By 2003, a number of advantages to CES were being investigated and documented by the management consulting profession and by groups such as the Global Environmental Management Initiative (GEMI) and the Conference Board. These advantages serve to explain why a firm would invest in efforts to move it beyond basic legal compliance with all laws.
Competitive advantages gained by environmental strategies include the following:
1. Margin improvement—seeking cost savings at every stage of the product life cycle through more efficient use of labor, energy, and material resources.
2. Rapid cycle time—reducing time to market by considering environmental issues as part of the concurrent engineering process during the early stages of design.
3. Market access—developing global products that are environmentally ‘‘preferable’’ and meet international ecolabeling standards in Europe, Japan, and other regions.
4. Product differentiation—introducing distinctive environmental benefits, such as energy efficiency or ease of disassembly, that may sway a purchase decision.
CES is the blend of classical environmental regulatory compliance matters with these new strategic dimensions and elements. CES, at its best, is an integral input in the creation of business strategy, product selection, and a corporation’s public affairs and reporting under Sarbanes Oxley, and related laws of disclosure both before the U. S. Securities and Exchange Commission and before the investment community.
From l985 to 2003, different firms excelled in these four highlighted attributes: margin improvement, rapid cycle time, product differentiation, and market access. Intel was motivated to pursue CES to enhance its needs for rapid cycle time reductions, and marketing-based firms such as Nike and Proctor & Gamble set up CES goals for reasons of basic product differentiation. In the end, CES began as a means of improving corporate bottom lines through cost containment and new product opportunity programs.
If one were to estimate the degree of penetration of CES into corporate boardrooms, it kept its stigma as being an added cost, or what some have referred to as a ‘‘bag on the side of corporate strategy,’’ for many years after Bhopal. Although the diligent and deliberate attempt to lessen a firm’s environmental liabilities is a prime force behind CES, the relentless thirst for profit has proven a more reliable and less distracting guide in the new thinking regarding CES. The list of four key elements and goals of CES can be thought of as the turning point from the old century thinking into the new century, where the pressures for sustainable product mixes and policies became far more palpable.
A firm can achieve CES by a sequence of related efforts, including the following:
1. Make environmental management a business issue that complements the overall business strategy.
2. Change environmental communication within the company to use traditional business terms that reflect business logic and priorities.
3. Adopt metrics to measure the real costs and business benefits of the environmental management program.
4. Embed environmental management into operations, similar to the successful design-for-environ – mental models (here, environmental footprint reduction elements are entered into the equation at the product design stage).
5. Radically change the job descriptions and compensation of environmental managers—and line managers—to reflect the realities of doing business.
Others answered the question of how a firm would begin to move beyond compliance by pointing to the cost and administrative inconvenience of penalties and fines. The classic and more vivid example is the demise of Union Carbide, and its eventual purchase by Dow, after Bhopal, a tragic accident that killed over 2700 people in Bhopal, India. Lessons from Union Carbide for practitioners of improving environmental management systems, under the rubric of CES, include this summary of Union Carbide’s major changes after Bhopal:
1. An intricate classification scheme of standards, regulations, and audits, which allows executives more insight into the firm’s liabilities, priorities, and high – risk areas. Technical staff functions of regulatory compliance can then be linked to the legal department’s liability containment measures and strategies.
2. A large database of audit findings statistically amenable to analysis. From this corporate base, executives from different divisions compete for capital resources on more exact terms. Its size and consistency make it a management tool of considerable consequence.
3. A systematic monitoring and control program, more reliable than the traditional environmental, health, and safety systems. For instance, Union Carbide’s worldwide computer program prioritizes risk at its 1200 facilities worldwide and assists senior management with its growth or phase-down plans.
4. New management tools, based on the audit system, provide quality assurance and executive reassurance that the company’s environmental practices do not violate the law or threaten human health or the environment. Nationwide, more than 200 executives have served jail time for environmental crimes. This executive assurance program—developed for Union Carbide by A. D. Little—helps senior management feel ‘‘in touch’’ with the firm’s liabilities, compliance issues, and long-term viability.
Other recognized drivers in corporate behavior for corporate environmental strategy included Superfund Authorization and Reform Act (SARA) Title III, which put public pressure on companies by requiring disclosures on chemical stockpiles, warehouses, and such, and the Chemical Manufacturers Association’s responsible care initiative, which outlined a code of behavior.
The disruption caused by the Union Carbide accident spurred the above regulations and conduct codes throughout the industry. The public lost faith in the industry and the negative opinion polls increased. Corporate environmental strategy is, in part, a response to the negative public image and public concerns about environmental, health, and safety performance.