Voluntary Initiatives: The New Politics of Corporate Greening 9781442603066

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voluntary initiatives

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voluntary initiatives and the new politics of corporate greening

Robert B. Gibson, Editor

b broadview press

©1999 Robert B. Gibson All rights reserved. The use of any part of this publication reproduced, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, or stored in a retrieval system, without prior written consent of the publisher—or in the case of photocopying, a licence from CANCOPY (Canadian Copyright Licensing Agency) 6 Adelaide Street East, Suite 900, Toronto, Ontario, M5C 1H6—is an infringement of the copyright law. Canadian Cataloguing in Publication Data Gibson, Robert B., 1950-

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Voluntary initiatives : the new politics of corporate greening ISBN 1-55111-218-3 1. Industrial management - Environmental aspects. 2. Business enterprises - Environmental aspects. 3. Social responsibility of business. I. Title. HD30.255G52 1999 658.4'o8

C98-932754-X

Broadview Press Ltd., is an independent, international publishing house, incorporated in 1985. North America: P.O. Box 1243, Peterborough, Ontario, Canada K9J 7H5 3576 California Road, Orchard Park, NY 14127 TEL: (705) 743-8990; FAX: (705) 743-8353; E-MAIL: [email protected] United Kingdom: Turpin Distribution Services Ltd., Blackhorse Rd., Letchworth, Hertfordshire sG6 IHN TEL: (1462) 672555; FAX (1462) 480947; E-MAIL: [email protected] Australia: St. Clair Press, P.O. Box 287, Rozelle, NSW 2039 TEL: (02) 818-1942; FAX: (02) 418-1923 www.broadviewpress.com Broadview Press gratefully acknowledges the financial support of the Book Publishing Industry Development Program, Ministry of Canadian Heritage, Government of Canada. Composition by George Kirkpatrick.

PRINTED IN CANADA

contents Preface vii

vii

Part I Introduction

I

1. Questions about a Gift Horse

1. Questions about a Gift Horse

3

Part II Options and Issues 13 2. Non-Regulatory Environmental Measures John Moffet and Francois Bregha 15 3. Voluntary Initiatives and the Law 4. A Sober Second Look

Kernaghan Web

32

Paul Muldoon and Ramani Nadarajah 51

67

Part III Experience with Voluntary Initiatives in Canada 5. Responsible Care

John Moffet and Francois Bregha

6. The ARET Challenge

Debora L.VanNijnatten

7. The Day the NGOs Walked Out 8. A Claim to Sustainability 9. Who Killed CIPSI? Wolfson 125

69

93

Debora L.VanNijnatten

Mary Louise McAllister

101

111

Elfreda Chang, Doug Macdonald, and Joanne

10. The VCR Doesn't Work Robert Hornung 134 11. The Dofasco Deal 12. Reluctant Followers

Lynda Lukasik ErinWindatt

141 149

Part IV International Voluntary Initiatives 159 13. Beyond Command and Control Bradley D.Wylynko

161

14. Environment and Value at Nortel Networks Margaret G. Kerr 176

15. Aiming Low

Saeed Parto

16. Standard Inequities

182

Jennifer Clapp

199

17. Demanding Good Wood Martin von Mirbach Part V Conclusions

211

227

18. The New Directions Group Position The New Directions Group, with an introduction by Paul Griss 229 19. Voluntary Initiatives, Regulations, and Beyond Robert B. Gibson

239 Appendix: The Alternatives Pocket Guide to Voluntary Corporate Initiatives for Environmental Improvement Jennifer Lynes and Robert B.Gibson 258 Index 265 Sidebars Key Elements of the Responsible Care Codes of Practice CCPA, summarized by John Moffet and Francois Bregha 71 The WMI Vision Statement Whitehorse Mining Initiative

112

Practising Prevention: British Columbia's Pollution Prevention Demonstration Project Bradley D. Wylynko 168 Six answers for six questions about the global implications of ISO 14001 Riva Krut and Harris Gleckman 192 Principles of Forest Management

Forest Stewardship Council 213

Criteria and Critical Elements Canadian Council of Forest Ministers

215

Elements of Ecologically Responsible Forest Use Silva Forest Foundation

219

Environmentalists in the Certified Wood Marketplace

James Sullivan

222

A Five-Tier Approach to Effective Environmental Initiatives Gary Gallon 250

preface If something sounds too good to be true, it probably is. That pretty much sums up environmentalist reaction to voluntary corporate initiatives for environmental improvement. Whether this is an appropriate reaction is the subject of this book. The concept of voluntary initiatives does sound good. Almost anything voluntary seems admirable.Volunteerism suggests an altruistic commitment to the needs of others, and this is certainly something to be celebrated, especially in a culture that has such a fixation with individual achievement, competitiveness, and gain. But corporate altruism is an excellent candidate for the "too good to be true" category. Corporations are the last entities from which altruistic behaviour is anticipated. They are the embodiment of an economic theory of aggressive self-interest. In this theory, the pursuit of self-interest in a competitive market drives innovation and efficiency, and society as a whole benefits. Unfortunately, this happy result is an accidental consequence; it is not the intent of the players. Corporate individuals seeking growth and gain are expected to exploit all exploitable resources and avoid all avoidable costs. Beyond what is immediately profitable or strategically advantageous, they are expected to do nothing voluntarily. Altruism is not in the picture. If further corporate actions to protect or serve the public interest are required, they must be compelled by public authority. Corporate practice does not always fit the theory. Companies often overlook opportunities for profit. Many also engage in acts of goodness that cannot easily be explained as seeking strategic advantage. But until recently it has been rare, even eccentric, to suggest that we might rely significantly upon corporate volunteerism to protect the public interest in areas, such as environmental protection, that are traditionally regarded as costly and antithetical to corporate self-interest. And yet, so-called voluntary initiatives are spreading all over. They are now a major topic of discussion among public authorities and other parties interested in the environmental behaviour of the private sector. They are the main focus of innovation. Ten years ago the idea was scarcely mentioned. In Canada today a sizable portion of new initiatives in environmental governance are centred on experiments with non-regulatory measures that involve the more or less voluntary co-operation of industry. Other countries too are following this path, as are a variety of international bodies. What are we to make of this? First, we can recognize that something significant is happening here. Certainly, the concept and its application are controversial. Every one of the Canadian and international initiatives discussed in the following pages has stirred criticism and concern as well as enthusiastic advocacy. As we shall see, the results so far are also mixed. However, there have certainly been successes as well as disappointments, and even those who are most doubtful about the Robert B.Gibson

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immediate effectiveness and longer-term implications of current experiments with voluntary initiatives have good reason to take them seriously. Second, we can safely presume that voluntary initiatives for corporate greening are not an isolated phenomenon. They are products of a long history, responses to widely held hopes and dissatisfactions, indicators of emerging opportunities and perils. The debates about voluntary initiatives are part of a much larger and long-standing struggle about how to manage the unruly forces of commerce, how to enhance the flow and distribution of material gains while maintaining civility and ecology. We should look for the immediate merits and limitations of particular initiatives. We should try to find out where they work and how to use them more beneficially. But we should also keep one eye on the larger theatre and consider the part voluntary initiatives might play in pushing progress toward sustainability. The essays, reports, and arguments in the following pages cover a range of perspectives on and experiences with voluntary initiatives. Most of the authors and most of the stories are Canadian and inevitably unique in important ways. But the central issues and the lessons to be learned are widely applicable. In this book, the operative idea has been to combine specific practical understanding with consideration of broad implications. Accordingly, the authors — who work in government, industry, consulting companies, non-government organizations, and academia — are chiefly practitioners of one kind or another who have a close familiarity with case experience. But all of them are also interested in the larger questions. Their perspectives and positions differ. In the end, however, I think it is possible to achieve a synthesis of sorts that recognizes both the perils and the potentials of voluntary initiatives, and that suggests a path for the next generation of such initiatives. One characteristic of this path is that it relies very little on the allegedly "voluntary" aspect of voluntary initiatives. As the reader will see, altruistic commitment has not been a big factor in the corporate record of environmental voluntarism so far, and is not expected to be a significant force in the future. It is, therefore, all the more significant that the contributors to this book are, without exception, exceptionally busy and able individuals who have essentially donated their work to this project. Behind the scenes, there have been substantial additional contributions from a host of anonymous paper reviewers, advisors, and assistants. Commitment and mutual aid are, despite all outward signs in this world, still the basis for much of what is accomplished as well as much of what is admirable in our lives. This book is the evolutionary product of a decision by the editors and staff of Alternatives Journal to assemble a special issue on voluntary initiatives. The exceptionally large number of strong submissions and evidently rising interest in the topic led us to prepare a book as well. The book accordingly owes a great deal to my colleagues at Alternatives, especially managing editor Suzanne Galloway, who provided most of the necessary organizational competence for the project. I would like also to thank especially Ray Tomalty, Stephen Bocking, Marcia Ruby, and Janice Dickie of Alternatives', Jennifer Lynes and [viii]

Preface

Saeed Parto of the graduate program in Environment and Resource Studies at the University of Waterloo; Michael Harrison of Broadview Press; and the authors, many of whose contributions went well beyond the papers offered in the following pages. They are all exceptions to the rule that begins this preface. Robert B. Gibson Waterloo, Ontario

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one Questions about a Gift Horse • Voluntary corporate initiatives for environmental improvement are attractive, worrisome, and significant • Robert B. Gibson Ever since the fall of Troy, gift horses have been treated with some suspicion. Etiquette may rule against looking them in the mouth, but other parts are worth checking. In the world of business activity and environmental protection, voluntary initiatives are gift horses of considerable significance. All manner of corporations and industrial organizations are now promoting, even undertaking, socalled voluntary initiatives. They are minimizing resource use, reducing waste, cutting pollution, enhancing environmental aspects of product quality, preventing accidents, repairing ecological damage, and strengthening the environmental sensitivity of corporate decision making, all without being compelled to do so by government authorities, at least not directly. Perhaps few of these initiatives are truly voluntary. Several evident motivations are involved and the main ones seem to be in keeping with corporate self-interest. By definition, voluntary initiatives are not driven by regulatory requirements. They are voluntary in the sense that governments do not have to order them to be undertaken. And they are attractive — to governments as well as to corporations — for precisely that reason. They seem to offer an alternative to regulation as a means of gaining corporate environmental improvements. Governments may play important roles as initiators, signatories or behindthe-scenes promoters. Formal and to some extent binding agreements — among companies, or between companies and governments, or even with nongovernment third parties such as communities or environmental groups — are often involved. But new regulations are avoided and in some cases, existing regulations are sidestepped. Not all voluntary initiatives are explicitly intended to replace existing regulations or pre-empt additional ones. Some have no clear link to regulatory concerns at all. Nevertheless the distinction from regulatory measures defines voluntary initiatives and is at the centre of the controversies surrounding them. Over the past three decades, regulatory requirements of various kinds have become the main political means of getting industry to improve its environmental performance. They have been remarkably successful in important ways. The standard of corporate environmental behaviour, especially concerning air and water discharges and waste management, is unquestionably better than it was 30 years ago, and although some of the gains may be attributed to technological advances and better information, regulatory requirements have certainly played the crucial role. Still, perhaps no one is entirely satisfied with the tool or Chapter one: Questions about a Gift Horse

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its results. Subject industries have predictably resisted strengthened regulations, arguing variously that the requirements are unnecessary or excessive, unduly rigid, unfairly burdensome, and impossibly costly. Environmental advocates, also predictably, have often complained that existing requirements are too weak, too narrow in application, and too rarely enforced. The situation is not entirely adversarial; industry and environmentalist representatives have often found points of mutual agreement. But, generally, regulatory agencies have been caught between corporate resistance to regulation, often supported by industry-promoting ministries, and environmentalist demands for more effective action, often supported by broad public expectations. In the last few years, environmental agencies in most jurisdictions have also been victims of energetic cost-cutting, driven by concerns about deficits and, in some cases, ideological devotion to a minimal public sector. Voluntary initiatives have been proposed and are being implemented in this context. Not all are directly intended to pre-empt, replace, or even supplement regulatory controls. But voluntary initiatives, individually and collectively, are a response to the established regulatory approach. Both proponents and opponents see a larger agenda in which voluntarism is increasingly a substitute for regulation. Whether this is good or bad is a matter of lively debate. As we shall see, the debate about voluntary initiatives as a substitute for regulation is just the beginning of a bigger story. We will eventually want to consider the prospects for a new politics of corporate greening that goes well beyond the immediate tensions between voluntary initiatives and regulations. The starting point, however, is the present conflict between those who advocate voluntarism as the way of the future, and those who find this idea questionable, if not pernicious. Grounds for Advocacy Many corporate and government authorities have been persuaded that voluntary initiatives should now be the focus of effort and innovation in environmental governance. Enthusiasm for new regulatory action is now rare. Voluntary initiatives, promising environmental gains with greater corporate willingness and less government effort, are in ascendance. "More improvement for less cost" is the mantra for both corporate and government advocates of voluntary initiatives. Corporate advocates argue that voluntary initiatives are preferable to regulatory obligations because they are more flexible and can be adopted and implemented more efficiently. Firms allowed to pick their own ways of achieving environmental objectives can often find ways of doing so that fit well with their particular processes and priorities, that contribute to other corporate goals, and that involve less expense and fewer delays. Governments too expect savings, at least insofar as voluntary corporate action reduces the need for developing and enforcing regulations, and minimizes conflicts with regulated industries. Despite the cost-cutting focus, both also say that voluntary initiatives will bring significant environmental improvements. [4]

Robert B.Gibson

This welcome prospect has led to a rapid proliferation of experiments with a wide range of mechanisms, applications, partnerships, and participants.1 Governments have "challenged" companies to cut emissions instead of requiring them to do so through regulations.2 Industry organizations have issued codes of practices for their members.3 Environmentally aware firms have established new internal management systems and have also pushed improvements on their suppliers.4 Environmental authorities have negotiated special deals with individual companies willing to go beyond established regulatory standards.5 International organizations are setting stewardship quality standards for wood products6 and encouraging corporations to adopt management systems better able to respond to environmental problems and opportunities.7 And so on. The list of initiatives is already lengthy and there are no signs that the enthusiasm is waning. In the process, many companies have found that environmental improvements can be profitable. A simple re-routing of a methanol transfer pipe at FMC Inc.'s hydrogen peroxide plant in Prince George, British Columbia, enabled the company to recycle the methanol rather than burn it, eliminating a hazardous source of pollution and realizing $200,000 in annual savings.8 Northern Telecom vice-president Margaret Kerr reports in chapter 15 that her team made a $i million investment in process research and development that saved $4 million in the first three years of a CFC elimination project. As she understates it, "we managed to realize an attractive return on investment that considerably heightened senior management's interest in pursuing environmental initiatives."9 Similar, though often less dramatic stories are now common. This is partly because government and industry advocates of voluntary initiatives are actively collecting and publicizing such stories.10 But there are evidently also more and more successful tales to tell. We might quibble that not all of the praised activities have been purely voluntary. Many "pollution prevention is profitable" discoveries have been pushed by regulatory action, especially performance-based regulations.11 Companies anticipating increasingly demanding regulatory requirements have been moved to look for overall process change efficiencies and, to their surprise, have often been successful.12 And these successes have led other companies to begin looking for profitable efficiencies in areas they had traditionally neglected because they assumed that environmental improvements would inevitably entail more costs. But even if many of the happy stories derive from regulatory pressures, they suggest that there is a logical basis for being positive about the potential for voluntary, or at least self-initiated, corporate action. Voluntary initiatives are an apparently valid option where firms can be persuaded that environmental improvements can serve their economic selfinterest. A second factor that affects the plausibility of voluntary initiatives is the increasingly wide-spread institutionalization of environmental obligations. After decades of slowly advancing environmental awareness and accompanying environmental law, the world of corporate management has changed. Chapter one: Questions about a Gift Horse

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Consideration of environmental risks and liabilities is a requirement imposed not merely, perhaps not even chiefly, by regulators, but also by bankers, insurers, and investors. More broadly, responsible environmental performance is now expected not just by employees, customers and neighbours, but also by fellow corporations worried about their own reputations being tarnished by association13 or determined to maintain their competitive advantage as an environmentally reputable firm by imposing requirements on their contractors and suppliers.14 In this way, direct regulatory pressures for environmental improvements have been joined by a host of additional inducements. Together, these are the main grounds for advocacy of voluntary initiatives: they offer flexibility, the promise of greater efficiency and the potential for financially as well as environmentally profitable solutions, and they are supported by a broad range of pressures not directly dependent on regulatory demands. Reasons for Doubt The main reservations about voluntary initiatives parallel the main grounds for advocacy. While the proliferation of success stories certainly shows that environmental improvements can be profitable, it does not establish that they are typically profitable, or that the profitable ones will provide sufficient environmental gains. The success stories do not even provide a basis for confidence that, with education and encouragement, most companies will begin to look carefully for economically beneficial environmental improvements. Similarly, while environmental expectations have become more broadly incorporated in public and institutional demands, this does not establish that these pressures will be sufficient to drive corporate environmental improvement. The doubters suspect that even where public and institutional demands are strong, they need to be underpinned by a powerful regulatory presence. Expectations for voluntary initiative success are not yet firmly supported by the record of experience. The Canadian Chemical Producers Association's Responsible Care programme can perhaps claim the most notable achievements. It evolved from steps taken in the mid-19808 to become a leading voluntary initiative in Canada and a model for others around the world. Responsible Care is widely recognized as an important factor in the substantial pollution reductions achieved by the chemical sector in recent years.15 But although Responsible Care is a pioneering effort with a longer record than that of most other initiatives, questions remain about how much of the evident success is properly attributable to genuine environmental enlightenment, and how much to other, outside forces including regulatory pressures and the desire to pre-empt further regulatory action. Critics of the current enthusiasm for voluntary initiatives, including many veteran environmental advocates, accept that voluntary initiatives can be successful, that in certain circumstances these initiatives can bring environmental benefits without compromising other, longer-term objectives. But they are in[6]

Robert B. Gibson

clined to condemn uncritical and general reliance on voluntarism as a substitute for enforceable regulations and as an excuse for cutbacks in governments' regulatory capacity. The critics offer two main reasons for doubt. The first is that the association of cost-cutting and environmental improvement seems a little too convenient, especially at a time when cost-cutting appears to be the ruling objective for governments as well as corporate interests. Corporations are, by charter as well as by culture, driven to focus on profitability. If they favour voluntary initiatives over regulations, it is reasonable to assume that this is mainly because they expect the voluntary approach to be less costly, not because it may bring greater environmental benefits. Innovative corporations have been pushing voluntary initiatives for a decade or more, but their interest in the concept arose at a time when governments saw regulations as their main tools and were apparently ready to continue to expand and tighten regulatory requirements. This provided an understandable motivation for the private sector to demonstrate better, voluntary solutions. But if the regulatory threat weakens, corporate volunteerism will fade as well. In contrast, government enthusiasm for the concept has come recently and has coincided suspiciously with the rise of political devotion to deficit reduction. The governments most willing to embrace corporate volunteerism in place of regulation have also been those most energetic in gutting environmental and other social programmes in the name of fiscal responsibility.16 Such governments inspire little confidence as leaders of initiatives for environmental improvement. Moreover, their evident disinclination to introduce new regulatory requirements eliminates the threat of regulation as a motivation for voluntary corporate action. In these circumstances, the shift to voluntary initiatives seems part of a general government retreat from efforts to ensure environmental protection and improvement. Such a retreat places greater reliance on corporations to act in the public interest while reducing their motivations to do so. A second ground for scepticism about voluntary initiatives is the memory of pre-regulatory times. Modern environmental law is the product of a long and difficult struggle, first to get legislation passed and then to win a public role in its development and application. Before this was achieved, corporations were free to work under the discipline of the market without serious constraint or guidance from environmental regulation. The unfortunate legacy of those years is still being cleaned up, at great and often public expense. Some past abuses were due to ignorance rather than unrestrained corporate self-interest and we may now be a little wiser. Nevertheless, the record of past experience in the less regulated marketplace provides ample reason not to trust in it as a reliable means of ensuring corporate environmental responsibility. The sceptics' main concern, then, is not that voluntary initiatives are undesirable, but that they are being proposed and adopted as substitutes for regulation and justifications for dismantling regulatory capacity.

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Immediate Questions and Underlying Issues All this is just a beginning, however. The positions outlined above are oversimplifications. Clearly the relationship between voluntary initiatives and regulatory requirements is central. But it is reasonable to suspect that on closer examination the relationship will emerge as something much more complex than it appears in this initial sketch of the contending positions. Much the same can be said for the relationship between environmental improvements and corporate advantage. Indeed, one possibility worth considering is that everyone is at least partly right. Voluntary corporate initiatives can be more efficient than prescriptive regulations. They can cut costs for governments as well as corporations and they can achieve faster and greater environmental improvements. They can be valuable supplements to regulations. They can even be acceptable replacements for them in some circumstances. At the same time, they can be a corporate means of avoiding environmental obligations and a cover for government dereliction of duty. The challenge is to determine how the positive potential can be attained and the pitfalls avoided. There are two immediate sets of questions to ask about the gift horse of voluntary corporate initiatives. The first set concerns how and when are individual initiatives likely to be beneficial. In what circumstances, using what mechanisms, involving what participants, supported by what other pressures, and in what combinations with other tools, can an individual voluntary initiative be an effective, efficient, and fair means of improving corporate environmental performance? The second set of questions concerns voluntary initiatives generally as a strategy for corporate environmental improvement. Should voluntary initiatives be widely adopted? To what extent and under what conditions can they provide a useful substitute for or supplement to environmental regulations and other conventional means of ensuring environmental protection and rehabilitation? It is unreasonable to expect easy answers to these questions. But the first questions - the ones that seek criteria for individual voluntary initiatives - are relatively manageable. Indeed, there have already been creditable attempts to provide a satisfactory answer. One of the best is the New Directions Group's "Criteria and principles for the use of voluntary or non-regulatory initiatives to achieve environmental policy objectives," reproduced in chapter 18, below. This document, prepared largely by industry and environmental group representatives, represents an emerging consensus on the rules for individual voluntary initiative success. While most existing initiatives fall well short of the standard set by the New Directions Group, the agreement on principles is a significant step. The questions in the second set are more difficult. Assessing the general desirability of voluntary initiatives, and defining the necessary overall framework for their use, along with regulations and other instruments, involves big under-

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lying issues about how we might successfully govern ourselves and our economy on a planet that we will need to sustain us for much longer than seems likely given our present behaviour. Voluntary Initiatives and the Big Problem The big problem, simply stated, is that business as usual is not sustainable. Perhaps there are still some who would deny this. Certainly there are plenty of publications - including reputable products of the business press - that rarely consider the longer term and even more rarely allow the implications of longer-term thinking to affect day-to-day reporting. But where even a little thought is given to the matter, there is not much debate on the central point: we have only one planet and it cannot sustain infinite expansion of demands on its resources, assimilative capacity, and ecological integrity. Arguably the stresses of current human activities are now well beyond what can be sustained on a planetary level. If the brink has not yet been reached everywhere, this is no reason to suppose that there is no brink at all. We must everywhere learn to live within our means. It does not follow that further economic growth is to be avoided. On the contrary, greater material well-being is desperately needed for the millions who now live in deprivation and insecurity. Helping them to obtain it is a practical as well as moral imperative. As the Brundtland Commission observed, any hope of stabilizing human populations rests on ensuring material security (and empowering women) especially among those who are now destitute and whose future subsistence depends on having at least some children survive into supportive adulthood. Further economic growth is also ecologically desirable insofar as it develops and implements ways of reducing environmental demands. Growth that replaces wasteful processes and practices with more efficient ones, that favours reused or renewed resources, and that rehabilitates degraded areas, is more than desirable. It is obligatory. Economic advance is needed where it reduces deprivation and increases equity, where it does more with less, and where it helps recover what has been damaged. Activities that respect this principle provide net gains for communities and ecosystems.They also extend the planet's carrying capacity for humans. Activities that do not do so inevitably push us closer to the abyss. Business as usual is not sustainable in much of the world today essentially because its driving imperatives do not seek equity or net gains for communities and ecosystems. Conventional practices that serve the basic principles of sustainability tend to be serendipitous or marginal. The prevailing economic focus is narrow and short term. Moreover, there is no obviously adequate mechanism by which a favouring of equity and net gains can be incorporated effectively into overall economic practice. Since market-based industrial expansion is not much more than two hundred years old, perhaps it is not surprising that we are still wrestling with how

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to manage it. The usual approach has been to respect the market mechanism as a wildly successful promoter of technological innovation and economic growth, and assign governments the tasks of ensuring reasonably equitable distribution of benefits, protecting vulnerable individuals and communities, and maintaining the environment upon which everything depends. While some governments have done better than others, none has found a reliable way to deliver prosperity with equity, security, and sustainability. And as our economies and environmental problems expand from the local and regional to the continental and global, things appear to be slipping further and further away from the scale at which our present institutions of governance might hope to operate with competence and credibility. The debate about voluntary initiatives comes at a time of rising doubts about the capacity even of national governments to regulate corporate behaviour and deliver public goods. We had once assumed that as economic activities expanded, governments could expand accordingly to address the inevitable problems. But expectations of a tidy linear relationship have proven to be unrealistic. In environmental governance, for example, our new problems are much more complex and difficult than the ones initially faced. Many of the most troubling current threats — those due to alteration of atmospheric chemistry, for example, or the broad human and ecological health effects of persistent toxics and other synthetic chemicals — involve the ill-defined but potentially disastrous cumulative global effects of many activities. It is now neither easy nor often adequate to set and enforce firm, unilateral standards. And this is not just because of ecological complexities or scientific uncertainties. Environmental protection authorities also face the political and economic realities of global competition, powerful corporate bodies, and persistent interjurisdictional tensions. Meanwhile, the pace of technological innovations, including new solutions as well as new worries, is such that a reactive approach to environmental problems is unlikely to be sufficient or efficient. Governments are probably much less impotent than they often seem these days.17 It is entirely possible that they could do more, and be more effective, without any huge increase in their resources. But, in environmental protection at least, there is good reason to doubt that more of the conventional regulatory response to identified problems could be enough. Perhaps the most serious inadequacy of the established government approach to environmental protection through regulation and associated tools is the underlying assumption that mitigation is the proper objective. Governments both promote and police economic activity and most of the controls aim only to prevent serious damage. When excessively negative effects occur or are anticipated, corrective action may be required, though seldom in a way or to a degree that threatens economic priorities. Even preventive requirements, such as those in environmental assessment legislation, typically attend only to serious adverse effects.18 This approach inevitably means accepting more environmental decline as the price to pay for economic and other benefits. The best environmental result is going down more slowly than we fiol

Robert B.Gibson

would in the absence of controls. It might be reasonable in a clearly sustainable but materially poor society living well within the carrying capacity of its environment. But it is suicidal in a clearly unsustainable rich society already contributing unconscionably to global ecological decline. For voluntary initiatives, the big issue is not whether they can win some environmental improvements. It is what part they can play in establishing a more powerful and reliable means of ensuring that equity and net gains are incorporated effectively into overall economic practice. This, then, is the context in which voluntary initiatives must be judged. We can see them as a gift and a threat - a new and potentially powerful additional tool for improving corporate environmental behaviour, but also a possible Trojan horse, providing a deceptively attractive cover for elimination of regulatory capacity. Accordingly we can try to define when voluntary initiatives should be avoided, when they are appropriate, and how they should be designed and applied for maximum benefit. But beyond this we should consider the potential role of voluntary initiatives in addressing the big problem of managing economic practice for equity and net gains as well as material advance. The most interesting question for voluntary initiatives is not whether they can win environmental improvements, but whether they can be part of new approach to the integration of economy and environment, and the pursuit of a just and prosperous sustainability. Robert B.Gibson is an associate professor in the Department of Environment and Resource Studies at the University of Waterloo and editor of Alternatives Journal: Environmental thought, policy and action.

Notes 1

2 3 4 5 6 7 8 9 10

See John Moffet and Francois Bregha, "Non-Regulatory Environmental Measures," chapter 2, below, and Jennifer Lynes and Robert B. Gibson, "The Alternatives pocket guide to voluntary corporate initiatives for environmental improvement," Appendix, below. See Debora L. VanNijnatten, "The ARET Challenge," chapter 6; and Robert Hornung, "The VCR Doesn't Work," chapter 10, below. See John MofTet and Francois Bregha, "Responsible Care," chapter 5, below. See Margaret G. Kerr, "Environment and Value at Nortel," chapter 14, below. See Lynda Lukasik, "The Dofasco Deal," chapter n, below. See Martin von Mirbach, "Demanding Good Wood," chapter 17, below. See Saeed Parto, "Aiming Low," chapter 15, below. See Bradley D. Wylynko, "Beyond Command and Control," chapter 13, below. See Margaret Kerr, "Environment and Value at Nortel," chapter 14, below. One example is Industry Canada's recent unveiling of a virtual Canadian Business Environmental Performance Office (BEPO), http:/ /VirtualOffice.ic.gc.ca/BEPO, a site "developed jointly by Industry Canada and

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11

12

13 14 15 16 17 18

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Environment Canada, with the partnership of several industry associations and other federal and provincial government departments." It is meant to provide "easy one-stop access for business across all industry sectors, particularly small business, to environmental performance information and experts via the Internet." The promotional invitation says, "Stop by and wander our virtual halls and get hooked on some of the featured on-line discussions, cutting-edge tools and success stories from around the world." Performance-based regulations set a target and let the regulated firm decide how to meet it. In contrast, prescriptive requirements typically define the technology, or at least the technological options, that must be installed to achieve compliance. Prescriptive requirements have usually focused on "end of the pipe" pollution abatement technologies that are costly and seldom provide opportunities for savings. Performance-based regulations are more open to solutions centred on process changes that may also improve products, reduce resource needs, and cut wastes and waste disposal costs. Michael Porter and Claas van der Linde, "Green and Competitive: Ending the Stalemate," in Richard Welford and Richard Starkey, eds., Business and the Environment (London: Earthscan, 1996). See especially John Moffet and Francois Bregha, "Responsible Care," chapter 5, below. Again see Margaret Kerr, "Environment and Value at Nortel," chapter 14, below. See John Moffet and Francois Bregha, "Responsible Care," chapter 5, below. See Paul Muldoon and Ramani Nadarajah, "A Sober Second Look," chapter 4, below. See, for example, Linda McQuaig, The Cult of Impotence: Selling the Myth of Powerlessness in the Global Economy (Toronto:Viking, 1998). Under the Canadian Environmental Assessment Act, projects expected to cause serious adverse effects may nevertheless be approved if the responsible authorities judge these effects to be "justifiable in the circumstances."

Robert B. Gibson

two Non-Regulatory Environmental Measures • What are they and what makes them work? • John Moffet and Francois Bregha In recent years, so-called "voluntary approaches" have taken on greater prominence as complements or substitutes for traditional regulatory approaches. Increasingly, they have also been adopted as good business practices. While, as we shall see below, many of these approaches are not truly voluntary, they are being used to address subjects as diverse as public participation, toxic chemicals reduction and phase-out, pollution prevention strategies, product stewardship, life-cycle programmes, environmental labelling, environmental management systems, procurement policies, and international standards. These approaches range widely from individual company initiatives to collective actions by several industry sectors, from specific pollution control responses to broad pollution prevention strategies. Importantly, they also range from measures entirely initiated and developed in the private sector to programmes negotiated with government. This paper reviews recent trends, summarizes some of the key issues with respect to ensuring effective and credible voluntary initiatives, and discusses the implications of their continued use for industry, government, and non-government organizations.1 We emphasize that voluntary measures represent one possible approach among many, and are appropriate only in certain circumstances. To be acceptable, they must both ensure effective results and engender public trust. This requires careful attention to design, particularly where government is involved, either by sanctioning the initiative or by actually delegating responsibility for environmental management to industry. In particular, as nonregulatory - or, more accurately, extra-regulatory - mechanisms, these initiatives require effective accountability mechanisms, including clear, verifiable objectives and public reporting of results. Finally, we observe that the design and implementation of these approaches may require new sets of skills and institutional arrangements on the part of both government and industry. Categories and trends It is possible to categorize non-regulatory initiatives in many ways. The list below illustrates the diverse range of current and emerging initiatives according to broad, shared characteristics. Authorized flexibility in attaining regulatory obligations Legislated compliance plans Section 10 of the Ontario Environmental Protection Act typifies a number of Canadian environmental statutes which authorize nonChapter two: Non-Regulatory Environmental Measures

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compliant regulatees to negotiate a plan for coming into compliance in return for a government commitment not to enforce the law so long as the plan schedule is met. Government recognition of industry initiative Regulatory exemption programmes A number of jurisdictions have introduced measures offering regulatory exemptions to induce regulatees to undertake voluntary environmental initiatives that exceed the spirit of existing legal requirements (for example, the US Project XL). Government-industry negotiated agreements Many Canadian jurisdictions are seeking ways to address environmental issues through negotiated agreements. This interest stems in part from the emphasis on agreements - or "covenants" — in countries such as Denmark and the Netherlands, and in part from the experience in Canada with the less formal memoranda of understanding (MOus) between various sectors and the provincial and federal governments. Eco-labelling Many countries now have programmes allowing manufacturers to mark their products with a label certifying certain environmental attributes. Some are government-run (for example, Germany), some are privatized (for example, Canada's Eco-Logo programme), while others involve collaborative action (for example, the Forestry Stewardship Council's eco-labelling programme).2 Government challenge measures Challenge programmes Various government initiatives have challenged polluters to improve their performance beyond regulatory requirements and to report their efforts publicly.These programmes have had mixed results. Some, like the Voluntary Challenge programme (VCR) designed to reduce greenhouse gas emissions, have had only limited effect.3 By contrast, programmes such as 33/50 in the US and the federal Accelerated Reduction and Elimination of Toxics Programme (ARET) have been quite effective.

Government-industry partnerships Green design partnerships Governments have often entered in partnerships with industry to develop new technologies, pilot the implementation of new techniques, sponsor training, and raise awareness. This type of venture is becoming increasingly important for the promotion of "green design" strategies. Industrial ecoparks The goal of industrial ecology is to link the inputs and outputs within and across industries, forming closed-loop flows of material and [ 16]

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energy, thus extracting and wasting less. As such, this concept represents an overall objective for government and business policy as well as a descriptor of discrete initiatives such as the various industrial eco-parks currently under development in North America and Europe. Methodological norms Environmental accounting Environmental accounting is an emerging method to incorporate environmental costs into managerial accounting and capital budgeting practices, making these costs more visible to managers, and therefore more likely to be managed. This development is being pushed by governments (for example, the US EPA s Environmental Accounting Project), accounting associations (for example, the Canadian Institute of Chartered Accountants and the Society of Management Accountants of Canada), and individual companies (for example, Ontario Hydro). Environmental auditing Regular audits for potential legal liabilities and for potential environmental risks have emerged as good business practice over the past decade. Increasingly, Canadian courts are indicating that regular audits which are communicated to all relevant decision makers are a key component of "due diligence" - the management practices required as protection from liability for an accidental or unforeseen contravention of an environmental law. A number of jurisdictions have recently implemented policies designed to encourage auditing by restricting the use of audits by enforcement officials (for example, Ontario, Nova Scotia, Environment Canada, the US Department of Justice, and about half of the American states). Industry-initiated industrial activity Industry-community or industry-environmental organization agreements In Europe some important environmental issues have been addressed on the basis of contracts between a community and an industry, with no government participation (for example, the series of contracts between the Port of Rotterdam and the major industrial polluters along the Rhine).4 Private agreements have also been negotiated between advocacy organizations and industry (for example, between McDonalds and the US Environmental Defense Fund on the design of new packaging). Environmental management systems The term "environmental management system" describes the management system organizations put in place to address environmental issues.These can range considerably in scope and sophistication. While some environmental management systems are developed in-house, increasingly they are based on norms established by third party standards associations (for example, the iso 14000 series). Both the courts and legislators are starting to reference these as standards of behaviour.5 Increasingly, certified Chapter two: Non-Regulatory Environmental Measures

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compliance with an environmental management system standard is also being required in order to sell to governments or to conduct business with companies with strict environmental stewardship codes. Sectoral initiatives Although the chemical industry's Responsible Care programme is the leading example of a voluntary sectoral code of practice, many other sectors have recently developed or are in the process of developing similar schemes (for example, the Canadian Pulp and Paper Association and the Canadian Electrical Association). Supplier challenges "Extended producer responsibility" laws (for example, in Germany and Japan) make designated manufacturers (and some distributors) responsible for the ultimate disposal of their products. Such laws are forcing companies to minimize the environmental impacts of their products throughout their lifecycles. Increasingly, product lifecycle considerations are also being driven by environmental management systems.6 These developments are inducing companies to address the environmental behaviour of both their suppliers and customers. Some companies, for example, have developed formal programmes to challenge their suppliers to reduce the environmental impact of their products. Company specific pollution prevention, or energy reduction plans Growing numbers of companies are implementing internal measures to reduce the use of energy and resources and to minimize the generation of wastes. These measures range from substituting inputs to redesigning products and processes. Contributing Factors Non-regulatory or voluntary environmental initiatives are relatively recent arrivals on the public policy scene. Until a few years ago, environmental policy in most industrial countries represented a mix of regulatory measures, public exhortation and, less commonly, economic instruments. Since the beginning of the 19908, both government and industry have expressed increasing interest in the non-regulatory measures described above. In addition to an increased sensitivity to environmental issues, industry's interest stems from four main considerations: Desire to influence the public policy process Industry is learning that pro-active voluntary initiatives can lead to a less confrontational relationship with government, help shape future policy and regulatory initiatives, and even pre-empt regulatory development. Some corporate participants are drawn to voluntarism by hopes of keeping the environmental objectives lower than they would be if imposed by regulations.7

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Flexibility By offering participants flexibility in terms of how to achieve a given environmental objective, voluntary measures can be as cost-effective as a performance-based regulation. Desire to minimize financial and legal liability related to environmental performance Management initiatives to anticipate and prevent or minimize potential risks systematically can help reduce concerns about legal liability as well as help obtain more favourable financing or insurance. Trade and competitiveness concerns Voluntary standards such as iso 14000 are becoming increasingly important determinants of the ability of a company to sell to or buy from certain markets. The prospect of enhancing eco-efficiency ("pollution prevention pays") is also leading companies to redesign products and production processes in anticipation of reducing their resource and energy use and waste production costs. Governments share many of these grounds for interest in voluntary initiatives. In addition, government interest may be driven by: an ideological interest in reducing government intervention in the market place; expectations that the promotion of voluntary approaches will place fewer demands on government's reduced resources; and a belief that the promotion of voluntary approaches will be more effective in some cases than regulatory intervention. Industry and government enthusiasm for voluntary approaches is not universally shared. Environmental groups, in particular, have been critical of these approaches, fearing that they are used to mask both growing government indifference to environmental issues and declining government capacity to enforce its own regulations.They are concerned that giving industry the lead implies that the pace of environmental progress will be dictated by what industry thinks it can afford. The critics are also concerned that voluntary approaches may pre-empt future government intervention should it become necessary (which, of course, is one of the reasons why industry favours them). While empirical evidence about the effectiveness of voluntary environmental initiatives is still limited (there is a much longer history in the consumer area8), it is clear that they do not always work. In some cases, they do not result in measurable environmental improvement. In other cases, they are deemed unacceptable by the market, the public or the government. Conversely, examples of successful initiatives that effectively protect the environment also exist. The circumstances in which these initiatives are applied and their design characteristics therefore matter. We turn to a brief examination of these factors below.

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Critical Success Factors

Despite the growing incentives for voluntary action and the increasing variety of approaches, a number of important factors continue to impede participation in, or undermine the effectiveness of, non-regulatory measures. In some cases, these relate to industry concerns about short-term economic implications. In other cases, the market or regulatory/policy context may not create adequate supportive incentives. Still other initiatives may fail due to design flaws or the absence of more fundamental structural change. Finally, in some cases, lack of public trust can lead to pressure for government intervention. In order to overcome these problems, non-regulatory initiatives of all kinds must produce results that are efficient and effective, and that engender public trust. Effectiveness and trust, of course, are often linked: third parties will only trust an initiative that actually produces results, while one of the most powerful means to ensure ongoing effectiveness is to invite external accountability by publishing results regularly. The considerations described below should therefore not be considered in isolation. Ensuring efficient and effective results Some voluntary environmental initiatives can entail simple technical "fixes" and can be implemented without much effort. Most, however, require businesses to challenge the way they have traditionally operated. As such, they will have to overcome a variety of potential barriers, including an unwillingness to act voluntarily in the absence of certainty about future regulatory requirements; concerns about potential adverse effects of disclosing environmental shortcomings, including exposure to legal liability or new regulations, impact on reputation, and confidentiality of information; concerns about free riders; cost issues such as limited capital due to pre-existing investment plans and concerns about short-term cost versus long-term payback; and uncertainties about consumer response because consumers' stated preferences often differ from actual purchasing behaviour. In overcoming these barriers, voluntary initiatives will benefit from seven features applicable to any sort of organizational change:9 Clear, measurable objectives inform ongoing decision-making and provide a basis for monitoring, evaluation, and internal and external reporting. Relating the initiative to the organization's core values makes it easier for managers and employees to sustain interest and support for an initiative.

