Seeking Greener Pastures
By Meghan Laska and Steve Guglielmi
Wharton's Eric Orts: On the Cutting Edge of
Environmental Management
Listening to Eric Orts
speak passionately about
ozone depletion, species
extinction and climate
change, it's not surprising
that the Wharton legal
studies professor considers
himself an environmentalist.
But Orts is
quick to banish the suggestion
that he's of the
"us-versus-them, blame-corporate-
America"
school.
"Business corporations are not the
enemy," says Orts, who also heads
Wharton's Environmental Management
Program. "It's too easy to say
that businesses are the bad guys.
They are only responding to market
demands. A key is for environmentalists
and businesses to work with markets,
rather than against them."
Gauging the ever-changing public
mood about environmental issues and
the fast-paced changes in regulation
that often result is perhaps the biggest
challenge businesses face today, Orts
says. And the best way to stay ahead
of the curve of regulation and public
opinion, he believes, is to take seriously
their responsibility to the natural
world.
"This doesn't mean becoming a
charitable organization," he says, "but
it does require making tough and
informed choices about a firm's environmental
impact and policy."
Corporations, environmentalists
and the government working together
is a key theme of Orts' recent work. A
2001 book he co-edited, Environmental
Contracts: Comparative Approaches
to Regulatory Innovation in the United
States and Europe, explores an alternative
type of regulation that brings businesses,
governments and nonprofit
environmental organizations together
to forge cooperative agreements. The
approach is used widely and successfully
in Europe, and Orts believes
environmental contracts would ultimately
be far more productive for U.S.
businesses and the environment than
"the usual lobbying and litigating over
'command and control' regulation."
The "command and control"
environmental regulatory system in
the United States has had some measure
of success, especially in light of
disasters that have taken place in other
parts of the world without more stringent
environmental codes, such as
Russia. The problems with the system
are numerous, however, and loopholes
are common. "The job of businesses
is to maximize profit," Orts says.
"Government is only a constraint. If
you could persuade the government
to let you pollute and even destroy a
river, you could do that under the old
model. After all, you're just doing
your job."
Within the past 20 years or so,
however, the laws themselves have
matured, and public opinion has evolved
in a way that regards polluting
practices as a liability for companies.
Still, the question remains for businesses
how it's possible to remain
innovative under increasingly restrictive
codes.
"It used to be an either-or proposition
for most businesses: either we're
environmentalist, or we're going to
make money," says Orts. "Now, the
objective is changing to 'we're going
to be environmentalist and make
money.' " He points to British Petroleum
and Shell as two blue chip companies
that are "long green" – businesses
that are looking at the benefits of
working with the environment so that
resources will be available to them in
the future.
Looking ahead is key to Orts; he
does it constantly. "The science is clear
that global climate change is happening.
Who will be equipped to deal
with that in 50 years?" he asks. He
points out that along with climate
change will come a new regulatory
regime as well as a new public opinion
consensus, and businesses will need to
be prepared to deal with both. The
point is not to wait for change, but to
be proactive. And that, according to
Orts, is precisely what environmental
contracts encourage companies to be.
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