plastic. Chrysler is using completely recycled plastic in the interior trim of its popular minivans. Both car companies have made increasing use of these recycled plastics, made by companies such as Washington Penn Plastics and AlliedSignal, because of their cost and performance advantages over "virgin" plastic, not because of an attempt to meet some vague environmental goal. The savings "go straight to the bottom line," said Tony Brooks, Ford's special recycling coordinator. "Ford's position is that we will do everything we can to use recycled materials in our cars, but they can't cost more than virgin and they must perform at least as well as virgin."

Problem, Innovation, Solution

Most environmental issues in America today represent not only public-sector controversies but also private-sector opportunities. For companies that can identify a problem and devise a solution, the potential profits are significant.

In the case of plastics, profit-seeking corporations are experimenting with edible food packaging that offers better protection, lower cost, and few environmental considerations. ConAgra, Inc., the processed-food giant, is working on an edible bag in which to package products such as frozen entrees that currently used plastic bags. "If you could make a boilable, edible bag, you could replace the plastic with something that is part of the food -- ultimately eliminating a source of package waste," says the company's packaging director, Brian Hopkins. Other companies are working along similar lines. Quaker Oats is testing edible coating for breakfast cereals. RJR Nabisco is working on a film made from milk protein that could be used to coat frozen fish products and baked goods.

These innovations aren't being pursued simply to reduce package waste. Food manufacturers also want to improve food preservation to enhance the taste and freshness of their products. Instead of having consumers buy whole fruits and vegetables, for example, and then slicing or dicing them at home, manufacturers could prepare large quantities of fresh produce -- such as pre-sliced onions or oranges -- and then preserve them with edible coatings. The cost of the foods would be lower, consumers could enjoy the convenience of pre-sliced ingredients, and waste peelings -- currently spread out over the entire population of homes -- would be centralized in manufacturing facilities and thus easier to dispose of. The resulting boon to human health would be significant. "Consumption of fresh fruits and vegetables could be higher if this service were provided," says Attila E. Pavlath, a food scientist with the U.S. Department of Agriculture.

Other corporations are focusing their innovative energies on hazardous waste spills, hoping to profit from creative solutions to this most serious of environmental dangers. Whether it is the Exxon Valdez oil spill of 1989 or Superfund sites or underground leakage of cancer-causing chemicals, the topic of hazardous waste often generates passionate feelings and great concern about environmental damage. But is the answer to spills to be found in banning substances or jawboning industry to reduce its dependency on them? Many entrepreneurial U.S. companies say no.

The answer, they suggest, is to find new ways to clean up spills quickly, easily, and effectively. Bioremediation -- using bacteria or fungi either found in nature or engineered in laboratories to clean up hazardous wastes -- is a promising technology that offers the prospect of a cleaner economy without sacrificing the modern industrial processes that make our so economy productive. In Seattle, UNOCAL is using petroleum-eating bacteria to clean a six-acre patch of dirt where an oily residue of gasoline and disease fuels had accumulated over 65 years of leaks from its Seattle Marketing Fuel Terminal. Once the site is clean, UNOCAL expects to sell it for a significant price to commercial or residential developers.

Bioremediation isn't exactly a new idea -- municipal water systems have long used bacteria to purify sewage and paper companies have used them to remove organic matter from industrial sludges—but a bustling new industry of bioremediation enterprises promises to clean up such hazardous materials as DDT, wood preservatives, toxic petrochemicals, and radioactive waste. Corporate pioneers in the area include Amoco and Du Pont, but most of the new technologies are coming from small, start-up firms such as Remediation Technologies of Concord, Massachusetts, Alpha Environmental in Austin, Texas, and Envirogen of Lawrenceville, New Jersey. Ironically, many bioremediation approaches have come from a close observation of how Mother Nature herself deals with waste. In searching for microbes to clean up oil spills, Alpha Environmental president Eugene Douglas said, "we went to where there are natural oil seeps in the Mediterranean, Central Asia, and North America, but where there isn't what you'd call pollution. Over time, microbes at these sites have evolved the ability to ingest that oil."

