What drvies companies to go green

Tuesday, May 30, 2006

MANAGING FOR SOCIETY, THE MANILA TIMES By Evelio G. Echavez What drives companies to go green

THE controversy caused by the reported tailings spills of the Lafayette Mining’s polymetallic project has added a new weapon in the arsenal of antimining groups, which have been calling for the revocation of the Mining Act of 1995 and the prohibition of the entry of new investors in the country’s mining industry. Even as the effects of the Marcopper mining disaster ten years ago are still being felt and some issues remain unresolved, this new environmental disaster has happened making concerned interest groups more vigilant and vocal in airing their sentiments; and rightly so. I therefore want to address what drives companies to go green or to become environment-protection-conscious. In their article “Why companies go green: a model of ecological responsiveness” published in the Academy of Management Journal, authors P. Bansal and K. Roth say that prior research has identified four drivers of corporate ecological response, namely: legislation, stakeholder pressures, economic opportunities and ethical motives. Legislation on environmental protection is considered adequate in this country. Laws on environmental protection include the Clean Air Act, the Clean Water Act and the Mining Act of 1995. The Mining Act of 1995, for example, requires mining companies to obtain an Environmental Compliance Certificate that certifies that the project under consideration will not create an unacceptable environmental impact. Stakeholders are also known to exert pressures on companies in regard to ecological responsiveness. These pressures come from customers, local communities, the press and environmental interest NGOs. The stand of some groups for a total mining ban in the country closes all forms of dialogue and shows the lack of appreciation of some parties on the importance and necessity of the mining industry to our civilization and our economy. As humans, we need metals for varied purposes: construction of buildings, bridges and other infrastructures; and for making machines, tools and equipment. It is important that there will be a two-way, give-and-take communication and interaction between the companies and the concerned stakeholders. A third driver is economic opportunities. By intensifying or altering production processes, maximizing recycling, minimizing waste, firms reduce their environmental impacts while at the same time lowering the costs of inputs and waste disposal. Many companies have found out that by improving their environmental performance through the reduction of all kinds of material waste (reduction of pollution) they also have been able to lower their costs. In the same article, the authors mentioned that ethically motivated companies respond because it is the “right thing to do.” Ethical motives depend on the corporate values the company espouses; particularly on the values of the company’s leadership. Let me cite an example of a group of companies that was involved in cement production and sales. In the early 1990s, the cement industry experienced significant growth. The government emission standard for cement dry-process plants was 150 milligrams per normal cubic meter (mg/Ncum) maximum. In 1990 the chairman and CEO of Phinma, Mr. Oscar J. Hilado, issued a directive that in five years’ time all kilns in the Phinma Group must have an emission level of 100 mg/Ncum (maximum). Phinma at that time managed and operated six cement plants. Four years after Hilado issued the order, some of the cement kilns including an old wet-process kiln (that had an emission standard of maximum 500 mg/Ncum) whose clinker dust collecting/trapping equipment were either new or upgraded, attained dust emission levels of 50 to 100 mg/Ncum. This was a clear example of how ethically motivated executives can provide the needed leadership toward corporate ecological responsiveness.