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Ongoing, explicit commitment of senior managers helps to reinforce awareness of the change, and can be particularly important when introducing an initiative that cuts across traditional management boundaries. Ongoing commitment of resources is necessary to ensure the translation of an idea into operational reality. Willingness and capacity to communicate across traditional organizational boundaries through integrating mechanisms such as cross-functional teams typify successful corporate pollution prevention strategies. The inception, development, and implementation of such strategies usually require attention to a diverse array of questions covering regulatory, engineering, financial, and marketing issues. Consistent signals are needed to encourage innovations and support for longterm improvements. With the exception of changes to products and processes that reduce costs, many environmental initiatives will have a relatively longterm return. Existing decision-making procedures, reward systems, and personnel evaluation criteria often focus on short-term payback considerations. Institutional capacity, including the appropriate skills and methods for tracking the relevant information, is required if organizations are to recognize and act on opportunities for environmental and financial gains, especially in traditionally low-priority areas (as energy efficiency has typically been for many businesses). Conventional approaches often miss such opportunities even where well documented potential benefits exist. Ultimately, in order to ensure ongoing effectiveness, voluntary approaches must foster a change in the organization's culture. While there are many design- and process-related lessons that can help support such change, time and sustained commitment are inevitably required. Experience with voluntary initiatives involving more than one company suggests that implementation may be more effective if it is gradual.10 The potential for free riders (companies that reap the benefit of a voluntary initiative without participating in it) can also undermine effectiveness and discourage participation. Indeed the free rider problem represents a major challenge to the design of voluntary approaches and often dictates when these cannot be used." The issue arises in different forms. Firms undertaking an initiative on their own may want to appeal to a market demand and will be concerned about ensuring that competitors do not gain a "free" advantage by associating themselves with the initiative without undertaking the reforms. In such cases, effective communications and marketing will be critically important in differentiating the proponent from its competitors. Similarly, participants will want to ensure that certification processes are well recognized and distinctive. In the case of sector-wide initiatives, the main consideration will be to ensure participation by all those who will benefit from the initiative. Successful Chapter two: Non-Regulatory Environmental Measures

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sectoral and multi-industry initiatives have revealed that effective solutions tend to involve creating a combination of positive incentives to participate and effective mechanisms to monitor and punish those who do not.12 Peer pressure and mutual support can also be very helpful in minimizing free ridership, in sustaining momentum for continued improvements, and in redressing capacity differences among small and large participants.13 Generating public trust Earning and retaining public trust are essential to realizing the full benefits of any voluntary approach other than those initiated solely for internal cost-savings. The relevant goals here include greater sales, more satisfied staff and customers, and the creation of an effective supplement or alternative to regulation. Regulatory regimes have built-in accountability mechanisms. Voluntary measures, in contrast, may have to provide their own.Trust will arise only when observers are satisfied that an initiative is both "doing the right thing" (that is, aiming at an appropriate target) and "doing it right" (that is, actually achieving its goals). At a minimum, creating and maintaining public trust thus requires two things. First, the objectives of the initiative must be clear and measurable. Second, the measure must provide for regular public reporting of results in an easily accessible and understandable manner. One of the principal ways by which companies can foster trust is by communicating objectives and achievements with stakeholders. The tool most widely used is some form of public reporting. Voluntary approaches vary widely, however, on what, when, and how they report. The credibility of reported results is likely to be enhanced where these have been subjected to some external verification. Companies or industries can develop their own verification process, as the chemical sector has done with its Responsible Care initiative. This model, however, is subject to criticism. A more credible, and therefore more effective, form of accountability involves third parties (for example, the environmental audit processes stipulated by many of the Dutch covenants). Third-party certification of environmental management practices (CSA; iso) or product performance (eco-labelling) can also enhance the credibility of a voluntary initiative. Although there is wide consensus that various "public" stakeholders should be involved in establishing and administering self-management regimes,14 difficult issues are raised in debates about the desirable extent of public involvement, especially in designing voluntary initiatives. Public participation may be crucial for credibility where the initiative is perceived as an attempt to influence the regulatory process — in particular the setting of objectives. But the presence of potential critics at the table may increase the difficulties of winning voluntary co-operation from hostile or indifferent corporate cultures. Finally, in some cases, it may be useful to try to establish an ongoing dialogue with the affected community. This too can be difficult. Such a dialogue

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can take many forms, from open houses to newsletters, advertisements in the local media, advisory committees, etc.15 Supporting through law and policy A coherent legislative and policy context is required both to promote voluntary initiatives and to ensure their effectiveness. A recent review of federal programmes to convince American businesses to reduce pollution voluntarily concluded that most existing initiatives have had minimal benefits either for environmental protection or for industry participants. The main lesson from the study is the difficulty of creating strong incentives for industry action without a supportive legislative and policy context.16 Similarly, recent OECD-sponsored reviews of "extended producer responsibility" (EPR) programmes17 conclude that industry-led EPR programmes have only been effective when supported by regulation.18 Clear rules are required to create appropriate incentives. Similarly, a coherent policy context is required to reinforce these incentives. Where government delegates certain functions to industry (often referred to as self-management), the policy context must do more than simply provide a supportive framework. It should be clear, for example, that the government has adequate power to oversee self-management initiatives, and to step in and assume more direct responsibility and control, if required. Moreover, while selfmanagement can be authorized through non-statutory means (such as agreements), ideally, it should be authorized by legislation. This does not necessarily require detailed legislative provisions. As Davies and Mazurek conclude in their review of US initiatives: The lack of a statutory basis for environmental initiatives or programmes always foreshadows difficulty. ... civil servants tend to spend their time rightly - on programmes grounded in law.... Also, without a legal mandate, decisions must be made by some sort of consensus, which is rarely efficient or effective in an atmosphere as contentious as environmental management.19 Implications Implications for government The trends described in this paper raise difficult issues for government related to the circumstances in which it should formally endorse voluntary initiatives as complements or alternatives to regulation. While government can support voluntary action in general, the difficult questions it must confront are: i) in what circumstances and using what means can it encourage greater voluntary performance? ii) in what circumstances and under what terms should it officially sanction environmental management responsibilities to industry (for Chapter two: Non-Regulatory Environmental Measures

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example, by means of an MOu)? and iii) in what circumstances and under what terms should it explicitly delegate environmental management responsibilities to industry? Although governments in many countries are addressing these issues, only a few have articulated formal policies concerning the circumstances in which they will formally endorse self-management. In general, however, an emerging perspective suggests that policy-makers should consider these instruments as part of the overall suite of environmental policy instruments, to be utilized only when, either alone or in combination with others, they are the best option. This evaluation must be made on a case-by-case basis using the same sort of criteria that are appropriate for selecting any other type of environmental policy instrument. In addition to the considerations related to public trust discussed above, the following considerations appear to be useful in helping evaluate the potential effectiveness of voluntary measures:20 environmental effectiveness, which will depend on the height of the targets and the adequacy of the incentives for participation and accountability; administrative and compliance costs, which will not necessarily be any less than for an equivalent regulation (see below); industry cost-effectiveness (see "implications for business," below); contribution to innovation (proponents argue that voluntary initiatives ensure greater innovation than regulations by allowing industry more flexibility and by encouraging business to take greater ownership of environmental problems; but critics say innovations resulting from commitments to which industry voluntarily agrees will often be limited to inexpensive and easily achievable improvements); promotion of cultural change (in comparison to regulations, voluntary and negotiated approaches are expected to be more effective in instilling the kinds of cultural changes that can support continuous improvements in performance because they shift the initiative to design a response to environmental issues from government to the companies concerned);21 and avoidance of adverse competition and trade law effects (government must ensure that companies do not rely on a self-management regime to fix prices or reduce competition, and that any voluntary regime they endorse or support complies with relevant trade laws).22 Experience also suggests that, where governments sanction self-management measures, they should require certain core design features, including: clearly defined, measurable objectives and targets;23 incentives for participation and compliance; mechanisms for monitoring and measuring effectiveness; an accountability and public involvement framework.

and

Incentives are particularly important. Both positive incentives24 (for exam[24]

John Moffet and Francois Bregha

pie, greater flexibility in achieving an environmental objective) and negative incentives25 (for example, the threat of prescriptive government intervention) motivate performance by integrating environmental concerns more closely with business goals and operations. Some incentives - primarily those related to flexibility and reduced costs - may be inherent to a voluntary approach and may be sufficient to drive progress. In other circumstances (for example, where most of the benefits accrue to society rather than the firm), more powerful incentives may be needed to alter industry behaviour in a way that would achieve public policy goals fully and minimize the chances of free riders undermining the initiative. In these circumstances, the government (or the industry proponents themselves) may have to consider introducing additional incentives to motivate increased participation and performance. These incentives will be warranted where their cost remains lower than the social benefits that obtain as a result of higher environmental performance. In some cases, businesses clearly undertake voluntary initiatives in order to pre-empt regulatory development or to improve their relationship with government. An important question stemming from this dynamic is how important is the threat of government intervention in stimulating such voluntary actions and in ensuring their continued effectiveness? In other cases, government presumably has a much less direct role to play. At a minimum, as some European and Asian countries have demonstrated, government policy can directly support the development of green technologies and products as well as help stimulate the green market demand to which growing numbers of companies are responding. Finally, governments involved in these new activities will face various internal issues.26 For example, support for voluntary measures may require governments to develop new institutional arrangements and acquire new skills beyond those associated with its traditional roles of policy development and regulatory implementation and enforcement. Governments will also have to confront difficult questions about the appropriate relationship between new activities to promote voluntary initiatives and support self-management regimes, and ongoing activities such as the enforcement of regulations and the design of future policies. Implications for business The measures described in this paper create important opportunities for Canadian companies in securing new markets and influencing the future form of the regulatory regime. Analyses of voluntary approaches suggest that the following benefits may be available to participating companies: greater operational flexibility leading to lower production costs, lower transaction costs, faster product time to market, and faster diffusion of new technologies and best management practices; improved employee morale; Chapter two: Non-Regulatory Environmental Measures

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better internal communications; preferential interest or insurance rates; improved health and safety of employees; improved public image; and improved government relations. Capitalizing on these opportunities will not be easy, however. Companies may have to make significant changes in their corporate culture. Support for non-regulatory measures may require considerable investments of time and resources. As we have argued above, businesses may also have to commit to measurable, verifiable results and regular public reporting. Finally, experience suggests that both the effectiveness of participation and the level of public trust may turn on the degree to which prospective participants have already demonstrably committed themselves to addressing environmental issues, for example by establishing credible environmental management systems. Implications for the public Public commentators should distinguish between true voluntary initiatives and government-endorsed self-management. While the public should support voluntary activity, it should remain wary of its potential impact on future policy decisions. It should also ensure that governments carefully consider and justify decisions to endorse self-management activities with the same degree of rigour they apply to regulation making. While acknowledging that flexibility of implementation is one of the main features of voluntary activities, the public should insist on continued access to any joint government-industry objective setting decisions, as well as ongoing access to monitoring results. Conclusion Canadian businesses can be expected to continue to develop an increasingly diverse array of voluntary initiatives to improve their environmental performance. While many of these initiatives to date have succeeded in enhancing environmental protection, some have not. Any voluntary approach to the environment must confront issues related to how to mobilize and maintain support within the company or industry sector, how to encourage continuous improvement in performance, when and how to involve the public, how to track and measure results, and how to report results. In addition, there are difficult questions about the circumstances in which government should become involved in voluntary measures, whether by sanctioning the activity, by participating in it, or by delegating environmental management responsibility to industry through the measure. Although Canadians are at the forefront of some of the initiatives described in this paper, other jurisdictions have valuable experience in areas where we have little (for example, negotiated agreements). We need to learn from activi[26]

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ties elsewhere. Because we must ultimately translate these lessons into the Canadian context, however, we also must continue to experiment with new initiatives and support research on effective design and implementation. John Moffet and Francois Bregha are partners in Resource Futures International, an Ottawa-based environmental law and policy consulting firm.

Notes 1

2

3 4

5 6

7

The observations and opinions in this paper are based on a series of research projects we have conducted in the past few years into various aspects and types of voluntary and self-management initiatives. In addition and without specific government recognition, some companies have devised their own eco-labelling approaches to differentiate themselves from their competitors (e.g., Loblaws "green" products). See Robert Hornung, "The VCR Doesn't Work," chapter 10, below. For a discussion of a Canadian example, see M. Doelle, "Regulating the Environment by Mediation and Contract Negotiation: A Case Study of the Dona Lake Agreement," Journal of Environmental Law and Practice 2 (1992), p. 189. See Kernaghan Webb, "Voluntary Initiatives and the Law," chapter 3, below. ISO 14001, for example, encourages each participating company to "establish and maintain a procedure to identify the environmental aspects of its activities, products, and services that it can control and over which it can be expected to have an influenced The unfortunate fact that some companies like voluntarism because it might reduce environmental objectives underlies much of the debate about the appropriate role of government with respect to voluntary approaches, especially whether and when government should consider accepting a voluntary approach as an alternative to regulation. Some critics argue that governments should never formally be involved in voluntary approaches. The concern is that government sanction of a voluntary measure may implicitly restrict government s ability to act in the future. In response to these concerns, one school of thought is that governments should only embrace voluntarism where companies agree to exceed established regulatory standards ("go beyond compliance"). This is in effect the focus of many of the recent US programmes. There is also a view that governments should only entertain proposals for voluntary approaches from companies that have good compliance records. In such cases, voluntarism is accepted only where there is little or no risk that environmental objectives might be compromised. Regardless of their position on these issues, most environmental advocates are much less comfortable with the use of voluntary approaches as alternatives to tighter regulatory controls. In Canada's Accelerated Reduction/ Elimination of Toxics (ARET) programme, for example, it is likely that some participating corn-

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panics hope that if their conduct is of a high enough calibre, it will discourage the government from imposing even higher restrictions. See, for example, three papers presented to the Industry Canada Symposium on Voluntary Codes, November 1996: Gregory Rhone, "The Canadian Care Labelling Programme"; Chris Ferguson, "Industry Self-management in Ontario"; and Allan McChesney, "Voluntary Standards and Dispute Resolution in Cable Television." In addition to the existing literature on organizational change, there is a rapidly growing literature addressing the organizational implications of voluntary pollution prevention and other forms of environmental self management. See, for example, K. Strasser, "Preventing Pollution," Fordham Environmental Law Journal 1:8 (1996); D.P. Beardsley, Incentives for Environmental Improvement: An Assessment of Selected Innovative Programmes in the US and Europe (Washington: Global Environmental Management Initiative, 1996); F. Bregha et al., The Integration of Environmental Considerations into Government Policy, report prepared for the Canadian Environmental Assessment Research Council (Ottawa: CEARC, 1990); N. Ashford, "Understanding Technological Responses of Industrial Firms to Environmental Problems: Implications for Government Policy," in K. Fischer and J. Schot, eds., Environmental Strategies for Industry: International Perspectives on Research Needs and Policy Implications (Washington: Island Press, 1993). F. Bregha and J. Moffet, "The CCPA'S Responsible Care Programme," presented at the Industry Canada/Treasury Board conference, Exploring Voluntary Codes and Their Role in the Marketplace, Ottawa, September, 1996. While it is impossible to predict with certainty when the free rider problem will arise, both theory and experience suggest that free riders will be more of a problem in highly dispersed sectors, sectors involving highly priced sensitive products or commodities; and sectors dominated by imports. For a good overview of free riders and voluntary action, see Strick, J.C., "Economic Conditions Conducive to The Development of Successful Voluntary Initiatives," presented at the International Workshop on The Economics and Law of Voluntary Approaches in Environmental Policy, Nov. 18-19, i996,Venizia. The Canadian Chemical Producers'Association (CCPA), for example, has made implementation of Responsible Care a condition of membership. Membership in the CCPA provides considerable benefits. By contrast, the failure of a chemical producer to implement Responsible Care could be costly in terms of concerns from: i) customers, investors and insurers worried about why the company is not part of the programme (is it due to an inability to implement the management systems involved?); ii) enforcement officials establishing priorities for inspections (is the company's environmental performance not adequate to meet the requirements for joining the programme?); and iii) the courts, which increasingly are referring to industry "norms" to define the standard of care required of a company to raise a defence of due diligence in a strict liability prosecution. Participants in the Motor Vehicle Manufacturers Association memorandum of understanding exchange "pre-competitive" information to ensure that all members are aware of techniques for meeting the relevant environmental objectives. John Moffet and Francois Bregha

14

15

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18 19 20

21

22

A similar sense of mutual buy-in is further enhanced in the Responsible Care programme by means of regular fora in which CEOS report on progress, and hold each other accountable for any perceived failures to perform up to the collectively defined standard for the initiative. In its guide to self-management models, the Ontario Ministry of Consumer and Commercial Relations observes that "in most cases, self management needs to include consumer and public safety advocates, independent professionals, or other 'third parties' to work effectively" MCCR, Approaches to Industry SelfManagement (Toronto, 1996), p. 8. As one of their obligations under the Responsible Care programme, members of the CCPA are required to engage in consultations with the local community. Where these have taken place, they have proved effective in earning a level of community trust much higher for individual companies than national polling results suggest for the industry as a whole. T. Davies and J. Mazurek, Industry Incentives for Environmental Improvement: Evaluation of US Federal Initiatives (Washington: Global Environmental Management Initiative, 1996). These extend the responsibility of producers to cover the management of their products once those products have reached the post-consumer phase (i.e., once they have become waste). Many EPR regimes, including the Canadian National Packaging Protocol, rely on some form of self-management. OECD, Extended Producer Responsibility Programmes, International Workshop on Waste Minimisation, March 1995. Davies and Mazurek, Industry Incentives (n. 16), p. 3. See, for example, Dutch Ministry of Housing, Spatial Planning and the Environment, Provisional code of conduct for concluding environmental covenants (The Hague: HSPE, 1996); Commission of the European Communities, Communication from the Commission to the Council and the European Parliament on Environmental Agreements (Brussels: CEC, November 27, 1996), COM (96) S6i Final. See also the criteria in World Business Council on Sustainable Development, "Sustainable Production and Consumption: A Business Perspective" (Geneva: WBCSD, February 1996); and OECD, "Applying Economic Instruments to Packaging Waste" (Paris: OECD, 1993). Because they can ensure greater "buy in," voluntary initiatives can, in theory, also more easily stimulate up- and down-stream stewardship activities. Although difficult to measure, these "soft effects" can be very significant in many cases, particularly in increasing compliance and the effectiveness of environmental protection measures over the long term. The precise design or contextual factors that stimulate these types of benefits are ill-understood, however, making estimation of the potential for a given initiative to generate these benefits difficult. The Technical Barriers to Trade (TBT) Agreement of the World Trade Organization (WTO) establishes rules for how mandatory "technical" regulations and voluntary "standards," including those in the environmental field, should be developed, designed, and implemented. A Code of Good Practice for the Preparation, Adoption and Application of Standards is included in Annex 3 of the TBT Agreement. Voluntary

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standards supported by national governments are required to comply with the code, and national governments must take reasonable steps to ensure compliance by sub-central governments and non-governmental standardizing bodies within their territories. The North American Agreement on Environmental Cooperation (NAAEC), signed as an environmental side agreement to NAFTA, also potentially raises issues. Article 14 authorizes submissions from any person that a Party is failing to enforce its environmental law effectively. The application of this process to cases where industry self-management initiatives are used to achieve government-sanctioned environmental objectives is as yet unclear. Critically important for motivating and measuring performance and for ensuring public trust, statements of objectives should include an implementation timetable and intermediate targets. Positive incentives can include a legislative exemption from regulatory requirements for parties to designated agreements (e.g., the compliance plan model provided for in the Ontario Environmental Protection Act); recognition (e.g., through awards, publicity, sanctioned use of a logo); technical assistance, especially in pollution abatement and product stewardship applications (e.g., some US Project XL initiatives and US programmes to encourage voluntary industry greenhouse gas emission reductions); links to other government programmes (privileged access to government programmes involving research support, export promotion, regional and infrastructure development can be offered as a carrot to motivate performance); financial incentives (grants, allowances for more rapid depreciation of equipment, tax credits, reduced fees) are less available in the current climate of government deficit reduction but could be used in the future; reduced transaction costs as a result of less duplicative reporting requirements, and quicker or combined permitting (e.g., Canada's Recognising and Encouraging Voluntary Action (REVA) initiative, which gives companies greater operational flexibility by combining air, water, and land permitting systems into one approvals process). In every case, the purpose of these incentives is to create benefits that would accrue exclusively to the companies participating in the agreement. Negative incentives can include threat of government intervention through regulation or an economic instrument (e.g., many of the Dutch covenants, which are explicitly linked to the permits process, with the threat of more intrusive permit requirements for non-compliers; and New Zealand's voluntary climate change programme, which was introduced with an explicit government threat that it would introduce a carbon tax if the voluntary measures did not reach desired emission reduction targets by 1997); economic instruments (e.g., the taxes, fees, and user charges used in several European countries to encourage participation in negotiated agreements; John Moffet and Francois Bregha

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adverse publicity, fear of which can be a powerful driver of corporate attitudes, management, and performance, except where a company does not value its reputation (e.g., a small seller of an undifferentiated product); consumer pressure, the effectiveness of which will vary depending on the type of product, the type of market, the extent of public concern, and degree of affinity between consumer and industry interest; legal liability, which may be an increasing problem for non-participants where a voluntary initiative effectively creates a new norm of behaviour that ultimately defines the legal standard of care; and exit difficulties, especially the risk that a firm leaving an agreement would raise questions about its environmental commitment and invite government and public scrutiny. Many of these issues are reviewed in J. Moffet and D. Saxe, Voluntary Compliance Measures in Canada (Montreal: North American Commission for Environmental Cooperation, forthcoming).

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three Voluntary Initiatives and the Law • The practice and promise of voluntary environmental initiatives depend heavily on a productive partnership with legal instruments • Kernaghan Webb In spite of their seemingly innocuous name, voluntary environmental initiatives1 can have significant links to the legal system, and important legal implications for individuals, environmental groups, the private sector, and governments. Indeed, the connections between voluntary measures and the law are critical to understanding why such arrangements do or do not work.2 Such connections are numerous and varied. An important impetus for industry developing voluntary initiatives is often the perception that the initiatives will decrease the likelihood of new regulations being imposed. Adherence to the terms of voluntary programmes may diminish the likelihood of enforcement actions being initiated or successful, while non-compliance with provisions of a voluntary programme can assist courts in finding firms penally liable. Through regulatory prosecutions and private legal suits for breach of care (known in the law as the tort of negligence), the terms of voluntary programmes can in effect be judicially imposed on firms who are "free riding" on the positive image created by those who voluntarily comply with the programme. Failure to adhere to the terms of voluntary programmes can lead to legal actions in contract by participating parties (e.g., firms, industry associations, environmental groups, consumers). Members of a community may be able to draw on the existence of voluntary initiatives in tort actions to assist in establishing liability against individual firms. Participation by government in the development of voluntary programmes can further or impede regulatory objectives, but may also leave government open to legal actions.Voluntary initiatives may be pursued to overcome limitations of legal instruments such as jurisdictional constraints, may have trade law implications, and may run afoul of competition law requirements. As even this brief listing suggests, those who choose to ignore or downplay the linkages between voluntary measures and laws may be underestimating the power of such non-regulatory instruments, perhaps to their own detriment. Clearly, the legal system can and does play a key role in reinforcing the effectiveness of voluntary initiatives. Indeed, voluntary programmes operate within a framework of law. At the same time, these programmes can help to address some of the weaknesses of the legal system, by refining and clarifying ambiguous legal concepts such as reasonable care, by inducing firms to monitor their own behaviour and exceed baseline regulatory standards, and by avoiding some of the jurisdictional constraints which are associated with legislative initiatives. The result is that legal and voluntary approaches represent a potentially [32]

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fruitful partnership, when the two are used in the right set of circumstances and in the right way. The Regulatory System and Voluntary Initiatives Voluntary environmental initiatives are frequently adopted by industry for reasons which do not relate directly to the regulatory system. For example, firms may sign on to non-regulatory programmes in response to consumer demand, to demonstrate good corporate citizenship within a community, or to enhance the efficiency of a firm's operations. But in at least two ways, the regulatory system can be a stimulus for voluntary action. First, firms may develop and adhere to voluntary standards in an effort to decrease liability under existing regulations. Such voluntary initiatives can be viewed as supplements or reinforcements to the regulatory system. Second, voluntary programmes may be put in place by industry in an attempt to forestall new regulations being developed. In this respect, voluntary initiatives represent alternatives to the regulatory system. Voluntary initiatives as supplements to the regulatory system The main type of offence included in federal and provincial environmental regulations is called the strict liability offence.3 With this type of offence, once the Crown has proven the facts of the contravention beyond a reasonable doubt, the accused will be convicted unless he or she establishes on a balance of probabilities that every reasonable action was taken to avoid the commission of the offence. This is often referred to as the due diligence defence. When courts consider the due diligence defence, a key issue to be ascertained is whether particular behaviour constitutes reasonable care in a particular circumstance. Courts may look to evidence of industry standards when considering due diligence defences. The existence of a voluntary code or standard - particularly one which concentrates on management systems and involves third party compliance verifications4 — can be of considerable assistance to a court's determinations of reasonable care. In a recent Ontario case, the court held that non-compliance with a recognized industry standard constituted evidence of lack of due diligence on the part of the accused.5 Both judges and legal commentators have suggested that compliance with environmental management standards such as iso 14000 (which involves auditing by independent third parties) can reduce legal liability.6 Industry-developed standards can also play a role in regulatory sentencing. Recently, courts have required compliance with a voluntary programme as a term of sentence in a regulatory enforcement action. In JR.. v. Prospec Chemicals,7 following a finding of guilt for exceeding Alberta sulphur emissions limits contrary to Alberta environmental legislation, defence counsel proposed that Prospec be permitted to seek iso 14000 certification as part of the court-ordered sentence. The judge agreed, ordering Prospec to complete the iso programme and post a letter of credit for $40,000, subject to forfeiture if the Chapter three: Voluntary Initiatives and the Law

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company failed to comply with the certification order. One commentator has suggested that programmes such as iso 14000, which can involve independent certifications that a firm has successfully passed an environmental management system audit, may be of particular use in sentencing by "judges who may be lacking the experience and time to devise an appropriate organizational structure for environmental compliance."8 In the United States, draft sentencing guidelines stipulate that adherence to the terms of environmental compliance programmes can considerably reduce the penalties imposed.9 The fact that courts can draw on the existence of voluntary standards in determining penal liability and in imposing sentences is of considerable importance to industry, government, environmental groups, and others in the environmental community. Most notably, it suggests that all parties must treat the development and implementation of voluntary initiatives seriously, since adherence to the terms of such programmes can reduce the likelihood of regulatory liability and failure to do so could assist a court in finding firms in contravention of environmental legislation. At the industry level, firms considering developing non-regulatory programmes should be aware from the outset that their efforts could affect regulatory enforcement actions.10 Firms that agree to adhere to the terms of a non-regulatory programme need to understand that the sanctions for noncompliance may extend beyond whatever penalties may be imposed by their industry association to include conviction under regulatory regimes.11 At the same time, a firm which does not participate in a voluntary programme may nevertheless have the standard imposed on it through a regulatory enforcement action. In this way, the management of firms who believe they can take a "free ride" on the positive industry image produced by others who adhere to a voluntary programme may have an unpleasant surprise awaiting them when their non-compliance with the terms of the programme subsequently plays a role in a court's determination of regulatory liability or as part of sentencing. The fact that a voluntary programme can in effect be imposed by the courts on free riders may create an incentive for reluctant industry members to participate in such programmes. This will at least give them "a seat at the table" when standards are set. The prospects of free riders being held liable at least in part because they are not complying with a voluntary programme is perhaps some solace to industry members who participate in the formulation and implementation of such programmes. In short, the imposition by the courts of a voluntary industry standard on a non-participant may represent a counter-argument to those who maintain that voluntary programmes fail to address the free rider problem.12 For governments, the incentives to participate in non-regulatory initiatives and monitor their development and implementation are considerable. The fact that voluntary programmes can play a role in determining regulatory liability suggests that governments need to participate in the development of such programmes so that the standards produced are as rigorous as possible. Should gov[34]

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ernment fail to provide such input, there is the risk that the standards produced will be considered reasonable by judges (who may lack the time or expertise to delve into the detail of individual voluntary agreements) even though they may be viewed as inadequate by government. Involvement by government in the development of voluntary programmes can also be seen as providing needed guidance to the private sector about what constitutes reasonable care or due diligence for the purposes of regulatory liability. In light of cutbacks and continued budgetary pressures, governments may welcome non-regulatory approaches which decrease some of the enforcement burden on regulatory agencies. In a number of ways, industry participation in voluntary programmes can reduce government enforcement costs. Companies which comply with voluntary programmes may be less likely to be in contravention of the law. While government monitoring of all firms is essential, a complying company can save government the expenses associated with investigations and enforcement actions as well as remedial costs. Moreover, selfidentification by industry of who is complying with voluntary programmes and who is not can assist government in targeting inspection and investigation efforts. In the interests of keeping a good public image, industry associations may even feel compelled to come forward with information concerning "bad actors" in their sector.13 Because self-regulatory programmes can decrease pressures on limited enforcement budgets and assist in targeting bad actors, there may be merit in government creating incentives for companies to adhere to terms of voluntary programmes and initiate audits which further the objectives of regulatory regimes. At the same time, as part of enforcement actions, governments may wish to use audit information as evidence of non-compliance with laws. This may discourage companies from engaging in voluntary actions (e.g., audits) which can be used against them in enforcement actions.14 Other incentives to stimulate compliance with voluntary programmes could include expedited permitting, and less frequent inspections for those firms which adhere to terms of recognized programmes.15 Most importantly, rigorous, consistent enforcement action by government which detects and appropriately addresses non-compliant behaviour is an essential component of any government strategy designed to encourage the private sector to develop and adhere to the terms of voluntary programmes. At the same time, however, governments need to recognize that participation by their officials in the development of non-regulatory measures can be taken into account by courts in subsequent legal actions. This can happen in several different ways: as part of a due diligence defence raised by an accused who is adhering to a voluntary standard, the involvement of government in the formulation of that standard could be taken as evidence of its inherent reasonableness, and thus assist the accused in avoiding a conviction;16 an accused firm that is known to be complying with a voluntary standard Chapter three: Voluntary Initiatives and the Law

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developed with input from government could claim that an enforcement action against it is unjustified17 and therefore the prosecution should not be successful; and government involvement in a voluntary initiative adhered to by an accused firm could be a factor in a claim brought by the accused firm of procedural unfairness in an administrative action,18 or negligence in a tort action.19 In an indirect manner, the effect of these potential legal "liabilities" on government is to reinforce the necessity that government act in a publicly accountable manner when it participates in voluntary programmes. In short, just as industry needs to think through the implications of developing non-regulatory measures, so too government involvement in voluntary initiatives should be undertaken only after carefully considering the advantages and possible negative consequences of such involvement. Where government participation does take place, effort must be taken to ensure that it is done in an open and scrupulously fair manner.20 Environmental groups, too, need to consider seriously the merits of participating in the development and implementation of voluntary programmes in light of the considerable impact such programmes can play in stimulating good conduct from industry, and in influencing judicial interpretations of regulatory liability and sentencing. Environmental group involvement can help to encourage adoption of more rigorous standards and stronger inducements for implementation. At the same time, environmental groups need to consider how direct involvement in industry programmes will be perceived by their members and the broader community.21 Increasingly, environmental organizations seem to be recognizing the benefits of establishing direct relations with industry through the vehicle of voluntary programmes. Mike McCloskey, chair of the American Sierra Club, is reported as saying, The time is right for corporations and environmentalists to deal directly with each other and not filter everything through government.The companies that sign the CERES Principles (a voluntary code concerning environmental responsibility) identify themselves as ones that organizations like mine should approach in our desire to forge a new relationship.22 For courts, the challenge will be to examine non-regulatory programmes critically — to look behind assertions that a particular voluntary code represents "the industry standard" and determine who was involved in its drafting and implementation, and how they were involved. Increasingly, there may be more than one non-regulatory programme in operation, necessitating that courts compare the relative merits of each.23 In turn, counsel for the prosecution and defence will need to become much more familiar with the details of voluntary standards and the processes of development and implementation.

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Voluntary Initiatives as alternatives to regulation The preceding discussion focused on voluntary initiatives as supplements to the regulatory system. But in some cases, voluntary initiatives are specifically adopted in an attempt to avoid the development and imposition of new regulations. For industry, new regulations may be viewed as a threat,24 since government-imposed obligations represent a potentially undesirable unknown: regulations could set an unnecessarily high standard (from an industry perspective), and compliance with them could be more cumbersome, expensive and time-consuming than adhering to self-imposed standards.The challenge for industry is to ascertain the real likelihood that government will act through development of new regulations if effective voluntary measures are not put in place, and to develop non-regulatory systems which will be seen by government (and others) as sufficiently rigorous in substance and implementation to make new regulations unnecessary. Where government has a responsive, up-to-date regulatory system, and a track record of acting decisively through regulatory measures when new problems arise, there is arguably a credible threat stimulus to galvanize voluntary industry action. In this respect, a well-functioning regulatory presence can help to create the right environment for voluntary action. A second, more positive governmental stimulus for industry self-management is the perception in the private sector that sincere attempts to initiate and implement effective nonregulatory approaches will be positively received by government. If this second, positive stimulus is missing, then industry might well decide that seizing the initiative to develop voluntary approaches will not be worthwhile. In short, government must be prepared to act decisively through regulatory measures but be alert to the potential for voluntary programmes in the right set of circumstances. In todays climate of fiscal constraints, governments might find attractive the prospects of industry taking the initiative to manage a problem on its own, since this approach appears at first blush to assist in keeping public sector administrative costs to a minimum. However, if the standards are not as high as those which would be mandated by government, if there is not effective oversight and widespread implementation, or if the existence of the voluntary programme in some way handcuffs the ability of government to act decisively and appropriately should problems arise, then the advantages of voluntary approaches as alternatives to regulations may be illusory. As a result, government must closely monitor development and implementation of voluntary initiatives and be prepared to act with regulatory measures if the need arises.25 In cases where a regulatory measure replaces a voluntary programme, government may be able to draw on the substance of voluntary programmes in the development of regulations.26 While this may be small solace to industry, those firms that are already complying with the voluntary programme should have less difficulties in adjusting to life under a regulatory programme than do firms that never participated in the voluntary initiative. Some jurisdictions are beChapter three: Voluntary Initiatives and the Law

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ginning to experiment with co-regulation or "self-management" approaches, where a regulatory structure provides industry sectors with an opportunity to develop and implement standards which are then approved by government, and overseen by a government agency27 While there is much to commend this statutorily recognized "middle path" approach between purely voluntary measures and conventional command-and-control techniques, it remains ultimately an initiative which has an explicitly coercive, regulatory base (i.e., compliance with the standards is mandatory, as prescribed by legislation). It is thus beyond the scope of discussion in this article. Contracts and Voluntary Initiatives Voluntary initiatives are in essence consent-based regimes, in the sense that in the normal course of events parties agree of their own volition to abide by the terms of the initiative (in exchange for receiving certain benefits) and are not required to do so by legislation. The main legal instruments used to formalize consent-based agreements are contracts. Parties to a contract who fail to comply with contract terms can be liable for restitution, damages or specific performance requirements.28 In all legal suits in contract, it is necessary to establish that the terms of the agreement are sufficiently precise to be actionable, that there was agreement between the parties about those terms, that consideration was exchanged, and that breach of contract occurred.29 Courts have held that, through contract-based actions, industry associations can discipline their members for failure to meet agreed-upon standards.30 It is also possible for individual firms to require suppliers to meet non-regulatory measures as terms of contracts.31 Firms which pay for the right to use a particular logo indicating that environmentally sound practices are being used, and agree to comply to the terms of the programme underlying that logo, can be the subject of legal actions in contract brought by the organization which developed that logo if the contract terms are breached. On some issues, a contract-based voluntary programme may have as high or higher credibility in the marketplace than regulatory initiatives enforced by government agencies, so that products endorsed by respected groups may be considered by shoppers to be more attractive than those which meet government standards. Particularly in developing countries, the compliance verification systems which are part of contract-based programmes may be superior to those provided through domestic regulatory regimes. As one might expect for market-driven, contract-based programmes, it is not uncommon for rival initiatives to emerge and vie for the attention of consumers. Just as companies may bring legal actions against their competitors where they feel that claims made about products are misleading, so too is it possible that organizations touting rival voluntary standards may bring legal actions.32 This competition is positive, from an environmental and consumer standpoint, since in the usual course of events it provides choice to industry

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and consumers, and may help to identify weaknesses in existing programmes. Thus, industry would be well advised to monitor closely the development of rival voluntary initiatives (including those spearheaded by environmental groups), and where possible to work to ensure that the terms of the initiatives are technically and economically feasible. This, in many ways, is the mirror image of the more common situation where it is environmental groups who are compelled to monitor closely and participate (often reluctantly) in the rulemaking activities of industry, to ensure that the terms of their initiatives will lead to significant environmental improvements. In other situations, it may be possible for local community associations to contract directly with industries concerning such matters as emission controls or compensation. These types of community-industry pacts may be particularly attractive in jurisdictions where the regulatory system is substandard.33 Consumers can also play a role. Firms which attempt to attract clientele by stating that they are adhering to the terms of a voluntary code are vulnerable to actions in contract brought by consumers when products fail to meet stipulated standards.34 While it may seldom be feasible for individual consumers to bring legal actions when voluntary codes are violated, those jurisdictions which have modern class action legislation may make it more practical for groups of similarly situated consumers to bring successful actions.35 In addition, failure to meet the terms of a voluntary code may constitute misleading or deceptive advertising under the federal Competition Act36 or provincial trade practices legislation.37 In such circumstances, government agencies may bring actions on behalf of affected consumers. The Tort of Negligence and Voluntary Initiatives Many voluntary environmental initiatives are based on consent. Where the terms of such initiatives are violated, the consent-based nature of many such measures makes contractual legal suits a particularly promising avenue of recourse for private parties who have some contractual link to the programme. Individuals who are not contractual parties to a voluntary agreement are less fortunate. While they can also be harmed, they cannot initiate a legal suit in contract. However, they may be able to bring legal actions based on the tort of negligence if they can establish that they were owed a duty of care by the defendant, and that duty of care (as reflected in the voluntary agreement) was violated.38 Thus, for example, affected communities that are downwind from a polluter, and have not entered into a contractual relationship with that polluter, may nevertheless be able to draw on the existence of voluntary standards to establish liability in tort. The key is to demonstrate that the defendant owed a duty to a particular individual or group, and that the type of harm which occurred was foreseeable. A duty of care is said to be owed to those one can reasonably foresee as likely to be harmed should one act, or fail to act, in a certain

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way.39 While non-regulatory standards such as those of the Canadian Standards Association are not conclusive on their own, courts have interpreted compliance with such standards as evidence of reasonable care.40 In negligence actions, courts can impose liability in tort on a firm, drawing on the existence of a non-regulatory programme as evidence of the standard of care owed, even if the firm never directly participated in the non-regulatory initiative.41 This provides a strong incentive for participation. Individual firms that might otherwise be tempted to take a free ride on an industry initiative are thereby encouraged to adhere to its terms as a protection against tort liability. Jurisdictional Constraints and Voluntary Initiatives One of the reasons why governments may initiate, participate in, or sponsor voluntary measures is because of Jurisdictional constraints which hamstring more conventional legal instruments. For example, within Canada, it may be possible for a coalition of stakeholders to devise and implement a voluntary instrument concerning protection of wildlife or reduction of emissions where a legislative instrument pertaining to the same topic might fail due to federalprovincial constitutional difficulties.42 At the international level, trade agreements such as the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA) restrict the ability of governments to develop measures which could be interpreted as barriers to trade. A key requirement is that trade measures do not discriminate between home-produced goods and imports, or between imports from or exports to different trading partners. In addition, trade measures are not to discriminate between like products on the basis of method of production. Many voluntary environmental initiatives such as those pertaining to sustainable forestry harvesting could be described as instruments which discriminate on the basis of method of production and may have the effect of decreasing trade from countries where uncertifiable methods of production are used. However, because these programmes are developed by non-governmental parties (e.g., industry and/or environmental groups), are driven by consumer demand, are voluntary and are not legislatively required, at first glance it is difficult to envisage how they could be considered "trade measures" under GATT.

