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Re: Market Forces and P2-Reply
Hi everyone,
I recommend an article entitled "The Economy, Jobs, and the Environment" by
Roger H. Bezdek, from the GEMI '95 Conference Proceedings.
His company, Management Information Services in DC looked at anecdotal,
econometric and empirical evidence about the impact of environmental
regulations. Anecdotal evidence supports pro and con positions. Econometric
models may be hugh and "robust", but always forget a few key parameters,
like innovation or external benefits. And empirical evidence such as what
is actually happening in countries and states with strong environmental laws
gives statistically significant evidence of a positive correlation between
such regulation and economic health. It seems a major factor is that
companies have benefitted from the push for reengineering towards cleaner
and more efficiency processes. Also, "environmental regulations ...transfer
the wealth from polluters to pollution controllers and abaters and to less
polluting firms." This is not a net loss for the nation.
What this says for your individual client or stock investments is less
certain, I think.
At 10:31 AM 2/14/97 -0600, Thomas Vinson wrote:
>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@battelle.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's
> 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 "green" 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
> "green-ness" 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 "see the light" and are making significant strides.
> 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't address a number of broader social
> needs/issues that simply aren't reflected in the price
> signals which zoom around us constantly. There's a great
> article in the Better World 'Zine, an online
> socially-responsible business journal who's 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's 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
> "necessity" commodity) and invests in cleaning up THEIR
> product or process?
>
> Remember, the free market gives us "USA Today" as well as
> the NY Times, McDonald's as well as the corner deli, and (to
> quote Bruce Springsteen -- another product of market forces
> -- "53 channels and nothing on."). 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't think market signals are
> important. No. Do I disagree with the notion of more
> public disclosure of environmental data? Heck no! 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.
>
>
> 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'm entitled!
>
> Scott Butner
> butner@battelle.org
>
>
>
>
Janet Clark
Technology Transfer Manager
MA Toxics Use Reduction Institute
University of Massachusetts
One University Ave.
Lowell, MA 01854-2866
Tel 508-934-3346
Fax 508-934-3050
email clarkjan@turi.org
Check out the NBEN interactive site at http://www.nben.org and...
P2Gems, a web search tool at http://www.uml.edu/turi/