Profit Versus Prevention

There is another absolutely critical issue raised by this system case study. The examples of profitable pollution prevention cited in the last chapter indicate that under certain circumstances firms can save money and reduce pollution simultaneously. The discussion of this chapter suggests that there are commercial situations in which the aims of corporate profitability and the aims of preventive environmental protection are directly at odds with one another. The reason for this is as follows. Generally speaking, corporate profitability is based on maintaining revenues from the sale of products. But there are a number of important cases in which the product is the pollutant.

This is clearly illustrated by the example which we have been discussing. A preventive solution to mercury contamination involves producing and using less mercury, producing and using less chlorine, producing and using fewer chlorine products, and producing and using fewer of the materials which contaminate our water supplies. But this solution suggests a loss of revenue to mercury producers, chlorine producers and producers of a vast range of chlorine products. The same problem arises whenever the product is the pollutant. And this is the case for all those companies which are suppliers of raw material inputs: for instance, bulk chemical producers, mining companies, primary metal producers, and fuel supply companies.

In each of these cases, the consumers have an economic incentive to reduce their purchases from suppliers. They might do this, for instance, by increasing the efficiency of their processes. Their own corporate environmental performance is improved and costs are reduced. But for the suppliers who provide these raw material inputs, the situation may be very different. To them the reduced material demand represents lost revenue. Sales are reduced and eventually the profitability of the company is threatened. For this reason suppliers have a strong incentive to discourage reductions in material use, and to find new expanding markets for their products. So we can expect raw materials suppliers to represent a vociferous lobby against the reduction of material flows through the economy.

The economic reality of this position is clearly illustrated by the introduction of state-wide legislation in the US designed to reduce the use of toxics. It is no surprise to find that the first states to introduce this kind of legislation are generally chemicals users rather than chemicals producers. States with a predominance of chemicals producers have found the introduction of the legislation considerably more difficult, and there has been fierce industrial opposition to it.9

The same basic problem affects other kinds of producers. In Chapter 4 I raised the subject of extending product lives. The fewer material goods are produced, the fewer environmental impacts arise before, during and after the useful life. Improved maintenance, reconditioning and the remanufacturing of durable goods may deliver economic benefits to product users. But the reduced market for new products which results from this change represents a direct threat to the profitability of the producer.

So the implications of the discussion in this chapter extend beyond the welfare of the primary materials producers. They also include the welfare of producers of consumer durables. The important issue here is this: on one side of the equation, products in general pollute; on the other side of the equation, the sale of material products is the fundamental basis for the profitability of many industrial enterprises.

Now we can see that the preventive strategy is not just tinkering at the edges of the industrial economy. Rather it demands fundamental changes to the way in which the economic system operates. This is why I have argued that we need an understanding of the dynamics of the system in which we are operating. In particular, we have to take account of the importance of the profit motive which operates at the heart of the modern industrial economy. In Chapter 2, I discussed briefly the origins of that particular feature of Western civilisation. In intervening chapters I have used the same feature repeatedly as a focal point for examining various strategies for preventive environmental management. Essentially those strategies aim for a substantial reduction in the material intensity of human activities. In the next chapter, I intend to argue that a major reorientation of that same profit motive is absolutely vital to the success of this task.

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