Given that the effect of voluntary programmes such as those pertaining to sustainable forestry practices is not to prohibit production by certain methods, or to prohibit imports from a particular firm or country, but rather to provide information to consumers about how particular firms have produced their products (and those consumers who do not care about such matters are free to buy uncertified products), it might be more proper to characterize such initiatives as increasing consumer choice and information rather than restricting trade. If, however, compliance with these voluntary standards were to be [40]

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required as a term of a regulation or licence, or in procurement contracts, and thus amount to a governmentally imposed restriction on imports, then it is more likely that GATT could be considered to apply. The Agreement on Technical Barriers to Trade (TBT), which was passed to further the objectives of GATT, applies to both technical regulations and voluntary standards.43 The TBT agreement imposes many requirements on "recognized bodies" concerning the content of standards, as well as the processes for developing them, with the intention of minimizing the creation of new barriers to trade.44 "Recognized body" is not defined in the technical barriers agreement. The most obvious recognized bodies existing in virtually every country are those which are part of the national standards system. For example, in Canada, the Standards Council of Canada, which is a creature of statute45 reporting to the Minister of Industry and which participates on behalf of Canada in deliberations of the International Organization for Standardization, is a clear example of a recognized body. The Standards Council of Canada is statutorily empowered to oversee the operations of standards bodies such as the Canadian Standards Association (CSA), which would appear to be another example of a recognized body. The iso 14000 environmental management standards would be an excellent example of a voluntary standard developed by a recognized body. Characterizing industry associations, coalitions of private sector firms, environmental groups and aboriginal representatives, or even individual firms which have developed their own voluntary codes, as recognized bodies for the purposes of the technical barriers agreement, would appear to represent a considerable expansion in the coverage of the Technical Barriers to Trade and GATT agreements.46 The Wo rid Trade Organization (WTO) has yet to make a definitive determination on this issue. However, even assuming such a determination were made, it is not at all clear that the technical barriers agreement applies to non-product related47 processes and production method standards such as those pertaining to sustainable forestry practices.48 If the WTO were to decide that non-governmental voluntary initiatives were subject to the technical barriers agreement, and if it were further to decide that non-product related standards such as those concerning sustainable forestry harvesting were subject to the agreement, then such bodies would by law be required to meet the substantive obligations contained in the agreement.49 Such obligations include requirements not to treat foreign products any less favourably than national products,50 to not create "unnecessary obstacles to trade,"51 to allow a period of at least sixty days for the submission of comments on draft standards,52 and to take those comments into account.53 None of these requirements would significantly constrain open, well-structured voluntary programmes of multi-jurisdictional application. Industry associations and environmental groups could respond by developing new voluntary initiatives in ways that minimize vulnerability to challenges before the WTO. Government departments and agencies need to be careful to ensure that their involvement in voluntary initiatives (participation of officials Chapter three: Voluntary Initiatives and the Law

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in development, provision of financial assistance) is not seen to be creating new obstacles to trade. Given that the effect of these programmes is to increase consumer choice and information concerning products, not to restrict entry of products into a country, and that government is not requiring anyone to adhere to the terms of the programmes, there would appear to be good arguments that such involvement would not offend the GATT or technical barriers agreement. Nevertheless, because the WTO has not made a definitive statement on this issue, it is possible that different interpretations will carry the day. If the WTO concludes that initiatives developed solely by industry and/or environmental organizations are subject to the technical barriers agreement, this may decrease the incentive for non-governmental actors to develop such initiatives. Competition Law and Voluntary Initiatives Since voluntary initiatives frequently involve competitors coming together to make standards and impose rules on themselves, there is clear potential for such measures to have anti-competitive impacts for businesses and consumers. Section 45(1) of the Competition Act54 prohibits agreements that prohibit or injure competition unduly Subsection 45(3) provides a defence if the agreement relates to "measures to protect the environment." By virtue of section 45(4), however, this defence does not apply if the agreement is directly or indirectly likely to unduly lessen competition, in a number of specified ways. The Competition Bureau has published a paper on strategic alliances which attempts to provide guidance on how these provisions are applied.55 Some industry associations which have developed voluntary environmental programmes have consulted the Bureau in an effort to ensure that their activities do not have unanticipated competition law effects, and have not been required to change their programmes.56 In light of uncertainty about exactly how the Competition Act provisions will apply to voluntary measures, the strategy of engaging in early and regular consultations with the Competition Bureau seems to be prudent. Conclusions

Voluntary environmental initiatives may be developed by industry, environmental groups, standards organizations, and government for a wide number of reasons which do not relate in any direct manner to the legal system: consumer demand, increased efficiency, supplier demand, public image, and community pressure are but a few of the non-legal impulses underlying voluntary initiatives. By the same token, however, the legal system can play an important role in stimulating the development of voluntary initiatives, or reinforcing the effectiveness of such measures. Governments may encourage voluntary programmes or assist in their development as a way of minimizing enforcement costs and decreasing the pressure for new regulations. Industry might develop them in an attempt to meet reasonable care requirements in regulatory and tort U2l

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law. Judges might draw on them in their determinations of due diligence and in devising appropriate sentencing structures. And industry associations, standards organizations, and environmental groups may rely on the contractual basis to such programmes to stimulate compliance. Voluntary initiatives which are developed in an open and fair manner with the meaningful participation of all affected stakeholders and which are the subject of independent third party compliance verification can supplement regulatory and private law approaches at the same time as those voluntary measures are reinforced by the legal system. In advanced industrialized countries such as Canada, the United States, Europe, and some parts of Australasia, government is in a position to maintain a respected and efficient legal system, and a vigilant and consistent "firm but fair" regulatory enforcement presence. These two elements can provide strong encouragement to the private sector to engage in voluntary measures which reward compliance and penalize those who flaunt the law. Where the existing regulatory regimes and legal systems are weak (for example, in developing countries), voluntary initiatives may in some cases provide a stronger impetus for environmental action than do statute-based approaches. While a positive, symbiotic relationship between the legal system and voluntary measures seems to resemble the proverbial and elusive "win-win" situation, all parties concerned need to understand thoroughly the legal implications of such ventures before becoming involved. There are many ways in which the regulatory, tort, contract, trade, and competition law aspects of voluntary programmes can trip up the unwary. No individual firm, industry association, government, court, environmental group, or private citizen is immune to the legal effects of a poorly planned or implemented voluntary initiative. Moreover, the potential for legal liability can discourage governments, the private sector, and environmental groups from participating in voluntary initiatives. In Canada so far, voluntary initiatives have spread with little government effort to give them formal recognition or to encourage their development.57 In some ways, this bodes well for the future of voluntary initiatives in Canada. It suggests that there is already in place the proper "climate" for voluntary measures in the form of demanding and well-informed consumers, a competitive marketplace, a basic set of framework regulatory laws (environmental and competition) with adequate enforcement, a comparatively efficient and fair justice system, and a modern national standards system, so that firms, associations, environmental groups, governments, and courts turn to voluntary measures instinctively or with minimal prompting. Indeed, one can make arguments that the self-regulatory "systems" now being developed in Canada and elsewhere may provide a glimpse of the regulatory landscape of the future in advanced industrialized democracies: industry associations moving beyond lobbying to take on the primary responsibility for controlling their members' behaviour (and thus being more effective lobbyists in the process), environmental groups and community groups participating in Chapter three: Voluntary Initiatives and the Law

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such initiatives or in some instances taking the lead in their development rather than waiting for government to provide them with that opportunity, and governments and courts providing the framework for all these activities to happen, but tending to play a reinforcing and facilitating role unless direct regulatory or enforcement action is needed. Alternatively, governments could more consciously and explicitly encourage the development of voluntary initiatives, and expressly integrate them into statutory regimes. An attempt to explicitly "build" a voluntary environmental programme on a legislative base is currently being undertaken by the European Union (EU) through the Eco-Management and Audit Scheme (EMAs). 58 The legal framework encourages industry to adopt explicit and comprehensive environmental management procedures, as verified and audited by independent third parties. In the future, EMAS may become a mandatory system in Europe, but for now it is not. There are currently no statutory penalties for failing to put in place an EMAS. It is too early to say whether this legislative framework will encourage widespread adoption of EMAS in Europe. The iso 14000 environmental management system operating in Canada and the United States (and elsewhere) represents a similar initiative to EMAS, except that it was developed without there being express statutory encouragement along the lines of the European approach.59 Whether the current, largely "hands off" Canadian approach to voluntary initiatives is sufficient, or a more ambitious and aggressive approach following the European example will be necessary in Canada and elsewhere, is difficult to say at this point. What is clear is that voluntary measures are playing an increasingly important role in environmental protection in Canada and in other jurisdictions, and that a clear-headed understanding of the legal implications of such initiatives is essential for all stakeholders. Analysis suggests that in Canada the incentives to participate seriously in voluntary initiatives are closely but accidentally linked to a set of legal instruments or stimuli - the threat of regulations, prosecutions, and tort and contract liability. None of these legal instruments was specifically designed to promote voluntary initiatives and, more significantly, none of them is now being applied directly for this purpose. Perhaps an intelligently integrated and well focused strategy of credible regulatory threats, exemplary regulatory prosecutions, tort legal suits, and contract law actions might provide a powerful boost for voluntary initiatives. This type of "strategic" encouragement of voluntary initiatives might be more effective at stimulating effective voluntary action than either the current "hands off" approach or the more interventionist European statute-based approach. If successful, this approach could be supplemented through strategic and co-ordinated use of economic instruments and education-based campaigns. Kernaghan Webb is sessional lecturer in law and public administration at Carleton University, and senior legal policy analyst in the Office of Consumer Affairs, Industry Canada. [44]

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This paper draws substantially on research undertaken for the Voluntary Codes Project, a joint project of Industry Canada's Office of Consumer Affairs and Treasury Board s Regulatory Affairs Division, and in particular, K. Webb and A. Morrison, "Legal Aspects of Voluntary Codes," in D. Cohen and K. Webb, eds., Exploring Voluntary Codes in the Marketplace (Ottawa: Government of Canada, forthcoming). The paper also draws on K. Webb, "The Legal Framework for Voluntary Arrangements: Present and Future" (prepared for and presented at the 1997 Learneds Law and Society Meeting, May 1997). This paper was prepared as an independent research work and represents the opinions only of the author. Notes 1

2

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4

5 6

As used here, a voluntary initiative is a set of non-legislatively required commitments or obligations agreed to by one or more entities, designed to influence or control behaviour, to be applied in a consistent manner or reach a consistent outcome by all parties. See the "pocket guide" (appendix, below) for a typology of voluntary initiatives. For purposes of legal analysis, a key distinguishing feature among voluntary initiatives is whether government has in some form or other participated in development or implementation. At numerous points in the chapter the significance of governmental involvement in voluntary initiatives is discussed. The issue of whether or not voluntary initiatives "work" is a separate topic in its own right. This volume contains several chapters where assessments are made of existing programmes (see, e.g., Robert Hornung, "The VCR Doesn't Work," chapter 10, below, for a review of the Climate Change Voluntary Challenge and Registry Programme). Voluntary initiatives succeed or fail for a variety of reasons, which may or may not be attributable to their legal dimensions. Nevertheless, the legal implications of voluntary initiatives can contribute to their effectiveness or their failure. For example, s. 36(3) of the Fisheries Act, Revised Statutes of Canada 1985, c. F14, as amended; or s. 16(1) of the Ontario Water Resources Act, Revised Statutes of Ontario 1990, c. 0.40, as amended. For further information about regulatory offences, see K. Webb, "Regulatory Offences, the Mental Element and the Charter: Rough Road Ahead," Ottawa Law Review 21 (1989), pp.4i9ff. For example, the iso 14000 environmental management standards or the Canadian Chemical Producers'Association's Responsible Care initiative. For discussion of iso standards see below (chapters 15 and 16), and International Organization for Standardization, Environmental Management Systems: Specifications with Guidance for Use (ISO/DIS 14001, June 1995). For discussion of the Responsible Care initiative, see chapter 5, below. R. u Domtar [1993] Ontario Judgments, No. 3415 (Ontario Court — General Division). See, for example, comments to this effect by an American judge and a New Zealand lawyer in "Reducing legal liability with an iso 14001 EMS," Standards

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7 8

9

10

11

12

[46!

New Zealand Environmental Newsletter 1:1 (February 1996), p. i. See also J. Melnitzer,"Fix environmental snags before seeking iso 14000 certification," Law Times, June 16-22, 1997, pp. 14-15. R. v. Prospec Chemicals Ltd. [1996] Alberta Judgment, No. 174, Alberta Provincial Court, January 25, 1996. Environmental lawyer Diane Saxe, reported in Melnitzer, "Fix environmental snags," (n. 6). See also the discussion below on the need for critical judicial scrutiny of voluntary standards. See E. Orts, "Reflexive Environmental Law," Northwestern University Law Review 89 (i995), pp.i28i-i283.The environmental compliance programmes must involve a commitment of resources and a "management process" that is reasonably calculated "to achieve and maintain compliance with environmental requirements" (Orts, p. 1282).The draft sentencing guidelines, which will be binding on federal courts, stipulate that firms which have put in place "environmental compliance programmes" can have their penalties reduced by up to 65 per cent (Orts, p. 1282). Brian Wastle, vice-president, Canadian Chemical Producers'Association, has indicated that in the initial phase of development of the Responsible Care voluntary programme, legal counsel had noted the potential liability flowing from adoption of the Responsible Care principles. Personal communication, September 1996. In this vein, some commentators have suggested that companies seeking certification to a voluntary standard should address any known issues of noncompliance with environmental laws first, since the disclosure obligations associated with voluntary programmes can render the company vulnerable to regulatory enforcement actions. See Saxe in Melnitzer, "Fix environmental snags," (n. 6). The question may legitimately be asked, "How voluntary is a programme if it can be imposed by a court on a firm against its will?" A programme is voluntary in the sense that legislation or regulations do not require compliance with the terms of the programme, and courts are not required by legislation or regulations to draw on the existence of a voluntary programme in their determinations of reasonable care or in sentencing. Indeed, from one case to another, a court can choose to draw on the existence of a voluntary programme or not. A voluntary environmental measure developed by an industry association is one way of attempting to meet the reasonable care standard, but individual firms are free to articulate and implement their own systems. As long as an individual firm can demonstrate to the satisfaction of the court that the approach developed by that firm constitutes reasonable care or due diligence, then there is no need to use an existing programme developed by the industry. Similarly, with respect to sentencing, a court may devise its own set of requirements which a firm must meet as part of a sentence, and need not rely on an existing programme developed by industry. Thus, at first instance, a firm can decide against using an existing voluntary programme, if it wishes to gamble that a court will find that its own approach constitutes reasonable care. Kernaghan Webb

13

14

15

16

17

18 19

20

21

J. Rees, in Hostages of Each Other: The Transformation of Nuclear Safety Since Three Mile Island (Chicago: Chicago University Press, 1994), talks of an industry concerned about its image as a whole, and therefore motivated to identify non-complying parties who could bring the reputation of the sector into disrepute. As part of the "Enforcement and Compliance Policy" for the Canadian Environmental Protection Act, Environmental Canada inspectors are to conduct inspections and investigations in a manner which will not inhibit the practice or quality of auditing. See Environment Canada, Canadian Environmental Protection Act Enforcement and Compliance Policy (Ottawa: Supply and Services, 1988), p.29. Under the policy, inspectors are not to request environmental audit reports during routine inspections, although access to such reports may be required where there is a reasonable belief that an offence has taken place. The question of government access to audits remains a contentious issue. See J. Cascio," Implications of iso 14001 for Regulatory Compliance," paper presented to the Fourth International Conference on Environmental Compliance and Enforcement, Thailand, 1996, p-3. Available on internet at http://www.inece.org/4thvoli/4toc.html. As is discussed below, courts are beginning to look more closely at the origins and development of voluntary standards. For example, in Department of Labour v. Waste Management NZ Ltd. [1995] Court Registry Number 40040511262 (District Court, Auckland), a New Zealand court rejected assertions made by legal counsel that an American standard was appropriate and applicable to New Zealand circumstances, suggesting that it may be inferior to the New Zealand standard as a result of the way in which it was developed, or the circumstances surrounding its development. This type of judicial investigation of voluntary codes could very well lead to judicial explorations of the roles played by domestic governments in the development and subsequent implementation of a standard, as evidence of its reasonableness in the eyes of that government. See below for more discussion of the role of courts in determinations of the reasonableness of voluntary programmes. Action may be unjustified if it constitutes abuse of process (see Webb, Pollution Control in Canada [Ottawa: Law Reform Commission of Canada, 1988], pp. 4649), or officially induced error (see, e.g., R. v. Cancoil Thermal Corp. (1986) 52 Criminal Reports (3d), p.188. See Webb, Pollution Control (n. 17), pp. 44-46. As discussed in K. Webb and A. Morrison, "The Legal Aspects of Voluntary Codes," in D. Cohen and K. Webb, eds., Exploring Voluntary Codes and the Marketplace (Ottawa: Industry Canada, forthcoming). For two examples of government involvement in voluntary programmes, see discussion of the Climate Change Voluntary Challenge and Registry Programme (chapter 10, below) and the Accelerated Reduction/ Elimination of Toxics Programme (chapters 6 and 7, below). For insights on the perspective of environmental non-governmental organizations concerning voluntary standards development, see, e.g., T. Burrell, CSA Environmental Standards Writing: Barriers to Environmental Non-Governmental

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22 23 24

25

26 27

28 29 30

31 32 33

34 35 [48]

Organizations Involvement (Toronto: CIELAP, 1997). The role of environmental group participation is discussed in chapter 7, below, concerning the Accelerated Toxics/Elimination of Toxics (ARET) project, and in chapter 17, below, concerning sustainable forestry management initiatives. J. Andy Smith, III, "The CERES Principles: A Voluntary Code for Corporate Environmental Responsibility," Yale Journal of International Law 18 (1993), p. 309. See n. 16, above, concerning a recent New Zealand case where courts rejected application of an American standard. In some instances, regulations may be welcomed by existing industry players because the regulations may create trade barriers that decrease competition from foreign companies, create a level playing field among existing firms, or provide comparative certainty about a standard and the roles of parties vis-a-vis enforcement. A recent example of this comes from another policy context, that of the protection of personal information. After participating in the development of voluntary standards for the protection of personal information through the Canadian Standards Association, the federal government announced its intention to introduce federal legislation drawing on the CSA standard. The decision to shift from support for a voluntary standard to legislation based on a voluntary standard came following recommendations from some industry associations that an exclusively voluntary approach would not create a "level playing field." See Industry Canada/Justice Canada, The Protection of Personal Information: Building Canada's Information Economy and Society (Ottawa: Industry Canada/Justice Canada, 1998). See n. 25. See, e.g., discussion of Ontario and Quebec consumer protection regimes in Webb and Morrison, "Legal Aspects" (n. 19). See also B. Wylynko, "Beyond Command and Control," chapter 13, below. See generally, Webb and Morrison, "Legal Aspects" (n. 19). For scholarly explorations of the essential elements of contracts, see, for example, G. Fridman, The Law of Contract in Canada (Scarborough: Thomson, 1994) See, e.g., Ripley v. Investment Dealers Association (Business Conduct Committee) [1991] 108 Nova Scotia Reports (2d) 38 (NS Court of Appeal). The court held that the Association's disciplinary process is not subject to the Canadian Charter of Rights and Freedom's protections (which generally apply only to government programmes). See, e.g., K.Webb, G. Rhone, and J. Stroud, "The Gap's Code of Conduct for Treatment of Overseas Workers," in Cohen and Webb, Voluntary Codes (n. 19). See, e.g., M. Strauss, "Infant formula producer ordered to scrap ads," Globe and Mail, November 7, 1996, p. 64. See S. Pargal and D. Wheeler, "Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia," Journal of Political Economy 104 (1996), p. 1314. Webb and Morrison, "Legal Aspects" (n. 19). In Canada, British Columbia, Ontario and Quebec have modern class action legKernaghanWebb

36 37 38

39 40 41 42

43

44 45 46

47

48

49

50 51 52

islation. For more information, see M. Cochrane, Class Actions in Ontario: A Guide to the Class Proceedings Act ig$2 (Toronto: Canada Law Book, 1992). Revised Statutes of Canada 1985, c. C-34,8.52. For example, the Ontario Business Practices Act, Revised Statutes of Ontario 1990, c. B.I8, as amended, s. 2. For discussion of environmental negligence cases, see E. Swanson and E. Hughes, The Price of Pollution: Environmental Litigation in Canada (Edmonton: Environmental Law Centre: 1990), pp. 53-61. Swanson and Hughes, The Price of Pollution (see n. 38). See, e.g., Visp Construction v. Scepter Manufacturing Co. [1991] Ontario Judgments, No. 356 (Ont. Court of Justice - General Division). See, for example, Reed v. McDermid St. Lawrence Ltd. (1991) 52 British Columbia Law Reports (2d) 265 (BC Court of Appeal). This is not to suggest that a voluntary initiative would accomplish what a cohesive and coordinated federal-provincial legislative regime could accomplish, but rather that a voluntary initiative may be more feasible, and in some respects (e.g., in that it specifically involves industry and environmental groups as partners) more successful. Pursuant to Annex I of the tbt Agreement, "standard" is defined as a "document approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory..." See especially Annex 3 of the tbt Agreement, which sets out a "Code of Good Practice for the Preparation, Adoption, and Application of Standards." See the Standards Council of Canada Act, Revised Statutes of Canada 1985, c. S-i6, as amended. The Canadian delegation at a recent meeting of the WTO Trade and Environment Committee has sought to have all eco-labelling programmes brought under the WTO umbrella. See WTO Trade and Environment Bulletin No. n (9 August 1996), at http:/www.wto.org/environ/ teon.htm. A non-product related process is a process which does not affect the final outcome (e.g., the look, feel, use, and operation) of a product. Thus, for example, by simply looking at the final wood product it would be impossible to tell the difference between one which was the product of a sustainable forest harvest and one that was made using wood from a clear cut forest. As noted above, the definition of "standard" focuses on a document that provides rules for "products or related processes and production methods...."The question is, what constitutes a rule for product or related production methods? This has yet to be the subject of a definitive statement by the WTO. Most notably, those obligations included in the "Code of Good Practice" which is appended to the agreement. It is not entirely clear what the powers and sanctions would be should an incidence of non-compliance be detected. Annex 3, Code section "D". Annex 3, Code section "E". Annex 3, Code section "L".

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53 54 55 56 57

58 59

[so]

Annex 3, Code section "N". Revised Statutes of Canada 1985, c. C-34. Director of Investigation and Research, Competition Bureau, Strategic Alliances Under the Competition Act (Ottawa-Hull: Supply and Services, 1995). Interviews with the author. The Voluntary Challenge and Registry Programme and Accelerated Reduction/Elimination of Toxics Programmes are two examples of voluntary initiatives with significant government involvement. The adequacy of that involvement is discussed in chapters 6, 7 and 10, below. The following discussion introduces the concept of what is being referred to by some commentators as "reflexive law." See Orts, "Reflexive Environmental Law," (n. 9). As discussed in Orts, "Reflexive Environmental Law," (n. 9). Note that some commentators consider EM AS to be a stronger system than the iso 14000 standards. See, e.g., Saeed Parto, "Aiming Low," chapter 15, below.

Kernaghan Webb

four A Sober Second Look • The regulatory approach looks better when the context and consequences of voluntary initiatives are taken Into account • Paul Muldoon and Ramani Nadarajah Since at least the early 19908, the idea of using "voluntary initiatives" as an approach to environmental protection has been aggressively promoted by industry, many government departments, and some leading scholars. Like using antibiotics as a response to infections, voluntary initiatives are being touted as the cure-all. While those promoting voluntary initiatives continue to market this approach, however, public interest groups have been raising concerns and calling for a more cautious, methodical examination of the role and potential effectiveness of these initiatives. An initial, more sober look at voluntary initiatives reveals more questions than answers. How should voluntary initiatives be defined and what are their essential elements? In what circumstances should they be used? How should they be administered, monitored, and evaluated? What should be the role of government and what should be the role of the public in the negotiation, administration, and evaluation of such initiatives? What criteria should be used to determine the effectiveness of voluntary initiatives? Few if any of these questions have yet been answered satisfactorily. While the potential advantages of responsibly applied voluntary initiatives have been well publicized by government and industry advocates, the weaknesses and negative consequences in practical application have received comparatively little public attention.1 Accordingly, government and industry confidence has rested chiefly on faith that voluntary measures will work effectively, not just in individual instances but as an overall strategy. Unfortunately, significant practical problems have arisen in the actual application of voluntary initiatives, and these suggest that such initiatives have been overrated as a policy instrument for moving us toward a sustainable environment. In this chapter we outline four of the most important weaknesses of voluntary initiatives: the lack of public involvement in the development and overseeing of voluntary initiatives; the danger that the initiatives will pre-empt more rigorous environmental protection measures; the lack of accountability and verification of such measures; and the problem of how to ensure an even playing field for the affected industries.

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The regulatory approach may be in need of reform. It has, however, been a predictable, robust, inclusive, and reasonably fair way to govern corporate behaviour. Insofar as voluntary initiatives lack these qualities, they remain in important ways a less attractive tool than regulations. In the end, there may be a place for voluntary initiatives as a means to supplement the regulatory framework. The reality, however, is that both industry and government have promoted voluntary initiatives as a preferable alternative to regulation. Industry has often pursued voluntary initiatives to avoid the stringency, transparency or accountability of a regulatory framework, and governments have often used them as a justification for cutbacks in regulatory capacity. In our view, such uses of voluntary initiatives are likely to compromise environmental protection and the public interest. Indeed, they are likely to compromise the effectiveness of voluntary initiatives themselves, since these typically rely on the continued development and implementation of a comprehensive and effective regulatory framework.2 Finally, we recognize that there is a large continuum of measures under the rubric of "voluntary initiatives" in Canada. At one end of the spectrum are codes of practice initiated, administered, and maintained entirely by industry.3 At the other end are private agreements negotiated between industry and government and approved as substitutes for specific regulatory requirements.4 Here we focus on those initiatives at the latter end of the spectrum where the government has intervened, either as a sponsor or as a party to the initiative, and where the initiative implicitly or explicitly seeks to pre-empt or replace regulatory requirements. How Voluntary Initiatives Have Emerged Voluntary initiatives are neither new nor unique to Canada. They reflect longstanding corporate pressures, intensified in recent years by international political and economic trends. Favouring "market-based" approaches Until thirty years ago, a citizen's right to protect the environment was found in the common law. The shift from common law, which focused on "private rights" between parties, to regulatory action, with its focus on "public law," commenced around the 19605 and coincided with a period of increased regulatory activity in many areas of social policy, such as employment standards and human rights, in addition to environmental protection.5 The increase in regulatory activity was fostered by growing public concerns over environmental deterioration and a demand for greater governmental involvement to protect environmental quality. The evolution from "private law" to "public law" was also marked by a fundamental shift in societal values which recognized the need for environmental protection for society as a whole as opposed to only for those citizens whose health, economic, and property interests were directly [52]

Paul Muldoon and Ramani Nadarajah

and adversely affected.6 In short, the environment has come to be understood as a public interest issue and, thus, a mainstream public policy issue. Toward the end of the 19808, a considerable backlash began in response to the flurry of regulatory activity of the preceding twenty years. The driving assertions for the backlash were that government was too interventionist and too prescriptive in telling industry how to run its business, that the amassed regulations were now a costly hindrance to industries' ability to achieve and maintain competitiveness in a global economy, and, indeed, that regulations acted as a brake to more efficient action. Industry lobbied intensely for a shift away from the traditional regulation toward much less interventionist, market-based approaches. The market advocates held that unhindered economic pressures would ensure the proper pricing of natural resources and the internalization of social and environmental costs of products, thereby automatically guiding responsible corporate behaviour and also ensure environmental protection. According to this philosophy, the visible hand of the regulator would be replaced by the invisible hand of the market. Another driving force behind market-based measures has been the increasing globalization of the world economies through liberalized trade, as evidenced by the passage of the Canada-US Free Trade Agreement, the North American Free Trade Agreement (NAFTA), the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), and the anticipated Multilateral Agreement on Investment (MAI). Facing increased pressures of global competition, both industry and governments have sought to eliminate "unnecessary inefficiencies" associated with regulatory demands by streamlining procedures and harmonizing national and international requirements. Many of the resulting changes have been criticized by environmental advocates for reducing regulatory standards and effectiveness. Certainly, the context is now one of acute chill against any aggressive regulatory action as well as warmth toward nonregulatory or "voluntary" alternatives.7 Flexible, industry-based voluntary initiatives fit conveniently into the vacuum created by the absence of regulatory momentum. This is in part because they are rooted in the same market philosophy that drives trade liberalization and regulatory retreat. Retreat of government in environmental governance International economic forces alone cannot account for the zeal with which regulators and industries have embraced voluntary initiatives. During the past decade, a trend of fiscal conservatism coupled with an increased reliance on individualism has dominated politics in North America and much of Europe. A key feature underlying this fiscal conservatism has been described by one Canadian commentator as a ... return to an earlier focus on enforcing more narrowly defined legal and political rights. It wants to wean us away from the notion of govChapter four: A Sober Second Look

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ernment as provider and equalizer, and re-establish the discipline of the marketplace in meting out these sorts of rewards where they are "earned". Under the harsher discipline of the marketplace, we would have no automatic "rights" or "entitlements"; all we should have is whatever we could get by selling our services to those with money to pay us.8 The change has been marked by a decline or retreat of government from its traditional leadership role of defining and promoting economic and social policy goals. Government sees itself as a stakeholder and an equal at the table rather than as the "regulator" protecting the public interest by intervening authoritatively in the "regulated" industrial sector. The favoured image today is of a partnership with government brokering action where consensus prevails. This change has been reinforced by a wave of deficit reduction through government cost-cutting, which has left many environmental agencies with insufficient resources for authoritative interventions.The government downsizing that has occurred in the past decade has been especially severe for Canadian ministries and departments (see Table i). Some provinces have cut their environmental protection agencies by as much as 60 per cent. Environment Canada has had an over 30 per cent reduction (which translates into a reduction of over 1500 staff between 1994 and 1997). In Ontario, which had been generally regarded as being at the forefront of environmental law enforcement, the loss of capacity resulting from budgetary reductions has been evident in the significant decline in the number of prosecutions initiated by the Ministry of Environment.9 Moreover, the Ministry's monitoring infrastructure has been steadily dismantled.10 The combination of regulatory backlash and government downsizing has produced significant deregulatery initiatives in some jurisdictions. In Ontario, Table 1: Downsizing of Environmental Ministries11 Jurisdiction

Reduction in

Resource Reduction Staff Reduction

Ministry Budget

(Smillions)

Ontario

43% (since 1995)

290 to 165

2,430 to 1550

Alberta

31% (since 1993)

405 to 317

1550 to be cut 1993-2000

Newfoundland

60% (since 1995)

10.6 to 3.6

Canada

Over30%(since1994)

not available

(federal government)

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not available over 1500 cut from approx, 5400

Paul Muldoon and Ramani Nadarajah

virtually every environmental statute relating to environmental protection and natural resource management has undergone major amendments, often with little or no meaningful public input.12 These amendments have significantly weakened environmental laws, reduced or eliminated public participation opportunities in the government decision-making process, and established the framework for various self-regulation systems for a wide range of activities which could detrimentally affect the natural environment. These changes cover the areas of mining, aggregates, forestry, land-use planning, energy, pesticides, wildlife, wilderness and parks, environmental assessment and environmental science, and monitoring with a view to reducing, eliminating or weakening regulatory requirements.13 Little attention has been given to how environmental protection and resource conservation objectives are to be served in the new circumstances. The apparent assumption is that where genuine environmental problems exist, the market will advance to cover the government retreat. Critique of regulatory approaches The third peg of the stool in the emergence of voluntary initiatives is the result of a highly successful campaign by industries in advocating "reform" of the regulatory structure. Industry representatives have argued that the regulatory approach imposes unnecessarily high production costs and reduces innovation and global competitiveness. In this campaign, voluntary measures have been promoted as the logical alternative. This criticism of the "command-and-control" approach has proceeded with little consideration of its role, historical effectiveness, and continuing strengths, or of alternatives other than voluntarism. The critique of the regulatory approach has often been framed as a simple, single alternative situation; the current regulatory structure is not viable and therefore the voluntary approach is necessary. The reality is more complicated. First, many of the failings of the regulatory efforts are more properly attributed to poorly designed regulations and ill-informed regulators, than to the regulatory approach itself This point was best summarized in a report prepared for the Federal Standing Joint Committee for the Scrutiny of Regulations: Those critical of the use of regulations as a policy instrument typically characterize regulations as inflexible, difficult to amend, and therefore as being inefficient. Although it seems trite, it must be pointed out in response to such criticisms that none of these attributes [is] capable of being possessed by regulations themselves. In fact, such criticisms relate not to regulations per se, but rather to the process by which regulations are made and amended. There is no inherent reason why the regulatory process cannot be more responsive to changing circumstances. In the end any process, including the regulation-making process, can only be as effective as those in charge of it.14

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Second, some of the most serious criticisms of regulatory interventions have already been addressed successfully. For example, it has long been recognized that the "prescriptive" type of regulations reminiscent of the 19608 and 19705, which required industry to install prescribed pollution control or waste treatment equipment, do not encourage pollution prevention or process efficiencies, lag behind new solutions and technologies, and may not even keep up with advances in control options. In response, few new environmental regulations in the past decade have been prescriptive.15 Instead, most have set performance targets and have given companies the flexibility to adopt or develop the most efficient way to achieve them. Studies of such performance-based regulations indicate that, when accompanied by expectations of enforcement, they drive technological innovation, enhance competitiveness, and create a market for environmental technologies.16 Not surprisingly, those jurisdictions with the most stringent environmental regulations have also tended to have the largest environmental industry sector.17 Finally, turning to voluntary initiatives as the solution to regulatory failings overlooks other options that appear to have more advantages. Most environmentalists agree that the "control" component of "command-and-control" is problematic, not just because the old prescriptive controls discourage innovation, but also because control focuses attention on reaction to already generated pollutants. A preferable approach would replace control with prevention. However, for effective application it should also retain the command component. The result would be a new "command-and-prevent" system that would combine regulatory authority with a focus on flexible process and performance improvements, the promotion of system efficiencies, and pollution prevention.18 Claims that the regulatory approach is fatally flawed and that voluntary measures are the best response to its continuing limitations are at best questionable.19 They have nevertheless enjoyed continuing popularity among government as well as industry officials. Despite the evident weaknesses in the case for voluntary initiatives, much more effort is being expended on developing a new non-regulatory regime than is being devoted to improving the regulatory approach. This, it seems, is testimony to the influence of globalization and its accompanying ideology, which provide the larger context of the debate. The Practical Limitations of Voluntary Initiatives Proponents of the voluntary approach have claimed that it brings a series of benefits for both industry and the regulator. For instance, they often suggest that such initiatives can reduce the time delay and the resources required by industry to comply with the regulatory process (e.g., applying for permits) while allowing governments to cut resources and expenditures in drafting, monitoring and administering regulations. During a time of fiscal restraint and budget cuts, these promises make voluntary initiatives an apparently attractive vehicle for promoting environmental protection.20

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Why, then, argue against voluntary initiatives? Why cast doubt on initiatives where regulated industries "volunteer" to do something without a legal mandate, and do so possibly more expeditiously and cost effectively than by enacting a regulation? This section attempts to respond to this question by examining the four main limitations of voluntary initiatives. The resurgence of the backroom approach to environmental decision making One of the great achievements of environmental law in recent years has been the introduction of greater public participation in the government decisionmaking processes — a change which has made decision-makers more accountable and, in our view, quite clearly improved environmental decisions.21 The shift to voluntary initiatives threatens to take us in the opposite directions. One of the hallmarks of voluntary agreements in Canada thus far is that they have been negotiated behind closed doors. For example, none of the over one dozen memoranda of understandings negotiated between the federal government, Ontario, and various industrial sectors, was developed in an open consultative manner with public interest groups at the table. There have been only a very few agreements (perhaps only one) where public comment was sought. However, this occurred after negotiations had been concluded and it had no effect on the final agreement.22 Under the federal government's proposed Regulatory Efficiency Act, "compliance agreements" between industry and government would have been negotiated in secret and not even the results of the negotiations would have been subject to public disclosure requirements.23 One voluntary initiative that did include public interest groups during negotiations is the Accelerated Reduction/Elimination of Toxics (ARET) programme. However, after approximately a year, all public interest groups withdrew from the consultation over the lack of progress in having their views heard and acknowledged. After the groups left, the federal government and the various industry associations proceeded to conclude and administer the programme without public interest group involvement. It consequently suffers from limited credibility.24 The general practice of closed-door negotiations of voluntary agreements is a throwback to the regrettable early tradition of regulatory deal-making in Canada, which was gradually corrected after a 25-year campaign to make the environmental decision-making process more open and transparent. At both the federal and provincial levels of governments, significant efforts have been devoted to ensuring that the public has some access to the development of standards, approvals and other such decisions, that evidence offered by a proponent or applicant can be tested or challenged, and that there is some scrutiny of agency discretion. In the normal course of environmental decision-making, such principles of public participation are seldom questioned.25 The absence of participation in the actual negotiation of voluntary initiatives gives credence to the view that these are "private deals" between industry Chapter four: A Sober Second Look

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and government. As with the regulatory route, it may be years before the public will be able to convince the decision makers to open the door to public participation in voluntary initiatives. When it comes to voluntary initiatives, the guarantees for public participation are simply non-existent. Hence, there is little wonder why voluntary initiatives are thought to be quicker and easier; some of the most basic guarantees pertaining to public input are not applicable and therefore government and industry can negotiate outside of the public spotlight. The public confidence in voluntary initiatives will necessarily be compromised when the public is excluded from the negotiations in the first place. What was lost? What was gained? Where were the trade-offs? Pre-emption of more stringent regulatory initiatives and public policy debates The absence of public involvement in the development of voluntary initiatives is worrisome for two related reasons: it increases the danger that use of voluntary approaches will lead to acceptance of inadequate environmental objectives, and it increases the likelihood that public voices will be effectively excluded from influencing decision making on crucial public policy issues. The first problem arises from the essential character of voluntary initiatives. They are voluntary, at least in the sense that industry willingly agrees to do something because it anticipates some net gain. Typically the anticipated advantage that attracts industry participation is the avoidance of less desirable regulatory requirements. Most voluntary agreements, expressly recognizing governments' continuing right to regulate, implicitly assume that government will not do so if an agreement is in place. Otherwise, there would be no incentive for industry to enter into a voluntary initiative. This is where the problem emerges. Because voluntary initiatives rest on industry willingness and on avoidance of stronger regulatory requirements, there would seem to be considerable danger that environmental protection measures will be dictated by what industry is willing to do, rather than by what is required to be done to maintain a healthy and sustainable environment.26 Especially if the deal is struck between government and industry without significant public involvement, there is insufficient assurance that the need for more stringent requirements or greater accountability will be examined carefully. Unlike the regulatory process, the voluntary mechanism lacks the procedural safeguards and public accountability measures that might correct this problem. A possible response would be to let industry "voluntarily" take action and then regulate if that action is insufficient. However, this option is often unrealistic. Companies want reasonable certainty and predictability in the rules that govern their behaviour. They legitimately protest when the rules are changed in mid-course, after technological, personnel, investment, and other decisions have been made, especially when the new requirement entails an essentially [58]

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different response. When initial requirements are set too low, future conflicts are almost inevitable. If the requirements are not strengthened, environmental quality suffers, but if they are strengthened, companies that are part way through the earlier, now inadequate requirements are unfairly burdened. In effect, the timing of environmental decisions is critical and such decisions must be made properly the first time. In the setting of environmental objectives, the central decisions often turn on fundamental points of public policy. Where public input is denied, as in the negotiation of the initiatives, the public is also deprived of its rights to participate in the relevant debates and influence the relevant policy making. When government and industry agree in a voluntary initiative upon targets and how the targets are to be met, they are pre-empting necessary debates among the public on what environmental goals are appropriate and how best to achieve them. One of the most obvious and divisive policy issues in this area is whether initiatives should focus on the reduction of "emissions" to the environment or the reduction of the "use" of substances that lead to environmental problems. In practice this involves the classic debate between traditional end-of-the-pipe, treatment-oriented pollution control and the more "up-the-pipe" process change, pollution prevention approach. While extensive public debate continues and despite international agencies' efforts to promote the chemical use reduction option, governments and industry have been negotiating voluntary initiatives focusing on emissions-oriented pollution control.27 In the end, voluntary initiatives have served to undercut more progressive, more rigorous and more comprehensive environmental protection programmes. Lack of verification and accountability

Few voluntary initiatives have a verification process in place that can measure the effectiveness of the initiative with a high degree of public confidence. Few initiatives provide for independent auditors and assessors, detailed verification protocols, access by the public to raw facility-specific data or funded public advisory panels. Their absence raises scepticism about the reliability of claims about initiative achievements. Voluntary initiatives generally only require industry's "best efforts" to meet specific targets and are not legally binding. Thus the non-binding nature of these types of initiatives creates a high degree of uncertainty about the actual commitment of the industry signatories to ensure compliance.28 Industry argues that even though traditional enforcement routes are not available, such agreements can be enforced in the "court of public opinion." This implies that voluntary initiatives require the public to serve as a watchdog and that companies respond when the public watchdog is unhappy. If a company or an industry fails to comply with a voluntary agreement, the public is expected to notice and embarrass industry sufficiently to compel compliance. Chapter four: A Sober Second Look

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Two sets of questionable assumptions underlie this position. The first set of assumptions concerns the public's willingness and ability to act as an effective watchdog. Effective public supervision requires that individuals and groups have the time and resources to monitor compliance with voluntary initiatives, that they have convenient access to reliable data, and that the media are willing to publicize non-compliance. These conditions are not met easily or automatically and there has been little evidence of effort to meet them effectively in many voluntary initiatives so far. Indeed, it is not clear that this problem is understood. Proponents of voluntary initiatives remain puzzled about environmentalists' lack of interest in participating in public advisory groups regarding voluntary agreements. Recently, senior government officials sent a letter to stakeholders noting the "insufficient interest" in forming a public advisory group to "enhance public participation" in four joint federal-provincial voluntary initiatives.29 What they apparently fail to recognize is that public interest groups generally find their limited resources better employed in maintaining and strengthening the regulatory structure than in participating in these types of advisory groups. The lack of opportunity for input into formulating and negotiating the terms of these initiatives may also account for the disinterest on the part of public interest stakeholders. The second set of questionable assumptions centres on the expectations that the public pressures would, in themselves, be sufficient to compel corporate compliance with voluntary commitments. Available empirical data do not support the argument that companies are influenced by the fear of public scorn to take voluntary programme compliance seriously. In 1996, KPMG Management Consultants conducted a poll of Canadian companies, municipalities, school boards, and hospitals concerning their motivations for having an environmental management system in place. Of those that had such a system, 93 per cent said their primary motivation was to ensure compliance with regulations. Seventy-three per cent also cited concern about potential directors' liability, a factor also dependent on environmental laws. Voluntary programmes ranked near the bottom of the list of motivators.30 Introduction of new inequities A primary concern with the use of voluntary initiatives is that it creates an uneven playing field for the regulated community. A classic example of this problem arose in the context of negotiations of compliance agreements under the proposed Regulatory Efficiency Act. A report prepared for the Standing Committee which reviewed the proposed statute was highly critical of the scheme. The report noted that the proposal: ... contemplates a system under which there may eventually be as many different rules as there were persons subject to a particular regulation. One person may be dispensed from the application of five sections of the regulations, a second may be dispensed from the application of the whole [60]

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regulation, while a third person remains subject to the regulation because he was unable to persuade public officials to grant him any dispensation. To describe such a system as one that respects the principles of equality before the laws strains credulity.31 Several forms of unfairness are likely to ensue. Large companies with greater resources, expertise, and access to government decision-makers will have a significant advantage over smaller companies in entering into voluntary initiatives. In addition, the negotiation of such initiatives may not include all companies within a particular industrial sector, thus creating "free riders" — companies that are not a party to the agreement but who gain an advantage by being associated with it. Free riders undermine the credibility of the agreement and reduce the environmental benefits by continuing to pollute at levels beyond the targets set in the agreement. If "free riders" are responsible for a large portion of the targetted pollution, the overall environmental benefit of the initiative may be modest at best.32 The free rider problem is really one of equity. Some facilities within a sector will invariably refuse to "volunteer" to do anything, unless prescribed by law. How should they then be treated with respect to the good performer? Should they receive the benefit of not being regulated (which is a benefit of having a voluntary initiative)? Industry response to the free rider problem has been manifold. Some suggest that programmes should be developed to give extra benefits to good performers. Their hope is to "unlevel" the playing field for the benefit of good performers.33 Others are more explicit in calling for regulatory concessions; that is, if you are a good performer in a voluntary programme, there is the possibility of being expressly relieved of some regulatory burden. Another option would be to have a regulation put into place that makes all facilities comply with the programme. While even some in industry regard this as a fair approach, others question why it is necessary to precede the exercise with a voluntary component when in fact it might be easier to regulate from the start. Finally, voluntary agreements require, and will continue to require, substantial government resources.34 The administrative costs involved in negotiating and implementing voluntary agreements with specific industries may, in fact, be more costly than simply promulgating and enforcing a single regulation. The Need for a Regulatory Approach The question which remains is not whether to replace regulations with voluntary initiatives, but rather how to ensure that the current regulatory system can be made to work better. In a time of increasingly scarce government resources, it would be more productive, in the long run, to concentrate on improving how regulations are made and administered. Better designed regulations that are cost-efficient, encourage innovation, and provide clear performance goals could address most of the concerns that the regulated community expresses Chapter four: A Sober Second Look

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about the current regulatory structure. While voluntary agreements may, in specific instances, be useful in promoting action beyond a regulatory baseline, an effective and enforceable regulatory system will be critical to ensure the success of any such agreement. The need for a strong regulatory framework cannot be overstated. A recent article in the Harvard Business Review lists a number of compelling reasons for regulations: to create pressures that motivate industry; to improve environmental quality in cases where innovation and the resulting improvement in resource productivity do not completely offset the cost of compliance; to alert and educate companies about likely resource inefficiencies and potential areas of technological improvement; to raise the likelihood that product innovations and process innovations in general will be environmentally friendly; and to level the playing field during the transition period to innovation-based environmental solutions, ensuring that one company will not gain position over others by avoiding environmental investments.35 In the final analysis, ensuring the regulatory approach works would better serve the broader societal interests more effectively and efficiently than expending government time and resources devising alterative schemes with potentially more pitfalls and questionable results. Paul Muldoon is the executive director and Ramani Nadarajah is counsel at the Canadian Environmental Law Association. They thank Paul McCulloch, student-at-law at the Association, for his help and comments in drafting this article. Notes 1

2 3

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Existing critical analyses include, for example, Karen Clark, The Use of Voluntary Pollution Prevention in Canada: An Analysis and Commentary (Toronto: Canadian Institute of Environmental Law and Policy, 1995); Paul Muldoon, "Drawbacks to Voluntary Pollution Prevention Agreement in Canada," The Great Lakes United Bulletin of Pollution Prevention (Fall 1994), p. 15; John Jackson, "The Spread of 'Regulatory Voluntarism' and Abandonment of the Goal of Zero Discharge," The Great Lakes United Bulletin of Pollution Prevention (Fall 1995), p. 16; and Terry Burrell, "Law in the Public Interest: Shrinking Government and the Protection of Ontario's Environment," a paper prepared for a conference sponsored by the Canadian Environmental Law Association, December 1996. See, for example, Doug Macdonald, et al. "Who Killed CIPSI?" chapter 9, below. One example would be where an industrial association issues guidelines for behaviour and performance targets along with an internal disciplinary process without any involvement whatsoever by government. Paul Muldoon and Ramani Nadarajah

