Sustainable development, environmental regulation and eco-management systems

introductory paper at the Round-Table Conference "Sustainable Use of Natural Resources on Middle Danube" (May 11, 2004)

Although the term 'sustainable development' began to be widely used in the nineteen-eighties, the underlying concept was understood by farmers and foresters in the Middle Ages. Mediaeval peasants realised that agricultural land and forests needed to be managed. They knew that without such management these resources would soon become exhausted.

In 1987 the World Commission on Environment and Development (chaired by Gro Harlem Brundtland) produced a report - Our Common Future - which provided a definition: 'Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs'.[2]  Although widely used, this definition is notoriously vague.

Sustainable development is a normative ideal. As a desirable objective, it is accepted by policy-makers in all developed countries. These people have very different motives and goals, however, so sustainable development is open to different interpretations. A distinction is often drawn, for example, between advocates of weak sustainability and strong sustainability. In essence, proponents of strong sustainability argue that the world's stock of natural capital is irreplaceable and must be maintained. Renewable sources of electricity such as wave and wind power are acceptable; burning fossil fuels is not. Advocates of weak sustainability agree that the capital stock must be maintained but argue that artificial capital can act as a substitute for natural capital. A country which has a single major natural resource such as oil or gas may exploit that resource to promote sustainable development in agriculture and other areas.

Although a great deal has been written about sustainable development, much of this is of limited practical value to the directors and managers of businesses and other organisations. John Elkington is Chairman of Sustainability and one of the world's most eminent authorities on sustainable development. According to Elkington:

'Many business people first experience sustainable development rather as the blind? encounter an elephant for the first time. One approaches the beast from behind, nervously handling the tail. He shouts a warning: the elephant feels like a snake hanging in the air. For the second, encountering a back leg, the experience is very different: she reports that she has her arms around a warm tree. And so it goes? The reports are hugely diverse - and yet all are right, to an extent. All the bits add up to an extraordinary, as yet invisible, whole'.[3]

In much the same way, people within organisations - engineers, accountants, lawyers, public relations specialists and senior managers - may respond very differently to the need for sustainability. Elkington states:

'The sustainability agenda, in short, is bigger and more complex than individual reports of its parts might suggest, increasingly demanding "joined-up thinking" from companies and their boards. The central question: can they learn to manage the new agenda as an integral part of competitive strategy, or will they need? to be shepherded by regulators?'[4] 

In the nineteen-nineties sustainable development was established as a legal principle. In 1992 the United Nations Conference on Environment and Development was held in Rio de Janeiro. Sustainable development is the central theme of the Rio Declaration on Environment and Development. Principle 4, for example, states: 'In order to achieve sustainable development, environmental protection shall constitute an integral part of the development process, and cannot be considered in isolation from it'.

In 1993 the European Community launched its Fifth Environmental Action Programme. The title - Towards Sustainability - is significant. In 1997 the EC Treaty was amended (by the Treaty of Amsterdam) and sustainable development became one of the fundamental objectives of the EC. According to Article 2, it is now obliged 'to promote throughout the Community harmonious, balanced and sustainable development of economic activities'.

Article 6 states: "Environmental protection requirements must be integrated into the definition and implementation of? Community policies and activities? in particular with a view to promoting sustainable development". Article 174 is also important. This asserts that EC law and policy must aim at a 'high level' of environmental protection. In reality, the standard is set by those member states which take environmental protection most seriously, e.g. Germany, Austria and the Scandinavian nations. This has serious implications for new member states like Hungary, Slovakia and the Czech Republic. Countries which aspire to join the Community in the future will have to demonstrate clear commitments to sustainable development.

All modern states are obliged to take appropriate measures to protect the environment, conserve natural resources, and promote sustainable development. There are three main policy instruments available to governments:

1. Command and control regulation
2. Economic instruments (sometimes called 'market mechanisms')
3. Informational devices

Although certain activities may be absolutely prohibited, command and control regulation typically involves the establishment of performance standards for polluters. Water pollution is a good example. EC law seeks to eliminate the discharge of highly toxic 'Black List' substances into the aquatic environment and to regulate discharges of other less dangerous 'Grey List' chemicals.[5]  Black List substances include mercury, cadmium and mineral oils. Lead and zinc are found in the Grey List. Businesses are allowed to cause some pollution but they must first obtain permits from regulatory bodies. These will specify the nature and type of the discharges allowed. Individuals and organisations which make unauthorised discharges may face civil and criminal penalties.

