Academic journal article Business Economics

Business and the Environment: Is There More to the Story? Evidence of Good Environmental Stewardship Is More Extensive Than Most Economists and Executives Recognize

Academic journal article Business Economics

Business and the Environment: Is There More to the Story? Evidence of Good Environmental Stewardship Is More Extensive Than Most Economists and Executives Recognize

Article excerpt

Actions taken to improve the environment are frequently good for profits, but many executives, including economists, are not fully aware of just how good business's environmental record is. As a result, they often have difficulty responding to critics. This article will present three major points: 1) the environment of the United States is much improved over the past several decades, and business's pursuit of profits has been an important factor; 2) the public's information about business and the environment is poor; and 3) this faulty information fosters the impression that business is evading its responsibilities.

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"If there were an international tribunal that prosecuted crimes against the planet, like the one in The Hague that deals with crimes against humanity, what is happening on the Cumberland Plateau in eastern Tennessee would undoubtedly be indictable.... About 200,000 acres on this tableland have already been clear-cut by the paper industry, and the cutting continues" (Shoumatoff, 2003, p. 15).

This quote comes from an article, "The Tennessee Tree Massacre," published by the Natural Resources Defense Council. Business economists are probably used to hearing criticism of business's environmental record, although language like this may be a bit over the top. Such magazine articles--plus movies such as Erin Brockovich, which blames a power company for community deaths, and newspaper articles alleging that industrial toxins are endocrine disruptors--all carry the message that business is an irresponsible steward. Most people would not dispatch executives to The Hague, but many do resent American industry for not doing more to protect the environment.

Is there truth to this charge? Certainly, there are bad actors in business, as everywhere. But, on balance, the story is much more positive than we often see, whether in the media, in textbooks, or among environmental groups.

To business executives themselves, a record of environmental improvement should not be surprising. Actions taken to improve the environment are frequently good for profits. Duncan Meldrum, Chief Economist of Air Products and Chemicals, Inc. and President of the National Association for Business Economics (NABE) in 2003-2004, points out that even when an action to mitigate environmental damage "looks like a pretty weak investment on a direct financial return basis," benefits can range from lower insurance rates to higher productivity and improved products. (1) Furthermore, Meldrum suggests, proactive environmental programs help companies find the best way to solve a problem--before regulators impose an expensive technical solution that isn't really appropriate.

In spite of this implicit understanding in the business community, however, it is my contention that many executives, including economists, are not fully aware of just how good business's environmental record is. As a result, it is sometimes difficult for them to respond to hostile critics. In addressing the environmental record, I would like to present three major points. One is that the state of the U.S. environment has improved significantly, and business's pursuit of profits has been an important factor. The second is that the quality of the public's information about business and the environment is poor. The third is that this lack of information fosters unrealistic ideas that give the impression that business is evading its responsibilities. In conclusion, I will return to the "Tennessee Tree Massacre."

Environmental Quality Improves

Over time, environmental quality has improved dramatically in market-driven developed countries such as the United States. The environment is also better in such countries than in less-developed countries, including formerly communist countries. Although the terms "improved" and "better" are subjective, quantifiable measures support this claim. In the United States, the level of contamination in the air falls year by year (Hayward and Schwartz, 2004, citing Environmental Protection Agency data); in fact, the air has been improving in major cities such as Pittsburgh, New York, and Chicago since before the Second World War (Goklany, 1999, p. …

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