4

5

6

7

8 9

10

11 12

The type of "compliance agreements" contemplated by the proposed federal Regulatory Efficiency Act (Bill C-62, 35th Parliament, ist Session [ist reading, December 6, 1994]) is a classic example of this end of the spectrum, since if a compliance agreement were entered into by a facility and the government, the facility would be exempt from specified regulatory requirements. The government chose not to proceed with this bill due, at least in part, to vocal opposition from a range of public interests groups across Canada. A more current, and now common, example would be the "memoranda of understanding" whereby industrial associations (and in one instance, a particular facility) have entered into agreements with one or more levels of government to undertake certain action to achieve certain objectives. T. Conway, "Taking Stock of the Traditional Regulatory Approach," in Bruce Doern, ed., Getting it Green: Case Studies in Canadian Environmental Regulation (Toronto: C.D. Howe Institute, 1990), pp.25-5y. John Swaigen, "How the Legal System Works," in David Estrin and John Swaigen, eds., Environment on Trial (Toronto: Emond-Montgomery Publications Ltd., 1993), p. 7. For example, on January 29, 1998, the federal Government and nine of the provinces signed the "Canada-Wide Accord on Environmental Harmonization," which seeks to harmonize environmental protection laws among the different jurisdictions. This accord raises serious concerns that it may result in the erosion of standards in those provinces that have chosen more stringent regulations and detract from the federal government's ability to set and maintain effective national standards. See National Environmental Law Section of the Canadian Bar Association, Commentary on the Draft Environmental Management Framework Agreement (Ottawa: Canadian Bar Association, 1996); and Canada, Standing Committee on Environment and Sustainable Development, Harmonization and Environmental Protection: An Analysis of the Harmonization Initiative of the Canadian Council of Ministers of the Environment (Ottawa: House of Commons, December, 1997). Linda McQuaig, Shooting the Hippo (Toronto: Penguin Books Canada Ltd., 1995),

p.7. Mark Winfield and Greg Jenish, Ontario's Environment and the Common Sense Revolution, A Second Year Report (Toronto: Canadian Institute of Environmental Law and Policy, 1997), p. 2. For instance, by 1996 the number of water monitoring stations in Ontario had dropped from nearly 700 to 200. The number of air monitoring stations had decreased to its lowest level in twenty years. See Ontario Public Service and Education Union, Nothing Left to Cut: A Field Report on the Activities of the Ontario Ministry of Environment and Energy (Toronto: OPSEU, 1997). Paul McKay, "Environment Canada Told to Cut Staff, Spending: Impact Compounded by Provincial Cuts," The Ottawa Citizen, October 4, 1997. Environmental Commissioner of Ontario, Annual Report 1996 (Toronto: ECO, 1997). The Canadian Environmental Law Association has provided comment on

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13 14 15 16 17

18 19 20 21 22

23 24 25

26

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many of the proposed changes. CELA'S publications list includes the detailed submissions. ECO, Annual Report 1996 (see n. 12), p.i. Secretariat of the Standing Joint Committee for the Scrutiny of Regulations, Report on Bill C-6z (Ottawa:The Secretariat, February 16, 1995), pp.i5-16. See Michael E. Porter and Claas van der Linde, "Green and Competitive: Ending the Stalemate," Harvard Business Review (September-October, 1995). Interagency Environmental Technologies Exports Working Group, Environmental Technologies Export, p. 16. Green Industries Ministerial Advisory Committee, Green Industry Sector Strategy, citing Sentar Consultants, Ltd., Western Provinces Environmental Industries Business Development Study (prepared for the Governments of Canada, British Columbia, Alberta, Saskatchewan, and Manitoba, 1993). See Bradley Wylynko,"Beyond Command and Control," chapter 13, below. Porter and van der Linde, "Green and Competitive" (n. 15), and Clark, Voluntary Pollution Prevention (n. i). See Michael Potier, "Agreement on the Environment," The OECD Observer 189, (August/September 1994), pp. 8-n. See Ontario, Environmental Bill of Rights, 1993 Statutes of Ontario 1993, c. 28. and Canadian Environmental Protection Act, Revised Statutes of Canada, 1990, c. 16. The Environmental Management Agreement (a Three Party Agreement between Environment Canada, the Ministry of Environment and Energy, and Dofasco, Inc.), for example, was placed on the Environmental Bill of Rights Registry after it had been negotiated. The public was not part of the negotiation of the agreement. For further discussion on this agreement, see Lynda Lukasic, "The Dofasco Deal," chapter n, below.The only late adjustment to the agreement required that all, rather than just 50 per cent, of stored high level PCBS were to be destroyed by the year 2000. Standing Joint Committee for the Scrutiny of Regulations, Report on Bill C-62 (n. 14). See Debora L. VanNijnatten, "The Day the NCOS Walked Out," chapter 7, below. For further background, see Marcia Valiante and Paul Muldoon, "A Foot in the Door: A Survey of Recent Trends in Access to Environmental Justice," in S.A.Kennett, Law and Process in Environment Management (Calgary: Canadian Institute for Resources Law, 1993), pp. 142-169. Paul Muldoon, Comments on Environmental Management Third Party Agreement between Environment Canada, MoEE and Dofasco, Inc. (Toronto: Canadian Environmental Law Association, 1997). For example, the purpose of the Memorandum of Understanding between the Canadian Chemical Producers Association and the Ontario Ministry of Environment is to "reduce emissions." Most of these programmes are emissions based. However, 23 US states now have toxics use reduction laws that focus on chemical use as opposed to emission levels only. Similarly, the International Joint Commission which monitors the regulatory programmes of both the US and Canada has recommended examining chemical use reduction as means of furPaul Muldoon and Ramani Nadarajah

28 29

30

31 32

33

34 35

thering pollution prevention. See International Joint Commission, Seventh Biennial Report to the Government of Canada and United States (OttawaWashington: IJC, 1994). Clark, Voluntary Pollution Prevention (n. i),p. 8. Brian Le Clair, Senior Advisor, Pollution Prevention Office and Tom Tseng, Manager, Toxics Prevention Division, Ontario Region, Environment Canada, to Pollution Prevention Stakeholders dated January 8,1998. The letter indicated that there was insufficient interest in creating a public advisory group for four joint federal-provincial pollution prevention Memoranda of Understanding. KPMG Environmental Risk Services Inc., Canadian Environmental Management Survey (Toronto: KPMG, 1996). The survey found that the influence of voluntary programmes has increased from 16 to 25 per cent since 1994. However, KPMG noted that the influence of international standards (such as ISO 14000), a factor also related to voluntary initiatives, had dropped from being considered important by 25 to 16 per cent. The declining influence of international standards, the report notes, was oddly inconsistent with the increased importance of voluntary programmes. In any event, both voluntary initiatives and international standards were at the bottom end of the scale of factors influencing organizations to take action on environmental issues. Standing Joint Committee for the Scrutiny of Regulations, Report on Bill C-62 (n. 14), p.7Michelle Swenarchuk and Paul Muldoon, De-regulation and Self-Regulation: A Public Interest Perspective (Toronto: Canadian Environmental Law Association, 1996). This is part of the rationale for the Ontario draft programme entitled "REVA Recognizing and Encouraging Voluntary Behaviour." See Ontario Ministry of Environment and Energy, "Proposal to Establish 'Performance Plus+'" (Draft Paper, November 13, 1996). Clark, Voluntary Pollution Prevention (n. i),p.i7. Porter and van der Linde, "Green and Competitive" (n. 15).

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five Responsible Care • Canada's most influential voluntary initiative offers many lessons but Its biggest challenges may lie ahead • John Moffet and Francois Bregha In 1990 the United Nations Environment Programme granted Canadian Chemical Producers' Association1 president Jean Belanger a Global 500 award to recognize the significant environmental benefits that have flowed from the CCPA'S Responsible Care programme. Probably the leading sectoral voluntary environmental programme in the world, Responsible Care was initiated in Canada after a series of highly publicized accidents in Europe, Asia, and North America had undermined the public reputation of the chemical industry, and raised the spectre of more costly and intrusive government regulation. Over the past decade and a half, it has evolved gradually to become an elaborate management system adopted by chemical industries in 40 countries and copied by other industry sectors in Canada and abroad. Responsible Care includes a statement of policy, guiding principles, a national advisory panel, a chemical referral centre, a verification process, and six codes of practice with 152 individual elements covering community awareness and emergency response, research and development, manufacturing, transportation, distribution, and hazardous waste management (see sidebar).While it rests firmly on industry self-interest, it is also a recognition of moral obligations and an attempt at making a fundamental change in corporate culture.2 Origins and Evolution In 1977, the explosion of a chemical factory in Seveso, Italy marked the first of several high-profile and extensively-reported accidents that rapidly undermined public confidence in the chemical industry and led to demands for stricter government regulation. In Belanger's words,"... we went from being an 'invisible industry' to one under a microscope. Our employees found themselves being stigmatised simply because they worked in the chemical industry."3 Opinion polls commissioned by the industry showed that the public did not discriminate among companies; the actions of one company tarnished the industry as a whole. Large companies such as Dow Canada realized as a result that only a concerted approach would restore public confidence in the industry.4 Concerned about its eroded credibility, not just with the public but also government decision makers, the CCPA developed a Statement of Policy on Responsible Care in 1979. At the time, the Statement of Policy was a one-page statement of good intentions, neither binding on CCPA membership nor backed-up by operational codes of practice. In 1983, after the extent of the chemical contamination at Chapter five: Responsible Care

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Love Canal became better appreciated, a dozen members of the CCPA agreed to sign the statement to signify public commitment to the principles underlying it,5 and the CCPA asked the senior executives of all its other members to sign as well. Although compliance with the statement remained voluntary and not yet a condition of membership in the association, several CCPA members balked at committing themselves publicly to such a code of ethic, in part because of legal liability fears. They were afraid that a judge might use the statement in determining the appropriate test of due diligence in the event of an accident.6 In 1984, a public opinion poll revealing wide public distrust of the industry7 and the Bhopal disaster in India tipped the balance in favour of more forceful action. That year, the CCPA made a commitment to the Statement of Policy on Responsible Care a condition of membership in the association. In addition, the CCPA asked its member companies to conduct safety audits of their facilities and the handling of their products. The CCPA hoped that voluntary action would forestall restrictive government regulation. Canadian chemical company leaders were concerned about the proliferation of regulations in the United States and the renewed interest in Canada in tightening regulatory controls,8 particularly in a climate of public mistrust. As CCPA president Belanger acknowledged in a speech, "Couple mistrust with a growing public belief that environmental laws and regulations are too lax and you can see that an industry like ours could suddenly find itself the target of harsh and perhaps unmanageable restrictions" (Belanger, 1990, 12). CCPA members decided that collective action was required. Recognising that the Statement of Policy on Responsible Care needed to be backed up to be credible, the CCPA commissioned internal task forces to identify possible courses of action. One of the most important recommendations of this exercise was to adopt a "cradle to grave" approach.9 The CCPA decided to develop a detailed code of practice for every step in a chemical's life cycle. It established six specialized task forces, comprised of representatives of member companies who were experts in the area, to translate the principles in the Statement of Policy into operational terms. These task forces presented draft codes to a National Advisory Panel. Run by a professional facilitator, the panel was comprised of 12 (unpaid) external experts and environmental and labour advocates. After on average six or seven iterations of each draft code, the National Advisory Panel and the CCPA Board of Directors agreed to appoint one panel member to revise each of the codes to ensure consistency. This process resulted in the six Responsible Care codes of practice (see sidebar: Key Elements). In 1991, the CCPA added the collection and publication of emissions and waste data to the programme and made it mandatory in 1993.The CCPA now reports these data together with information on transportation and employee health and safety annually. In addition, Responsible Care emphasizes community consultations, requiring each member company to engage in ongoing community advisory processes. Finally, in 1993, the programme required mem[70]

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Key Elements of the Responsible Care Codes of Practice Community Awareness and Emergency Response (CAER) The CAER requirements relate to each of the other five Codes.This Code requires companies to establish a "right to know" programme at any site where chemicals are handled. Each company must: know and respond sensitively to community concerns; advise the community of potential hazards associated with its operations; have an emergency plan; and integrate the emergency plan with the community emergency response plan. Research and Development This Code applies to each stage of development (from initial research to marketing and beyond) of all investigative technical work regarding new technical products, processes, equipment and applications, as well as all new uses for existing products. Members may not sponsor or conduct research unless it complies with the code. Members are also precluded from introducing new products not developed in accordance with the Code. Manufacturing This Code applies to all aspects of manufacturing and operations - including siting and decommissioning - of both new and existing sites. Members must develop systems covering plant design, construction and operation to protect employees, the community and the environment from any harmful effects of chemical manufacturing. Transportation Members must have an active programme to ensure that they transport chemicals and chemical products in a manner that minimizes the risk of accidents and of injury to the persons involved in transportation activities, and to the public and the environment along transportation routes.They must provide to people situated along those routes information concerning any dangers. Distribution This Code covers all activities related to the sale of chemicals and chemical products and services as well as the movement of goods that come from suppliers to be resold or to be converted into new products.The Code establishes standards and procedures and provides training guidance for the storage and handling of chemicals and chemical products. Members may not buy from suppliers or sell to distributors and customers who do not comply with the Code. Hazardous Waste Management Members are encouraged to assess best practices, to reduce, reuse, recycle or recover hazardous waste, and to cooperate in remediating contaminated sites. These key elements are excerpted from the Canadian Chemical Producers Association, Codes of Practice Commitment Package (Ottawa: CCPA, undated).

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bers to conduct internal audits of compliance with the codes of practice and, in 1994, introduced a system of external verification of performance. Responsible Care may continue to evolve.The CCPA claims devotion to the philosophy of "continuous improvement" and the National Advisory Panel provides ongoing advice on the programme's development and implementation. Items listed for future CCPA consideration include marketing and advertising practices, the role of life cycle analysis, full cost accounting, minimizing use or elimination of certain products, energy conservation, the role of renewable and ecologically sound resources for feedstock and energy needs, the extent of contaminated site remediation required, remediation of contaminated environments other than waste sites, more comprehensive performance reporting to stakeholders, and the extension of technology sharing beyond sharing of management practices.10 The Impacts of Responsible Care The main objectives of Responsible Care were to regain public trust and forestall or influence future regulatory developments by improving the environmental performance of the industry as a whole and by improving community relations. Its successes have been considerable but incomplete. Environmental and workplace health and safety impacts CCPA member records indicate a steady decline in workplace injuries, a marked reduction in the frequency and severity of transportation incidents, and significant cuts in emissions of various pollutants over the past decade. By 1994, CCPA member companies had achieved a 50 per cent reduction in their total emissions of polluting substances compared to 1992 (60 per cent in heavy metals, 87 per cent in sulphuric acid, 50 per cent in ozone depleting chemicals; and 30 per cent in known carcinogens).11 These cuts have been made at the same time the industry has grown in output, and thus cannot be attributed to economic slowdowns. CCPA members project a further 50 per cent cut in overall emissions by 1999. These reductions are the result of several factors, including mandated government reporting requirements (NPRI), other voluntary programmes (ARET), and legislated targets (e.g., for CFCS) and cannot therefore be attributed entirely to Responsible Care. Both CCPA members and third parties12 agree, however, that Responsible Care has played an important role in ensuring that these emissions cuts have been made by all members, rather than just by a few industry leaders. [72]

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Financial and economic impacts Like most environmental initiatives, Responsible Care requires action with a long-term perspective. This inevitably conflicts with the myriad pressures facing companies to forego long-term environmental investments in favour of short-term profit. Such pressures come from financial institutions, markets, and investors, which typically have focused on short-term considerations with little understanding or appreciation of the long-term potential for environmental investments. Individual managers too are often evaluated largely on the basis of short-term performance. The disincentives to participate in the type of collective action required by Responsible Care are particularly acute among small companies, few of which are in the CCPA. IS The CCPA currently represents 70 chemical manufacturers. While its membership includes a limited number of small specialized producers and giants such as Dow, most members are medium-sized firms with 150 to 500 employees.14 Small companies tend to be less worried about the image of the industry as a whole, and to have less knowledge about new "green" technologies and fewer resources to invest in change that has little prospect of short-term payback. The implementation of Responsible Care nonetheless includes a large number of participants and represents a considerable investment by the Canadian chemical industry. In addition to the work implied in the development of detailed codes of practice, the CCPA has held training workshops for its members on each of the codes, published newsletters, prepared user guides, set up a chemical referral centre, developed compliance and reporting protocols, established the national advisory committee, and organized regional "leadership groups" to allow member companies to share information and apply peer pressure on industry laggards. To pay for these collective investments, the CCPA significantly increased its membership dues shortly after introducing Responsible Care. On top of this collective effort, individual companies have had to train staff, collect information, develop "written policies, standards and procedures" for each of the six codes, set up reporting systems, make necessary process changes, engage in community consultations, and monitor compliance.15 According to Brian Wastle, CCPA vice president for Responsible Care, only one company has ever left the CCPA over concerns about the cost of compliance.16 Evidently most CCPA members find net benefits. Two schools of thought dominate the debate about these benefits. Michael Porter and Claas van der Linde, for example, argue that the costs of continuous environmental improvement are investments in competitiveness.17 Others argue that once the low hanging fruit (e.g. energy retrofit investments with short payback times) have been picked, these types of investments will become increasingly expensive. When evaluated against other opportunities, such investments may only be justifiable from a social perspective - not from an individual firm's perspective - and government intervention will be required to ensure that they are made.18 Chapter five: Responsible Care

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Although Responsible Care participants have reported a wide range of possible benefits, at least some of them are in the "low hanging fruit" category. Most participants have reduced their workers' compensation, waste management, clean up and disposal costs. Pollution prevention research spending has reportedly yielded returns of 150 per cent on investment for Dow Chemical.19 Most participants have improved their ability to respond to emergencies due to improved systems and improved community relations, which enable them to avoid protracted disputes based on distrust. Some proponents argue that Responsible Care helps companies reduce the costs of product research and development by helping them avoid costly investments in environmentally inappropriate products. Some members also credit their Responsible Care certification status with helping ensure faster permitting and less costly financing and insurance. At least one company has reported that its participation in Responsible Care has led its banks to reduce their lending rates because they were satisfied that the company represented a lower risk. Many participants also believe that they have reduced their potential legal liability. Porter and others argue that many of the elements of Responsible Care are consistent with total quality management. They hold that, particularly for small companies, the information that participants have developed and shared as a result of Responsible Care has helped companies learn, plan, and manage in a more systematic manner. The resulting improvements can range from significant savings in inputs and waste disposal costs to more intangible benefits such as strengthened communications between plant and corporate offices.20 This management system orientation may also help companies adapt to the iso 9000 and 14000 standards more easily than some other sectors.21 While implementation of the programme inevitably entails costs, some in the industry prefer to characterize Responsible Care's stewardship approach as expanding the nature of the services the industry offers. One US industry official asks, How much new business did you get because you did a good job at a customer's site? How many lawsuits did you avoid because you kept a customer from misusing a product? Or how much did you save on environmental cleanup because of safer handling or disposal? Those are things that are very difficult to measure, but they are services that a company might not have provided 10 years ago.22 The degree to which the chemical industry will continue to realize these benefits, especially in an era of increasing international trade, is unclear. Some proponents say Responsible Care helps the Canadian chemical industry differentiate itself from foreign competitors and attract investment in new plants in Canada. But increased competitiveness pressures today are leading to restructuring, downsizing and potentially less focus on environmental issues.23 The pressure to demonstrate a short-term return on environmental investments may therefore grow. [74]

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International trade dynamics are also generating more generic environmental management certification programmes.The European Union requires compliance with its "EMAS" for certain firms operating in member countries and many transnational appear to be interested in obtaining iso 14000 certification. Neither of these standards is as comprehensive as Responsible Care. If these schemes become the accepted standard for international commerce, the Canadian chemical industry may not continue to be willing to enforce their own, more comprehensive standard as well.24 Impacts on corporate culture The philosophy embodied even in the earliest versions of Responsible Care amounted to a new attitude towards environmental protection and worker safety. Industry traditionally did the minimum the law requires, maintained a low profile and downplayed public concerns. Responsible Care encouraged participants to seek out and address public concerns and lead the policy process. It therefore had to overcome not only immediate concerns about cost and risk but also habits deep seated in corporate culture.25 Some anecdotal evidence suggests that the initiative has helped change organizational culture to a certain extent. On the basis of several interviews with three CCPA member companies, A.J. Green (1995) cites numerous examples of actions reflecting changed beliefs and attitudes directly attributable to Responsible Care. These include investments made in increased safety; recognition of the value in consulting neighbouring communities despite the difficulties in doing so; adjustments in compensation approaches to remove conflicts with Responsible Care objectives; slower, more rigorous decisionmaking; greater emphasis on pollution prevention; acceptance for responsibility over products after they leave the plant; and grudging acceptance of loss of sales to customers who did not meet Responsible Care standards.26 Responsible Care may have also helped promote employee pride and satisfaction, enhancing productivity as well as helping create a cadre of ambassadors to the community. Green quotes one company executive saying, "It's morally good. It's righteous. It's great, it was a lot of fun working on it. ... Responsible Care breeds happier people."27 Finally, the strong emphasis on public outreach in Responsible Care may have helped foster a more consumer-oriented attitude in what was traditionally a very inward-oriented industry. Cultural change, however, is a long-term process. A survey by the US Chemical Manufacturers Association shows that, seven years into their version of the programme, fully 35 per cent of the industry's employees did not know what Responsible Care was.28 David Powell, a University of Toronto academic and consultant who has been extensively involved in Responsible Care almost since its inception, similarly observes that although the Canadian industry has changed considerably in the intervening ten years, many companies still have difficulty understanding the need for ongoing public dialogue - a concept that was antithetical to the pre-Responsible Care industry, and whose implementaChapter five: Responsible Care

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tion remains a challenge for many traditionally trained engineers and business managers. Impacts on government policy One of the main objectives of Responsible Care was to foster a less adversarial relationship with government and to pre-empt or at least influence the content of additional regulation. Success in achieving this objective has obvious attractions for industry but can raise concerns from a broader public interest perspective. Relationship with existing regulatory obligations

Responsible Care may well have helped increase the standard of care expected of the chemical industry under existing regulatory obligations. Most environmental regulations establish strict liability offences. Once the Crown has proved a breach of the law, the defendant can avoid liability only by establishing that the breach occured despite "due diligence."29 Canadian courts have emphasized that due diligence requires a management system, with such elements as regular audits, clear assignment of responsibilities, training, instruction and supervision of employees, information systems, and effective lines of communication.30 One of the leading factors relied on by the courts in defining what constitutes a reasonable management system is the prevailing industry norm.31 Thus, it is widely expected that chemical companies will increasingly be held to a standard like that established by Responsible Care.32 It is also conceivable that Responsible Care could influence the standard of care owed by a participant to a third party. Civil suits of negligence and nuisance are based on tests of reasonable behaviour. If Responsible Care ratchets up the standard of care reasonably expected of a chemical manufacturer, it may also indirectly influence the standard of care owed by that business to its neighbours. While Responsible Care may have a clearly positive impact on regulatory and common law standards of care, its implications for the administration of those laws are mixed. Resource-strapped government enforcement officials may be tempted to use membership in Responsible Care as the basis for placing a CCPA company low on their list of inspection priorities. But empirical evidence so far does not confirm that Responsible Care certified companies will necessarily always be in compliance. The federal and provincial governments have prosecuted various CCPA members for environmental violations over the last five years. Tioxide, a (then) CCPA and Responsible Care member, received the largest penalty ever imposed under federal environmental legislation in a widely publicized 1995 case. Moreover, Responsible Care membership is not contingent on 100 per cent compliance. Companies can become members upon making a commitment to comply with the programme. They then have three years to fulfill the obligations, after which time they are subject to evaluation. Even certified companies will not automatically be [76]

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decertified upon violating a law. The CCPA s current policy is that a violation raises a "red flag" and that individual incidents and patterns of behaviour will be dealt with on their own merits. Responsible Care officials acknowledge the dilemma. Failure to expel a violator could undermine the credibility of the programme. But some violations may be minor and expulsion from CCPA means that member companies lose their leverage over a fellow chemical company, whose performance will inevitably affect the entire industry's reputation. Proponents of Responsible Care argue that participation is not a guarantee of compliance, but certified companies are less likely to be out of compliance on a systematic basis, and more likely willing to take remedial measures without a threat of prosecution. Thus, it is argued, government enforcement officials should treat Responsible Care companies differently from other companies by emphasizing a compliance promotion approach versus a stricter enforcement approach. Most environmental advocates take strong exception to this assertion, arguing that examples such as Tioxide illustrate that officials must continue to exercise enforcement discretion on a case-by-case basis. Critics further warn that reliance on a non-governmental programme to establish enforcement priorities may be the start of a slippery slope to deregulation. Relationship with the policy development process

One of Responsible Care's explicit objectives was to build up industry credibility with government decision-makers and to pre-empt stricter government control of the industry. Most observers and participants agree that the chemical industry now enjoys a much more cooperative and influential role with government policy-makers than before it initiated the programme. Some specific success are also evident. The fact that the CCPA developed and implemented its own reporting process in the early 19905, for example, may have helped influence the form of the federal National Pollutant Release Inventory (NPRI) scheme, which is less intrusive than the US Toxics Release Inventory (TRI) model. Responsible Care's high profile may have increased government's comfort with voluntary measures generally, thereby helping foster support for initiatives such as the Major Industrial Accidents Council of Canada. CCPA officials credit Responsible Care with the government's increased willingness to consider voluntary commitments in lieu of regulations for specific issues such as benzene emissions from chemical manufacturers. Some point to the recent memoranda of understanding between the chemical industry, the federal government, and various provincial governments as evidence of a new partnership.33 Both industry and government officials agree that the programme has helped increase the level of trust between the government and the industry. To a certain extent, however, this development simply reflects the recent trend towards a more transparent and inclusive regulatory development process that has applied also to other sectors which do not have the equivalent of a Chapter five: Responsible Care

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Responsible Care programme. Moreover, opinion is divided on whether these new dynamics are desirable. Critics within the environmental and labour communities argue that one of the potentially most dangerous aspects of government involvement in voluntary initiatives is the increased potential for capture. Government involvement may amount to tacit approval of certain policies, and may effectively amount to promises not to regulate in other cases. According to many critics, government officials and industry representatives alike, these concerns point to the need for strong accountability mechanisms and public involvement in voluntary measures. CCPA officials emphasize that they have addressed these issues explicitly in the design of Responsible Care. Impacts on the industry's public image The chemical industry is one of the only major Canadian industries to have opened itself up to extensive public scrutiny through annual environmental reports, the creation of public advisory committees, and third-party verification of its performance. It has invested heavily in improving its public image.34 And there is widespread agreement that Responsible Care has improved community-level public relations.35 Although these efforts have increased the industry's transparence, and arguably have helped improve its environmental performance, they have not yielded the expected dividends in improved public perception. Responsible Care may have helped arrest the precipitous decline in trust that marked the early to mid-19808, but CCPA polls continue to reveal low overall levels of public confidence in the industry. One of the reasons for this failure may be found in the mixed views of environmental and labour advocates. Some acknowledge the significant changes carried out by the chemical industry since the inception of Responsible Care, pointing to features such as the emphasis on public involvement and reporting as models for voluntary measures in other sectors. Some critics argue that Responsible Care's accomplishments remain superficial. A union leader at Dow Canada, for example, argues that Responsible Care has brought no great change to the company's operations, just an evolution in the understanding of worker safety and health.36 More commonly, however, the criticism levelled against Responsible Care is not that the programme has been ineffective, but that its very success is now being used inappropriately as a shield against further regulatory intervention. Paul Muldoon of the Canadian Environmental Law Association argues that these problems almost inevitably arise when governments become involved in voluntary measures — as they have with the CCPA pursuant to the federal and provincial memoranda of understanding signed in 1995. Similarly, David Bennett of the Canadian Labour Congress argues that the use of Responsible Care as a lobbying device against further regulation is engendering considerable cynicism and skepticism among third parties. This problem may be exacerbated in the case of Responsible Care by the high profile role played by the CCPA both in administering the programme and [78]

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in handling the industry's government relations interests. A number of critics argue that the CCPA has adopted contradictory roles by using the success of Responsible Care as the basis for increasingly anti-regulatory lobbying.37 Explaining Responsible Care and its Impacts It is not immediately easy to see why Responsible Care was born in Canada and in the chemical industry. In the 19805 chemical companies in other countries also faced loss of public trust and growing pressure for stricter government regulation. Indeed, the major events that had eroded this trust — Seveso, Love Canal, Bhopal - had all happened outside Canada's borders, although a few lesser incidents (for example, the Mississauga train derailment, the St. Clair toxic "blob," the PCB fire in St.-Basile-le-Grand) and growing scientific concern over the effects of persistent, bio-accumulative toxic chemicals on wildlife and humans, particularly around the Great Lakes, contributed to the changing public mood. Other sectors, oil and gas for example, also faced public scrutiny after major environmental disasters, and were more vulnerable to public ire, since they sold directly to the consuming public. Nevertheless, no other sector in the past decade has set collective standards as rigorous as those established by the CCPA. Part of the answer to this puzzle lies in the development of environmental policies in the 19805, and the particular circumstances of the Canadian chemical industry at that time. As M. Roy observes, the pressure for responsible action facing North American industries had expanded during that period to encompass employees, consumers, and spouses and children of executives, each of whom plays an important role in shaping the "culture" within which businesses make pollution-related decisions.38 These pressures were accentuated for the chemical industry. Because it is highly capital-intensive, the chemical industry places a premium on regulatory certainty and good employee relations in order to ensure adequate investment levels. In the wake of Seveso and Bhopal the industry faced a rapidly growing loss of public confidence. While it was not concerned about direct consumer boycotts, it was very concerned that public mistrust could lead to a decline in interest in working in the industry, and in increased demand for new regulations. In Canada, these concerns took on particular significance given the federal government's announced intention to reform the Environmental Contaminants Act and renewed provincial interest in environmental reform in the mid 19808. Canadian chemical industry was able to respond to these pressures in a positive way in part because it was relatively small (compared to the US, for example) and, despite being mostly foreign-owned, it operated relatively autonomously. The industry had also recently enjoyed positive experiences in a couple of high-profile multistakeholder processes, which may have suggested to some of the participants that a more proactive and participatory approach to the policy process might serve better than the industry's traditional defensive approach.39 The single most important factor, however, appears to have been the role of Chapter five: Responsible Care

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specific leaders. Heads of the largest Canadian chemical companies were instrumental in developing the new vision and pushing their peers to accept it. They were supported by CCPA president Belanger, who had been appointed in 1979. A former civil servant, he was sensitive to the industry's need to re-establish its credibility in order to influence government policy, and he understood the growing importance of working collaboratively with external partners. Once established, Responsible Care faced the central voluntary initiative challenge of balancing standard rigour against participant capacity. If standards are set too high initially, most companies may be reluctant to participate. If standards are too low, no credibility is gained. Responsible Care's response was incremental development, which recognized that peer pressure and culture change require time to evolve, and allowed participants to design each aspect themselves. Other crucial factors have been the dedication of sufficient resources,40 and an emphasis on peer pressure and mutual assistance. Responsible Care had to win the participation of companies concerned about the costs, or reluctant to place all their environmental activities under the Responsible Care umbrella, or worried that participation in a collective programme would eliminate benefits from unilateral action, or unwilling to participate without assurance that all others would contribute their fair share and not "free ride." The CCPA used peer pressure effectively to create an atmosphere of mutual accountability and to encourage laggards to improve their performance. Among the main vehicles for the delivery of Responsible Care are the six Regional Leadership Groups, comprised of the chief executive officers from each member company. These groups meet quarterly to "compare notes of their progress, or lack thereof, and their difficulties, and offer each other help in approaches or expertise."41 Beyond providing a forum for trading advice and reporting on progress, these "leadership groups" have demonstrated the personal commitment of the chief executive officers and have proven to be an effective means of applying peer pressure: "The consequences of a chief executive having to stand up in front of his peers and say, 'We didn't make it' are severe enough that only once has a member withdrawn for not meeting even the minimum standards."42 One of Responsible Care's most important innovations is that it has fostered the transfer of technical know-how among chemical companies in reducing their emissions of certain toxic substances. Large companies, in particular, have helped smaller ones in establishing the necessary control systems to reduce emissions, notwithstanding initial unease about the implications for competition. Through this sharing of information and management approaches, the programme has achieved greater gains than if each company had worked on its own and a higher level of participation by overcoming concerns that Responsible Care would be too difficult or would cost too much. The CCPA has been instrumental in promoting this collective action by its members by acting as a catalyst in maintaining the commitment of the industry's chief executive officers, providing a mechanism for mutual assistance, and [So]

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coordinating joint action.43 The CCPA also produces extensive publications and fosters ongoing informal exchanges of technical and management advice among company personnel and Responsible Care coordinators. Crucial Design Features Four elements of Responsible Care's design have played a significant role in the impacts of the initiative. Responsible Care certification as a condition of CCPA membership The chief executive officer of each CCPA'S member company must commit formally to the Statement of Responsible Care and Guiding Principles. Companies that do not perform their activities in accordance with the programme must reform or leave the association. This requirement is an important source of motivation. Membership provides a variety of important benefits, ranging from the extensive information provided by the association to the informal networking among the member companies. And because Responsible Care now effectively defines the standard of care expected of the chemical industry, former members would have a hard time justifying to a court why they had decided to leave the CCPA because they did not want to adopt Responsible Care. Membership may send important signals to government officials, to the courts, and to suppliers and customers about the environmental quality of a company's operations. Reporting The proponents of Responsible Care have long recognized that its credibility depends on effective measurement, monitoring, and public reporting of performance. This raises a number of difficult issues. What should be measured and reported? At a minimum, companies should track toxic emissions. Ideally, however, reports should also address other dimensions of a company's environmental performance, to allow third parties to verify that emission reductions have not come about at the expense of the creation of some new risk, or simply because of an economic slowdown, and to allow readers to compare firms' overall environmental performance.44 Finally, in order to maximize public trust, any system of reporting ought to be verifiable independently. Public reporting under Responsible Care is occurring at an increasing number of different levels in Canada.45 The Transportation Incident Measurement programme (TIM) provides annual measures of transportation related incidents.The CCPA aggregates workplace health and safety information under the 1982 Safety, Health and Accident Reporting Experience (SHARE) initiative, which collects statistics on accidents that cause employee injuries. CCPA member companies report to the association on their implementation of the management systems they have put in place for Responsible Care's six Chapter five: Responsible Care

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codes. Emissions reporting is also a condition of membership in the CCPA. In 1994,60 members with 174 facilities reported on the releases of 369 substances. These include the 178 substances on Environment Canada's National Pollution Release Inventory (NPRI) and the 117 on the voluntary Accelerated Reduction/Elimination of Toxics (ARET) list. Some of the additional substances have been identified by the CCPA. Fifty-six others have been identified by individual companies as being emissions of concern either to their workers or their communities. The CCPA has published five annual Reducing Emissions reports which provide aggregated information on member company emissions of chemical substances to air, water, and land. These reports differ significantly from the NPRI data in that they also contain projected emissions for a five-year period. More recently, the CCPA has begun publishing Responsible Care annual reports. These include the reports of Responsible Care's National Advisory Panel. The 1995 annual report refers extensively to the findings of the various external verification teams that audited compliance with Responsible Care's six codes of practice. Members also provide information to the public on a company-by-company basis. An increasing number are issuing environmental reports to their communities and shareholders, outlining their environmental emissions and describing planned remedial and preventive activities. Compliance verification When a company joins the CCPA, it commits to implementing fully the 152 elements of the codes of practice within three years. In 1994, the CCPA reported that some 98 per cent of the code elements had been implemented by companies that have been members for three years or more. This assertion is based on self-reported information and is not easily verifiable. Early critics of the programme (including some members of the National Advisory Panel) recognized this problem and pushed for independent evaluations. In 1993 the CCPA instituted a compliance verification process involving site visits by a four-person team independent of the company. Composed of two industry and two non-industry members, including a community representative, the verification team reviews a plant's management systems, through interviews with plant officials, suppliers, customers and community residents, document reviews and site visits. The company pays the cost of the visit. These costs are about $10,000 to $14,000 on average, including per diems for the industry and National Advisory Panel members and, if he or she so desires, for the community representative. By the end of 1997, 40 CCPA members had passed an external evaluation and 13 more were scheduled for review in 1998. The remaining companies were still implementing the codes. While more advanced than most other countries' Responsible Care evaluation requirements, the CCPA'S approach only partially addresses the need for independent evaluation. The evaluation focuses on the presence of a manage-

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ment system that is committed to continuous improvement. Instead of measuring actual performance, the evaluation assesses whether the company has a sound basis for its practices (e.g., conformity with a standard industry practice or an international norm, comparative research, etc.). Some of the criteria relied on by the evaluators are therefore vague and subjective. Also, the evaluations are not conducted by independently licensed external auditors as a financial audit would be. Many participants and critics argue that improved public credibility for Responsible Care depends on a shift to a more objective and independent evaluation process focused on actual performance.46 Public involvement Some supporters of voluntary initiatives fear public involvement might be too adversarial and undermine efforts to foster cultural change over time. Others argue that the public does not have any legitimate role since the action is by definition voluntary. But while Responsible Care is nominally voluntary and unilateral, it also has the guise of public policy, and the CCPA has long held that public involvement is central to the success of Responsible Care. From the outset of the initiative, the CCPA has sought formal and informal input from outside stakeholders. Since its establishment in 1986, the National Advisory Panel has emerged as an influential yet controversial aspect of Responsible Care. The NAP influence the evolution of the initiative, especially the introduction of external compliance audits and the strengthening of the "right-to-know" provisions of the Community Awareness and Community Response code of practice. Critics charge that the panel represents an attempt to control public input and point to the lack of a mechanism to ensure that Responsible Care members address panel recommendations. And there are few other formal mechanisms for public consultation at the national level. Responsible Care also requires participating companies to support local involvement. The Community Awareness and Emergency Response code of practice encourages member companies to establish local advisory committees and to report directly to the communities of which they are part. Responsible Care's 1995 annual report states, "if a CCPA plant is located near you, or ships chemicals through your community, it's your right to be told about all the risks you're exposed to. It's your right to ask tough questions and to expect clear answers." Many companies have established such advisory committees. Many also report to their communities through open letters, community advisory panels, open houses, community meetings, and articles in the local press. Future Challenges While Responsible Care has enjoyed notable success, its greater challenges arguably lie ahead. To remain environmentally effective and enhance public trust, the programme must promote continuous improvement by individual Chapter five: Responsible Care

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members and in the programme itself. This means extending the programme up and downstream (product stewardship), and moving beyond minimizing the environmental impact of ongoing activities to questioning the environmental legitimacy of certain chemical products, while retaining participation level and respecting international pressures. Stewardship The easiest part of Responsible Care was improved in-plant controls. The more difficult part will be applying stewardship principles once the product leaves the direct control of the manufacturer.47 Although CCPA members have endorsed extending Responsible Care to suppliers, distributors, and resellers,48 they are currently struggling with practical impediments such as how to reward a salesperson for not selling to an inappropriate customer.49 Success here also depends on convincing suppliers and users to adopt similar programmes of their own accord. When the CCPA developed Responsible Care, few related industries were interested in participating or developing parallel initiatives. Recently, however, some - like the specialty chemical manufacturers - have initiated development of similar programmes. This interest is partly due to the increased leverage which Responsible Care companies can apply to their suppliers and customers as a result of the international recognition and endorsement of the programme. Compliance with the basic elements of the programme has become the industry norm around the world. According to David Powell, who has been involved in both Responsible Care and a number of subsequent initiatives, this interest is also partly due to a growing realization that the implementation of a credible voluntary measure may be an effective means to strengthen an industry's negotiating hand in the policy development and review process. From processes to products To date, Responsible Care has encouraged CCPA members to focus on ensuring that they produce their products in a safe and environmentally appropriate manner. It has also exercised some influence over the development of new products. It has not, however, forced members to ask in a rigorous and systematic manner whether they ought to continue using and producing current products. In the view of many writers on the topic, making this transition represents the next level of environmental management and pollution prevention to which Responsible Care and similar voluntary programmes must rise. The willingness of the chemical industry to address emerging debates such as those surrounding endocrine hormones and the use of chlorine as a feedstock by various industries will therefore be an important litmus test of capacity of Responsible Care to continue to engender positive change within the chemical industry.

