- Economy Weblog - https://economy.blogs.ie.edu -

Sustainability Vs. Competitiveness

Environmental sustainability and its subsequent social benefits have long been regarded by many businesses as necessary evil that translates directly into fewer profits. The conventional approach to protecting natural resources from industrial activity comprises a raft of restrictive regulations, taxes and fines aimed at steering firms in the most “environmentally appropriate” direction. Hence, the environment has often been perceived by the corporate world as a source of costs and risks that need to be minimised, or, in the worst cases, as a reason to cover up certain practices. The resulting showdown between public and private interests is markedly influenced by the way their somewhat static and unidimensional respective visions of the problem have been formed.

Given this scenario the regulator could be forgiven to for being tempted to take the easy option of protecting the environment at source, imposing absolute or relative limits on the exploitation of endangered natural resources, overseen by government bodies that are not always effective. The slightly more complicated alternative is to introduce coercive measures (e.g. fines, taxes, permits) that oblige firms to assume the cost of reparation in order to dissuade environmentally damaging behaviour, or for government agencies to persuade the business community to become more socially responsible by means of subsidies, tax allowances and other incentives.

Most businesspeople tend to respond to these measures reactively, adhering to regulations on a minimal basis in the belief that this is the only way to protect their profit margins. The overall effect is negative. Prohibition of a resource, for example, leaves no incentive for companies to evaluate the (legal) viability of sustainable exploitation, while coercive and persuasive environmental measures are often given no more than a cursory glance in business plans, the only aim being to minimize taxes and fines and maximise subsidies and allowances.

In short, the actions of government agencies and subsequent reactions of business organisations both tend to fuel the conventional idea of two opposing fronts: environmental sustainability versus business competitiveness. This is because both regulators and companies tend to overlook the possibilities and benefits of eco-innovation.