Although command and control regulation is sometimes necessary, it has serious limitations.[6]  The prosecution of businesses for environmental offences is a controversial issue. Criminal courts may be ill-equipped to deal with such issues and their sentencing powers are often inappropriate.[7]  Another problem is the amount of environmental law that businesses have to deal with. In Germany, for example, there are approximately 800 environmental laws, 2,800 environmental ordinances and around 4,700 technical instructions. If the laws of the sixteen states (lander) are taken into account the total rises to about 35,000 environmental regulations..[8]  Administrative costs can be high. There is also the problem of 'regulatory capture'. Environmental agency staff may be reluctant to prosecute the businesses they are supposed to regulate.

Although the deficiencies of command and control strategies have been recognised for many years, these shortcomings were of limited significance when modern environmental regulation began in the nineteen-sixties. The immediate priorities were to address urgent issues like 'acid rain' and hazardous river pollution. In most developed countries polluting activities are now tightly controlled and further regulation is unlikely to lead to major environmental improvements. Command and control regulatory systems can be used to discourage factory owners from discharging toxic chemicals into rivers. It is far less easy for such systems to control the use of fertilisers and pesticides by farmers.[9]  It is even more difficult to regulate the behaviour of consumers.

Market based instruments generally use fiscal incentives and deterrents in order to achieve environmental policy goals. In many countries there are high taxes on petrol and other fuels. Increasing such taxes should (in theory) encourage the use of public transportation systems. The recycling of waste is promoted by taxing businesses that operate landfill sites. These businesses pass on their costs to those who wish to dispose of waste. Some countries have introduced energy taxes. The United Kingdom, for example, imposes a 'climate change levy' on suppliers of coal, natural gas and other fuels. It is based on the energy content of the fuel and effectively raises the price of energy. There are some non-fiscal market based instruments. Emissions trading schemes are currently being developed in various European countries. Carbon trading within the EC is scheduled to begin in January 2005.

Economic instruments have many critics. Taxes are generally unpopular. In theory, duties on petrol and oil could be raised until the use of cars and other private vehicles was seriously reduced. In reality, any such measure would arouse strong public opposition. Such taxes also tend to be regressive, i.e. they hurt the poor more than the rich. Although businesses tend to prefer emissions trading schemes to taxes many environmentalists object in principle to the concept that the right to pollute can be bought and sold. Is the environment just another commodity?

Like economic instruments, informational devices are non-coercive. In essence, they try to encourage organisations to produce information about their activities and products. There are two main forms: eco-labels and environmental management systems. In Germany the Institute for Quality Assurance and Labelling decides which products and services deserve recognition. Those which pass the necessary criteria are awarded the well-known and highly-valued 'Blue Angel' mark. In April 2004 approximately 3,800 products and services were labelled in this way. A similar scheme (the 'Nordic Swan') was established in Scandinavia in 1989. An EC eco-label (the 'European Flower') was introduced in 1992.[10]  Eco-labelling schemes have most influence on businesses in areas where green consumerism is strong, e.g. Germany, Austria and Scandinavia. They are less effective in markets where there is a low degree of environmental awareness.[11] 

A related development is the growing use of environmental management systems. An environmental management system 'is a set of management processes and procedures that allow an organisation to analyse, control and reduce the environmental impact of its operations and services to achieve cost savings, greater efficiency and oversight, and streamlined regulatory compliance? It is closely linked with the notion of eco-efficiency'.[12] 

Environmental management systems began to be developed in North America in the nineteen-seventies following a series of accidents at industrial sites. Various industry codes relating to environmental management were widely adopted. Pollution prevention techniques eventually evolved into management systems. These began to be adopted by European companies in the nineteen-eighties.