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Responding to international dynamics The increasing internationalization of the economy may have important implications for the status and form of Responsible Care as a domestic initiative. For example, weaker but highly publicized new international certification standards such as iso I40O050 could replace Responsible Care as the norm to which government officials and the judiciary hold the industry.51 Some companies may start to question the costs of certifying with two similar programmes unless they see a significant advantage in special identification with Responsible Care. The status of voluntary domestic initiatives such as Responsible Care under international trade laws such as the "Code of Good Conduct" is also unclear. The Code, an annex to the World Trade Organization's Technical Barriers to Trade agreement, applies certain rules to the development and use of voluntary measures for domestic policy and may constrain domestic capacity to implement environmental policy through measures such as eco-labelling, voluntary codes of practice and negotiated agreements. Conclusion The Responsible Care programme is the most far-reaching voluntary environmental initiative launched by an industry sector in Canada. It has aimed to improve the chemical industry's environmental performance, to improve its relationship with government, and to foster increased public trust. To date, the programme has made significant progress towards the first two objectives. Through Responsible Care, the Canadian chemical industry has achieved substantial reductions in the emissions of many toxic chemicals, regained the confidence of policy makers after a series of well-publicized accidents had eroded it, and arguably forestalled tighter, more prescriptive regulatory controls. The programme's impact on public trust has been less satisfactory. Individual companies report improved community relations, and because of improved environmental and workplace safety performance, the industry has avoided the public concerns of the Seveso and Bhopal years. But polls indicate that it remains low in the public's esteem. Continued prosecutions of CCPA and non-GCPA chemical companies continue to arouse skeptics. In addition, particularly as the programme's ability to influence the ongoing policy development process has grown, critics have become increasingly vocal in their demands for additional accountability mechanisms such as clear objectives, more openness to public input and a more rigorous system of independent verification. The successes of Responsible Care so far have arisen in part from the way in which it was designed and implemented. Eight important lessons about design and process may be transferable to other initiatives: seek outside input in all phases, including the initial design, implementation and verification; provide sustained, senior-level leadership; Chapter five: Responsible Care

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commit sufficient resources; rely on an incremental process for programme evolution and improvement; use well orchestrated peer pressure; support individual action with information sharing, technological and management know-how; back up the programme's benefits with negative incentives for collective action (for example, by making association membership conditional on programme certification); and include strong internal and external accountability mechanisms, including mandatory public review, involvement and reporting requirements. However, Responsible Care's successes also depended on a unique juxtaposition of crisis and leadership that helped initiate the programme and ensure that it received high profile support. Additional design features or supplementary government action will likely be needed to create equivalent drivers for similar voluntary programmes in other sectors. A central question for Responsible Care - as for most other voluntary environmental initiatives — is how important is a credible threat of regulatory intervention for the initiative's development and ongoing success. There is no question that the threat of regulation served as a major incentive for the development of Responsible Care. The more difficult issue is how important an ongoing threat (or lack thereof) has been to the programme's potential (or lack thereof) to ensure continuous improvements. To a certain extent, Responsible Care has taken on a life of its own. It has become a more demanding code of practice than it was ten years ago. Through the accountability mechanisms and reporting requirements, the CCPA has established powerful internal drivers for further improvement of the programme. Proponents of Responsible Care as an alternative to future regulations also point to the continued evolution of the programme despite the evident decline in public pressure for environmental regulations and in governments' capacity to intervene. They also point to the growing interest in Responsible Care on the part of other industries. It is difficult to accept the case that there is no role for government in promoting and monitoring voluntary measures, however. It is in the interest of Responsible Care companies to ensure that the entire chemical industry is subject to strong backstop regulation and monitoring, for example. Although the CCPA represents 90 to 95 per cent of the chemicals that are manufactured in Canada, it does not represent some small manufacturers. Nor does it represent upstream suppliers or downstream users of chemicals, including the specialty manufacturers, which blend products from CGPA-produced chemicals. The CCPA argues that the best way to address this issue is to convince other companies to adopt Responsible Care style programmes. But the credible threat of more regulation may be needed to spur such initiatives and, in the meantime, effective government control over this full spectrum of users and producers is required to prevent free riders from undermining the CCPA'S [86]

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efforts to restore the tarnished public image of the chemical industry as a whole. Unless public advocates are satisfied that the government is at least tracking the programme's effectiveness on the basis of highly transparent and accessible information, they will remain dissatisfied with the programme and mistrustful of any suggestion that it replace regulations. In our opinion, there is no doubt that a credible threat of government intervention will often be required to motivate action. Responsible Care was initiated in response to such a threat and other sectors are now developing similar programmes precisely in order to avoid regulatory intervention. Moreover, initiating a programme and seeing it through its first years may be the easy part. If continuous improvements are to be maintained after the least expensive gains have been made, governments may have to introduce increasingly persuasive encouragements and pressures. However, some companies are prepared to commit themselves to long-term environmental improvements as a corporate goal rather than as an explicit response to government incentives. Dow Chemical, for example, is aiming to reduce its dioxin emissions by 90 per cent, its emissions of other priority compounds by 75 per cent, its waste and water use per pound of production by 50 per cent and its energy use per pound of production by 20 per cent, all over the next ten years. Governments have the advantage of many tools for inducing environmentally beneficial behaviour, including: backing up self-enforcement, even if just through maintaining a realistic threat of regulatory intervention if voluntary action is not effective; ensuring accountability (e.g., through mandatory public involvement and reporting requirements); facilitating information exchange to enable small companies to participate; educating consumers to support demand for green products; encouraging financial institutions to fund environmental investments; and providing supportive procurement, research and development, and trade policies. These need to be used carefully. Overt government support for a voluntary measure may give companies facing environmental prosecution opportunities to claim officially induced error or abuse of process. Clear accountability is also crucial, since active government participation may also encourage public suspicion that the regulators have been captured by the regulatees. Responsible Care, with its public reporting requirements and evolving compliance verification mechanism, takes public credibility and accountability more seriously than most similar environmental initiatives. Nevertheless, these remain among the main issues raised by programme critics. The test now facing proponents of Responsible Care, and other voluntary initiatives for which it is a recognized model, is whether it can continue to improve chemical industry performance and credibility in the more difficult areas of product stewardship and product assessment that lie ahead. Chapter five: Responsible Care

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John Moffet and Francois Bregha are partners in Resource Futures International, an Ottawa-based consulting firm. This paper draws substantially on research undertaken for the Voluntary Codes Project, a joint project of Industry Canada's Office of Consumer Affairs and Treasury Board's Regulatory Affairs Division, A longer version of this paper will appear in D. Cohen and K.Webb, eds., Exploring Voluntary Codes in the Marketplace (Ottawa: Government of Canada, forthcoming). Notes 1

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The Canadian Chemical Producers'Association (CCPA), established in 1962, represents the Canadian manufacturers of a broad range of petrochemicals, inorganic chemicals, polymers, and other organic and specialty chemicals. In 1994, its 63 member companies accounted for over 90 per cent of the chemical manufacturing capacity in Canada. CCPA members operate more than 200 manufacturing and distribution facilities and employ some 30,000 people. The CCPA describes Responsible Care as "an ethic, an attitude, and a method of thinking" about responsible management of chemicals and chemical products. See CCPA, Responsible Care 1992:A Total Commitment (Ottawa: CCPA, 1992), p.i. Jean Belanger, "Being Responsible Partners in Canadian Society," presentation to the Air and Waste Management Association Environmental Government Affairs Seminar, Ottawa, 1990, p. 5. AJ. Green, Assessing Organizational Culture: Do the Values and Assumptions of Canadian Chemical Companies Reflect Those Espoused by "Responsible Care," thesis, Master of Science in Technology and Policy, Department of Chemical Engineering, Massachusetts Institute of Technology, August n, 1995. C.Limoges et L.Davignon, "L'initiative gestion responsable de 1'association canadienne des fabricants de produits chimiques," rapport preliminaire, phase i, (Centre interuniversitaire de recherche sur la science et la technologic, Universite du Quebec a Montreal, 15 juin, 1995). See "Impacts on Government Policy," below; and K.Webb and A.Morrison, "The Legal Aspects of Voluntary Codes," in D.Cohen and K.Webb, eds., Exploring Voluntary Codes and the Marketplace (Ottawa: Industry Canada, forthcoming). In mid-1987, a survey of the members of the US Chemical Manufacturers Association (CMA) revealed that "everyone's number-one or number-two problem [was] the negative public perception of the industry." In the early 19805, the Canadian government had begun its review of the Environmental Contaminants Act and launched a high-profile public consultation process to remedy its weaknesses. Public concern about the threat chemical substances posed both to human health and the environment, fuelled by the industry's perceived poor environmental record, would lead government to strengthen its control over toxic substances in the new Canadian Environmental Protection Act. The need to control chemical substances from "cradle to grave" had been one of the main recommendations of the "Niagara process," the multistakeholder group established by the federal government to recommend improvements to the John Moffet and Francois Bregha

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Environmental Contaminants Act. CCPA, Responsible Care and Sustainable Development (Ottawa: CCPA, 1994). CCPA, Reducing Emissions: A Responsible Care Initiative, 1994 Emissions Inventory and Five Year Projections (Ottawa: CCPA, 1994). Including, for example, various federal and provincial government officials and environmental advocates interviewed for this paper. As a recent study observed, costs represent a disincentive to small chemical companies to belong to the CCPA; see Limoges et Davignon, "L'initiative gestion responsable," (n. 5). The CCPA does not include many of the smaller "specialty chemical manufacturers," most of whom belong to a parallel industry association. Nor does it represent the hundreds of (typically medium and small) companies that blend chemicals in the process of manufacturing items such as carpets. CCPA, Responsible Care 1992 (n. 2). According to Wastle (personal communication), only two members have left the Association over Responsible Care: the CCPA asked one to leave because it was not implementing the public outreach requirements; another left over a philosophical disagreement about Responsible Care advertising. Michael Porter and Claas van der Linde, "Green and Competitive: Ending the Stalemate," Harvard Business Review (September-October, 1995). See, e.g., C. Stevens, ed., Environmental Policies and Industrial Competitiveness (Paris: OECD, 1993); Noah Walley and Bradley Whitehead, "It's Not Easy Being Green," Harvard Business Review (May-June, 1994), pp. 46-52; and A. JafTe, S. Peterson, P. Portney and R. Stavins, "Environmental Regulations and the Competitivness of U.S. manufacturing: What Does the Evidence tell Us?"'Journal of Economic Literature xxxiii (March 1995), pp. 13 2-163. See Chemical Week 157:1 (July 5-12, I995),p.ii2. See J. Nash, J. and J. Ehrenfeld, "Code Green: Business Adopts Voluntary Environmental Standards," Environment 38:1 (January/February 1996), pp. 16-45. The International Organisation for Standardisation (iso) has promulgated various business management standards.The iso 9000 standard provides a benchmark for implementing and evaluating management processes focused on maintaining product and process quality. The iso 14000 series will address a range of issues related to the design of environmental management systems; see Saeed Parto, "Aiming Low," chapter 15, below. "Chemical Manufacturers Welcome Challenges of Product Stewardship," Chemical and Engineering News 72:42 (October 17, 1994), p.3i. According to the president of a Washington consulting firm, "environmental managers [in the chemical industry] are in a less influential position than they were five years ago," quoted in Chemical Week (July 5-12, 1995), p-43The US Chemical Manufacturers Association (CMA) has started to explore the possibility of combining an evaluation of Responsible Care compliance with an iso 14000 audit. To date, however, the CCPA has been reluctant to link the two initiatives. Jean Belanger has said, "Responsible Care ... is our culture and, above all, it is not

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a programme. Programmes have beginnings and ends - Responsible Care must be our ongoing way of life." Belanger, "Responsible Care: Developing A Promise," presentation to the First International Workshop on Responsible Care (Rotterdam: European Chemical Industry Council, 1991), p.i. See Green, Assessing Organizational Culture (n. 4). In a review of Responsible Care in the US, Nash and Howard reach similar conclusions, observing that "Responsible Care, as a coordinated effort by the whole industry, provided a legitimate framework which enabled them to make changes that might not otherwise have been high priority." See J. Nash and J. Howard, "The U.S. Responsible Care Initiative: The Dynamics of Shaping Firm Practices and Values," presentation to the Fourth International Research Conference of the Greening of Industry Network (Cambridge: Massachusetts Institute of Technology, November 12-14 I99S),p-26Green, Assessing Organizational Culture (n. 4), p. 150. Lois Ember, "Responsible Care: Chemical Makers Still Counting on it to Improve Image," in Chemical and Engineering News, May 29, 1995, pp. 10-18. R. v. Sault Ste. Marie (1978), 40 Canadian Criminal Cases (2d) 353 (Supreme Court of Canada). The courts continue to elaborate the precise elements of due diligence as it relates to environmental management. See, e.g., R. v. Bata Industries, 7 Canadian Environmental Law Reports (New Series) [CELR (NS)] 245; R. v. Crown Zellerbach Properties Ltd. (1988), 49 Dominion Law Reports (4th) 161 (Supreme Court of Canada); R. v. Toronto Electric Commissioners, 6 CELR (NS) 301 and R. v. Courtaulds Fibres Canada, 9 CELR (NS) 304 (Ontario Court General Division). More generally, see the discussion of the environmental due diligence jurisprudence in J. Swaigen, "Negligence, Reverse Onuses and Environmental Offences: Some Practical Considerations," Journal of Environmental Law and Practice 2 (1992), p. 149. and in E. Hughes, "The Reasonable Care Defences/' Journal of Environmental Law and Practice 2 (1992), p. 214. R. v. Consumer's Distributing Co. Ltd. (1980), 57 Canadian Criminal Cases (2d) 317 (Ontario Court of Appeal); R. v. Dupont (unreported, 23 January 1986, Ontario District Court); R. v. Hodgson 1985, 4 F.P.R. 251 (N.S. Provincial Court). That said, it is interesting to note that on January 25,1996, the Alberta Provincial Court issued an order under the Alberta Environmental Protection and Enhancement Act (EPEA) endorsing a settlement agreement which included, in addition to a $100,000 fine, the obligation to become iso 14001 certified by June 30, 1998. Prospec Chemicals had made an application to join the CCPA at the time of the judgment, but was not yet certified under Responsible Care. Since this was a negotiated settlement, it is difficult to predict what its implications are. Nonetheless, the fact that iso and not Responsible Care certification was chosen raises issues with respect to whether iso 14000 will supplant Responsible Care as the industry norm in the eyes of regulators and the judiciary. During the last two years, the governments of Canada, Ontario, and British Columbia have all signed Memoranda of Understanding with the CCPA focused on the mutual promotion of pollution prevention. John Moffet and Francois Bregha

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It has run national advertising campaigns and encouraged its member companies to place ads in local newspapers, developed and co-sponsored a course for environmental journalists with the University ofWestern Ontario, developed a weeklong course for teachers on environmental and chemical issues (Knowledge of the Environment by Youth or KEY), and developed communications material and tips for its member companies. As well, it encourages member companies to reach out to their communities and keep them informed of their activities. The CCPA describes the benefits of Responsible Care as follows: Collectively [member companies] succeed in their goal of self-regulation and public confidence in the industry. Individually, each member increases its standing in the community in which it operates and with those with whom it does business. It experiences increased employee satisfaction and morale. Member companies and their people can be justly proud of their efforts and commitments. It makes them leaders.(CCPA, How to Communicate and Promote Responsible Care, [Ottawa: CCPA, undated], p-4). Green, Assessing Organizational Culture (n. 4), cites company officials saying that community members on their compliance verification teams had been "blown away" by their experience. Scott Munro, general manager of the Lambton Industrial Society in Sarnia, similarly observes that "we have seen and measured significant improvements to the environment, but the biggest change is the openness in providing information" (Chemical Week 157:1 [July 5-12, 1995], p.68). "Third Party Verification Keeps Initiatives Fresh," Chemical Week 157:1 (July 5-12, 1995), p. 68. This problem appears to be particularly acute in the US. In 1993, for example, a senior official of the US Environmental Protection Agency's Office of Pollution Prevention and Toxics noted: One of the problems I think the Responsible Care programme suffers from is its connection with CM A [the Chemical Manufacturers' Association], because CMA plays many roles for the industry. And one of the things CMA does on behalf of the industry is attack regulations. ... It appears sometimes that the positions CMA is taking in public policy debates are not consistent with Responsible Care. (Chemical Week 157:1 [July 5-12, 1995], p.i8). M. Roy, "Pollution Prevention, Organizational Culture and Social Learning," Environmental Law 22:1 (1992), pp. 189-252. And better than the more confrontational US approach or the more corporatist approach relied on in Europe. Four people work on the programme full time, in addition to the support provided by the CCPA president and the vice president for government relations. Each member also designates at least one Responsible Care co-ordinator and provides various technical and management resources to support the programme Belanger, "Responsible Care" (n. 25), p.4. Brian Wastle, Responsible Care Vice-President, CCPA, quoted in Chemical Week 157:1 (July 5-12, 1995), p.66. Belanger, "Responsible Care" (n. 25).

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US Chemical Manufacturers Association vice-president Jon Holtzman has observed that emissions-based reports "are important to get the [Responsible Care] process in place, but they're not a company by company comparison" (quoted in N. Cunningham, "Environment, Self-Regulation, and the Chemical Industry: Assessing Responsible Care," Law and Policy 17:1 [1995], p-7i). The chemical industries in other countries are also trying to address these challenges. The US relies heavily on the Toxics Release Inventory (TRi).The French group Rhone Poulenc has developed an environmental index which can be applied in every plant, and allows reports to be combined to produce a measure of the environmental performance of each company The UK Chemical Industries Association and France's Union des Industries Chimiques have adopted this index as an environmental performance indicator. Similarly, the Australian Chemical Industry Council is developing a set of performance indicators ranging from emissions reductions to local community consultation panels. These indicators are designed to be closely related to the codes in the Australian version of Responsible Care, and to take into account both compliance with the processes set out in the codes and performance in relation to output and quality of operation. See Cunningham, "Environment, Self-Regulation ..." (n. 44), p. 72. The CCPA is reportedly planning to introduce a second round of verifications focusing on performance. A protocol on performance assessment is expected to be ready for implementation in late 1998. "Taking Care Outside," Chemical Week 157:1 (July 5-12, 1995), p-53Responsible Care's Distribution Code of Practice requires CCPA member companies to ensure "with due diligence" that their suppliers, distributors, and resellers "meet the minimum standards of this code of practice." Although this approach represents a very significant departure from traditional industry codes of practice (see Limoges et Davignon,"L'initiative gestion" [n. 5]), the Association justifies it on the premise that any negative news about chemical products will hurt the industry as a whole regardless of whether one of its members is directly involved. Although some Responsible Care companies have started to address this issue, Brian Wastle of the CCPA (personal communication) acknowledges that it remains an ongoing challenge. A CGPA-sponsored comparison of Responsible Care and iso 14000 illustrates the broad range of issues — such as public involvement and reporting — that are not included in the iso regime; see CCPA, A Primer on Responsible Care and ISO 14001 (1995). See also Parto,"Aiming Low," chapter 5, below. See discussion of the Prospec Chemicals case in n. 32 above.

John Moffet and Francois Bregha

six The ARET Challenge • The multi-sectoral Accelerated Reduction/Elimination of Toxics CARET) Challenge has suffered from limited effectiveness and poor public credibility, but Improvements may be coming • Debora L VanNijnatten (with files from Gary Gallon) The Accelerated Reduction/Elimination of Toxics (ARET) Challenge — likely Canada's most high-profile and best known voluntary pollution prevention initiative — asks that industry participants achieve programme goals by the year 2000. Already, however, both critics and proponents are lining up to pronounce upon the success or failure of the programme. ARET appears to represent much of what is possible through voluntary initiatives and, simultaneously, much o what is wrong with them. Criticisms have come fast and furious, yet many continue to hope that, in an era of declining government commitment and resources, voluntary initiatives such as ARET can aid in achieving environmental protection. For their part, ARET participants are already fixing their sights beyond 2000 and contemplating changes to the programme. Musings about the future of ARET are forcing careful consideration of its current strengths and weaknesses and a burgeoning literature on designing voluntary initiatives provides some guidance for this exercise. Critical to the quality and effectiveness of any voluntary initiative is the need to engender and maintain the trust of both the non-government organization community and the broader public.1 Without such trust and the legitimacy that this confers, industry will not get credit for genuine environmental protection measures taken. Moreover, there will be little incentive for industry to act in the first place, and environmental benefits may be minimal. To gain public trust, voluntary initiatives must specify performance-based goals; reward participants attaining these goals while penalizing (in some way) those who do not; include mechanisms for monitoring, reporting, and verify ing actions; and perform all of the above in an open and transparent manner. Although there is no immediate or easy answer to the question of whether ARET has been a success or failure as a voluntary initiative, it is evident that the programme does not currently satisfy all of these requirements. This may, how ever, be about to change. The Past The ARET programme had a difficult birth, a problematic adolescence, and is already suffering a mid-life crisis. After a promising but arduous start, in which representatives of industry, government, environmentalists, and labour sat down together and collaboratively drew up a list of toxic substances, even prioritizing them for action, the process foundered on questions of implementation. Chapter six:The ARET Challenge

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The subsequent withdrawal from the process by the environment and labour sectors dealt a significant blow to ARET'S credibility, which has laboured under criticism since. The ARET Challenge, more recently launched by the remaining members, has failed to emerge from under this shadow. The ARET concept itself evolved out of work done in 1990-91 by the New Directions Group (NDG), an independent, voluntary network of leading industry executives and environmental groups interested in developing non-adversarial approaches to environment- economy problem solving. The NDG called on the federal government to sponsor a co-operative approach to identifying, then reducing and/or eliminating the most problematic toxic substances. In response, the federal Minister of the Environment launched in 1992 a group now known as the ARET Stakeholders Committee. Originally composed of representatives of the environmental and labour communities as well as of industry, government, health, and professional associations, the Stakeholders Committee set about formulating criteria for evaluating the toxicity of chemicals and then applying these criteria to substances. B mid-1993, the Committee had completed, with multistakeholder agreement, its work on identifying, assessing, and categorizing a list of 117 substances. These substances were then further categorized into "priority" lists. However, stakeholders on the Committee were unable to reach agreement on targets (whether the targeted substances should be reduced or eliminated) and methods of implementation (whether voluntary or regulatory methods should be used to achieve stated goals). The environment and labour groups chose to leave the ARET process in September 1993. Industry and government representatives, convinced that the initiative should be continued, moved onward.2 With secretariat support from Environment Canada, the remaining members issued a Challenge to industry to reduce or eliminate emissions of ARET-targeted substances in March 1994.3 The ARET Challenge was designed as a national programme to reduce toxic substance emissions across eight industry sectors (mining and smelting; pulp and paper; chemical and chemical specialties; aluminum; oil, gas and petroleum products; electric utilities; some manufacturing; and some federal departments). The Challenge seeks, through voluntary actions, the virtual elimination of 30 persistent, bioaccumulative, and toxic substances (List A), and significant reduction in emissions of another 87 toxic substances (List B). By the year 2000, the ARET group of companies aims to have reduced List A substances by 90 per cent and List B substances by almost 50 per cent. The first action plans were submitted at the end of 1994 and an overview of the emission levels and emission reduction commitments were contained in the first ARET Challenge progress report, Environmental Leaders i, issued in early 1995.The second progress report, issued exactly two years later, stated that over 270 companies achieved emissions reductions of 17,460 tonnes.4

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The Present What has the ARET Challenge delivered in terms of environmental benefits? The most recent estimates indicate that ARET'S 278 participants have achieved emissions reductions of approximately 21,500 tonnes of pollutants. Over the next two years, the programme is expected to exceed its original targets for many List B substances.5 Companies representing approximately 40 per cent of Canadian industrial production have publicly committed to the programme. In addition to the improved emission reduction results, these companies report that they have derived numerous benefits from ARET, such as the development of effective toxics management strategies, reduced chemical spills, process and product cost reductions, and improved leak detection and repair programmes.6 However, problems with the reporting and verification structures of ARET have become evident, as have difficulties in gaining full industry participation in the programme. Questionable emissions claims? ARET'S emissions claims have been questioned due to disparate data collection methods and reporting timelines as well as a lack of third-party verification. The reported 49 per cent reduction in emissions of ARET-targeted substances calculated from base-year levels may be misleading. Although ARET officially commenced in March of 1994, participating companies were allowed to select a base year as early as 1988. Thus, a company could count its reductions from an emission baseline chosen up to six years prior to commencement of the programme. In addition, companies have adopted different base years. For example, if a company's emissions were higher in 1988 than in 1990, the company could pick 1988 as the base year from which to begin calculating its reductions, which would then appear to be larger than they actually were. This increase would then appear in the ARET progress report, attributed to that company. The ARET Secretariat reports that "estimating emissions is not an exact science" and acknowledges that they receive data generated in a number of ways (from direct periodic monitoring and sampling protocols to extrapolation).7 While general guidelines exist, the reporting format for the presentation of ARET action plans is not prescribed. In fact, measurement of some ARET-targeted substances has required new data collection and reporting methods on the part of companies. Though an increase in information relating to substances previously not measured could be seen as a good thing, the result is that reduction estimates are often difficult to compare. Moreover, some companies report only through the National Pollutant Release Inventory (NPRI), which uses definitions and reporting formats which may be different from those employed by ARET. It is thus difficult for the Secretariat to achieve a high level of accuracy in calculating the numbers at present.

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The Secretariat's 1997 Environmental Leaders 2 progress report asserts that "for the most part, these reductions can be directly attributed to the commitment of ARET participants to this voluntary initiative."8 Yet some reductions might have been driven by earlier regulations or other motivating factors. For example, the ARET progress report stated, "In December 1994, INCO Ltd. completed a five-year $600 million rebuild of its smelter at Copper Cliff, Ontario. This resulted in a 90 per cent containment of sulphur dioxide."9 While these reductions are referred to as an ARET voluntary achievement, they were actually required by Ontario regulations under the province's Environmental Protection Act™ The credibility of ARET data is further diminished by a lack of outside verification.Verification is essential to gaining public trust and realizing the full benefits of a voluntary approach; it is, in fact, the link between credibility and effectiveness. It was this issue of verification that most concerned the Queen's University Environmental Policy Unit, when it undertook an assessment of ARET for Environment Canada. The Unit's report strongly recommended the establishment of a system for monitoring the effects of ARET that was considered by all sectors to be impartial. The report warned that "the success or failure of ARET rests, in the end, on the effective implementation of pollution abatement as well as credible and trustworthy reporting."11 The chemical industry, when designing their Responsible Care voluntary programme in the mid-1980s, recognized the importance of outside verification.12 Responsible Care, participation in which is a requirement of membership in the Canadian Chemical Producers' Association, employs fourperson verification teams comprising community members, industry representatives, environmentalists, and academics who are wholly independent of the companies being verified. The teams prepare a report on their findings for public, employee, and peer scrutiny. Moreover, the Canadian Electrical Association has recently developed an Environmental Commitment and Responsibility Programme along the lines of Responsible Care.13 It includes a verification component, though other components are less well developed. Other industry sectors involved in ARET have not yet undertaken similar programmes. Indeed, the absence of an independent verification mechanism hampers the governments ability to recognize the emissions reductions that are actually achieved by industry participants under ARET. In sum, then, the setting of early and disparate base years has likely distorted the actual reductions achieved under ARET, and the lack of a consistent reporting format is widely seen as a weakness of the programme. There is also some concern that emissions reductions attributed to ARET might be more accurately attributed to other policy initiatives. The problem of non-participation In addition to concerns about reporting and data collection by ARET participants, an inability to achieve the full participation of all industry sectors pre[96]

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sents a significant obstacle to the realization of programme goals. ARET, as it has developed, might be regarded as a case study in free ridership. Almost as many companies have abstained from the programme as have chosen to join it: 250 non-participants compared to 278 members.14 Moreover, participation is uneven across industry sectors and certain industry leaders appear to be carrying the brunt of the load in meeting the reduction targets. Within each industry sector, there are a number of companies that refuse to participate in the ARET Challenge, although this number varies according to sector. For example, in the pulp and paper sector, 36 per cent of the 59 members of the Canadian Pulp and Paper Association refuse to participate in ARET. 15 In the oil and gas sector only four of the eight members of the Canadian Petroleum Products Institute, representing 60 per cent of Canada's total refining capacity, participate in ARET. Moreover, only two of the five member companies of the Aluminum Industry Association have submitted ARET action plans. Member companies that do little to meet their commitments must make their poor results publicly available through the ARET progress reports. There are no penalties, however, for those companies that refuse to participate in ARET. In fact, these companies might be able to gain a competitive advantage, or benefit from an improved public image through their association, while in actuality changing very few of their practices. The resulting uneven playing field has so frustrated ARET participants that some are calling for the introduction of field-levelling regulations. Certainly, the ARET programme is commendable in that it requires and tallies participating companies' reductions of identified toxics. Other voluntary programmes, such as the Voluntary Challenge and Registry Programme (VCR) to meet Canada's commitment to reducing global warming gas emissions, simply require that participants register action plans.16 However, despite the strong stance by some industry associations that their member companies participate in ARET, participation remains variable and free riders abound. Future Where does ARET go from here? Critics continue to ask whether the basic goals of ARET and the process used to achieve these goals are sound. Underlying the reluctance of many environmentalists to endorse voluntary initiatives is the concern that voluntary initiatives will necessarily involve the casting off of "elimination" or "zero discharge" as policy goals, because industry's voluntary actions will be determined by what is currently affordable and technically feasible. Many believe that regulation is the only way to ensure that ambitious targets for environmental protection will emerge and force technological innovation. This perspective underlay the decision of environmental and labour groups to leave the original ARET process. At present, ARET'S relationship to the existing regulatory framework is unclear, and many of its weaknesses pertaining to reporting and verification Chapter six: The ARET Challenge

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requirements as well as levels of participation likely stern from its unenforceable status. Compliance with regulations has been thus far the most important factor motivating industry to undertake environmental protection activities.17 It is less clear what role other drivers - including a desire to improve public image, attaining efficiencies that improve income generation, liability requirements and the presence of "environmental leaders" within organizations18 - play in encouraging environmentally friendly activities. Indeed, determining the incentives to participate, or not participate, in the ARET programme has proven difficult, despite considerable research on the part of the ARET Secretariat in this area. This is not to suggest that regulations are always the panecea. Francois Bregha and John Moffet have pointed out that The federal government would not have been able to achieve the reductions realised under ARET by relying on the Canadian Environmental Protection Act, which regulates less than 10 per cent of ARET'S 117 substances: it has neither the procedural tools to assess quickly the toxicity of so many substances, nor the necessary enforcement capacity to apply a purely regulatory approach.19 They also note that ARET, as a non-regulatory initiative, offers a means to overcome the "jurisdictional question" which typically arises in Canadian environmental policy-making. More generally, the design and enforcement of current regulations may lead one to question their utility, at least occasionally. It is often alleged that voluntary initiatives are less costly and quicker to design and implement than regulations. In the ARET case, Environment Canada has been able to support a broad programme through a modest investment of approximately $i million and industry reports that participation in ARET has been less costly than would have been the case under regulatory compliance. Yet it is also likely that the easiest emission reductions have already been achieved and any reductions made beyond current targets will take longer and be more costly. The ARET process itself was also relatively time-consuming; after two years of multistakeholder negotiations and three years of the Challenge, most industry sectors still do not have full participation. The question of what might have been achieved under a regulatory framework is a pertinent one. The ARET Challenge appears to have reached a standstill in terms of recruiting new participants and reduction achievements under the current requirements are slowing. Realizing this, some Challenge stakeholders and participants, as well as outside observers, are contemplating changes that might lead to a renewal of the programme. For example, it has been suggested that ARET be expanded to include new substances. While the ARET substances list is considerable, it is not all-inclusive; the US Toxics Release Inventory, for example, covers five times the number of substances. In this vein, the lack of consistency in ARET and NPRI reporting requirements is under examination. In addition, ARET does not at present provide explicit incentives to spur continual [98]

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improvements in performance, something which proponents know must be addressed if the programme is to have a future. In any event, change is in the air and all indicators point in the direction of formalizing Challenge requirements. Any redesign will require difficult choices; how does one encourage other companies to join the team, at the same time that try-outs get harder and training is tougher? En Route to Credibility It is crucial that any redesign which takes place is conducted by means of a participatory, transparent programme. This is necessary for both the future effectiveness and credibility of the programme. The ARET Stakeholders Committee and the ARET Secretariat have already taken significant steps in this direction. In December 1997, the ARET Stakeholders Committee hosted a workshop on "the future of ARET."The objective of the workshop was to identify and discuss issues, ideas and actions that must be addressed in developing a path forward for ARET as a voluntary initiative beyond 2000.20 Thirty-one participants representing industry, academic, and environmental organizations, as well as federal and provincial governments, focused on the issues discussed above: verifying results, defining reporting requirements, increasing industry participation, setting targets beyond 2000, and specifying the role of the public and of governments in determining future steps. Most significantly, "all participants expressed strong support for a comprehensive, independent third party evaluation of the ARET programme."21 The primary motivation for the evaluation would be to highlight those areas in which modifications could improve the effectiveness and strengthen the credibility of the programme. This process of redesign/renewal will be watched closely by both critics and proponents of the programme. Considerable effort has already been expended on the ARET Challenge, yet present choices will determine how the nongovernmental organizations and the broader public views future efforts. It may be that the ARET Challenge experience will tell us more than any other voluntary initiative about how to get where we want to be beyond 2000. Debora LVanNijnatten is an assistant professor in the Department of History, Philosophy and Political Science at the University of Windsor. Gary Gallon is president of the Montreal-based Canadian Institute for Business and the Environment. Notes 1

2

New Directions Group, "Criteria and Principles for the Use of Voluntary and Non-Regulatory Initiatives to Achieve Environmental Policy Objectives," (November 4, 1997), p.2. See chapter 18, below. See Debora L. VanNijnatten, "The Day the NCOS Walked Out," chapter 7, below.

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3

4

5 6

7

8 9 10 11

12

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For more information contact: ARET Secretariat, Environment Canada, I3th Floor, Place Vincent Massey, 351 St-Joseph Street, Hull, Quebec, phone (819) 953-9O86; fax (819) 953-7970; email: [email protected]. See Environment Canada ARET Secretariat, Environmental Leaders 2: ARET Voluntary Action on Toxic Substances, a progress report on Accelerated Reduction/Elimination of Toxics programme (Ottawa, January 1997). See n. 4. David Roewade, Voluntary Environmental Action: A Participant's View of ARET. Report prepared for Industry Canada, Environmental Affairs Branch (Ottawa: June 1996), p. 19. Gary Gallon, Voluntary Environmental Measures: The Canadian Experience (Montreal: Canadian Institute for Business and the Environment, September 1997), p.n. ARET Secretariat, Environmental Leaders 2 (n. 4), p.9. ARET Secretariat, Environmental Leaders 2 (n. 4), p. 19. Gallon, Voluntary Environmental Measures (n. 7), p.io. William Leiss, project director, DeboraVan Nijnatten and Eric Darier, principal authors, "Lessons Learned from ARET: A Qualitative Survey of Perceptions of Stakeholders/'Working Paper Series 96-4, (Kingston: Environmental Policy Unit, School of Policy Studies, Queen's University, June 30, 1996), paper prepared for Environment Canada, ARET Secretariat. See Francois Bregha and John Moffet, "Responsible Care," chapter 5, above. Also see the Mining Association of Canada, Voluntary Emissions Reduction: The Mining Industry and the ARET Programme (Ottawa, March 1995). See Canadian Electricity Association internet site concerning the Environmental Commitment and Responsibility Programme: http://www. canelect.ca/ecr.html F. Bregha and J. Moffet, From Challenge to Agreement? Background Paper on the Future of ARET (Ottawa: Resource Futures International, December 8, 1997), p.I2.

15 16 17 18 19 20 21

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Roewade, Voluntary Environmental Action (n. 6), p.6. See Robert Hornung, "The VCR Doesn't Work," chapter 10, below. Ann Davis, 1994 Canadian Environmental Management Survey (Toronto: KPMG Environmental Services, 1994), pi. Gallon, Voluntary Environmental Measures (n. 7), pp.4-6. Bregha and Moffet, Challenge to Agreement? (n. 14), p.2. H. Versteeg, Final Report, Summary of Proceedings: Future of ARET Workshop (January 1998), p.2. Versteeg, Final Report, (see n. 20), p.4.

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seven The Day the NGOs Walked Out • The ARET project shows how voluntary pollution prevention may fail unless government ensures effective public involvement • Debora L VanNijnatten When the representatives of environment, labour, and other public interest groups walked out of the Accelerated Reduction/ Elimination ofToxics (ARET) multistakeholder process, government and industry members drew their chairs closer together and carried on. Yet something valuable had been lost. ARET began as a high-profile attempt by government, industry, and nongovernmental organization (NGO) representatives to address toxic substance use and emission in Canada. After the NCOS' departure, the process did produce a major environmental initiative - the ARET Voluntary Challenge - that has wo considerable industry participation and has claimed significant toxics reductions. But without the NCOS, the Challenge lacks the blessing of independent third parties. Perhaps more importantly, it lacks their participation in verifying the claimed results. Without these, the process and its claims lack public credi bility. As we shall see, participation by public interest groups in designing and implementing voluntary initiatives is crucial to their effectiveness and credibility, and only government can ensure the appropriate conditions for third-party participation. Indeed, the ARET case is a testament to the difficulties that may befall voluntary initiatives if government does not provide a clear, authoritative framework for consultative decision-making. A Role for Third Parties Environmental degradation is a systemic problem. It is linked to imbalances in the fundamental relationships between individuals, society, and the natural world. Yet, the structure and process of our government institutions, which have assumed responsibility for matters pertaining to environmental degradation, do not take adequate account of the interrelatedness of human and natural systems. They were neither designed nor intended to deal with large-scale systemic problems or, for that matter, to question the political and economic arrangements characteristic of modern industrial society. Realizing this, those concerned about the environment have sought to bring modern governance into line with environmental realities through reform of government structures and processes. Underlying many of these reforms has been the belief that, if the process of decision-making was made more inclusive of a wider range of interests - especially environmentalists and other public interest groups - these broadened deliberations would result in better environmental policy outcomes. Countless structures and bodies have Chapter seven: The Day the NGOs Walked out

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been created in Canada to inject environmental values into government decision-making, often through expanded opportunities for third-party participation. These more participatory institutions have delivered some environmental benefits. Nevertheless, we are not yet close to achieving a meaningful integration of the economy and the environment in public policy making. So the search for institutions of effective environmental governance continues. Most recently, this search has led some policy actors to contemplate a form of institutional change that may have far-reaching implications for environmental policy making, as well as for the participatory procedures established over the last decade. It has been suggested that, instead of tinkering with public institutions, society should look to private sector institutions to undertake environmental protection initiatives. The distinction between public and private institutions is deeply embedded in the philosophy underlying the organization of liberal democratic societies and, more specifically, in the manner in which we have carried out environmental protection tasks. However, three forces that have arisen since the late 19805 are challenging the traditional roles of public and private institutions. First, decision-makers and the general public have begun to question the roles of public and private institutions with respect to environmental protection. For example, it is argued that industry should undertake "product stewardship" and assume responsibility for the entire life-cycle of its products. Second, in a period of budget cutbacks, governments have been dismantling the environmental regulatory framework. For example, the Ontario government has cut its environment ministry's budget by 43 per cent and its staff by 36 per cent since 1995.' Finally, there has been a growing perception within the environmental policy community that traditional "command-and-control" regulatory approaches - federal or provincial laws that specify acceptable levels of emissions for industry, as well as how to achieve those levels - are no longer adequate. They have not achieved the expected level of environmental benefit and may be ill-suited to solving the current class of environmental problems. As a result, some environmental protection tasks formerly performed by government institutions are being shifted to individual corporations and industry associations or other industry structures.2 These tasks are being carried out, in Canada and other Western nations, under the rubric of what have become known as "voluntary pollution prevention initiatives" or "voluntary codes." Voluntary initiatives are intended to perform the same function as environmental regulations — apply effective external pressures on corporations to act in an environmentally responsible manner - without resorting to traditional regulatory instruments. The perceived advantages and disadvantages of voluntary initiatives are hotly debated, but there is wide agreement that if voluntary initiatives are to be effective and credible, they will have to include active participation by third-party public interest groups in both design and implementation processes. What has been less clear is how effective NGO participation is to be ensured. The politico-institutional arrangements by which governments in Canada [ 102]

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make environmental policy decisions have over the last decade become more consultative and inclusive of a wider range of interests. Multistakeholder fora are now frequently used as a crucial aid to government decision-making on environmental issues. A similar emphasis on public interest involvement would seem to be even more appropriate in the formulation and implementation of voluntary initiatives, where there are reasonable grounds for public doubts about industry and government motives. Nevertheless, in many voluntary initiatives to date, governments and industrial interests have proceeded with little or no outside input. This retreat to closed industry-government collaborations threatens a return to the relatively ineffective environmental decision-making that prevailed up to the mid-19805. Disquiet in environmentalist circles today regarding voluntary initiatives is thus neither surprising nor unwarranted.3 A few voluntary initiatives have been associated with multistakeholder consultations involving third parties as well as government and industry representatives. A prominent, though ultimately unsuccessful, example is the ARET project. ARET Goes Awry

ARET was born out of activities of the New Directions Group, an independent, voluntary network of Canadians from industry, environmental groups, and other non-governmental organizations which came together in November 1990. The group set about discovering alternative methods to reduce and eliminate emissions of toxic substances, given that little progress was being made on the regulatory front. In September 1991, the group called on the federal government to initiate a process for targeted reductions including phasing out some toxic substances. The federal environment minister responded by launching a body that became known as the ARET Committee. The ARET Committee was composed of representatives from industry associations,4 environmental groups,5 labour and aboriginal peoples, health and professional groups, and federal and provincial government officials. The committee had three objectives: to establish criteria for defining toxicity, to compile a list of target substances based on these criteria, and to devise a means by which industry could address its toxic emissions. The first task was achieved with multistakeholder consensus. The three chosen criteria were toxicity, persistence, and bioaccumulation. Application of the three-criteria approach led to a multistakeholder consensus, categorizing priority substances into five different lists comprising a total of 117 substances. Substances on List A-1 were considered the highest priority. Progress in implementing the third ARET objective is currently being made through a voluntary pollution prevention initiative called the ARET Challenge. The ARET Challenge seeks, by means of voluntary industry action, the virtual elimination of substances in list A-1 (90 per cent reduction by the year 2000) and a 50 per cent reduction in the same period for substances on the other lists. Chapter seven: The Day the NGOs Walked out

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However, the ARET Challenge was issued after the NGO representatives withdrew from the ARET Committee in September 1993 and is not supported by these sectors. Nor has the Challenge received particularly active support from government. It appears to exist in policy purgatory with minimal public sponsorship and little credibility. The case of ARET shows how crucial multistakeholder decision-making is to the code-setting and implementation process. The multistakeholder process breakdown was to a significant degree responsible for the subsequent failure to garner support and legitimacy for the ARET Challenge. Pinpointing why the ARET multistakeholder process broke down is therefore also important.The following discussion is based on confidential interviews with ARET Committee participants conducted during the course of a study analyzing participants'perceptions of the process and outcome.6 A Role for Authority Even after a decade or more of multistakeholder public consultation efforts, many questions continue to plague initiators and participants. To what extent should the process be managed? Who should be represented and according to what criteria? What does consensus mean and how might it be achieved? How binding should such a consensus be on policy-makers and participants? Such questions flow out of a more fundamental concern with how decision-making roles must change when a multistakeholder group takes part in the policy process. Any reasonable attempt to consult interests outside government in the course of public policy-making moves some authority from government to the multistakeholder body. At the same time, however, government's ability to provide an authoritative framework for the consultations, and to ensure that the final decision taken is consistent with the perceived public interest, must remain unhindered. This requires that government perform a delicate balancing act. Many a multistakeholder consultation process has gone awry because government erred in providing the multistakeholder group with too little or too much direction. The first rule for successful multistakeholder consultation is the provision, by government, of a policy framework within which consultation occurs. It is government's task to ensure that a multistakeholder process fits into the government's larger decision-making process and priorities and that the outcomes of the consultation inform this decision-making. This framework must be clear to participants from the beginning of the consultation so that they know what is expected from them and what results to expect from their work. A clear framework for participation is especially important where voluntary initiatives by industry are being developed as an alternative or complement to command-and-control regulation by government. Relations between public and private entities, complex enough in the normal regulatory process, can be especially perplexing in the voluntary code-setting and implementation process. The provision by government of a decision-making framework that is [104]