Bioremediation isn't the only solution profit-seeking corporations are working on. For the problem of oil spills, for example, Sea Sweep, Inc. of Denver, Colorado has developed an oil-absorbing, floating material, made from heating sawdust and woodchips, that will absorb 3.5 times its weight in oil. If administered to a spill, Sea Sweep will absorb the oil and then float to the surface for easy collection, after which it can be burned as fuel. Wyoming-based Centech has developed a centrifuge that generates relatively clean water and marketable oil from oil sludge, which is a serious problem around crude oil storage tanks and pipelines. In the area of industrial wastes, Tennessee's Olin Corp. has developed a process for dramatically reducing absorbable organic halides (such as dioxin) from the paper pulp-bleaching process. Martin Marietta Energy Systems, Inc. has a process for dechlorinating wastewater streams.

It would be impossible to list all of the environmental innovations and inventions one can find in just a single year, ranging from simple reuse technologies at plant sites to machines and acids that remove virtually all known pollutants from energy plant emissions. Some of these technologies have been developed, as Gore suggests, in response to regulatory mandates. Others have come about as companies seek to reduce their waste disposal costs, improve the efficiency of their production processes, or find new areas of opportunity in a growing, constantly changing economy. It is through innovation and productivity gains, not through corporate munificence or a commitment to a theoretical environmental ethos, that American business will make its most important contribution to a cleaner world and the health and safety of the public.

For corporate decisionmakers, true responsibility entails a recognition of the uncertainty that often accompanies environmental controversies and an unwillingness to put the interests of shareholders at risk by accepting environmental "truisms" at face value. It is by no means clear that simply recycling more, or substituting paper for plastic, or abandoning profitable enterprises because they require nonrenewable resources will necessarily serve environmental ends. Ultimately, such ends are determined and valued by human beings who also value healthful and reasonably priced foods, high-quality consumer goods, and job opportunities. The chances of making a poor decision are higher when corporate managers try to act like public policymakers or conservation experts.

Instead, as much as is practicable, corporations should let prices guide their decisions. In most cases, wasteful industrial practices impose measurable costs on firms, be they for waste disposal, raw-materials purchases, or lost customer revenue. Thus firms have every incentive to find alternatives. "For all environmental issues, shareholder value, rather than compliance, emissions, or costs, is the critical unifying metric," said McKinsey & Co. management consultants Noah Walley and Bradley Whitehead in their noted 1994 essay on corporate environmentalism in the Harvard Business Review. "That approach is environmentally sound, but it's also hardheaded, informed by business experience, and, as a result, much more likely to be truly sustainable over the long term."

An example of how truly responsible companies might make decisions about environmental issues is the case of Eco-Foam pellets, a substitute for Styrofoam peanuts in packing boxes or other containers. Texas-based American Excelsior Co. makes Eco-Foam out of corn starch and markets it as environmentally friendly. "The biggest benefit is that it's manufactured from renewable resources instead of petroleum products," says one local distributor. Should responsible companies concerned about the global environment use Eco-Foam instead of Styrofoam, then? Probably not. Managers need not evaluate all the pros and cons of the two products. They need only watch the price. In early 1995, Eco-Foam cost 25 percent more than Styrofoam. If we ever really start running out of oil, the price of petroleum products, including Styrofoam, will rise -- making alternatives competitive. Until then, the environmental benefits of switching to corn starch won't be worth the cost.

Public policymakers will continue to develop more efficient ways to regulate waste and pollution, and scientists will continue to gather information about the environmental risks from various substances or practices. As they do, pricing structures will evolve that communicate even more accurate information to manufacturers and entrepreneurs about the true cost of commercial activities and the potential rewards from innovative solutions to environmental problems.

There are many promising trends in environmental thinking and regulatory policy, from markets for emissions permits to the increased use of cost-benefit analysis to establish public priorities. Once ecological and economic ends are brought closer together, the perceived clash of interests between American business and Mother Nature will largely disappear. For corporations, the complex issues of environmental responsibility will always be challenging. But dealing with them requires no redefinition of the core profit-seeking purpose of economic enterprises.

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