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RE: P2 drivers
Carrying on the stream of thought started by Sue Sommerfelt last Thursday
about the potential for economics to drive P2...
At the very instant Sue was typing her email I was listening to an
interesting presentation by Richard Olson on "Drivers for P2 at Dow
Chemical" at the MidAtlantic P2 Conference. One of the main points made by
Mr. Olson was that in today's global, competitive marketplace not only does
P2 need to pay but in some businesses it needs to pay an ROI of 40% or
better. In other words, a P2 project with a payback of 3 years probably
doesn't get done, especially if the business is already in compliance and
there's risk that the project may not work.
There can be no argument that economic drivers are far more effective than
the soapbox approach, especially when the soapbox preacher works for an
organization with as little engineering credibility as the state.
Environmental economists have been preaching on their own about the power of
tradable permits, as mentioned in Sue's post. Tradable permits seem to be
working pretty well for S02 in the U.S. and for other pollutants on the
local level of several former soviet countries. But it's difficult to
visualize how tradable permits could drive ordinary waste reduction (e.g.
air toxics) where the chemicals to be reduced are not as clearly defined and
where it would be even more difficult to fix a market quantity.
Perhaps a more feasible way to enable the inherent economic advantages of P2
to work would be to focus on reducing the perceived risk of P2 projects.
The hurdle rate for any project is (or should be) based partly on that
project's risk. And perceived risk is not always a rational judgement based
on full information. Manufacturing managers are trained to be wary of
innovation because they don't have time for it and because many organization
are more effective at punishing risk takers than they are at rewarding them.
One way of decreasing perceived risk is to provide fuller information on the
economic benefits of P2. Anything that improves the credibility of the
messenger improves the amount of information received and decreases the
perceived risk. Teaming with trade association, as the PNEAC (printing)
website has done, is just one example of how to increase credibility.
Challenge grants, demonstration sites, case studies, if they're done well,
are all ways to decrease perceived risk ("if it worked for them it could
work for you") and economically drive P2. "Improved information
dissemination to decrease perceived risk" may be just a fancy way of saying
soapbox preaching, but it's a useful concept and gives me hope that TAPs are
not ignoring economic drivers.
North Carolina DPPEA
From: Sue Sommerfelt [mailto:Sue.Sommerfelt@uni.edu]
Sent: Thursday, January 21, 1999 9:54 AM
Subject: Re: Improving site visits - finding "regulatory levers"
Leif asked what do others think about regulatory "levers" for improved
"Levers" are just another command and control mechanism to dictate that
industry should do something about pollution. It is an improvement over
traditional command and control laws which have in the past dictated HOW
to manage pollution, but it is still command and control which is only
one of the regulatory tools that can be used in policy making, the
1) Deposit/Refund systems, which does seem to apply to P2 but to
2) Permitting, which is licensing polluters to pollute but placing a
control mechanism that may later be tightened
3) Tradable "stock" or vouchers that attempt to keep the amount of
pollution static by forcing technological innovation as the price of the
pollution voucher rises making an economic incentive for companies to
sell their stock to other companies by reducing their pollution
therefore being able to give up a share/voucher
The latter has real potential but lacks widespread acceptance. But it
hits on the only true incentive our free trade market system embraces:
Economic incentive is the only sustainable path to P2 implementation and
reduced environmental damage. We, as P2 service providers, must provide
tools to industry that make P2 implementation the best viable ECONOMIC
option. Simply stated, make P2 implementation the cost-affective
solution to reducing waste. That will push business into the use of P2
tools just like the slow but deep penetration of TQM (etc.) process
management tools, eventually businesses recognized that they would fall
behind the competitive market if they did not embrace continuous process
They challenge is of course HOW do we assist in the implementation of a
holistic P2 implementation strategy thereby giving an industry (such as
metal finishing) a profit boost to entice ALL industry to do the same.
Once the paradigm shift occurs the greatest P2 innovations will come out
of the R & D by industry. No offense to us, but just the simple fact
that once industry commits it's resources to competitively advance P2
technology they will outpace grant funded research.
Our work is the basis necessary to make the paradigm shift possible.
The lack of quantifiable results in P2 that is currently driving the
need for standardized measurement, skirts the issue that the
cost/benefits are the ultimate measurement device for P2 technologies.
Levers are based on economic incentive assuming of course they come with
full appropriations for enforcement. But that is another soap box.
I think P2 implementation will rise if we can offer tried-and-true P2
tools that will save the company money over the current waste management
practices AND incorporate environmental audits into the process
improvement flow chart.
Gosh, I haven't even had my coffee yet today,