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participatory and clarifies the roles of public and private stakeholders is crucial. In the case of the ARET Committee, however, the federal government assumed a low profile. Environment Canada insisted at the beginning of the process that all stakeholders would be "equal partners" and that the agency would be "just another stakeholder." The NCOS in particular felt that Environment Canada did, in fact, view itself only as one stakeholder in the ARET process, instead of demonstrating the pro-active leadership one might have expected in light of federal commitments in the Green Plan and in the Great Lakes Water Quality Agreement to eliminate toxics. A number of interviewees felt that Environment Canada was abrogating its responsibility to "govern," and that the agency should have set the terms of reference for the project more clearly. Indeed, a great deal of misunderstanding surrounded the mandate of the ARET Committee. Perceptions of the ARET process objectives varied widely among interviewees, who thought it was: "a programme to prove the validity of voluntary action in environmental policy," "a programme to eliminate the use of certain persistent, toxic chemicals," "a talk shop geared towards understanding where the different interests were coming from on the issue of toxics use," "a means of tackling toxic emissions through reductions and eliminations without a regulatory framework, although regulation might prove necessary in the end," or "a voluntary emission reductions plan implemented through industry associations who would then move their members to deliver." The greatest uncertainties regarding the mandate concerned whether the overall goal of ARET was reduction or elimination of substances deemed toxic and whether voluntary or regulatory efforts would be employed to achieve this goal. Some stakeholders wanted to address toxics use, as well as toxic emissions, because they believed pollution prevention was impossible without examining the use of toxic chemicals generally. The NCOS believed that the original purpose of ARET was to "identify the most hazardous toxic substances, and then develop strategies for their phase-out."7 For NGOS, there were "no safe levels" of such substances, and elimination was the "only appropriate long-term strategy." This meant uncompromising attempts to reduce both the generation and use of persistent toxic chemicals. Industry representatives, however, preferred the focus on emissions. In addition, interviewees disagreed on whether or not ARET was intended exclusively as a voluntary reductions programme. Opinion was divided on the role regulation should play in a voluntary programme - no role at all, as a backdrop to set minimum standards and ensure a level playing field, or as a proactive framework with extensive reporting requirements. Many believed that the regulatory stick was "in there somewhere," "sort of agreed to" or "implicit" in Chapter seven: The Day the NGOs Walked out

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the mandate. Yet this was not made clear in any directions given by government. One interviewee summed up the problem with the ARET Committee's mandate as follows: "The 'if question has to be resolved before the process starts, because multistakeholder processes can only deal with 'how' to get there." The broader goals must be set by the authoritative decision-maker. Interest groups and industry do not have the mandate for such goal-setting. In the ARET process, the broader goals were never articulated and participants spent much time arguing their positions on what should be done by governments and industry. "Environment Canada laid down no givens, so that stakeholders wandered forever," one interviewee explained. Lost Without a Framework The lack of an authoritative framework, evident in the ill-defined mandate of the ARET Committee, affected stakeholder discussions on substantive issues. Many participants doubted the usefulness and purpose of their participation in a process with uncertain goals. Indeed, there were various levels of suspicion concerning the "real" agenda behind the ARET initiative and who would be most likely to benefit. For example, some saw ARET as a "platform for industry in anticipation of regulations" and believed that the process was an "attempt to head off regulation." Not surprisingly, reaching agreement on the third objective - the course of action to be undertaken by industry after the criteria were developed and substances were identified — was problematic. The frustration expressed by a number of interviewees was summed up by one: "The process didn't seem to be getting anywhere, there was too much disagreement on fundamental issues." One interviewee noted that repeated attempts were made by stakeholders to clarify the use of terms such as "reduction", "elimination," and "pollution prevention" during the course of meetings. This might have helped to clarify the project's mandate, but the government participants did not act to provide an authoritative resolution. Interviewees also reported uncertainty about how decisions were to be made. One interviewee stated, "There were no formal rules for consensus/agreement, just a willingness to participate." The method for reaching "agreement" was variously described as "fighting it out," "general agreement around the table," "not necessarily requiring unanimity," "implicitly requiring unanimity," and "can everyone live with that?" The lack of clear decision-making rules, coupled with underlying suspicion, fostered "an initial distrust and prudence" among stakeholders, a sense of caution, and a lack of respect for the process. The various represented interests took to forging mini-consenses among themselves within caucuses (e.g., the industry "Friday Group"), or in "corridor negotiations" before or during the ARET process. One interviewee noted that groups would get up in the middle of the meeting and consult in caucus. [106]

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The uncertainties about goals and rules and the climate of suspicion may have complicated participant-constituency relations. Multistakeholder processes can work only if the representatives of each constituency taking part are committed to the process and work at convincing their constituencies that the process is worthwhile and that compromises must be made. In the ARET case, the ambiguity inherent in the process may have weakened any incentive for representatives to try to convince their constituencies that compromises were worthwhile, a difficult task under any circumstance.8 In the end, tensions among stakeholders proved too great. When the NCOS withdrew from the ARET Committee in September 1993, they wrote to Environment Canada, citing among their reasons for leaving the multistakeholder process the lack of leadership shown by Environment Canada and unsatisfactory handling of the elimination versus reduction issue.9 The remaining industry and government participants decided that ARET should continue. In March 1994, they issued the ARET Challenge to industry to reduce or eliminate toxic emissions voluntarily. Implementation Without Credibility Representatives from government and industry emphasize the reported figures for toxic reduction as evidence of the Challenge's environmental success. Since the ARET Challenge was launched in March 1994, 278 organizations have agreed to participate. Collectively, these organizations claim to have reduced toxic substance emissions to the environment by almost 17,500 tonnes - a decrease of 49 per cent from base-year levels (with base-year levels varying from company to company) to December 1995. Participants also are committed to further reducing emissions by another 8000 tonnes from 1996 to 2000. The average response from sectoral stakeholder associations after 21 months was 68 per cent of members, with 97 per cent participation for the Canadian Chemical Producers' Association. An Industry Canada study suggested that, as a percentage of total sector production, the main non-participants were small producers. According to the ARET Secretariat, the voluntary participants in ARET include the emitters of 83 per cent of the emissions identified through compulsory reporting under the National Pollutant Release Inventory as of December 1995. But environmental stakeholders remain doubtful about the ARET Challenge and its contribution to environmental protection for a number of reasons. While industry associations consented to participate, and a few brought nearly all of their members into the Challenge, many individual companies have chosen not to join the initiative. Because the ARET Challenge includes no means of forcing compliance, these companies continue to apply a lower environmental standard than other companies. Environmentalists have also expressed concern that claims about ARET'S environmental achievements have been inflated. For calculating their environmental improvements, companies are allowed to select a base year up to six Chapter seven: The Day the NGOs Walked out

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years before the ARET Challenge was issued. This has led to questions about how much of the claimed progress is legitimately attributable to ARET. ID The Achilles heel of the ARET Challenge's voluntarism is the absence of credible verification by third parties. Under the current ARET reporting procedures, a senior executive in industry signs the report instead of a junior employee in charge of reporting to environmental regulators. However, without credible verification by third parties, industry will not get public recognition for genuine efforts to improve environmental protection, especially in light of continuing public skepticism about voluntarism. Because these shortcomings in the ARET programme are environmentally unfortunate as well as evidently unfair to participating companies, environmentalists and some industry representatives now argue that a regulatory backbone for the ARET programme appears necessary. Certainly without NGO participation, the Challenge is vulnerable to public suspicion. It is a voluntary initiative taken in a time of government cutbacks and industry lobbying against environmental controls. For credibility, it needs the visible involvement of independent public interest stakeholders who could legitimate the programme, monitor compliance, and verify claims made about reductions achieved. Indeed, it is already apparent that the lack of third-party involvement in implementation has detracted from the early successes of the original ARET Committee. The ARET project was useful in the general sense that it encouraged a consideration of toxics within the broader framework of life-cycle analysis instead of merely end-of-pipe solutions. The drafting of a list of toxic substances to be reduced or eliminated was also significant. Considering the time and resource constraints, the classification of over 100 toxic substances wa remarkable. But since the departure of third parties from the ARET table the programme has taken a different and, according to some, questionable direction. Beyond ARET

In the end, the success or failure of programmes such as ARET rests not just on the effective implementation of pollution abatement, but also on credible and trustworthy reporting to third parties. Unfortunately, the frustrations of the ARET multistakeholder process drove the third parties from the table long before implementation began. One might view the voluntary code-setting and implementation process as a good opportunity to further the evolution toward more consultative government in Canada. Governance is the process by which we solve our problems collectively, and it is not inconceivable that we could address these problems through multistakeholder fora assigned to devise frameworks for voluntary action by industry and then to monitor industry's progress toward the agreedupon goals. Indeed, such a mechanism would seem necessary to ensure that any voluntary programme conducted by industry addresses both the regulatory [108]

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needs of governments and the environmental concerns of citizens. But the lesson from ARET is that third party willingness to participate should not be taken for granted. Without an authoritative framework provided by government, the multistakeholder forum approach is unlikely to work. Debora LVanNijnatten is an assistant professor in the Department of History, Philosophy and Political Science at the University ofWindsor. Notes 1 2

3

4

5

6

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Paul Muldoon and Ramani Nadarajah,"A Sober Second Look,"Table i, in chapter 4, above. Recognition of problems with "command and control" regulations has led many jurisdictions to shift to more "performance-based" regulation, as well as to experiment with "voluntary" initiatives. See Bradley D. Wylynko, "Beyond Command and Control," chapter 13, below. See, for example, Muldoon and Nadarajah, "A Sober Second Look," chapter 4. above; also John Jackson, "The Spread of 'Regulatory Voluntarism': Abandonment of the Goal of Zero Discharge," Bulletin of Pollution Prevention, insert to Great Lakes United Newsletter (Fall 1994), p. 16; and, Karen Clark, "Can Voluntary Agreements Replace Regulations?" Great Lakes United Newsletter (Summer 1995)^.25. The nine associations were the Canadian Chemical Producers' Association, the Canadian Manufacturing Association, the Canadian Electrical Association, the Aluminum Industry Association, the Canadian Manufacturers of Chemical Specialties, the Mining Association of Canada, the Canadian Petroleum Products Institute, the Canadian Pulp and Paper Association, and the Canadian Steel Association. Representatives from Pollution Probe, Great Lakes United, the Toxics Watch Society of Alberta, and the West Coast Environmental Law Association took part in the ARET Committee. The original study was undertaken on behalf of Environment Canada/ARET Secretariat by the Environmental Policy Unit of the School of Policy Studies at Queen's University. The present paper therefore owes much to William Leiss, the director of the Environmental Policy Unit, and to Eric Darier, who co-authored the resulting report. In the original study we sought to identify what could be learned from the ARET experience to render future initiatives potentially more effective. The objectives of the survey were to identify ways in which stakeholders in the ARET process to date, and other stakeholders familiar with that process (but not direct participants), perceived the nature of the consultative process (as well as any changes the respondents would recommend); the costs associated with the process; and the results of that process (in relation to the ARET Challenge). "Position of the Non-Governmental Organizations in the Accelerated Reduction/Elimination of Toxics (ARET) Consultation," Letter to Assistant

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8

9 10

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Deputy Minister Clarke, Environment Canada (September 17, 1993). To illustrate this point, it could be noted here that the representation of environmental interests in ARET was co-ordinated by the Canadian Environmental Network (cEN).The CEN does not take positions on behalf of their members, although issue-based working groups or "caucuses" of CEN may do so. Environmental representatives were thus unable to "make deals" with others around the table. Instead, the self-perceived role of environmental representatives is, rather, to act as "facilitators for the environmental perspective." On the industry side, it would appear that the boundaries defining what representatives of some associations could agree to on behalf of their constituency were also restrictive. "Position of Non-Governmental Organizations" (see n. 7) See Debora VanNijnatten with Gary Gallon, "The ARET Challenge," chapter 6, above.

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eight A Claim to Sustainability • The Whitehorse Mining Initiative represents an important voluntary step forward by the mining sector Mary Louise McAllister "Our vision is of a socially, economically and environmentally sustainable and prosperous mining industry, underpinned by political and community consensus."1 Such was the conclusion of the ambitious Whitehorse Mining Initiative (WMI), the national roundtable introduced by the Mining Association of Canada as a radically new approach to mining. The WMI was established to deal in a new way with some of the big issues facing the mining sector. It was to be a consensus-seeking exercise involving representatives from such diverse organizations as the Canadian Environmental Network, the Assembly of First Nations, and the major mining unions, as well as from industry and the federal and provincial governments. Issues were to be addressed in a structural way rather than as individual problems in a piecemeal fashion.2 The WMI approach is not one generally associated with an industry described as possessing traditional individualistic, independent and isolationist tendencies.3 Its promoters recognized that times were changing. The industry now needed to compete for government attention against a much broader array of diverse interests. They also knew that the attention once won would not necessarily be favourable. The country's early nation-building days are past and the public interest is no longer automatically equated with resource development and frontier economics. The WMI was therefore developed to foster partnerships with competing communities of interest, and to build for the mineral industry a more supportive public policy environment. As a voluntary initiative, the WMI was meant to serve many business and political goals. The industry hoped to promote a better public reception for mining activities and to foster a more favourable regulatory environment. It also hoped to encourage improvements in companies' environmental programmes to cut environmental damage and to establish due diligence defences against environmental accident liability. Government could benefit in a number of ways, such as from the development of a more harmonious policy and administrative environment, and possibly from streamlining or downsizing their own activities. Members of the environmental non-government organizations wished to use the initiative as a vehicle for completing Canada's protected areas networks and ecologically sensitive areas and to encourage application of stronger environmental ethics in the resource industry. Labour representatives wanted, among other things, to achieve a measure of employment stability for their membership. Aboriginal representatives sought the opportunity to participate in resource decision-making regarding mining in order to gain mineral development benefits for their communities and/or help establish policies govChapter eight: A Claim to Sustainability

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erning the sustainable use of the resources. Each group can judge for itself the extent to which the WMI met its objectives. From the broader perspective of long-term interests, however, the true test of the WMI turns on its contribution to creating and implementing a sustainable approach to resource development. This larger goal (presented in the final "Leadership Council Accord" of the WMI) would require the mining industry to adopt a long-term, holistic, and integrative approach which reflects complex interdependencies of biophysical and socio-economic systems and to gain the co-operative involvement of all stakeholders (see sidebar: WMI Vision Statement). The WMI's Challenge: Mining in Canada In Canada, mining-related activities have had, and continue to have, a significant impact on the economy and the environment. Canadians perched near the information highway commonly hear that we should put our "hewers of wood and drawers of water" image behind us and base our national econWhitehorse Mining Initiative Vision Statement Our vision is of a socially, economically and environmentally sustainable, and prosperous mining industry, underpinned by political and community consensus. Mining is an important contributor to Canada's well-being, both nationally and regionally. The Whitehorse Mining Initiative is based on a shared desire to ensure that mining continues to make an important contribution within the context of sustainable development. This vision is more simply stated than achieved. We recognize that the natural environment, the economy, and Canada's many cultures and ways of life are complex and fragile, and that each is critical to societal survival. Furthermore, no aspect of social, economic, and environmental sustainability can be pursued in isolation or be the subject of an exclusive focus without detrimentally affecting other aspects.... The Principles and Goals that we have adopted represent a major and historic first step toward revitalizing mining in Canada.They point to changes that can restore the industry's ability to attract investment for exploration and development and, at the same time, ensure that the goals of Aboriginal peoples, the environmental community, labour and governments will be met. The process by which we reached consensus also establishes a framework for creative co-operation, which is most important in this era of dynamic change. It is a framework that can help us anticipate, react, and adapt to changes quickly and effectively by allowing us to capitalize on the goodwill and the ability we have developed to work together, by enabling us to draw on the collective expertise of all the stakeholders, and by encouraging us to resolve differences in a constructive spirit. From The Whitehorse Mining Initiative, Leadership Council Accord: Final Report (October 1994).

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omy on environmentally friendly, "sunrise industries."The present reality, however, is that the country is a long way from being weaned from its resourcebased economy Mining and other resource industries are still main drivers of the Canadian economy. While Canada has technical expertise in such areas as automation, robotics, mobile communications and other information technologies, many of those enterprises have been developed to support the largescale activities of primary industry. Canada is one of the leading mineral producing countries in the world and the largest mineral exporter. The value of non-fuel mineral production was $17.1 billion in 1997. Canada produces over 60 minerals and metals. As of 1995, it had 298 metal, nonmetal, and coal mines, 3,000 stone quarries, sand and gravel pits, and 50 nonferrous smelters, refineries, and steel mills. Approximately 199,000 people are directly employed by the industry.4 In addition, there are many spin-off economic activities from mining including tourism, transportation, manufacturing, and services. The socio-economic impact of mining is particularly significant in regional economies outside of the metropolitan areas of the country. Mine exploration and development is a long process with a great deal of capital invested along the way. Only one in 5,000 prospects reaches the production stage. Brian Mackenzie and Michael Doggett have estimated that the average exploration costs for an economic base-metal discovery between 19461988 amounted to $64 million, with the average exploration period estimated at eleven years during the same period of time.5 In recent years, access to land has become a primary issue of concern for the industry because exploration requires a huge area of land in order to discover a promising prospect. The mineral industry is now considering the best approach to deal with such issues as the growing international and domestic pressures to achieve protected areas networks and sustainable natural habitats, and the fair settlement of Aboriginal lands claims, while at the same time fostering good community relations and developing environmental records that are publicly recognized. Both the social-cultural and the biophysical impacts of mining can be significant and not all mining companies have the inclination or capacity for sensitive handling of these impacts. The activities of exploration or Junior mining companies, for example, can have major social and cultural effects on previously isolated communities. Company personnel are rarely trained to deal effectively with local social or cultural concerns. Moreover, they may not feel that it is their responsibility to do so. Ian Thomson and Susan Joyce claim, With respect to the less tangible social issues, there is a widely held confidence amongst the Juniors and, unfortunately, some of the Majors, that by simply following the legal code, mining code and environmental regulations of any country, a company has inherently met all obligations to the local community as well.6

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Mining companies are typically more comfortable dealing with concrete environmental issues which draw on their scientific training. But here too the challenges are formidable. The six main stages of mineral activities (exploration, development, extraction, ore concentration, processing and refining, and decommissioning after the mine closure) have diverse impacts ranging from land and habitat disturbance to air pollution and water contamination. Even individually, it is difficult to evaluate many of these impacts, and potential responses to them. The complexities multiply in any realistic assessment, which must address the combined effects of mining activities in all six stages on the overall integrity of local and regional ecosystems.7 Earle Ripley and his colleagues conclude that to contend with these interconnected impacts, "environmental management needs to be holistic."8 But clearly this is only part of the story. The argument for more integrated and comprehensive consideration of biophysical effects extends as well to consideration of socio-economic and cultural effects and to relations between ecological and community concerns. Moreover, these latter elements unavoidably require consultation, and preferably co-operation, with potentially affected communities and other interests. What mining companies evidently need is not just holistic environmental management; they are an integrated and collaborative overall approach to ecological and community impact concerns. The Whitehorse Mining Initiative was the first comprehensive effort to develop a framework for accommodating these concerns. For the mining industry, then, the WMI represented a means of addressing two intersecting needs: to win new appreciation of the importance on mining in the Canadian economy and to establish credibility as a desirable and sustainable industry that merited the co-operation and support of other stakeholders. As a first step, the mining industry had to demonstrate an ability to get its own members to approach the industry's challenges in a systematic and co-ordinated way The Whitehorse Mining Initiative and the Leadership Council Accord Canada has a wide variety of mining associations, coal groups, prospectors and developers associations, and large mining company bodies organized nationally, provincially, and regionally. Traditionally, they have operated independently of each other. Recently, however, these organizations have begun to work jointly to improve their public profiles and to influence governments. The most influential national organization in this regard is the Mining Association of Canada (MAC), which has successfully drawn many of the mineral interests together and has encouraged support for voluntary environmental initiatives. The Mining Association has championed a number of initiatives in recent years. The most significant was the WMI, announced at a meeting of mine ministers in 1992. Named after the city where it was first announced, the WMI was introduced to help combat structural problems affecting the competitiveness and long-term sustainability of the Canadian mineral industry. The goal [114]

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was to achieve a comprehensive plan of action agreed to by diverse and influential communities of interest including industry, governments, labour, environmental non-governmental organizations, and Aboriginal representatives from across Canada.9 No details were offered at the Whitehorse meeting about the mandate, structure, or time-frame for the desired consensus-based accord. But the joint plan of action received general support at the meeting, and early in the process enjoyed fairly strong and widespread commitment.The WMI was based on an open-ended, flexible process that evolved as the initiative progressed. This flexibility proved to be a strength. Participants were involved in shaping the process and thereby assured that their interests were accommodated from the beginning. In a February 1993 meeting, the first tentative steps were taken. The participants generally agreed that the outcomes of the WMI should include: a strategic vision for the minerals and metals sector; a series of accords or partnership agreements among various stakeholders and industry; options and recommendations for policy or regulatory changes, consistent with priorities in this jurisdiction; and establishment of new consultative mechanisms to ensure the continuation of communication and co-operation, and to facilitate the management and/or resolution of conflicts.10 The process was to conclude in the fall of 1994, in time for the annual mines ministers' meeting. Financial support was split three ways. The federal government assumed one third of the costs, the provinces paid one third, and the Mining Association of Canada assumed the final third. Each of the voluntary sectors was allocated a budget. A total of $454,000 was provided to support participation by stakeholder groups. Thematic issues would be discussed through a series of roundtable meetings. The major concerns of the stakeholders included land access and use, workforce and community questions, environmental issues, Aboriginal issues, and financial performance and taxation issues. Four issue groups were formed around the general areas of environment, workplace, land access, and finance/taxation, although it was recognized that many of the issue areas overlapped. Each of the four roundtables, composed of diverse stakeholders, had the autonomy to organize itself and to determine its own process. The four developed different working cultures and group dynamics. Each issue group produced reports that included a set of principles and objectives and a list of over 150 recommendations. Principles and recommendations for sustainability were presented throughout the comprehensive documents. The Land Access Issue Group, for example, suggested that governments should move toward integrated resource planning and decision-making. Planning should address both ecological and socio-economic issues. Among their recommendations, the Environment Issue Group Chapter eight: A Claim to Sustainability

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suggested the establishment of an interdisciplinary network in land restoration and ecosystem renewal. The other groups also stressed the importance of partnerships and arrangements between different policy communities. In addition to the issue groups, a 44-member Leadership Council was formed. Reflecting the diversity of stakeholders, the council consisted of mining ministers, industry leaders, and representatives from environmental interest groups, labour, and first nations. The council developed the "Leadership Council Accord," outlining a shared vision and statement of commitment. Both the accord and the work of the issue groups were published and made widely available in electronic and paper form through the associations and by the Mining Association of Canada and Natural Resources Canada. The process was subject to many tensions, particularly because of the time constraints and fundamental differences of opinion about the appropriate use and management of natural resources. One of the most contentious issues was that of establishing protected areas where there would be no mineral exploration or development. Nevertheless, an agreement was achieved. It stated, "Protected area networks are essential contributors to environmental health, biological diversity, and ecological processes, as well as being a fundamental part of the sustainable balance of society, economy, and environment."11 A general consensus was reached with the signing of the "Leadership Council Accord," which included a vision statement, principles and goals as well as a commitment by the participants to follow up on their recommendations. Principles and goals included specific recommendations for improving the business, financial, and taxation environment for mining; reducing overlap and duplications of government regulations; maintaining government services and environmental protection; establishing transparent, efficient, and accountable environmental assessment processes; using high-quality and relevant information and science in environmental decision-making; ensuring reasonable access to land for exploration and development; creating protected areas; providing more certainty of mineral tenure; and attracting and retaining skilled workers. Overall, the WMI process generated four substantial issue group reports with their own sets of recommendations on both their own thematic areas and the accord itself. Much of the work was summarized in a document entitled, The Whitehorse Mining Initiative: Leadership Council Accord Final Report. Evaluating the Initiative and the Accord The relative success of the initiative is a subject for debate. Evaluations of the WMI vary among participants, who hold diverging expectations and perceptions about what the initiative could be expected to achieve. The participants in the WMI were able to develop a strategic vision for the minerals and metals sector. They also developed a series of accords and made recommendations for policy and regulatory changes. New consultative mechanisms to ensure the continuation of communication and co-operation, and to facilitate the management and/or resolution of conflicts, were developed following the meetings [i 16]

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(and are still being developed). In a follow-up conference in November 1995, it was agreed that the WMI should not seen as an end in itself but as a process. There were some concerns stated by the participants. At the workshops held during the follow-up conference, it was noted by some that the contemporary political climate in Canada may not be supportive of the consensus-based goals of the WMI process. Alan Young of the Canadian Environmental Network observed, There are those people who think that it [the WMI] was a sell-out. They are sceptical about a non-binding Accord. We've argued with them that these are a set of principles that we can work with. It [the WMI] is taking root amongst those who are interested in dialogue. The full spectrum, from negotiation to protest, is to be expected.12 Furthermore, some representatives of the environmental community have expressed concern that the WMI principles have not permeated deep into the industry itself.13 Nevertheless, the WMI went a long way toward developing a better understanding of the different stakeholders' perspectives. From a public policy perspective, the new alliances and contacts across government departments and organizations that developed during the process provided a valuable working basis for future policy discussions. Other countries, such as South Africa and Brazil, looked to the Whitehorse Mining Initiative to see how they can establish multistakeholder approaches to build consensus among competing interests. The WMI was ambitious in scope and there was much about it that inevitably could have been strengthened. The work of the issue groups and the final accord did, however, lay a very useful foundation for a more integrated and perhaps more sustainable approach to managing mineral development. For example, the newVoisey s Bay Nickel Company cites the WMI as a source for some of the principles it is following in the development of its new mine.14 The WMI nudged mineral sector culture toward a more co-operative approach with competing interests. Members of industry became much more aware of the breadth and diversity of impacts caused by their activities. Participants in the WMI were able to share fundamentally different world views about the appropriate use of natural resources. A general accord was signed based on a shared vision. These were no small accomplishments given how far the participants had to come by questioning their own ideological positions and assumptions. The principles agreed upon are being used as benchmarks to assess the level of progress toward more responsible practices in the mineral industry. Complementing the work of the WMI, the Mining Association of Canada also introduced a number of other initiatives including MEND, a $20 million research programme dealing with acid rock drainage, and AQUAMIN, a multistakeholder assessment of the aquatic effects of mining in Canada. The Chapter eight: A Claim to Sustainability

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Association has also promoted mining sector participation in the voluntary Accelerated Reduction and Elimination of Toxic Substances (ARET) pollution abatement programme. Mining company members reduced emissions in 1995 by 32 per cent from the 1988 level.15 Before a company can join the Mining Association of Canada it now must endorse the association's environmental policy.16 This policy calls for companies, in the absence of legislation, to apply cost-effective best management practices to advance environmental protection, to minimize risks, and to self-monitor to ensure compliance. Similar policies have been adopted by the Prospectors and Developers Association of Canada and the Canadian Institute of Mining, Metallurgy, and Petroleum.17 These efforts represent positive steps toward lessening the adverse environmental impacts of mining. Questions remain, however, about how these initiatives may be effectively monitored and assessed. In the case of ARET, for example, it has been noted that while the promised environmental results are substantial, "it is crucial that a credible and impartial verification mechanism be established to confirm the results of the ARET Challenge, in light of criticisms made of the voluntary approach to environmental protection."18 For their part, some of the larger Canadian mining companies have adopted numerous wide-ranging environmental and community initiatives throughout their global operations. Companies with international holdings such as Placer Dome, Barrick Gold, Noranda, and Inco have much invested in long-term projects with huge sunk costs. Many of these large and highly visible companies proclaim a commitment to meet or surpass existing environmental regulations and guidelines and to apply the same standards worldwide. Many large companies are also introducing environmental management systems and other iso 14000 standards. They advertise initiatives in the areas of community development, endangered species habitat protection, and restoration projects.19 Barriers to Implementing the Sustainability Principles of the Accord Established culture of the mining sector The culture of the mineral industry, in general, does not lend itself readily to consensus-building responses or to socio-political and economic concerns. The WMI suggests that some leaders in the industry are now venturing into this new terrain convinced that it is the way of the future. It will, however, be difficult to take these consensus-based processes one step further. A challenge that has yet to be tackled successfully is to persuade the majority of members of mining and prospecting associations that they should adopt a whole new approach which includes broader sustainability principles and ecosystem-based planning as well as shared decision-making with affected communities. These are approaches that need to be adopted and applied if mineral-related activities are to be environmentally sustainable in the long term. This will not be easy. As Bruce Mitchell notes, many people can buy into the idea of comprehensive, holistic approaches to environmental management that consider [i 18]

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the big picture. The difficulty is in understanding what it means in practice. This would include, for example, knowing how widely to cast the net, how large an ecosystem to consider, and how many components and relationships to address. If the big picture becomes too big, the planners and analysts may become so entangled in the complexities of multiple components and linkages that they are unable to complete their analysis in a reasonable period of time.20 Another challenge lies in the diversity of the mineral industry itself. There is tremendous variation in the nature of activities engaged in by various companies throughout the mineral development process; they all have their own set of impacts and constraints. Different associations address the specific needs of their particular sector. Furthermore, many companies are run by independent individuals who are not always enamoured of collective action. It is difficult for national associations to develop a common sense of purpose and a set of environmental standards. It is also hard to apply particular sanctions to companies that choose not to participate in the well-established, mature mineral associations. Competitive variables also may lessen the extent of voluntary initiatives in community and local environmental projects. If the costs of developing a mine prove to be too high, an ore body will not be developed. Costs are related to such variables as the quality and accessibility of the ore body, world prices and demand, production and development components (e.g., labour, infrastructure, energy, etc.), regulatory compliance, and political risk and instability.Voluntary acceptance of ecological and socio-economic considerations can add to these costs. In addition, some believe it is the obligation of governments, not the companies, to set the environmental and community standards. The companies' role is to live up to those standards, not to initiate additional measures. Thomson and Joyce observe, It is quite unrealistic to think that changes in the culture of an entire industry sector will be driven solely by moral and ethical considerations. An economic stimulus is required so that risk and reward, the prime forces in resource development, remain in balance. A simple desire to stay in business will be enough for some, but there could be a more persuasive force. We suggest that placing and maintaining a project in social and socio-economic good standing can be considered value added in the same way that exploration which defines the grade and tonnage of a mineral deposit is regarded as adding value to a property. 2I Voluntary initiatives cannot realistically be seen as a replacement for governChapter eight: A Claim to Sustainability

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ment regulation. Some industry representatives themselves will emphasize that it is the responsibility of government to provide a base of effective regulation. George Miller, past president and chief executive officer of the Mining Association of Canada, has stressed that public regulation cannot be replaced by self-regulation.22 Government traditions and fragmentation Governments themselves provide barriers to sustainability and the application of integrated strategies such as the WMI. Barriers include a historic lack of trust between industry, other organizations, and governments; by a measure of competition between government departments; and governments' lack of ability or willingness to co-ordinate their activities in a manner consistent with sustainability and with the principles of the WMI. Governments have difficulty fostering the trust of the mineral industry. Responsibility for that problem rests both with industry and government. Historically, the mineral industry has resented what it saw as government intervention and often still cites government-mandated costs when discussing its competitive concerns. Governments have played an important role in providing the stable regulatory environment necessary for a healthy and sustainable society and economy. The mineral industry does not often acknowledge the importance of that role. Over the past century, both the federal and provincial governments have provided various forms of public policy support and financial assistance to the mineral industry, supporting exploration, development and production activities through research, joint ventures, the provision of infrastructure, educational programmes, tax expenditures and grants. More recently, industry has seen a decline in tangible government support accompanied by growing public legitimacy for new interest groups seeking policy attention. The combination of these forces has fuelled industry's lack of trust in governments' ability to support mining interests. On the other hand, non-governmental organizations may not trust governments, which they see as pro-development. This is not a strong foundation for developing consensus-based partnerships. Governments themselves may not be very supportive of roundtables in practice, though they often use them to support political goals. Public bureaucracies by their very nature are based on principles of hierarchical structure, unity of command, neutrality, specialization, scientific management, and efficiency goals. Governments and departments often compete with each other for resources, prominence on the public agenda, and power.They develop their own cultures, ethos, and commitment to protecting the interests of what they perceive to be their own constituencies. Historically, ministries of mines and ministries of environment, for example, have had quite different agendas. These dynamics limit the ability of public organizations to facilitate the interdepartmental co-operation needed for holistic, integrated, inter-jurisdictional approaches to sustainability. [ 120]

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The WMI has been helpful in developing linkages between different governing departments. The federal and provincial governments have used the WMI principles to improve interdepartmental co-ordination and to formulate principles for sustainable development. The initiative has provided land-use managers and civil servants with an opportunity to develop a broader network that facilitates co-operative approaches to shared problems. The 1996 Minerals and Metals Policy of the Government of Canada: Partnerships for Sustainable Development, for example, incorporated many of the principles found in the WMI "Leadership Council Accord." In addition to voicing the traditional support for economic growth and job creation by the mineral sector, the policy statement introduced new terminology into its lexicon including the precautionary principle, life-cycle management, and the safe use principle. The importance of partnerships was stressed as was the need for strengthening the existing collaborative and consultative mechanisms to reflect the diversity of interests.23 While this approach appears to be sympathetic to principles of sustainability, partnerships can also be perceived as an opportunity for governments to reduce their role in the regulatory field at the expense of the environment. Recent initiatives to harmonize federal-provincial responsibilities in environmental assessment and environmental protection regulations are a case in point. Some argue that harmonization will allow for a smoother, more co-ordinated approach to environmental assessment and regulation. Others are concerned, however, that harmonization efforts will lead to reduced federal oversight of the resource-development ventures of the provinces. For voluntary initiatives such as WMI to work, governments have to provide an environment that is supportive of the principles of the WMI vision statement. However, governments must not only say they are supportive of those principles, but also demonstrate this support visibly in effective action. For example, if land has been set aside as an important landmark or designated site, and exceptions were made to allow a project to go ahead in that area, the credibility of the government in the environmental arena would be suspect. Moreover, governments must recognize that integrated voluntary initiatives will be effective only if they are supported by regulations that are consistent and enforced.24 Conclusion Voluntary measures such as the Whitehorse Mining Initiative can contribute considerably to co-operative agreements between disparate interests and thus fulfill some political and economic goals. If, however, the goal is long-term sustainability, as many public and private sector documents assert, then such initiatives need to be assessed in the context of much more complex and, therefore, nebulous goals. This suggests that traditional concepts of resource management be replaced by those presented by a more comprehensive approach drawing on principles suggested by the WMI vision statement. Chapter eight: A Claim to Sustainability

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This orientation is not easily reconciled with a mineral industry whose existence is predicated on the profitable extraction of resources. Environmental concerns which readily lend themselves to technological approaches such as application of acid-mine drainage mitigation techniques are ones that the industry is more likely to tackle with a measure of enthusiasm and commitment. Much more difficult for industry is to develop an appropriate strategy for implementing the work of the WMI and its accord. This approach requires co-operation with competing interests and governments. To meet the goals of the accord, governments will need to provide a co-ordinated yet adaptable regulatory foundation to support these initiatives. As the Social Investment Organization has noted, a continuous evolution of environmental regulation is needed to bring standards and procedures up to date with new understandings of environmental problems, changing tolerances for effects, new management techniques and newly available technology.25 This public function cannot be fulfilled by private-sector voluntary initiatives alone. In sum, the first-stage effort of the Whitehorse Mining Initiative was a success. Participants who held very different world views, interests, and perspectives were able to sign the final accord. These participants included leaders of industry and labour, senior government mining officials, well-known members of Aboriginal communities, and astute environmentalists. The signed accord was no small achievement. The work of the WMI participants now serves as a benchmark against which to assess progress towards its integrated vision. Many of the participants of the initiative are keenly aware, however, that the WMI accord is only a first chip at the base of the mountain in the quest for a more harmonized and sustainable approach to mining. Mary Louise McAllister is an associate professor in Environment and Resource Studies at the University of Waterloo and co-author of A Stake in the Future: Redefining the Canadian Mineral Industry. She gratefully acknowledges the financial assistance of the University of Waterloo Senate Research Council and the Social Sciences and Humanities Research Council of Canada. Notes 1 2 3

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The Whitehorse Mining Initiative, Searching for Gold: The Whitehorse Mining Initiative (Ottawa: WMI, 14 October 1994), p.n. See n. i Philip M. Hocker, No Mine Is an Island: The Mining Industry Amid Rising Environmental Expectations, working Papers no. 90-95 (Durango, Colorado: Mineral Policy Center, 26 April 1990). Natural Resources Canada; Statistics Canada, Natural Resources Fact Sheet, 1996 http://www.nrcan.gc.ca/mms/nrcanstats/factsheet.htm. See also Natural Resources Canada, Metals and Minerals Sector, Canadian Minerals Yearbook: 1998. Brian Mackenzie and Michael Doggett, "What the Alchemists Didn't Know:

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Comparing Canada's Base Metal and Gold Potential," CRS Perspectives (May/June 1993), p. 28. Ian Thomson, Orvana Minerals Corp., and Susan A.Joyce, consultant, "Mineral Exploration and the Challenge of Community Relations," 19 June 1997 (www.bc-mining-house.com/chamber/opinions/opin-it.htm). Earle A. Ripley, Robert E. Redmann, Adele A. Crowder, Environmental Effects of Mining (Delray Beach, Florida: St. Lucie Press, 1996), p-5i, consider potential effects in the six stages within a broader systems approach to reveal the stresses that mining places on a range of ecosystem attributes, specifically energy flow, food webs, structure and niches, communities and diversity, populations, geochemical cycling, succession, and stability and resilience. Ripley et al. (see n. 7), pp. 11o-111, explain," [R]emoving a contaminant from one part of an ecosystem only to place it uncontained or untreated in another does not solve the problems of its existence. Diluting a contaminant only widens the area affected by it. When treating wastes on land, it is always necessary to also consider the potential effects on groundwater and aquatic ecosystems." Mary Louise McAllister and Cynthia Jacqueline Alexander, A Stake in the Future: Redefining the Canadian Mineral Industry (Vancouver: UBC Press, 1997). McAllister and Alexander, A Stake in the Future (see n. 9), p.79. WMI, Searching for Gold (n. i), p.25. Alan Young, statement at follow-up meeting of WMI participants, assessing the progress of WMI implemention, Ottawa, November 1995. McAllister and Alexander, A Stake in the Future (n. 9), p. 169. Voisey's Bay Nickel Company Ltd., a subsidiary of Inco Ltd., "Information Booklet," October 1997. George Miller, President's Report, 1996/97 (Ottawa: Mining Association of Canada, 1997). The Mining Association of Canada's "Environmental Policy" covers all aspects of mining, from exploration to ultimate closure. Members of MAC are expected to adopt these principles as part of their corporate priority through the practice of integrated management, environmental management, continual improvement, efficiency, risk management, incident management, research, technology transfer, and public policy, etc. See the Mining Association of Canada, "Environmental Policy," revised June 1995. The Social Investment Organization, Canadian Mining Industry Focus Report (Toronto: SIO, 1997), p. 29. Eric Darier and Debora VanNijnatten, Lessons Learned from ARET: A Qualitative Survey of Perceptions of Stakeholders, Working Paper Series 96-4 (Kingston: Queen's University School of Policy Studies, Environmental Policy Unit, June 1996). See, for example,Voisey's Bay Nickel Company Ltd., "Information Booklet" (n.

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nine Who Killed CIPSI? • Was the Canadian Industry Packaging Stewardship initiative really done In by six business associations using the blunt instrument of a three-paragraph letter? • Elfreda Chang, Doug Macdonald, and Joanne Wolfson On October 30, 1995, six industry associations sharing no formal organizational ties, nor any history of joint lobbying, took what they themselves described as the "unusual step" of writing to Ontario Premier Harris in order "to highlight a key concern with respect to the Canadian Industry Packaging Stewardship Initiative (CIPSI) being brought forward by the Ministry of Environment and Energy."1 The CIPSI programme, which had been developed jointly over the previous three years by industrial users of the Blue Box programme, the Association of Municipalities of Ontario (AMO), and the Ontario Ministry of Environment and Energy (MOEE), would have required industries whose packaging products ended up in Blue Box curbside recycling programmes to provide municipalities with a portion of the programme costs. Now, two-and-a-half years after that letter was written, the Ontario government has taken the position that it will make no further effort to develop the programme until all of the business and municipal stakeholders reach consensus - something which, given the enmities developed over 30 years of debate in Ontario over the merits of refillable versus recyclable beverage containers, simply will not happen.2 The Ministry of Environment, during the past year, has not developed the programme further.3 The programme is, to all intents and purposes, dead. Who killed CIPSI? Was it really six business associations, using the blunt instrument of a three-paragraph letter? This seems unlikely. Any good detective starts with motive, but none is immediately apparent here. Since they were not involved in the programme, it did not impose any additional costs upon them. Nor did they raise any substantive objections in their letter. They simply said they were concerned that CIPSI had been developed "without due consideration of the impact the proposal would have on sectors outside of those that developed the CIPSI model" and asked for an opportunity to discuss the programme with the Ontario government.4 Or is there another culprit - possibly Colonel Mustard, in the conservatory, with a candlestick? Unravelling this mystery may tell us a great deal about the potential use of voluntarism as an environmental policy instrument. Voluntarism in Ontario In the summer of 1996, the Ontario Ministry of Environment and Energy released a consultation paper on regulatory reform entitled Responsive Chapter nine: Who Killed CIPSI?

