Bolstering Private-Sector Environmental Management

Article excerpt

"We are ready to enter a new era of environmental policy," Environmental Protection Agency (EPA) Administrator Christine Todd Whitman announced during confirmation bearings in January 2001. Noting that the country had moved beyond "command and control mandates," Whitman pledged to emphasize cooperative approaches among regulators and business. Similarly, President George W. Bush believes that lawsuits and regulations are not always the best ways to improve environmental quality. As governor of Texas, he emphasized voluntary agreements with industry as an alternative to government mandates.

How will Whitman and Bush implement their environmental philosophy? One approach, mentioned by Whitman and supported by a growing number of state agencies and the EPA itself, is to create "tracks" of environmental performance. In Whitman's home state of New Jersey in 2000, the Department of Environmental Protection launched a program called the Silver and Gold Tracks, which rewards companies that have stronger environmental programs than what is required under law. A similar program has been set up in Texas and in 10 other states, and the EPA initiated its National Performance Track program in June 2000. Although the incentives that agencies are offering vary across jurisdictions, qualifying companies are being offered greater choice in how they will meet environmental regulatory standards, reduced government oversight, penalty mitigation, expedited permitting, reduced inspection frequency, more cooperative relationships with regulators, and public recognition.

The philosophy behind performance-track programs is simple: Distinguish strong environmental performers from weak ones and give strong firms special recognition and rewards. Weak firms, seeking the incentives that agencies are offering, will emulate their environmentally stronger competitors. Instead of just punishing the bad, agencies will be able to nurture the good. Such approaches might even improve the efficiency of agency enforcement programs. If regulators know who the "bad guys" are, they can focus their enforcement resources where they will have the greatest impact.

What constitutes strong environmental performance worthy of special treatment by agencies? How does a regulator know when a firm deserves entry to the performance track? States and the EPA are answering this question in different ways, but one component is central to nearly all programs. In order to become a member of New Jersey's Gold Track, the Clean Texas program, or the EPA performance-track program, a firm must have established an environmental management system (EMS). The implementation of an EMS is one criterion among others that agencies are using to determine which companies deserve special treatment.

An EMS represents a collection of internal efforts at policymaking, planning, and implementation that yields benefits for the organization as well as potential benefits for society at large. When people inside. an organization take responsibility for managing environmental improvement, the internal regulatory strategies they adopt will presumably turn out to be less costly and perhaps even more effective than they would be under government-imposed standards. Moreover, when organizations have the flexibility to create their own internal regulatory approaches, they are more likely to innovate and will potentially find solutions that government standard-setters would never have considered. Finally, individuals within organizations may be more likely to see their organization's own standards as more reasonable and legitimate, which may in turn enhance compliance with socially desirable norms.

The potential for EMSs to improve environmental performance and fill the gaps in our existing system of environmental regulation makes them promising new tools. Yet as the Bush administration pursues its environmental policy agenda, policymakers should bear in mind that the EMS tool by itself is not necessarily sufficient for firms to create superior environmental improvement. …