Most environmental management systems have five common characteristics:[13] 

• The identification of environmental goals and targets. This generally leads to the development of an environmental policy.
• The identification of the organisation's environmental impacts and relevant environmental legislation.
• The establishment of control, measurement and monitoring procedures.
• The introduction of employee training programmes.
• The introduction of effective documentation systems which can support environmental auditing.

The basic environmental management system outlined above is appropriate for organisations which have the internal capacity to introduce such systems but do not require (or desire) the credibility/legitimacy associated with external validation. The best known forms of external validation are the International Standardisation Organisation's ISO 14001 and the European Community's Environmental Management and Auditing System (EMAS).

Why do organisations adopt environmental management systems? There are three main advantages:

1. Increasing efficiency and reducing waste.
2. Compliance with environmental regulations.
3. Improving public relations and achieving a 'green' reputation.

Little need be said about the desirability of increasing efficiency and reducing waste. The other reasons deserve more attention.

Environmental law evolved very rapidly in the last third of the twentieth century. The European Community introduced its first environmental directive in 1967. It has now enacted over three hundred environmental measures. Each of these is binding on all member states. A great deal of environmental legislation is also produced by member states and regional authorities. Germany's 35,000 environmental regulations have already been mentioned. Environmental management systems facilitate compliance with these regulations. They can also lead to improved relations with regulatory bodies. Although environmental management systems cannot eliminate all risks they can reduce the likelihood of prosecutions and civil actions.

An environmental management system can also improve an organisation's relations with its various stakeholders. An eco-label such as the German 'Blue Angel' or the 'Nordic Swan' can give a product manufacturer a significant marketing advantage. In much the same way, ISO 14001 certification or EMAS registration can legitimise a company's management, production and marketing systems. Companies with externally validated environmental management systems may expect their suppliers to be similarly validated. Banks may be reluctant to lend money to organisations that are not validated.

Employees and their trade unions are likely to favour such systems. Organisations will only establish environmental management systems if the benefits are likely to exceed the costs. All will try to increase efficiency and reduce waste. As the need to comply with environmental regulations increases, the need for systems which facilitate compliance also increases. As stakeholders become more familiar with environmental management systems, the economic case for the adoption of such systems becomes stronger.

Table 1 (below) provides a summary of ISO 14001 certifications in the Danube region. It shows that certifications are highest (in relation to population size) in countries which have highly developed regulatory systems (Switzerland, Austria and Germany) and in their neighbours (and trading partners) which joined the European Community in May 2004 (Slovenia, Hungary, Slovakia and the Czech Republic).

A comparable picture emerges if the distribution of EMAS registrations within the EC is examined (Table 2). The requirements are similar to ISO 14001 certification but corporate environmental reports must be made public. Although all member states are legally required to facilitate and encourage EMAS registrations, most registrations are concentrated in Germany and Austria. It should also be noted that EMAS registrations are not evenly distributed within these countries. In October 1997 over 70 per cent of Germany's EMAS registered sites were located in four states (lander): Hessen, Bavaria, Baden-Wurttemburg and North Rhine-Westphalia.[16] 

Economists sometimes categorise environmental management systems as 'club goods'.[19]  From this perspective, establishing such a system (or obtaining an eco-label) is like joining an exclusive sport or social club. There are costs. Membership may be quite expensive. But there are also benefits. And these benefits depend very largely on stakeholder recognition. The case for adopting an environmental management system may depend on the existence of a 'critical mass' of EMAS registrations or ISO 14001 certifications in a market or geographical area.[20] 

Although environmental management systems are a recent development, the evidence suggests that a 'critical mass' of this kind may be emerging on the Upper Danube. These systems do much to protect the environment. They can also facilitate trade between environmentally aware businesses. Advocates refer to the 'greening' of international trade. But club membership is also exclusive. There is evidence that eco-labels sometimes operate as non-tariff barriers. Externally validated management and auditing systems may also one day function as barriers to trade.[21]  Non-members may be excluded from the club.

Notes

[1] Senior Lecturer in Law, School of Social Sciences, Bath Spa University College, Bath, United Kingdom
e-mail: m.watson@bathspa.ac.uk

[2] (1987), Oxford University Press, Oxford, United Kingdom, 43.