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Environmental Protection.5 The paper symbolized the polarization of environmental dialogue in Ontario since the election of Mike Harris's Conservative government in June, 1995. While environmentalists quickly labelled it as yet another step in the Harris government's agenda of environmental deregulation,6 the Ministry itself claimed that the proposed reforms would induce economic growth and job creation, but would in no way lower environmental standards. In addition to rescinding "redundant and outdated" regulations, and amending others to make them more "cost-effective," the discussion paper proposed a number of measures for "going beyond regulation." These included such things as private sector certification, industry codes of practice, and voluntary agreements, which - unlike state-driven regulations and economic instruments - depend on the initiative of the polluting firm itself.7 Ontario has thus moved to join a number of Canadian provinces and other jurisdictions that have added voluntarism to their tool kit of environmental policy instruments.8 A standard critique of voluntarism is that it carries with it the "free rider" problem — those who will benefit from collective action have no incentive, when all are acting voluntarily, to assist in achieving those benefits. The Ministry discussion paper acknowledges this problem: "The drawback [associated with voluntarism] is that not all companies may participate in voluntary agreements, and consequently, companies who have invested in environmental protection measures can find themselves shouldering greater costs than their competitors."9 To address this weakness, it was proposed that the CIPSI programme have a "backdrop regulation," which would have required non-participating companies to divert at least 50 per cent (by weight) of their packaging from disposal. Since the cost of doing so would have been prohibitive, the backdrop regulation effectively would have required all relevant industries to participate in the programme. The Ministry discussion paper overlooks, however, an even more significant drawback of voluntarism, which is illustrated by the analysis of Blue Box funding and the death of CIPSI which follows: when a government is intent on deregulation, the policy instrument of voluntarism is inherently incapable of achieving its objectives. History of Blue Box Funding Although seldom discussed in these terms, the Ontario Blue Box programme is an early example of voluntarism. In 1976, the Ontario government introduced a regulatory requirement that a portion of soft drinks sold in the province must be packaged in refillable containers, collected through a depositrefund system. Successive Ontario governments were unable or unwilling to enforce this requirement, prompting a search for an alternative approach. In 1986, the Liberal government relaxed the refillable sales ratio requirement (from 75 to 40 per cent) in exchange for a "voluntary" contribution from the soft drink industry toward the capital cost of a new system of residential curbside recycling, dubbed the Blue Box programme.10 In the years since, the vol[ 126]

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untary participation by householders - who carry their Blue Box to the curb once a week - has proved more durable than the voluntary industry funding. As the vehicle to provide its funding to municipalities, estimated to be a total of twenty million dollars over three years, the soft drink industry established Ontario Multi Material Recycling Incorporated (OMMRI). The initial funding agreements stated that the start-up costs of Blue Box programmes would be divided equally among OMMRI, the province, and the participating municipalities. Operating costs were to be shared by the province and the municipalities, with the province subsidizing the programme on a sliding scale ranging from approximately one-half to one-third for the first five years.11 It was assumed that at this point revenue from the sale of recycled materials would cover all programme costs.12 However, revenues failed to reach expected levels, and by 1990 - with provincial subsidies due to expire and a recession playing havoc with the finances of many municipalities — it was clear that additional industry funding was needed to support the Blue Box programme. In February, 1990, OMMRI II was created by bringing in the newspaper and food product industries as partners with the soft drink manufacturers. Although this new organization pledged an additional $45 million in Blue Box funding,13 it encountered problems raising the necessary funds. Participation in OMMRI was voluntary, and the organization, bumping into the free-rider problem, was unable to attract a sufficient number of members. The next step in the evolution of voluntary product stewardship funding came in 1992, when the Grocery Product Manufacturers of Canada (GPMC), a national trade association whose 118 members produce food and food service products, introduced the Canadian Industry Packaging Stewardship Initiative (CIPSI). GPMC introduced CIPSI at that time because it was convinced that the newly elected NDP government was prepared to legislate some form of "product stewardship"14 - the concept that manufacturers must take some responsibility for the environmental impacts caused by their products, even after ownership, and liability, has passed to the purchasing customer. Similar negotiations were started in other provinces. Under the Ontario CIPSI proposal, an industry-managed fund would be formed to provide municipalities with up to two-thirds of the costs of recycling packaging as well as provide support for market development.15 As discussed, the CIPSI proposal included provincial legislation to ensure that all relevant industries did in fact participate in the funding programme. The Grocery Products Manufacturers were subsequently joined by six other industry associations, forming the "CIPSI coalition," which pressed the federal government and a number of provinces to support CIPSI as an alternative to such things as deposit-refund systems or German "Green Dot" mandatory take-back recycling programmes.16 Although the federal government refused to become directly involved, the Ontario CIPSI proposal was officially endorsed by MOEE in June 1994.1? After this provincial endorsement, as part of a public consultation process, the CIPSI proposal was presented to the other major stakeholder - the Association of Municipalities of Ontario (AMO), which repChapter nine: Who Killed CIPSI?

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resented those who had the responsibility to operate curbside recycling programmes. In November 1994, the AMO Board of Directors refused to endorse the CIPSI proposal. There were concerns that the programme did not include newspapers and magazines, which by weight make up over 50 per cent of Blue Box materials. Conversely, some municipalities objected to the fact that glass difficult to recycle and with low market value — was included. It was thought by some municipal representatives that glass could better be handled through deposit-refund programmes. Finally, it was thought that CIPSI did not offer a sufficient financial contribution to municipal recycling costs.18 After this decision, negotiations between the AMO and the CIPSI industries continued, albeit at a slower pace. In August, 1995, however, AMO reversed its position and endorsed the proposal, despite the fact that the CIPSI industries had not moved significantly to meet their demands. This reversal was intended primarily to get the proposal back on the bargaining table.19 This AMO endorsement was essential to the policy process, since the Ministry had taken the position that it would not implement CIPSI as long as it was opposed by the municipal sector.20 By this time, the Ministry was aware of potential objections from other industrial sectors but was confident they could be addressed. The other major actor, the Ontario newspaper industry, informed the Ministry it would participate at least in the early stages of the CIPSI programme, through partial funding of studies to determine more precisely the costs of recycling different Blue Box materials.21 In the early fall of 1995, the environment minister in the new Harris government, Brenda Elliott, brought the CIPSI proposal forward to the Priorities and Planning Committee of Cabinet. It was sent back for reworking, but subsequently given approval in principle.22 In October, 1995, after discovering that Cabinet was about to vote on the final CIPSI proposal, a representative of the Brewers of Ontario contacted five other industry associations — the Ontario Waste Management Association, the Canadian Federation of Independent Business, the Information Technology Association of Canada, the Ontario Automobile Dealers' Association, and the Motor Vehicle Manufacturers' Association - to organize opposition to the programme.23 Why were they opposed? Presumably their motives varied. The Brewers, as part of their ongoing effort to keep US beer out of the Ontario market, have always championed deposit-refund systems over re cycling.24 The car and computer industries may have been fearful that Blue Box product stewardship would serve as the thin edge of the wedge and lead to the introduction of European-style product stewardship take-back requirements in Ontario.25 The waste management industry was concerned that subsidies for municipal recycling would place private-sector recycling at a competitive disadvantage, and also may have opposed CIPSI because it was a policy process they were not part of and could not control.26 Whatever their reasons, through a conference call, these six associations hastily drafted their letter to Premier Harris.27 Following this expression of concern, the Ontario government indefinitely deferred further consideration [128]

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of the programme. The CIPSI industries, for their part, sent a letter dated November 21, 1996, to the premier, stating that they were "disappointed that there has been no decision about the CIPSI proposal, in the face of a lastminute objection."28 They went on to point out that the objecting industries generated little packaging waste, while CIPSI members generated some 80 per cent of Blue Box materials, that they had offered to meet with a number of the objecting industries and that the proposal had been developed over three years, in a process which included public hearings. They concluded by saying "we feel obliged to suspend this work pending a clear decision from the government." Since then the CIPSI coalition has been dissolved. OMMRI has been replaced by an organization known as Corporations Supporting Recycling (csR).The only industry funding it provides municipalities is for a limited number of pilot projects testing the cost-effectiveness of recycling certain materials, leaving property taxes and recyclable material sales revenues as the only funding sources for the Blue Box programme.29 Although neither the Harris government nor the CIPSI industries have printed the obituary, it is impossible to avoid the conclusion that CIPSI is dead. Who killed CIPSI? One possible explanation for the abandonment of CIPSI is that the business associations that sent the "unusual step" letter in October 1995 were politically stronger than CIPSI supporters, and thus better able to influence the Ontario government. Environmentalists, who have always advocated re-use as preferable to recycling, were not actively supporting CIPSI, and in any case were taking the position that industry should provide a greater portion of total Blue Box costs.30 With no environmental voice speaking on the side of CIPSI, it might be that its supporters, the Blue Box industries and AMO, were simply outgunned by its opponents. This does not seem likely. It is difficult to believe that an ad hoc group of business associations, which had devoted no paid staff resources to a campaign, were not formally organized, did not include significantly larger firms than its opponents, and, to the best of our knowledge, had not engaged in any lobbying activity (other than the ongoing, individual efforts of the brewers) had more political muscle than sectors such as the soft drink industry, which had been very successfully engaged in solid waste politics since the mid-1970s. A more satisfactory explanation comes from looking at the motivations and actions of the CIPSI industries themselves. Prior to the election of the Harris government, they were faced with the two alternatives that had originally given rise to the Blue Box programme - re-use, in the form of mandatory deposit-refund systems, or recycling, in the form of product stewardship funding. The latter was less expensive and therefore preferred. During the NDP era, the Ontario government actively considered, but then did not implement, an expanded deposit-refund system. The CIPSI industries had managed to prevent Chapter nine: Who Killed CIPSI?

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that policy option and had then gone on to put in place their preferred programme, when the June 1995 election intervened. The government elected in 1995 moved immediately and explicitly in all policy fields to reduce the costs that regulation imposes on business in the province.31 In the environment field, the Tories began a process of deregulation, which left it clear that they would not impose any new regulatory costs on business. The proposed CIPSI product stewardship funding was "voluntary" to the extent that it was not mandated by law - but it rested on the legal basis of the backdrop regulation and imposed new costs on industry. For those reasons, and because it was a relic of the previous administration, championed by a new, inexperienced minister (who has since been shuffled out of cabinet), it was unlikely to have been viewed with great favour by the premier's office.32 However, the Tories did not immediately abandon the programme - indeed they took no definitive position one way or the other. We cannot say that the Harris government itself directly killed CIPSI. Instead, we conclude that the initiative was killed by the CIPSI coalition itself. The CIPSI proposal existed only because it was seen by that industry group as less expensive, and therefore preferable, to the regulatory alternative of mandatory refillable sales or Green Dot take-back programmes. Once a government was in place that sent out a clear message that it would not impose any such regulatory requirements, the attractiveness of voluntary action in the eyes of the CIPSI industries must have faded quickly. As we have seen, the CIPSI industries continued to press for their programme in the summer of 1995, after the new government was elected. But once the process stalled, in November 1995, they made no effort to restart it.33 Why should they have? Why should they have voluntarily assumed costs that they knew would never be imposed upon them by the present Ontario government? It is for this reason that we argue it was the CIPSI industries themselves who killed the programme. Taking the analysis one step farther, however, we see that they were able to do so only because the Mike Harris government had thrown away the one policy instrument that can make voluntarism work — the threat of regulation, which makes voluntary programmes an attractive alternative. The same dynamic exists in other environmental policy fields. In the months leading up to the third meeting of parties to the Climate Change Convention, held in Kyoto, Japan, in early December 1997, it became apparent to Canadians that voluntarism had not been successful as an instrument for achieving the goal of stabilization of carbon dioxide emissions.34 A review of the 1995 national programme, which had as its principal element the Voluntary Challenge and Registry Programme (VCR), made these comments on the relationship between voluntarism and regulation: Experience with voluntary programmes elsewhere in Canada and in other parts of the world indicates that voluntary measures are more effective if there is a credible threat of an alternative that is more costly [130]

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or less flexible for the organizations involved....Various voluntary codes in the areas of tobacco advertising, direct marketing and broadcasting are all aimed to a greater or lesser extent on the objective of pre-empting government intervention.... If governments can convince industry that they will take other steps, such as regulations, to achieve Canada's mitigation goals in the event VCR fails, they will encourage industry leaders to lean on, or help, laggards improve their performance.35 One of the major findings of a German study, done recently by the Centre for European Economic Research, gives the same message: "A preference for negotiated solutions on principle as currently espoused by the Federal Government in Germany, is 'counterproductive.' If the government clearly signals its willingness to refrain from using regulatory or economic instruments in favour of industry agreements, it weakens its negotiating position."36 The failure of the CIPSI initiative demonstrates the ineffectiveness of voluntarism as an alternative to law. It might be an effective policy instrument if used as an adjunct to state-driven regulation, but it can never be an alternative. The Responsive Environmental Protection discussion paper fundamentally misrepresents this important policy dynamic by assuming that voluntarism can be effective outside a regulatory framework. In a policy climate such as that created by the Harris government, which is committed to fundamental and farreaching environmental deregulation, voluntarism must be seen for what it is — a smoke-screen, intended to mislead the public and to hide the fact that what is taking place is a significant reduction in levels of environmental protection. Elfreda Chang holds a bachelor's degree in environmental sciences from the University of Toronto and is community affairs co-ordinator with a Torontoarea waste management company. Doug Macdonald teaches environmental politics at Innis College, University of Toronto, and is undertaking postdoctoral research, in affiliation with the Environmental and Resource Studies Program, Trent University, into the role of business as an environmental policy actor. Joanne Wolf son is completing an undergraduate degree in environmental and urban studies at York University. Notes 1

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Jan Westcott, Brewers of Ontario; Lyle Bunn, Information Technology Association of Canada; Bill Davis, Ontario Automobile Dealers' Association; Judith Andrew, Canadian Federation of Independent Business; Nancy Porteous-Koehle, Ontario Waste Management Association; Mark Nantais, Motor Vehicle Manufacturers' Association, to the Hon. Mike Harris, Premier of Ontario (October 30, 1995). Gord Perks, Toronto Environmental Alliance, personal communication (October 30, 1997).

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Cathy Clarke, Ontario Ministry of Environment, personal communication (October 30, 1997). Westcott et al. to Premier Harris (n. i). Ontario Ministry of Environment and Energy, Reforming Environment and Energy Regulation in Ontario: Responsive Environmental Protection (1996). See, for instance, Jill Cameron, "Regulatory Review Process Pulls Knives Out With Consultation Paper," Intervenor, the newsletter of the Canadian Environmental Law Association 20:4 (1996). See Karen Clark, The Use of Voluntary Pollution Prevention Agreements in Canada (Toronto: Canadian Institute for Environmental Law and Policy, April 1995); Michelle Swenarchuk and Paul Muldoon, Deregulation and Self-Regulation in Administrative Law: A Public Interest Perspective (Toronto: Canadian Environmental Law Association, March 1996); and Terry Burrell, Law in the Public Interest (Toronto: Canadian Environmental Law Association, November 1996). For a review of environmental policy in Ontario and six other provinces see Mark Winfield, The Ontario Regulation and Policy-Making Process in a Comparative Context: An Exploration of the Possibilities for Reform (Toronto: Canadian Institute for Environmental Law and Policy [CIELAP], 1996). Reforming Environment (n. 5), p. 14. See Doug Macdonald, The Politics of Pollution (Toronto: McClelland and Stewart, 1991) and David Estrin and John Swaigen, eds., Environment on Trial (Toronto: Emond Montgomery and CIELAP, 1993). Metro Toronto Works Department, Residential Recycling in Metropolitan Toronto (May 1993). Who Pays for Blue? Financing Residential Waste Diversion in Ontario (Toronto: CIELAP, 1992),p. i. OMMRI News Release (Toronto: February 23, 1990). Colin Isaacs, "Some Packagers Facing Taxation Without Representation," The Financial Post (Toronto: February n, 1994). "Industry Proposal to Help Finance Blue Box Programs" (Toronto: MOEE News Release, June 8, 1994). The other CIPSI members were the Canadian Council of Grocery Distributors, the Canadian Federation of Independent Grocers, the Canadian Soft Drink Association, the Environment and Plastic Institute of Canada, the Packaging Association of Canada, and the Retail Council of Canada. "Industry Proposal to Help Finance Blue Box Programs" (Toronto: MOEE News Release, June 8, 1994). Babak Abbaszadeh, AMO policy analyst, personal communication (March 6, 1996). Abbaszadeh, (n. 18). Cathy Clarke, MOEE, personal communication (March 7, 1996). Tom Murtha, executive director, Newspaper Publishers of Ontario, personal communication (March 12, 1996). Ian Kalushner, formerly NDP Research Office, personal communication (November 22, 1996). Elfreda Chang, Doug Macdonald, and Joanne Wolfson

23 24 25

26 27 28

29 30 31

32 33

34 35

36

Sandra Banks, Grocery Product Manufacturers of Canada, personal communication (March 6, 1996). See Doug Macdonald, "Beer Cans, Gas Guzzlers and Green Taxes: How Using Tax Instead of Law May Affect Environmental Policy" Alternatives 22: 3 (1996). European policy does seem to be moving in that direction. See "Product Stewardship Developments in Europe," Business and the Environment (May 1996), for a review of Swiss and Swedish proposals for take-back requirements applicable to electronics and motor vehicles. John Hanson, Recycling Council of Ontario, personal communication (January 19, 1996). Westcott et al. to Premier Harris (n. i). Graham Freeman, Co-Chair, CIPSI CEO Steering Committee, President and CEO, Ault Foods Limited; and David Williams, Co-Chair, CIPSI CEO Steering Committee, President, National Grocers Co. Ltd., to the Hon. Mike Harris (November 21, 1995). Joe Hruska, Corporations in Support of Recycling (formerly OMRI), personal communication (November 18, 1996). Who Pays for Blue? (n. 12). See Cutting the Red Tape Barriers to Jobs and Better Government, Final Report of the Red Tape Commission (Toronto: Red Tape Review Secretariat, Cabinet Office, January 1997). Hanson (n. 26). "Proponents of CIPSI in Ontario Are Waiting for the Ontario Government to Make the Next Move"; and Judy Simon, "CIPSI Stalled in Ontario," 1996 IndEco Strategic Consulting Inc. web site: www.indeco.com.An abridged version of the article was published in Hazardous Waste Materials Management Magazine (January/February 1996). Anne MeIlroy, "Liberals on the Hot Seat Over Global Warming," The Globe and Mail (Toronto: October 24, 1997), p.A4. Resource Futures International et al., Reviewing the Progress Made Under Canada's National Action Program on Climate Change: Final Report (Ottawa: November 20, 1996), Ch 7, 10-11. Klaus Rennings, Karl Ludwig Brockmann, Heidi Bergmann, "Negotiated Agreements in Environmental Protection: No Free-market Instrument," Zentrum fur Europaische Wirtschaftsforschung GmbH, (ZEW) (undated), provided by cover letter from Heidi Bergmann, ZEW, to Doug Macdonald (December 9, 1996).

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The VCR Doesn't Work • The Voluntary Challenge and Registry Programme hasbeen the disappointing centre-piece of Canada's response to climate change • Robert Hornung Canada first made a commitment to address climate change in 1990, when then Environment Minister Lucien Bouchard announced that Canada would stabilize its emissions of greenhouse gases at 1990 levels by the year 2000.' This commitment was subsequently reconfirmed at the Earth Summit in Rio de Janeiro in 1992. It was not until 1995, however, that Canada developed a National Action Programme on Climate Change (NAPCc). 2 In the meantime, Canada's greenhouse gas emissions had grown at a staggering rate. Between 1990 and 1995, Canada's greenhouse gas emissions increased by 9.4 per cent.3 It is estimated that emissions increased again to somewhere between n and 13 per cent above 1990 levels in 1996.4 Unfortunately, the NAPCC does little to alter this trend. While the document includes many fine words on the "strategic directions" Canada's climate change policy should follow, it contains very little in the way of new actions to reduce greenhouse gas emissions. In fact, consistent with the federal and provincial governments' stated commitment to a "voluntary approach" to climate protection, the single most important new action contained in the NAPCC was the National Climate Change Voluntary Challenge and Registry Programme (VCR). The VCR is a national programme that calls on Canadian companies, governments, and organizations to voluntarily take actions that limit or reduce their own emissions of greenhouse gases. As a first step, participants are encouraged to submit a letter of intent confirming their commitment to take such actions. This letter is to be followed by the development and submission of an action plan and, subsequently, regular reports on progress in implementation. While the VCR is only three years old, it is already clear that this voluntary approach will not be enough to allow Canada to meet its greenhouse gas emission reduction commitments. Government projections indicate that Canada's greenhouse gas emissions will be 11 per cent above 1990 levels in the year 2000 and 19 per cent above 1990 levels in 2010, despite the existence of the VCR. 5 Evidently, the VCR has not stabilized emissions, nor is it expected to do so. Meanwhile Canada has agreed to go beyond stabilization. Canada's new commitment in the Kyoto Protocol is to reduce greenhouse gas emissions to 6 per cent below 1990 levels in the period 2008-2012.6 The voluntary approach represented by the VCR will not get us there. This does not necessarily mean that voluntary action has no role to play in Canada's efforts to meet its Kyoto commitment. A review of the VCR, however, makes it clear that the programme is significantly flawed and that it is currently

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doing little to encourage greenhouse gas emissions reduction in Canada. If voluntary action is to make more than a marginal contribution to climate protection in Canada, these flaws must be corrected. The Pembina Institute's Review The VCR'S participation list gives the programme the appearance of a resounding success. By October 1996, more than 600 companies, governments, and organizations had joined the programme. According to the federal government, 331 of these participants had submitted action plans to reduce greenhouse gas emissions.7 In April 1997, the Pembina Institute published Corporate Action on Climate Change, 1996: An Independent Review. This document examined the 587 VCR submissions provided by corporations to the federal government by September 1996. While the federal government claimed that approximately 300 of these submission represented "action plans," the term "action plan" was never defined. To facilitate its review, the Pembina Institute defined an action plan as a submission that included an inventory of greenhouse gas emissions from the company's operations, and a commitment to take at least one action in the future to reduce these emissions. Despite this weak definition of an action plan, we found that only 73 of the 587 VCR submissions reviewed met the criteria. The 73 submissions, the best of the bunch, were then reviewed in detail against 45 evaluation criteria developed by the Pembina Institute to assess the credibility and effectiveness of corporate action plans to voluntarily reduce greenhouse gas emissions. In essence, these evaluation criteria test whether or not a submission contains the following essential elements: detailed greenhouse gas emission inventories and projections; detailed descriptions of past and future actions to address climate change, their impact on emissions, and an assessment of performance relative to expectations; a greenhouse gas emission control goal; action plans to improve energy efficiency and increase the use of renewable energy sources; changes to internal financial signals that provide incentives for emissions reduction; employee education programmes on climate change; and actions to reduce greenhouse gas emissions outside company operations;8 Most of the 73 submissions reviewed did not include the basic information required for an action plan to be credible and provided little evidence that companies had taken any actions to reduce emissions that went beyond business as usual. For example,

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44 Per cent did not include a greenhouse gas emission control goal, 78 per cent did not adjust any internal financial signals or incentives to encourage greenhouse gas emissions reduction, 52 per cent did not include any initiatives to educate employees about climate change, and 64 per cent did not include any actions to encourage suppliers or customers to reduce greenhouse gas emissions. Indeed, the review concluded that most companies have simply used the VCR to catalogue past actions in normal business practice that also happened to reduce greenhouse gas emissions. As a result, only 11 of the 73 companies received a passing grade in the Pembina Institute review. What is Wrong with the VCR? The results of the Pembina Institute's review make it clear that Canadian companies should be concerned about the state of Canada's Voluntary Challenge and Registry Programme. After three years of existence, this key element in Canada's climate protection strategy has failed to demonstrate that corporate voluntary action can make a meaningful contribution to Canada's efforts to reduce greenhouse gas emissions. While companies clearly bear some responsibility for this failure, the major problem lies with government. Federal and provincial governments have provided little in the way of rules, support or incentives for VCR participants.9 No mandatory reporting requirements To date, the VCR has not established mandatory reporting requirements for participating companies because it has been felt that this would discourage organizations from participating in the programme. In other words, governments have been much more concerned with the quantity of VCR participants than in their quality. Unfortunately, the absence of mandatory reporting requirements has resulted in reporting that is both inconsistent and inadequate to demonstrate the credibility of reported greenhouse gas emission reductions. Clearly, more stringent and standardized reporting requirements would make it easier to assess the effectiveness of the VCR, facilitate recognition of achievements by VCR participants, encourage information sharing by VCR participants, and provide methodological rigour to support future policies and use of tools such as greenhouse gas emissions trading. The failure of government to provide leadership in this regard has led several Canadian industry associations to develop standard reporting templates for their members.10 While these efforts must be applauded, they have led to different reporting standards be-

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tween sectors and have left many VCR participants that are not members of an engaged industry association out in the cold. Recently, the federal government has developed a "Tier II" VCR reporting level that includes some mandatory requirements, but these remain inadequate.11 For example, "Tier II" still does not require VCR participants to provide greenhouse gas emission inventories in their submissions. No significant technical support for VCR participants Many companies participating in the VCR do not have the expertise or resources to identify cost-effective opportunities to reduce greenhouse gas emissions. Nevertheless, federal and provincial governments have never produced a "how-to" guide for VCR participants. There has been some effort to link complementary federal government programmes (for example, Federal Buildings Initiative, Energy Innovators, Industrial Energy Efficiency, and Fleet Smart) to the VCR by providing VCR participants with energy efficiency related information and tools, and by working directly with them to implement actions that improve energy efficiency and protect the climate. Yet these programmes are underfunded and understaffed. Between 1992 and 1996, the four programmes identified above received only $12.3 million from the federal government and no significant increase in resources was provided to cope with the demands of VCR participants.12 At the same time, most provincial governments have dramatically cut back, or even eliminated, their energy efficiency programmes. Once again, some industry associations have stepped in to fill the gap. But most VCR participants are not members of industry associations engaged in the VCR programme. As a result, many VCR participants lack access to the expert advice and tools they need to identify and implement "win-win" greenhouse gas emission reduction opportunities. No incentives for voluntary action to reduce greenhouse gas emissions While the VCR has encouraged some companies to look harder for opportunities to reduce greenhouse gas emissions, most companies are implementing only those actions that meet their company's standard criteria for approving investment decisions. In other words, most actions are responses to opportunities that companies should have recognized and addressed without VCR encouragement. If the VCR is to make a meaningful contribution to greenhouse gas emissions reduction, it must push companies to go beyond business as usual and make investment decisions that reflect a concern for climate protection. For this to happen, governments must provide participants with incentives. While many different types of incentives are available, few have been used. Chapter ten: The VCR Doesn't Work

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The weakest forms of incentives relate to public recognition. The federal government has run newspaper ads highlighting the accomplishments of VCR participants, and the Minister of Natural Resources Canada has personally contacted VCR participants to praise their efforts. In 1996, the federal government presented "VCR Awards" to more than 40 participants in the programme. Unfortunately, the criteria for selecting award winners were never clearly enunciated and it was evident to most observers that award winners were chosen to reflect a geographic and sectoral balance rather than simply to recognize merit. Governments could also provide VCR participants with a guarantee that early voluntary action to reduce greenhouse gas emissions will not result in their being penalized by the design of future greenhouse gas emission controls based in either regulation or the use of economic instruments. This is a legitimate concern. For example, if a future emissions trading system allocates emission quotas on the basis of emissions at that time, companies that took actions to reduce emissions today would be penalized relative to companies that did nothing. After examining the issue for more than a year, however, the federal government has still not provided any commitment to recognize early voluntary action in the design of future greenhouse gas emission control strategies. Finally, governments could actually provide financial incentives (e.g., through the tax system) to encourage companies to implement actions and adopt technologies that improve energy efficiency and increase the use of renewable energy sources. This is clearly going to be a major part of the United States' strategy for addressing this issue under the Clinton Administration. Once again, Canadian governments have been silent. Conclusion The VCR is failing to make much of a contribution to Canada's greenhouse gas emission reduction efforts because it lacks several of the key elements required in any successful voluntary programme: mandatory reporting requirements, technical support for participants, and clear incentives for participation. This failure clearly lies at the feet of those who designed the programme: the federal and provincial governments. Even though the VCR was the only new substantive measure Canada took to address climate change in its National Action Programme, governments have designed the VCR for failure. In early 1998, the VCR was privatized and removed from government operations. This provides one last opportunity to establish a credible and effective voluntary programme. The odds, however, are not good. Governments, which have failed to design and support the VCR adequately since its inception, have reduced their financial commitment and now provide only a third of the budget for the VCR programme. Meanwhile, industry's focus is shifting elsewhere. Private sector interests have recognized the magnitude of Canada's Kyoto commitment and the fact that significant new regulatory and fiscal measures will be required to meet the commitment. Accordingly they have begun to pay more attention to the process underway to design the new measures and demonstrate [138]

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less interest in participating in, much less actively saving, the VCR. If these trends continue, as appars likely at this time, the VCR will go down in history as a lost opportunity to prove that voluntary action could make a difference in solving Canada's environmental problems. Robert Hornung is the Climate Change Programme Director for the Pembina Institute, and author of the Pembina Institute's 1995 and 1996 editions of Corporate Action on Climate Change: an Independent Review. The Pembina Institute is a citizen-based non-profit organization seeking practical solutions for protecting our environment and building sustainable human communities. Notes 1

2

3 4 5

6 7 8 9

10

The announcement was made in May 1990 at a meeting of the United Nations' Economic Commission for Europe in Bergen, Norway, held to help prepare for the 1992 Earth Summit. Canada's National Action Programme on Climate Change was released at the annual meeting of federal and provincial energy and environment ministers in 1995. Environment Canada, Trends in Canada's Greenhouse Gas Emmissions 1990-1995 (Ottawa: Environment Canada, April 1997). Anne Mcllroy," Canada missing emission tagets," The Globe and Mail, 16 October 1997. The 2000 figure was presented by Neil Mcllveen of Natural Resources Canada to a meeting of the Canadian University Programme on Global Change in January 1998. It represents an increase over earlier estimates because it now includes the shutdown of nuclear power plants in Ontario. The 2010 figure is drawn from Natural Resources Canada, Canada's Energy Outlook 1996-2020 (Ottawa: NRCan, April 1997). Negotiations on the Kyoto Protocol of the United Nations' Framework Convention on Climate Change were completed in December 1997. Natural Resources Canada, Canada's Climate Change Voluntary Challenge and Registry - Progress Report (Ottawa: NRCan, December 1996). The Pembina Institute, Corporate Action on Climate Change, 1996: An Independent Review (Drayton Valley, Alberta: Pembina Institute, April 1997). In fact, the VCR fails to meet most of the criteria and principles identified by the New Directions Group (a mix of industry and environmental groups) as being essential for the design of voluntary programmes. See New Directions Group, "Criteria and Principles for the Use of Voluntary of Non-Regulatory Initiatives to Achieve Environmental Policy Objectives," reproduced as chapter 18, below. See, for example, Canadian Association of Petroleum Producers, Global Climate Change Voluntary Challenge Guide (Calgary: CAPP, 1997); Canadian Pulp and Paper Association, Greenhouse Gas Action Plan Guidelines (Montreal: CPPA, 1997); and Canadian Electrical Association, The Environment Commitment and Responsibility Programme (Montreal: CEA, 1998).

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11

12

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The tier II reporting guidelines have never been formally released. It now appears that they will simply form the foundation for a new discussion on reporting guidelines within the new technical advisory committee of the recently privatized VCR. Auditor General of Canada, Report of the Auditor General of Canada to the House of Commons (Ottawa: H of C, April 1997), Chapter 10: Natural Resources Canada — Energy Efficiency.

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eleven The Dofasco Deal • A single-facility environmental management agreement between the Hamilton steel company and environmental authorities raises hopes for abatement and worries about the precedent • Lynda Lukasik Canadian steel giant Dofasco Incorporated has entered into a voluntary agreement that surpasses the efforts of its national steel-sector counterparts to reduce emissions of key environmental contaminants. Negotiated with the Ontario Ministry of Environment and Environment Canada, the deal is being praised and condemned as a unique environmental management agreement between government authorities and an individual company. The eight-year agreement was officially signed by the Hamilton steel producer and its government partners in November 1997. No meaningful evaluation of its progress will be possible for some time. However, a survey of opinions reveals a rift between the attitudes of the partners to the agreement and those of non-governmental organizations and community members. The Dofasco agreement has been lauded by its signatories and other supporters as a cutting-edge approach to environmental improvement and an important step toward more efficiency and greater corporate responsibility in pollution reduction. Community and environmental group critics have scorned it as contributing to a larger trend that will ultimately work against environmental protection by weakening regulations, lowering public accountability, and permitting a more uneven environmental playing field. The catalyst for negotiation of the Dofasco agreement was Environment Canada's recently completed steel manufacturing sector strategic options process. A multistakeholder exercise, the strategic options process was initiated to develop and recommend industry control options for managing substances found to be toxic under section 11 of the Canadian Environmental Protection Act (CEPA).1 Strategic options process stakeholders proposed targets and control options for reducing key toxics including benzene, polycyclic aromatic hydrocarbons (PAHS), toxic metals, and dioxins and furans. The group's central recommendation was that industries should pursue proposed reductions though "enhanced voluntary measures." The only dissenting view came from the Canadian Environment Network toxics caucus representative - the one individual at the table not representing government or industry interests. The toxic caucus members held that regulatory requirements are needed to ensure the reduction of key toxics. Dofasco, which emerged as one of the most committed industry participants in the strategic options process,2 became the first company to build a voluntary agreement based on enhanced strategic options process emission reduction targets. Indeed, the Dofasco environmental management agreement Chapter eleven: The Dofasco Deal

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is distinguished by a commitment to go beyond the strategic options process targets for the reduction of the CEPA toxics benzene and PAHS. For PAHS, the strategic options process recommends reducing 1993 emissions by 27 per cent by the year 2000 and 44 per cent by 2005, while Dofasco's agreement aims for 30 per cent PAH reduction by 2000 and 50 per cent by 2005. With benzene emissions, Dofasco has upped the ante considerably by setting a target of 80 per cent reduction from 1993 levels by 2000, versus the strategic options process recommendation of 48 per cent by 2000 and 71 per cent by 2005. This is a noteworthy commitment given that the company is presently the largest single source of benzene emissions in the Great Lakes.3 Other notable targets in Dofasco's agreement include the company's commitment to surpass its Municipal Industrial Strategy for Abatement targets,4 to "use all reasonable efforts" to eliminate all polychlorinated biphenyls (PCBS) presently stored on site, to work to identify and reduce plant sources of respirable particulates, to enhance recovery of resources from steel by-products presently going to landfill, and finally, to reduce office waste by 60 per cent through reduction and recycling efforts. Remaining elements of the agreement serve to reinforce Dofasco's commitment to existing agreements, policies, and programmes.5 Issues and Opinions Despite the Dofasco environmental management agreement's potential contributions to local environmental improvements, several major points of contention have emerged over the nature of the agreement. The two main issues centre on government concessions granted through the agreement, and methods for ensuring public accountability.6 Concessions The major concession incorporated into the environmental management agreement involves the provincial environment ministry's agreement to work with Dofasco to consolidate existing pollution control certificates of approval and streamline the process for amending these certificates to accommodate facility modifications, industrial and process changes, and increase operational flexibility.7 Streamlining the certificates of approval and introducing operational flexibility are expected to make life easier for both Dofasco and provincial ministry staff. Mark Dunn, a senior environmental officer at the ministry's Hamilton District Office, expects the agreement to free up ministry staff time, allowing for more work on other local environmental concerns. He also believes the streamlining of approvals will facilitate implementation of proposed plant improvements through increased operational flexibility.8 For the environment ministry, operational flexibility works in contrast to the traditional government approach of demanding that an industry put a series of environmental [142]

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improvements in place within a short period of time, by instead allowing Dofasco to put together a work plan which phases in plant improvements over the eight-year life span of the agreement. This allows the company to budget for improvements over the long term and, according to Dunn, increases the likelihood that the company will come through with the necessary capital to implement the required improvements. Dofasco environmental specialist Tom McGuire does not consider efforts to streamline the approvals process to be equivalent to "concessions ."9 He says streamlining approvals and introducing more operational flexibility will simply facilitate company efforts, through business planning, to address priorities agreed upon by all partners. McGuire notes that Dofasco presently has 257 certificates of approval and is thereby faced with an unruly situation where the company sometimes finds it difficult even to know what is required of it. He expects that erforts to consolidate existing certificates and to develop new ones more expeditiously will not only provide benefits to Dofasco, but also create a model that the provincial ministry can use in the future to facilitate better management of other companies' certificates of approval. But it is just this wider application of the individual facility agreement approach that most worries critics of the Dofasco deal. Paul Muldoon of the Canadian Environmental Law Association (CELA) believes that granting regulatory concessions through individual company agreements will undermine the integrity and fairness of environmental controls. CELA'S position is that voluntary agreements should include no regulatory concessions.10 Muldoon's concerns centre on the Dofasco deal's status as the first example of an agreement negotiated between government and one company. The Dofasco agreement, Muldoon says, gives this one company advantages presently unavailable to other Canadian steel producers. He fears that if governments continue to negotiate on a company-by-company basis, instead of on a sector-wide basis, they will frustrate moves to level the regulatory playing field. Muldoon argues that if industry wishes to go beyond what is required by regulation, then it should do so and receive public recognition for it. However, he cautions, when a voluntary agreement is struck "there is concern that the real reason is to undertake some activities that will pre-empt or delay regulatory action by government."11 The Dofasco agreement partners are quick to point out that the deal does not place them above the law. McGuire describes the voluntary commitment that Dofasco has made as actually going beyond what the company is legally required to do. Environment Canada's Ron Shimizu adds that the basic environmental laws and regulations still hold and the voluntary approach is not replacing the regulatory approach. In addition, the Dofasco agreement does not preclude government from incorporating new concerns into the agreement or imposing new regulations if voluntary measures are not working.12 Muldoon recognizes that existing laws and regulations still apply within the context of the Dofasco agreement. But he argues that in practice the agreement "will make it very difficult to now strengthen or enhance the regulatory Chapter eleven: The Dofasco Deal

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framework for that facility and possibly others" and that, consequently, "regulatory limits for new pollutants will probably not be forthcoming." Muldoon is particularly concerned about CEPA toxics such as benzene and PAHS, which he believes should be regulated consistently across the steel sector and not addressed through voluntary measures negotiated between government and individual companies. Accountability Opinions are also divided on the fundamental issue of what constitutes effective public accountability within the context of the Dofasco agreement. Agreement partners are satisfied that they have taken all of the necessary steps to ensure that accountability to the public is maintained. The Dofasco agreement was developed through negotiations between the company, the provincial Ministry of the Environment, and Environment Canada. Prior to signing, a draft version of the agreement was put on the province's Environmental Bill of Rights Registry, and the public was given 30 days to comment. The company also held an open house, where opportunities were available to provide verbal and written comments. The partners will meet privately once a year to review the progress of the agreement's implementation and will rely on several avenues to keep the public informed of implementation progress, including local media coverage and a progress update to be included in Dofasco's annual environment report. The company is also involved in seven local multistakeholder environmental initiatives and has promised to discuss relevant aspects of the agreement with these stakeholders when this is deemed appropriate.13 In addition, Ontario environment officials believe Dofasco's reputation as a progressive leader will serve to reinforce the company's desire to avoid the public pressure it will undoubtedly face if it fails to meet its voluntary commitments. With the agreement formally written and signed, the ministry is more confident of the company's good intentions.14 Environment Canada echoes this confidence in Dofasco by explaining that the company's willingness to endorse pollution prevention approaches through the agreement was enough to convince the federal department to endorse Dofasco as a positive example to other companies.15 McGuire characterizes Dofasco's willingness to act as being a central element of the company's corporate culture. In keeping with this progressive culture, he says, the agreement reflects the company's desire to "walk the talk a little more."16 While the government partners may be satisfied that Dofasco will comply with the agreement to avoid public criticism and pressure for regulatory action, public interest representatives see too little evidence of attention to public concerns and too little effort to foster effective public involvement. The Dofasco agreement was negotiated behind closed doors, and the negotiators rejected public demands that some sort of community stakeholder group be set up to monitor agreement progress independently. Ironically, the fear of nega[144]

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tive community reaction that is expected to motivate Dofasco to act, also caused the company to shy away from involving community stakeholders as monitors of the agreement's progress. Government partners conceded to Dofasco's opposition to community observers, fearing that the company would pull away from the agreement if such observers were required. As a result, annual progress on implementation will be reviewed behind closed doors by the partners to the agreement alone. The review findings are to be reported, but critics say this is not very reassuring. The Dofasco agreement, they say, reflects a "leave it to chance" approac to public accountability and this is a fundamental shortcoming of the deal. CELA'S Muldoon finds the weakness of accountability provisions especially problematic when government and industry are relying on the "court of public opinion" as a means of ensuring implementation of the agreement. Such reliance on the public, Muldoon says, rests on a series of questionable assumptions: [It] assumes that the public has the resources and information basis to reveal the progress of the agreement, that the media are willing to publicize the problem and that the interested public will be able to take action when companies do not meet the voluntary commitments.17 Muldoon asserts that the "public should have a meaningful role in the negotiation and implementation of such agreements, analogous to the development of environmental laws." He also supports community representatives who have argued for an independent watchdog to monitor the progress of implementation and trigger public accountability mechanisms when problems arise. Community stakeholders echo Muldoon's concerns and question government trust in Dofasco's good will. One of these stakeholders is PatThiessen, a northeast Hamilton resident whose street ends at one of Dofasco's production lines. Thiessen has put a great deal of effort into working co-operatively with the company, through local stakeholder initiatives, to improve environmental conditions in her neighbourhood. Along with other Hamiltonians, Thiessen has willingly put her faith in the stakeholder approach by agreeing to sit at the table and work co-operatively with industry to resolve environmental concerns. At the same time, however, she laughs at the thought of leaving a company like Dofasco to police itself: I think that's criminal. For them [government] to think that industry is going to regulate itself. I mean, they're just not going to. ...They're [the company] saying they're doing this and they're doing that. The only way I believe it is when I start to see changes!18 Thiessen concludes from her experience that the presence of concerned community members at the table is the key to encouraging industries to act. Debbie Lambert, another active north-ender, is giving the company the Chapter eleven:The Dofasco Deal

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benefit of the doubt. "I'm just going to have to accept it — at least it's something." In a written response to Dofasco regarding the agreement she adds, If this agreement is really for the betterment of the environment and not all smoke and mirrors, I applaud you. But it is still my firm belief that industry should not police itself19 The Deal in the Big Picture The divergence in views regarding the Dofasco agreement appears to be due in large part to the fact that supporters and critics have each chosen to evaluate the agreement at different levels. The Dofasco deal is a single-facility agreement designed to make the government-Dofasco relationship more conducive to the promotion of pollution reduction at Dofasco. Pursuing what could be called environmental opportunism, government partners willingly accepted Dofasco s offer to enter into an agreement, in the hopes of making some progress in the on-going battle to reduce steel-sector emissions. It is difficult to find fault with the government's pursuit of such an opportunity when this is considered within a Dofasco-specific context. If the agreement succeeds, improvements to Hamilton's environment will be considerable. However, problems arise when the agreement is considered beyond Dofasco. Critics have situated their evaluation of the agreement at levels that allow for consideration of impacts that go well beyond the company This more holistic view has led to the characterization of the environmental management agreement as a "hit or miss approach" to controlling steel-sector emissions, with moral suasion triggered by the creation of "good guy company" examples serving as the government's main strategy for addressing sector-wide environmental concerns. A bigger-picture view also reveals that the approach to negotiating and monitoring such agreements takes steps backwards from earlier efforts to open environmental management and protection processes to public involvement. The strategic options process for the iron and steel sector marked the first missed opportunity for government to facilitate a meaningful debate, with its failure to provide local public consultation opportunities in communities such as Hamilton that are affected by steel sector pollution.20 Following close on the heels of the strategic options process, the Dofasco agreement negotiations did involve efforts to solicit public input, but led to a decision by agreement partners to disregard a request from the public to establish a community watchdog structure to monitor plan implementation. Reasons for the refusal included a argument that bringing in public stakeholders who are not aware of all of the issues surrounding the agreement would make a focused annual review difficult, and an expressed fear that the company might walk away from the agreement if government supported the inclusion of community representatives as observers.21 Considered in light of the fact that concerned community members appear to have little faith in the voluntary approach of the agreement [146]

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to begin with, agreement partners have likely committed a major blunder in refusing the request for an independent monitoring body. Their refusal has served to substantiate critics' concerns that voluntary compliance initiatives lack the access to environmental decision making that the rule of law, in contrast, often guarantees.22 Only time will tell what effects the Dofasco agreement will have on local pollution levels and on environmental improvements in the iron and steel sector. One can argue that government has made the right choice in putting its faith in Dofasco to achieve, successfully and voluntarily, all of the goals set out in the agreement. Certainly, small, progressive steps forward are better than no progress at all. One can also argue that, regardless of the potential for local environmental benefits, the narrow approach taken by agreement partners introduces the possibility of bigger-picture impacts which, if realized, may well outweigh any local benefits realized through the agreement. Whether the Dofasco deal will spur or slow overall efforts to reduce steelsector emissions of CEPA toxics remains a significant uncertainty. So far there has been little evident effort to confront such broader level issues in public debate. Critics have called for larger public discussion about the benefits and drawbacks of voluntary approaches, and more careful, open analysis of their role in a more comprehensive set of measures to ensure environmental improvements. This seems well warranted in light of potential and realized problems with the Dofasco agreement. Lynda Lukasik is a resident of Hamilton and a doctoral candidate in Environmental Studies at the University ofWaterloo. Notes 1 2

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Steel Manufacturing Sector Strategic Option Report (Ottawa/Hull: Environment Canada, 1996). The steel manufacturing sector strategic options process was plagued by a lack of extensive participation from members of the Canadian Steel Producers Association. Environment Canada, National Pollutant Release Inventory — Summary Report, 1994 (Ottawa/Hull: Environment Canada, 1994). MIS A is a mandatory provincial programme aimed at reducing pollutant releases in industrial wastewater. These include ongoing participation in the Voluntary Challenge Registry (VCR) of Canada's National Action Plan on Climate Change, and in the national Accelerated Reduction and Elimination of Toxics (ARET) programme, as well as continued involvement in working toward the goals of the Hamilton Harbour Remedial Action Plan. These issues have been highlighted by Paul Muldoon of the Canadian Environmental Law Association, with community members reinforcing concerns about public accountability.

