Re: Market Forces and P2-Reply

[josh_kanner@abtassoc.com]

     Definitely a cool thread.  Here's my two cents from the perspective of 
     environmental performance measurement.  If, as Scott B. notes below, 
     firms are not able to communicate performance adequately using 
     aggregate release or financial disclosure data: 
     "A good example might be a Dow or Monsanto (to pick arbitrary 
     examples), both still high on the TRI list
     in some regions, despite what I think most would agree is a pretty 
     serious commitment (and action) towards P2 and sustainable 
     development.  Would the environment be served if their stock values 
     dropped due to SEC listing of their cleanup liabilities, perhaps 
     forcing a reduction in their clean technology R&D efforts?"
     
     then perhaps the answer is to create new measures of performance.  Why 
     not normalize releases to production so that the efficiency of a 
     particular facility (company) is communicated?  Also, how about 
     presenting some of the R&D funding information as a percentage of 
     overall liability? (or some other measure of cleanup commitment)  With 
     ISO's environmental performance evaluation standards waiting in the 
     wings, are the market drivers for 'real' environmental performance 
     data (that may be able to capture p2 commitments, among other things) 
     strong enough to overcome the private and public sector barriers 
     (financial, legal, political, institutional) to collecting and 
     presenting it?  Which sector should/could do it?  -Josh
     
     ************************
     Josh Kanner
     Analyst
     Abt Associates Inc. 
     55 Wheeler Street
     Cambridge, MA 02138
     (v) 617-349-2485
     (f) 617-349-2660
     josh_kanner@abtassoc.com

______________________________ Reply Separator _________________________________
Subject: Market Forces and P2-Reply
Author:  uunet!great-lakes.net!p2tech at UUCPmail
Date:    2/14/97 12:08 PM


This is an interesting thread of thought, and relates to some of the = 
environmental cost accounting issues we have been investigating in Texas.  =
 I put this under another title so people can dig it out of the archives =
if need be.
Thanks
Th*mas
     
Thomas Vinson, Engineering Specialist
Industrial Pollution Prevention, Office of Pollution Prevention and = 
Recycling
Texas Natural Resource Conservation Commission 
MC-112, PO BOX 13087, Austin, TX 78711-3087 
512/239-1305
     
     
>>> Robert S Butner <butner=40battelle.org> 02/12/97 07:33am >>>
A half a dozen or so studies have come to my attention in the last year = 
that
all reach a similar conclusion: publication of environmental performance 
information has a material effect on firm financial performance.  The 
measures used vary from study to study--stock price, intangible asset = 
value,
cost of capital, debt ratings, etc.  If one believes the findings of these 
business school and economics profs. (which I guess I tend to), then it 
seems like an effort should be made within the company to examine two 
things: (1) the mechnaisms which make environmental information public 
and/or how the company can keep information private (2)opportunities to 
manage that flow of information where it cannot be made private.
     
          A couple of related thoughts, in a sense playing devil=27s 
          advocate (though I always thought THAT was the whole purpose 
          of business school):
     
          - despite the academic theorizing on relationship between 
          green ink and black ink, the =22green=22 mutual funds have 
          largely underperformed.  Is it possible that empirical data 
          are not living up to the theory?  Economists faced with such 
          a dilemna will usually tell you to disregard the data, but 
          in any event it could probably be explained by the metrics 
          used to select stocks, which may not actually measure
          =22green-ness=22 in the same way P2 people like to think of it.
     
          - remember that formal publication (and listing as a 
          liability) of environmental data including legacy 
          wastes/clean-up duties, may in fact penalize firms that have 
          come to =22see the light=22 and are making significant =
strides.=20
          A good example might be a Dow or Monsanto (to pick 
          arbitrary examples), both still high on the TRI list
          in some regions, despite what I think most would agree is a 
          pretty serious committment (and action) towards P2 and 
          sustainable development.  Would the environment be served if 
          their stock values dropped due to SEC listing of their 
          clean-up liabilities, perhaps forcing a reduction in their 
          clean technology R&D efforts?
     
     
          - market forces don=27t address a number of broader social 
          needs/issues that simply aren=27t reflected in the price 
          signals which zoom around us constantly.  There=27s a great 
          article in the Better World =27Zine, an online 
          socially-responsible business journal who=27s URL escapes me 
          but can be found easily via web search, which poses the 
          question:  which is better to invest in; an environmentally 
          progressive company like Ben and Jerry=27s that makes what is 
          ultimately a resource-intensive luxury item but does it in a 
          nice way, or a chemical company which makes (pick your own 
          =22necessity=22 commodity) and invests in cleaning up THEIR 
          product or process? =20
     
          Remember, the free market gives us =22USA Today=22 as well as 
          the NY Times, McDonald=27s as well as the corner deli, and (to 
          quote Bruce Springsteen -- another product of market forces
          -- =2253 channels and nothing on.=22).  As it should.  But it 
          can be dangerous to presume too much predictability or any 
          sense of optimality when relying on these forces.  Any 
          student of evolutionary theory knows this -- evolutionary 
          systems (and arguably the economy is one of them) do not 
          proceed according to a design; they adapt with little sense 
          of purpose, creating wonderous things along with monsters 
          (OK, perhaps no monsters, but certainly cockroaches and toy 
          poodles, which are almost the same thing).
     
          Does the above mean I don=27t think market signals are 
          important.  No.  Do I disagree with the notion of more 
          public disclosure of environmental data?  Heck no=21  But 
          I do think that this IS a can of worms, and opening it is
          not without its consequences, both good and bad.  It is also 
          dangerous to assume that more information will ALWAYS lead 
          to a more socially optimal state. =20
     
     
          Just some food for thought.  All in all this has been a very 
          interesting thread.
     
          And before I get flamed by the toy poodle owners of this 
          list, I own one.  I=27m entitled=21
     
          Scott Butner
          butner=40battelle.org