[3] 'Sustainable Development - What is it?'; http://www.sustainability.com/philosophy/what-is-sustainable- development.asp

[4] Ibid.

[5] Directive 76/464/EEC (Dangerous Substances in Water).

[6] Ackerman, B.A. and Stewart, R.B., 'Reforming Environmental Law' (1985), 37, Stanford Law Review, 1333-1365; Orts, E.W. 'Reflexive Environmental Law' (1995), 89(4), Northwestern Law Review, 1227-1340; Emery, A.R.T. and Watson, M., 'Organisations and Environmental Crime: Legal and Economic Perspectives' (2004), 19(6), Managerial Auditing Journal, forthcoming.

[7] Lazarus, R.J. 'Assimilating Environmental Protection into Legal Rules and the Problem of Environmental Crime' (2002), 27, Loyola of Los Angeles Law Review, 851-878; De Prez, P. 'Beyond Judicial Sanctions: the Negative Impact of Convictions for Environmental Offences' (2000), 2(1), Environmental Law Review, 11-22; Watson, M. 'Sentencing the Environmental Offender' (2002), 166, Justice of the Peace, 924-926.

[8] Wurzel, R.K.W., .Jordan, A, Zito, A.R. and Bruckner, L., 'From High Regulatory State to Social and Ecological Market Economy? New Environmental Policy Instruments in Germany' (2003), 12(1), Environmental Politics, 115-136, at 132.

[9] Stewart, R.B., 'A New Generation of Environmental Regulation?' (2001), 29, Capital University Law Review, 21-182, at 28-29.

[10] See generally: http://www.blauer-engel.de; http://www.svsnen.nu; http://www.eco-label.com

[11] Jordan, A., Rudiger, Wurzel, R.K.W. and Zito, A.R. 'New Instruments of Environmental Governance: Patterns and Pathways of Change' (2003), 12(1), Environmental Politics, 3-24, at 11.

[12] Schalttegger, S., Burritt, R. and Petersen, H., An Introduction to Corporate Environmental Management: Striving for Sustainability (2003), Greenleaf, Sheffield, United Kingdom, 296.

[13] Jiang, R.J. and Bansal, P., 'Seeing the Need for ISO 14001' (2003), 40(4), Journal of Management Studies, 1047-1067, at 1048.

[14] World Bank (2003), Data and Statistics. Available online: http://www.worldbank.org/data/countrydata/countrydata.html

[15] International Standardisation Organisation (2003), Survey of ISO 9000 and 14001 Certificates. Available online: http://www.iso.ch/iso/en/iso9000-14000/pdf/survey12thcycle.pdf

[16] Malek, T., Heinhelt, H.,Taeger, J. and Toller, A.E., 'The Implementation of EMAS in Germany', in Heinelt, H., Malek, T., Smith, R. and Toller, A.E. (editors), 2001 European Union Environmental Policy and New Forms of Governance, Ashgate, Aldershot, 107-118 at 112-113.

[17] Note 14 above

[18] ENDS, 'Regulators Place EMS Auditors under the Magnifying Glass (2003), Report 342, Environmental Data Services, London, 20-23.

[19] Kollman, K. and Prakash, A., 'EMS-Based Environmental Regimes as Club Goods: Examining Variations in Firm-Level Adoption of ISO 14001and EMAS in U.K., U.S. and Germany' (2002), 35, Policy Sciences, 43-67.

[20] Hillary, R., 'Pan-European Assessment of EMAS Implementation (1998), 8, European Environment, 184-192, at 187-188.

[21] See generally Krut, R. and Gleckman, H., ISO 14001: A Missed Opportunity for Global Sustainable Development, (1998), Earthscan, London; Roht-Arriaza, N. 'The International Organisation for Standardisation: Drafting of the ISO 14000 Series' in Steinberg, R.H.(2002), The Greening of Trade Law: International Trade Organisations and Environmental Issues, Rowman and Littlefield, New York. For eco-labels see Subedi, S.P. ?Balancing International Trade with Environmental Protection: International Legal Aspects of Eco-Labels? (1999), 2, Brooklyn Journal of International Law, 373-405.

This article was downloaded / printed from www.danube-cooperation.com