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Environmental Management Agreement among Dofasco Inc., Her Majesty the Queen in right of Canada as represented by the Minister of the Environment, and the Ministry of Environment, Province of Ontario (November 1997). Mark Dunn, Ontario Ministry of the Environment, personal communication, November 20, 1997. Tom McGuire, Dofasco Inc., personal communication, March 1998. Muldoon's position is set out in his formal response, on behalf of GEL A, to the draft agreement when it was posted on the province's Environmental Bill of Rights Registry. His critique of the agreement is available in the Canadian Environmental Law Association, Publication #331 (August 1997). Paul Muldoon, personal communication, December i, 1997. Ron Shimizu, Environment Canada, personal communication, November 27, 1997These initiatives include the Hamilton Air Quality Stakeholder Committee, Hamilton Air Quality Initiative, Hamilton Harbour Remedial Action Plan, Bay Area Restoration Council, Bay Area Implementation Team, Hamilton Industrial Environmental Association, and the Hamilton-Wentworth Region Vision 2020 Programme. Dunn, personal communication (n. 8). Shimizu, personal communication (n. 12). McGuire, personal communication (n. 9). Muldoon, EBR submission (n. 10) Pat Thiessen, personal communication, November 1997. Debbie Lambert, personal communication, November 1997. One public meeting was held, after the strategic options process Issue Table had made its final recommendations, but only because the Hamilton Harbour Remedial Action Plan co-ordinator put in a strong request for one. The meeting drew a considerable crowd, with clear concerns about a voluntary compliance approach for the steel sector. Dunn, personal communication (n. 8). Muldoon, EBR Submission (n. 10).

Lynda Lukasik

twelve Reluctant Followers • Small companies pose special challenges for promoters of voluntary initiatives • Erin Windatt Since the early 19905, governments internationally and in Canada have placed increasing emphasis on the use of voluntary initiatives as key tools for meeting commitments to protect environmental health. Ontario, for example, has promoted voluntary initiatives as cornerstones of its Pollution Prevention Strategy and the Canada-Ontario Agreement on the Great Lakes Basin Ecosystem.1 So far, the successes of these initiatives have been unevenly distributed. While some companies are willing to work to improve their environmental performance, moving beyond their regulated emissions requirements, others lag behind. In many industry sectors, small businesses pose the greatest challenge to increasing voluntary initiative participation, and therefore to their credibility as public policy instruments. Understanding the special circumstances of small businesses, and the barriers to their participation in voluntary initiatives, is among the greatest challenges facing advocates of non-regulatory approaches to environmental management. Experience with Federal/Ontario/lndustry Partnerships for Pollution Prevention In 1991 the Ontario Ministry of the Environment, in partnership with Environment Canada, began to develop a series of voluntary initiatives, each pertaining to a specific industry, that aim to promote pollution prevention.2 Five of these initiatives, including the Metal Finishing Industry and the Printing and Graphics Industry Pollution Prevention Projects, are formalized by memoranda of understanding, which are written agreements between the federal and provincial governments, industry associations for manufacturers and suppliers, and individual companies. The memoranda of understanding formalize the projects' task forces/steering committees, which are made up of these stakeholders. The task forces/steering committees give direction for the further development of the projects. As well, each develops a body of information on pollution prevention processes specific to the industry. Company signatories also agree to report their pollution prevention "success stories," which are used to encourage further action within their sector. These partners have targetted for increased participation the small businesses that make up their sectors. Participating businesses therefore commit not only to making emissions reductions, but also to becoming involved in promoting awareness and action by other companies in their industry. By reporting on their pollution prevention

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activities, these companies give some insight to the public on their progress in meeting public policy goals. While these pollution prevention projects do not replace existing regulation, they are at the top of the hierarchy of measures now being used for environmental protection. The Ontario government's current policy is to "explore all realistic alternatives to legislation/ regulation by government" and ask the questions: "Can voluntary codes, self management/self regulation or partnerships be used instead of government regulation; if not why not?"3 This new hierarchy is backed by the Ontario government's assertion that it can make progress in achieving its public policy objectives while reducing its direct responsibility over the ways in which these objectives are achieved.4 One of the attractions of this approach lies in cost savings for the development and enforcement of regulations. As well, it creates an "open for business" atmosphere by limiting government intrusion into business operations. Reducing pollution from the operation of small businesses is a particular challenge to regulators. Small operators make up 96 per cent of all businesses in Ontario, and are also responsible for a significant proportion of industrial toxics emissions.5 Monitoring discharges from, and enforcing standards at, these diffuse sources is time consuming and costly. With the substantial cuts to inspection and enforcement staff within the Ontario Ministry of the Environment, meeting regulatory goals relies increasingly on the voluntary compliance of small operators.6 The issue of voluntary compliance becomes even more problematic in the application of non-regulatory instruments, under which pollution prevention is not mandatory. The difficulties associated with promoting reductions in the use and release of toxics among small businesses are stumbling blocks in both regulatory and voluntary reductions frameworks, because the resource-intensiveness of this task runs counter to the prevailing "more with less" policy which is shaping and shrinking bureaucracies. Under the Ontario pollution prevention projects, the problem of monitoring and enforcing is transformed into a problem of motivating a great number of small businesses, company-by-company, to implement pollution prevention measures. Indications are that the large businesses in the metal finishing and the printing and graphics sectors, which account for a significant percentage of the industries' production, are making progress on pollution prevention.7 These large businesses have made formal commitments to develop and implement pollution prevention plans and report their results to the project steering committees. As well, they are taking an active role in directing the projects, contributing to guides, and encouraging other companies to become involved. For a variety of reasons, the participation of small businesses in the Ontario projects is less impressive. The Limitations of Smaller Businesses The Metal Finishing and the Printing and Graphics Pollution Prevention [150]

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Projects, which are aimed at small firms, were modelled on an earlier agreement with the three largest members of the Canadian Vehicle Manufacturers' Association — Ford, General Motors, and Chrysler. The results, however, have been quite different. Communications and participation were not significant problems for the three big motor vehicle manufacturers but are central challenges for the more numerous and smaller companies in the metal finishing and printing and graphics sectors. The difficulties of communications and participation are due, in large part, to the personnel limitations of smaller businesses. TJ.Bierma and EL.Water straat, researchers studying the promotion of pollution prevention among small businesses in the US, found the experience of small metal finishing companies was not conducive to concern for pollution prevention: Most ... managers are simply overwhelmed with responsibility. As a result, they are able to be proactive in only a few aspects of the business, such as production, marketing, or product design, and must simply react to problems in other areas of the business as they arise.8 These small businesses also find it more challenging to invest in the installation of new technologies, although current technologies have relatively short payback periods, usually less than two years.9 The metal finishing and printing and graphics projects' information exchange fora and training packages pay attention to these limitations, with targetted guides that offer advice on how to comply with existing regulations, guidance on how to obtain iso 9000/14000 certification and EcoLogo certification, and access to pollution prevention information and funding programmes. Yet the small companies at which training programmes are aimed may not have the staff available to attend workshops and put information from comprehensive guides into practice. Small businesses often mentally link pollution prevention with regulatory obligations. A recent study of environmental performance among small and medium-sized Canadian enterprises found that managers viewed "environmental awareness" as synonymous with "awareness of environmental regulations."10 Except where owner/managers have a keen personal interest in environmental protection, where taking action on pollution prevention is an act of conscience, small businesses tend not to be interested in becoming involved in the voluntary projects. These companies limit their attention to pol lution prevention to ensuring that they are in compliance with their regulatory requirements, even if going beyond these requirements is likely to produce long-term cost savings." This leads some members of the steering committees to believe that the assistance provided by the projects is largely obsolete for the innovators in the industry (the 50 per cent, in terms of production, who are implementing pollution prevention), and not wanted by the industry laggards (the 50 per cent that need help to improve).12 Similar observations from his study of the use of Chapter twelve: Reluctant Followers

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voluntary initiatives in Australia and New Zealand led Neil Gunningham to conclude that they are not viable vehicles for achieving environmental policy goals in sectors dominated by small businesses, where membership in a cohesive industry association is limited.13 The Free Rider Problem One of the major differences between voluntary initiatives and government regulations is that regulations set out requirements that all targetted polluters are obliged to meet.Those that do not comply are subject to penalty. Voluntary initiatives concentrate on "good actors" — motivating action by companies willing to take proactive steps beyond regulatory requirements. Companies that do not participate in voluntary initiatives (and that may not even comply with regulations), are able to take a "free ride" on the improved reputation of the sector which is generated by companies that are actually working to make emissions reductions. The term "free rider" is largely absent from the discussions surrounding the pollution prevention projects. Yet in terms of the number of Ontario businesses that have signed onto the projects — 18 of the approximately 1,940 facilities in the printing and graphics sector and 16 of the approximately 360 in the metal finishing sector - the number of non-signatories far outweighs the number of signatories.14 The signatories are predominantly the larger companies within the sectors, though efforts have been made in the metal finishing project to involve smaller companies and develop small-scale pilot projects.15 Becoming a signatory is not a prerequisite for obtaining emission reduction assistance. The project coordinators argue that, if signing on were required, the administrative and reporting obligations associated with formal participation would cause small and medium-sized enterprises to shy away from using the resources available to them. Encouraging Participation by Small Companies Outreach to companies in the sectors targetted by the pollution prevention projects focuses on encouraging them to utilize workshops, training sessions, and resource centres in order to create and implement pollution prevention plans. Companies are free to pick from among available techniques and technologies, weighing environmental, health and safety, and bottom-line benefits against capital expenditure and the length of payback period. They may also choose whether to report on their results. The degree to which this flexibility is problematic depends on the perceived context and intent of the projects. On one hand, with respect to signatories, the projects are cast as alternative regulatory regimes. The metal finishing and printing and graphics projects call for reporting from signatories, and the steering committees continue to work toward "more effective reporting and verification of quantifiable results."16 The future directions envisioned [152]

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for voluntary initiatives by the Ontario government include "the adoption of rigorous pollution prevention planning, auditing and reporting."17 On the other hand, with respect to non-signatories, the projects are focused on encouragement rather than requirements. The advertised benefits are the direct savings associated with decreased materials, processing and disposal costs, as well as indirect savings from decreased risk of accidents and proof of due diligence if accidents do occur.18 In this light, they are private actions, designed to accrue bottom-line savings to individual businesses. This moves the pollu tion prevention process outside of the public domain. As planning is incorporated into the management structures of individual operations, public policy issues such as credibility, access to information, and proving results are sidelined. This combination of quasi-mandatory and encouragement-oriented regimes reflects the situations and motivations of different types of companies within the sectors studied. The design of effective instruments to promote pollution prevention must certainly take these situations and motivations into account. However, especially where membership by smaller businesses in their sector associations is patchy (they seem more likely to become involved in their local chambers of commerce), maintaining maximum flexibility to entice more smaller businesses into the network of pollution prevention communications can bring the results of voluntary programmes, as public policy instruments, into question. This is the case especially where little information on the implementation of pollution prevention techniques and technologies is available. The body of reports from large business signatories to the agreements is not likely to quell concerns about the overall extent of projects' results. Recognizing that voluntary initiative participation cannot be required, organizers of the metal finishing and printing and graphics projects are wary of pushing a formal commitment and reporting structure on smaller companies. Instead they approach participation as a marketing challenge. Under written agreements, project signatories commit themselves to detailing their implementation "success stories." Compilations of these stories are used as inputs to the central work of the projects. Here, project coordinators, through site visits and workshops, actively encourage smaller companies to practice pollution prevention planning. The dynamics between large and small companies can also play a part in motivating pollution prevention, especially against the organizational backdrop of voluntary initiatives. Using a stewardship approach modelled on the Canadian Chemical Producers' Association's Responsible Care programme, larger companies, such as automobile manufacturers, set standards to be met by the smaller companies with which they do business (in this case, automotive parts manufacturers, themselves linked to metal finishers). In taking on a stewardship role, large companies are, in a sense, taking on responsibility for regulating sound behaviour within their (broadly defined) sector. Because small companies tend to be tied into business relationships with larger companies, either as upstream suppliers or downstream customers, their Chapter twelve: Reluctant Followers

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environmental practices can be influenced by the sector's dominant companies, through dissemination of information and training, audits, and codes of practice made mandatory in contractual agreements.19 By monitoring the activities of the companies with whom they have customer or supply links, large companies can decrease the risk of accidents or unsafe practices that might be associated with them, even when they do not occur on site. In doing so, they can reduce their liability, along with their insurance premiums, and promote a public image of environmental responsibility. However, stewardship arrangements can also have the effect of making smaller companies - those which may not be able to afford to develop environmental management plans and implement system upgrades - less viable. Considering Small Business Experiences in the Design of New Initiatives The formal elements of voluntary initiatives — including commitment, targetted substances and reporting — address issues raised by the large companies involved in their design. One of these is flexibility in terms of targets, time frames, and technologies. Some see involvement in voluntary initiatives as a way to portray their sector as proactive and environmentally responsible, to forestall further government regulation and/or assert their own agendas. Unlike large companies, with their big-picture perspective on the context in which they function, small companies tend to focus on their immediate responsibilities — meeting regulatory standards and providing required records.20 Large companies find that prescriptive regulation can constrain their flexibility to make investments in emissions reduction in conjunction with other capital investments timed according to their business cycles. For smaller businesses, one of the main concerns with regulation is completing required emissions reporting forms. The Canadian Federation of Independent Business calculates the proportion of government bureaucracy per unit output to be up to 15 times higher for smaller businesses than larger ones, and lobbies for the development of well-designed regulation rather than alternatives to regulation.21 For small companies, flexibility is not as important as minimizing the time commitment associated with reporting requirements, and getting governments to communicate the requirements clearly.22 Through the formal (signatory agreement) and informal (stewardship/encouragement) elements of Ontario's pollution prevention projects, the concerns of both smaD and large companies are being addressed. However, there are questions about the effectiveness of these arrangements in meeting public policy goals. Recent analyses of voluntary initiatives show that effective voluntary initiatives bear a striking resemblance to regulatory regimes, including sanctions for non-compliance and a way of assessing the effectiveness of initiatives in meeting their objectives.23 With a renewed emphasis on the need for verification of results, whether for enforcement or simply for benchmarking progress and measuring the effectiveness of initiatives, the logistics of monitoring in sectors with a high [154]

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proportion of small businesses is an issue for both voluntary and regulated pollution prevention initiatives. Uncertainties about the effectiveness of voluntary initiatives are serving also to underline uncertainties about the effectiveness of regulatory regimes, including compliance levels, monitoring, and verification. These uncertainties highlight the need for tools for environmental protection to take into account the experiences of small businesses. The next wave of public policy tools for pollution prevention seems to recognize this, and is using voluntary-regulatory hybrids or self-policing certification systems to blend flexibility and accountability.24 The chief issues addressed by the new tools are participation and verified compliance. Voluntary-regulatory hybrids can offer a means by which pollution prevention assistance is combined with enforcement amnesty in meeting existing regulations.25 Here, action on pollution prevention is motivated by regulatory requirements, but aid in adjusting operations to meet these requirements is delivered with the needs of smaller businesses in mind. In the metal finishing and the printing and graphics sectors, smaller companies are likely to participate successfully in voluntary programmes only if they are able to make changes that enhance rather than undermine their competitive position within their industry. Therefore, where there are short-term, winwin opportunities, the Ontario government could increase the means at hand for smaller businesses to take advantage of these opportunities at a reduced risk. However, more effort to involve small businesses as programme designers, and not just as targets of their implementation, is necessary for them to reflect better the interests of smaller businesses. The projects, through their organization and their definition of stakeholders, place restrictions on who has a voice at the decision-making table. More active efforts to involve small business in the design and monitoring of the Ontario pollution prevention projects would enhance their status as instruments for public policy. Erin Windatt is an environmental auditor and environmental policy analyst, currently working for the office of the Auditor General. She previously worked for Industry Canada and the ARET (Accelerated Reduction/Elimination of Toxics) Secretariat. She recently completed an M.A. thesis, "Voluntary Pollution Prevention Initiatives and their Application to Small and Medium Sized Enterprises," at Trent University's Frost Centre for Canadian Heritage and Development Studies. Notes i

Governments of Canada and Ontario, First Progress Report Under the 1994 CanadaOntario Agreement Respecting the Great Lakes Basin Ecosystem (Ottawa, 1994), p. 21. In 1993, Jean Charest, who was then the federal environment minister, said of the pollution prevention projects: "These co-operative and voluntary efforts between government and industry are a cornerstone to the federal government's strategy for the Great Lakes." See Ontario Ministry of Environment and Energy,

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Government and Metal Finishing Industry Sign Pollution Prevention Agreement (Press Release, June 4, 1993), p. 2. In all, ii sector-specific voluntary pollution prevention projects have been developed under this federal/Ontario partnership over the past six years. Also in effect is a municipal-level agreement between Environment Canada, the Ministry of the Environment, and the Regional Municipality of HamiltonWentworth. Red Tape Review Commission, Less Paper/More Jobs Test (Toronto, June 1996). The proposed reforms are to "[f]ocus on results as opposed to methods." Government of Ontario, Responsive Environmental Protection: A Consultation Paper (Toronto, 1996), p. 60. Environment Canada, Pollution Prevention for the Great Lakes: Tips for Small Quantity Hazardous Waste Generators (Ottawa: Environment Canada, 1991). Overall, there was a decrease of $154.4 million in the Ontario Ministry of Environment (and Energy) operating budget between 1994-95 and 1997-98. Its Compliance and Enforcement Branch budget was cut by 30 per cent ($14.7 million) over the same period. See Gary Gallon, "INFOTERRA: Budget Cuts to Environment in Ontario," July 24, 1997, citing the Ontario Management Board Secretariat, Province of Ontario Expenditure Estimates 1997-98. For a discussion of compliance policy, see Karen Clark, "The Use of Voluntary Pollution Prevention Agreements in Canada: An Analysis and Commentary" (Toronto: Canadian Institute for Environmental Law and Policy, April 1995), p. 3. Companies involved in the projects who have reported on their reductions show significant reductions in emissions of targetted substances, with the metal finishing industry reporting a total of 286,997 kg/year. The reductions were achieved through a mixture of substitution, process changes, and reclamation. Task Force of the Metal Finishing Industry Pollution Prevention Project, Third Progress Report (Jointly produced by Environment Canada, the Government of Ontario, the Canadian Association of Metal Finishers, the American Electroplaters and Surface Finishers Society, and the Metal Finishing Suppliers' Association, September 1996), pp. 4-8,15-38; Steering Committee of the Printing & Graphics Pollution Prevention Project, First Progress Report (Jointly produced by Environment Canada, the Government of Ontario, and the Ontario Printing and Imaging Association, June 1995), pp. 16-33. TJ. Bierma and F.L. Waterstraat, "Promoting P2 Among Small Metal Products Fabricators," Pollution Prevention Review (Autumn 1995), p. 29. Apogee Research, Socio-Economic Study to Assess the Canadian Metal Finishing Industry (Toronto: Apogee, August 1994, final report prepared for Environment Canada, 1996); Bierma and Waterstraat, "Promoting P2" (n. 8), p. 28. Thomson Environmental Management, The Industry Government Relations Group, EnviroCounsel Inc., Assistance to SMES for Environmental Performance: Initiative 6, Canadian Environmental Industry Strategy, prepared for Environment Canada (Fredericton, September 6, 1996), p.i8. Andrew MacDonald, "An Industry and Personal View of the Metal Finishing Pollution Prevention Project" (Presentation given at the Metal Finishing ErinWindatt

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Industry Pollution Prevention Workshop, Toronto, September 25, 1996), p. 2. See also Bierrna and Waterstraat, "Promoting ?2," (n. 8), pp. 31-35. MacDonald, "An Industry and Personal View" (n. u), p. 2. Neil Gunningham, "Learning from Others: the Australasian Experience with Voluntary Codes and Guides," presentation given at the symposium Exploring Voluntary Codes and Their Role in the Marketplace, Ottawa, September 12, 1996. Of the approximately 600 Canadian metal finishing firms, 60 per cent (360) are located in Ontario, according to Apogee Research, Socio-economic Study (n. 9), p.i. Of the approximately 3,800 Canadian printing and graphics firms, 51 per cent (1,938) are located in Ontario, according to Ontario Printing & Imaging Association, A Government Guide to the Printing Industries (Mississauga, 1994), pp. 2,6. For example, Reliable Plating, a firm with seven employees, is working with Environment Canada on a demonstration project. Azad Lalany, Reliable Plating, Ltd., and Peter Paine, Environment Canada, "Treatment of Rinse Water from the Electroplating Industry by Nano-filtration," presentation at Metal Finishing Industry Pollution Prevention Project Progress Review Workshop (Toronto, September 25, 1996). Task Force of the Metal Finishing Industry Pollution Prevention Project, Third Progress Report (Jointly produced by Environment Canada, the Government of Ontario, the Canadian Association of Metal Finishers, the American Electroplaters and Surface Finishers Society, and the Metal Finishing Suppliers' Association, September 1996), p. n.The Steering Committee for the Printing and Graphics Project is also to "[djevelop monitoring and reporting protocols and verification procedures for site specific facility pollution prevention plans." Steering Committee of the Printing & Graphics Pollution Prevention Project, Terms of Reference for the Joint Industry and the Canadian and Ontario Governments Pollution Prevention Steering Committee (Jointly produced by Environment Canada, the Government of Ontario, and the Ontario Printing and Imaging Association, June 1995). Government of Ontario, Responsive Environmental Protection: A Consultation Paper (Toronto, 1996), p. 58. Canadian Association of Metal Finishers, American Electroplaters and Surface Finishers Society, Automotive Parts Manufacturers' Association, Metal Finishing Suppliers' Association, Environment Canada, Ontario Ministry of Environment and Energy, Metal Finishing Pollution Prevention Guide (Toronto: September 1995), p. 12.

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Neil Gunningham, "Environment, Self-Regulation, and the Chemical Industry: Assessing Responsible Care," Law & Policy 17:1 (January 1995), p.8s. Garth Whyte and Brien G. Gray, An Action Plan to Reduce the Regulatory Burden on Small Business, submission to the Sub-Committee on Regulations and Competitiveness of the Standing Committee on Finance (Ottawa: Canadian Federation of Independent Business, November 3, 1992), p. 4. Canadian Federation of Independent Business, The Green Grassroots: Small Business and the Environment (Ottawa: CFIB, August 1991), p. ii; Garth Whyte and

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Brien G. Gray, Canadian Federation of Independent Business, An Action Plan to Reduce the Regulatory Burden on Small Business (Ottawa: CFIB, November 3, 1992), p. 4. Government of Ontario, Responsive Environmental Protection: A Consultation Paper (Toronto, 1996), p. 58. See, for instance, Kernaghan Webb, "What makes a 'good' code?" Office of Consumer Affairs Consumer Quarterly 1:4 (October 1996), p. 2. The Dry Cleaner Certification Regulation is one example of this new emphasis on enforceable standards. See, for example, the Compliance Leadership through Enforcement, Auditing and Negotiation (CLEAN) Project, developed by the American Electroplaters and Surface Finishers' Association, the National Association of Metal Finishers, and the Metal Finishing Suppliers' Association.

ErinWindatt

thirteen Beyond Command and Control • A new environmental regulatory strategy finks voluntarism and government initiative • Bradley D. Wylynko In January 1997, the manager of FMC Inc.'s hydrogen peroxide plant in Prince George, British Columbia, ordered the re-routing of a methanol transfer pipe. He had determined that large quantities of carbon dioxide were being emitted from burning the methanol in FMC'S power boiler. Re-routing the pipe enabled the company to recycle the methanol rather than burn it. FMC eliminated a hazardous source of pollution and realized $200,000 in annual savings.1 A sound business decision? Yes. A good environmental decision? Absolutely. Required by regulation? Not at all. FMC'S manager issued his order as a result of the company's participation in a new environmental management programme that combines legislative and voluntary initiatives, and brings companies, regulators, and even environmental activists together to find a new way to protect our environment. Environmental regulators and company managers face several new challenges at the end of the 2Oth century: the realization that science cannot provide the certainty that decision-makers demand, the now global ecological consequences of human activity, the reality of fiscal restraint, and the growing power of an informed citizenry. These issues were not part of the equation when environmental management systems were established in the early 19705. Then it seemed reasonable to take a linear, reactive, end-of-pipe, "command and control" approach, emphasizing pollution control and adherence to legislated standards. This approach worked reasonably well for basic local pollution abatement: it provided soot-free skies and phosphate-free lakes. But it has not stopped - and probably cannot stop - pesticides from reaching the poles, carbon dioxide from building up in the atmosphere, or hormonal imbalances from damaging fish. For these larger and more complex problems, at least, the system has proven to be rules-bound and legalistically gagged. A new regulatory strategy is required — one that provides an anticipatory, systems-based method to preventing environmental harm. Such a strategy would foster greater operational efficiency, and build company and community commitment to continuous environmental improvement. The strategy must ensure that companies comply with legal requirements, and at the same time encourage them to make environmental performance an integral part of their corporate agendas for innovation and global competitiveness. This chapter explores the foundation for such a strategy.

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The Limitations of the Command and Control Approach When post-war environmental problems first attracted a legislative response in the early 19708, environmental managers characterized the problem as a matter of controlling the unwanted by-products of industrial processes.2 They addressed the issue in a linear fashion by identifying problem emissions, measuring their impact on the environment, determining a non-impact emission level (or assimilative capacity), assessing the technological capability of the day, and setting legally enforceable emissions targets. Their approach resulted in cleaner skies, water, and land and it remains today the predominant response to the environmental harm posed by industrial pollution.3 Unfortunately, this "command and control" approach is showing signs of strain. Typically it requires government regulators and company managers to engage in lengthy and detailed negotiations to arrive at legally enforceable discharge specific standards. Once set, and enforced, the standards keep pollution and its effects within a specified range; but the approach does nothing to encourage companies to go beyond compliance with the letter of the law. Command and control regulations prescribing emission standards and detailing the technology required to meet them have worked relatively well in controlling readily apparent contaminants such as soot, phosphates, and heavy metals. But current environmental concerns centre on difficult-to-detect and difficult-to-assess by-products such as dioxins and furans. Dioxins and furans have been studied since the mid-1970s, yet debate still rages over acceptable levels of exposure, especially to the evidently most dangerous members of these chemical families. Initially, scientists thought that levels in the parts per billion were acceptable. It then became clear that parts per trillion were to be preferred. More recently, the International Agency for Research on Cancer has determined that 2,3,7,8-tetrachlorodibenzo-p-dioxin, the most dangerous form of dioxin, is a human carcinogen.4 Command and control standard setting is ill-suited to responding to such rapid changes in scientific understanding. Determining specific acceptable levels for each of the many different members of these chemical families is an enormous task. It is also never-ending, since the standards have to be adjusted frequently in light of new scientific findings. Industry finds that the moving targets thwart long-term business planning. Governments find monitoring compliance to these changing numbers prohibitively expensive. And in all this effort to address specific contaminants and immediate exposures, more serious cumulative and long-term environmental problems are neglected. The command and control standard-setting approach was designed to deal with specific pollution sources with local effects. But today the most worrisome environmental protection challenges are probably those at the regional or global level. Many large-scale contaminant problems — acidic precipitation, for example - are the cumulative products of discharges from many sources which are individually acceptable and in compliance with local standards.

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The most-discussed recent concern is the prospect of highly disruptive global climate change resulting from rising atmospheric concentrations of greenhouse gases. In 1996 the Intergovernmental Panel on Climate Change announced broad scientific agreement that, in part due to human-induced changes in atmospheric chemistry, global temperatures would likely increase by between o.8o°C and 4.5o°C by 2100.5 Predicted effects include sea levels rising from o.i to 0.9 metres world-wide, increased frequency of floods and droughts, and more extreme weather events. These effects respect no country's borders. Traditional command and control regulations focusing on local pollution have paid little attention to carbon dioxide emissions, and although greenhouse gases are now recognized as a major problem, the complexities of the problem are great. The mechanisms of the problem are beyond confident understanding and the scope of necessary action is beyond any existing authority. No one really knows what standards should be set, and no single jurisdiction can implement them. This challenge led to the 1997 United Nations Conference on Global Climate Change in Kyoto, Japan. After a week of hard bargaining, representatives at the conference managed to agree on global targets for greenhouse gas reductions. Critics quickly claimed that meeting the Kyoto targets would have serious economic effects. At the same time, environmentalists charged that the targets were too low to avert disaster.6 Both may be right. The command and control approach taken by the conference requires a level of simplicity and certainty that global problems simply do not offer. Government deficits provide another complicating factor. The command and control approach has given rise to a substantial bureaucracy in order to formulate standards and issue licences. Every government that took this route hired hundreds of staff to administer their programmes. These programmes are valuable and may still be necessary to provide a reasonable foundation of environmental protection. But in the flurry of recent deficit-cutting measures, governments are eliminating large portions of their regulatory control capacity. From 1996 to 1998 Environment Canada cut its budget by 30 per cent. Newfoundland, Quebec, Ontario, and Alberta followed suit with cuts of 65, 65, 44, and 37 per cent respectively. These cuts have resulted in staffing reductions and office closures. Ontario is currently preparing legal defences against the possibility of being sued for not enforcing its regulatory obligations.7 Command and control cannot be maintained in this fiscal climate. At the same time, public expectations for a clean and healthy environment continue to rise, along with a legitimate desire to be involved in that protection. The Canadian public does not accept that there must be a trade-off between jobs and the environment, or that contaminated groundwater and dirty air are the price of progress. However, the level of public trust of government and corporations is at an all-time low.8 The typical command and control style of closed-door negotiation is no longer acceptable.

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In sum, the linear command and control approach is proving to be inflexible and dangerously inefficient. It is simply not ambitious enough to deal with the new and emerging environmental problems of the late 2Oth century. Principles for an Alternative Approach An effective environmental management strategy must accommodate scientific uncertainty, along with the global nature of environmental problems, fiscal restraint, and the growing power of an informed citizenry. In order to meet these challenges, the strategy must be built upon a set of coherent and comprehensive principles. Six core principles follow. 1. Prevent pollution The key to a new strategy is a focusing on preventing pollution from occurring in the first place. Preventing pollution offers the only long-term response to scientific uncertainty and global effects. Only by preventing pollution, rather than trying to control it once created, can managers assure themselves that harm will be avoided. While the environment can assimilate a degree of contamination, human understanding of that assimilative capacity is quite limited and the notion is coming under increasing attack.9 Such attack has led various authorities to re-examine their approach to pollution management. This re-examination was first expressed internationally in the Ministerial Declaration of the Second International Conference on the North Sea. It states, [The Parties] [t]herefore agree to ... accept the principle of safeguarding the marine ecosystem of the North Sea by reducing polluting emissions of substances that are persistent, toxic and liable to bioaccumulate at source by the use of the best available technology and other appropriate measures. This applies especially when there is reason to assume that certain damage or harmful effects on the living resources of the sea are likely to be caused by such substances, even where there is no scientific evidence to prove a causal link between emissions and effects ("the principle of precautionary action").10 The principle of precautionary action was picked up in the 1990 Bergen Ministerial Declaration on Sustainable Development in the ECE Region. It adopted the concept for application throughout Europe: In order to achieve sustainable development, policies must be based on the precautionary principle. Environmental measures must anticipate, prevent, and attack the causes of environmental degradation. Where there are threats of serious or irreversible damage, lack of scientific certainty

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should not be used as a reason for postponing measures to prevent environmental degradation.r: The 1992 Rio Declaration, ratified at the United Nations Conference on Environment and Development, sought to apply the concept to the world: In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.12 More recently, the European Union has argued that the precautionary principle has become a rule of law.13 The precautionary principle has various implications, but for government it chiefly entails action in the absence of full scientific certainty, including encouragement of abatement beyond the minimum standards derived from current knowledge. For companies it means a shift from end-of-pipe compliance to overall emissions minimization, with an emphasis on prevention rather than control. But in order to prevent emissions, company managers and government regulators must become familiar with the operation of the regulated facility. They must understand its energy and material flows. They must move from focusing their attention on such activities as sewage treatment and air emission control, to understanding inputs, production processes, and outputs. This requires new knowledge, new skills, and most importantly, a new relationship between the regulators and regulatees as government starts to ask operational questions never before posed. This is an understandably uncomfortable prospect for many companies who prefer to keep government "out of the business ."Traditionally, staff employed in the environmental side of the firm had one focus: monitor the pollution control devices and ensure they work. Where a prevention focus is being introduced, environmental staff are being asked to understand and explain how the whole facility functions. They are often unfamiliar with this role, and unsure just how much to reveal to government. The necessary change in roles is also uncomfortable for government regulators. Where once they focused simply on monitoring the pollution control systems, regulators are now expected to work with the operational side of the business. This demands new skills of facilitation, communication and supervision. For people who have specialized in pollution control technology and operation, shifting focus to working knowledgeably and constructively with operational staff can be very difficult. Pollution prevention requires new techniques and new skills. As with all planning exercises, it requires more time and effort up front, to lead to better

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environmental protection in the longer term. This may seem to companies like just another cost imposed because of environmental constraints, but unlike pollution control, pollution prevention typically leads to greater efficiencies. It can actually improve a company's bottom line.14 Pollution prevention also affects governments' bottom lines. While not profit-oriented, governments still have to deal with a fiscal reality. Increased up-front planning and on-site involvement can cut the regulatory time and resources required for managing the site over the longer term. This is truly a case of an ounce of prevention winning a pound of cure; though planning may seem onerous at first, it is much less expensive than the enforcement otherwise required. In addition, up-front planning involves the community in a positive anticipatory exercise, unlike the reactive, negative experience of a courtroom. This first principle is therefore somewhat paradoxical: in order to achieve financial savings in the longer term, government needs to spend more time, and more resources and be more involved in a company's operations up front than it has ever been before. One promising application of the preventative approach is British Columbia's Pollution Prevention Demonstration Project (see sidebar "Practicing Prevention").The project, initiated in 1995, goes beyond the traditional focus on pollution control to find ways of avoiding, eliminating or reducing the quantity of polluting substances used or created. The results, including the pollution reduction and cost savings success at the FMC plant mentioned at the beginning, have been very encouraging. 2. Make the polluter pay In 1975, the Council of Ministers of the European Economic Community recommended approval of the "polluter-pays" principle.15 The concept quickly gained world-wide acceptance. Canada's federal government endorsed the principle in 1991, with the province of British Columbia following suit in 1992.l6 The polluter-pays principle shifts the responsibility for waste management from society at large to those who profit from creating the waste. This is a profound change in focus unrecognized in the traditional command and control approach. Typically, while a company expects to incur costs in controlling its production process emissions, little attention is paid to the environmental effect of the use and disposal of its products. With some exceptions, manufacturers have claimed no responsibility for their products once they leave the factory gate. In an innovative move, the province of British Columbia has institutionalized the polluter-pays principle through its Household Product Stewardship Programme. The programme, the first of its kind in North America,17 deals with household paint, solvents, pesticides, fuel, and pharmaceuticals. It has ensured that the producers and consumers of these hazardous products take responsibility for managing the left-overs.This results in both better environment

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management, and an incentive for the manufacturers (or "brand-owners") to reduce the hazardousness of the products. The programme requires brand-owners to provide collection facilities within four kilometres of the point of sale. However, if a brand-owner wishes to, they can submit a plan to the government outlining a collection programme that is equally effective and convenient to the consumer. If accepted by government, the plan substitutes for the four-kilometre requirement. The plans may be company specific, or drafted on behalf of the industry.18 To date, 100 paint and 9 solvent, pesticide, and fuel collection facilities have been opened across the province. From September 1994 to January 1998, approximately 6 million litres of paint were collected. Once collected, the material is recycled, neutralized or used for its heat value.19 In shifting the traditional responsibility for managing household hazardous waste from taxpayers to the producer/consumer, the product stewardship programme creates an incentive for brand-owners to re-examine their products. This leads both to a reduction in the amount left over, for example by re-designing the packaging and delivery system, and more importantly, to a re-design of the product itself. The goal of the product stewardship programme is the management of all household hazardous waste by brand-owners. Through this approach, changing environmental standards, due to uncertain science, becomes automatically incorporated into the design, delivery, use, and disposal of a product. 3. Focus on performance In a 1995 article entitled "Green and Competitive: Ending the Stalemate," Michael Porter and Claas van der Linde argue that a properly conceived environmental regulatory system not only fosters innovation, but can actually drive innovation by encouraging companies to outperform their competitors. The trick, they say, is to focus on performance rather than technique.20 Porter and van der Linde advocate a rejigging of the command and control approach, arguing that extending regulatory timeframes and concentrating on outcomes rather than techniques can free up a company to respond to a regulator's demands as the company sees fit. As evidence for this they compare the relative successes of the Scandinavian and US governments in achieving emission reductions in the pulp and paper industry. According to Porter and van der Linde, the Scandinavian companies, "developed innovative pulping and bleaching technologies that not only met emission requirements but also lowered operating costs." In contrast, the US companies failed to innovate, because the US regulations did not "[let] ... industries discover how to solve their own problems."21 In British Columbia, pulp and paper mill effluent discharge is regulated through the Pulp Mill and Pulp and Paper Mill Liquid Effluent Regulation.22 This regulation sets a target of zero discharge of adsorbable organic halogens (AOX)

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Practising Prevention: British Columbia's Pollution Prevention Demonstration Project • Bradley D. Wylynko In 1995, the province of British Columbia, Canada, embarked upon a new regulatory initiative: the Pollution Prevention Demonstration Project.The project, involving six major industrial sites across the province, aims to prevent pollution rather than merely controlling it after its creation. The goal of preventing pollution is accomplished through application of a hierarchy of preferred actions: avoidance, elimination or substitution of polluting products; reduction in the use of polluting products; elimination of, and reduction in, the generation of polluting by-products; reuse and recycling of polluting by-products; energy recovery from polluting by-products; and, if necessary, treatment or containment of polluting residuals; and remediation of contaminated sites. In order to assess and apply these actions, the project involves a five part exercise of initiation, review, planning, implementation, and evaluation.This exercise tracks all of the material and energy inputs, processes, and outputs of a facility. Gathered by a joint industry/government steering committee, the data are assessed to determine options to reduce "losses" to the environment.The best options become pollution prevention actions in a pollution prevention plan. In each case, a public advisory committee is established in the initiation stage to oversee the process.Through this committee, regular communications are maintained with the community. The project consists of the following pilot facilities: Westcoast Energy Ltd/s natural gas processing plant in Fort Nelson, BC. The plant processes approximately 600 million cubic feet per day of natural gas. Built in 1965, it employes 120 people. Its principal emissions include carbon and sulphur dioxides and hydrogen sulphide. Alcan Aluminium Company's aluminium smelter in Kitimat, BC. One of the largest aluminium smelters in the world, the Alcan smelter produces 272,000 tonnes per year of aluminium in the form of extrusion billets (cylindrical ingots) and sheet ingots (rectangular) in either pure form or as alloys. Employing approximately 1800 people, the plant began production in 1954. Its principal emissions include carbon dioxide and monoxide, perfluorocarbons, hydrogen fluoride, sulphur dioxide, coke and alumina dust, and poly aromatic hydrocarbons (PAHs). Cominco Ltd/s phosphate and ammonium sulphate plant in Trail, BC. Built in the 1930s to use the sulphur dioxide emissions from Cominco's smelter, the facility produces fertilizer for markets in Asia and the United States.The principal emissions include ammonia, fluoride, phosphate, and particulates. FMC Canada Ltd/s hydrogen peroxide facility in Prince George, BC. As a major supplier of hydrogren peroxide in BC, the company ships 39,900 kg of product per day from its facility. Built in 1990, the plant employs 100 people. Its emissions include a range of hydrocarbons. Fletcher Challenge Ltd/s pulp and paper mill at Campbell River, BC. Employing 1200 people, the facility produces 213,000 tonnes of pulp and 582,000 tonnes of paper per year. Emissions include adsorbable organic halogens (AOX), particulates, volatile organic compounds, and hydrocarbons. Tilbury Cement Ltd/s cement plant in Delta, BC.The facility produces approximately 1 million tonnes of clinker per year and emits a variety of substances including hydrogen sulphide and carbon dioxide.Commissioned in 1978,the plant employs 150 people in Delta, just south of Vancouver.

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Participants have found the pilot project very valuable. Not only have they seen a reduction in pollution and net cost savings, but the process has led to stronger community ties and greater public awareness. In some cases, where early gains could be made or environmental hazard were significant, pollution prevention techniques have been implemented even before the planning process is finished. Completion of the pollution prevention plans is expected by mid-1998, followed by finalization of the planning process and its introduction across the province.2

1

British Columbia Ministry of Environment, Lands and Parks, Introduction to Pollution Prevention Planning for Major Industrial Operations in BC (Victoria: MELP, 1996).

2

Memorandum of Understanding Steering Group, British Columbia Pollution Prevention Demonstration Project — Interim Report (Victoria: MELP, September 1997), p. 13.

by December 31, 2002, but does not specify how that target is to be reached. To date, all pulp mills have met the interim target of 1.5 kilograms of AOX per air dried tonne of bleached pulp. Such performance-based regulations, which set the goal posts and leave it up to industry to determine the means of achieving the goals, are a critical element of a new, more efficient strategy. 4. Encourage continual improvement Continual improvement, borrowed from the total quality management realm, involves beginning with minimum legal standards and then constantly striving to do better. Through a consistent programme of continual improvement, companies may progressively reduce their emissions - typically while also improving their bottom line. For example, in the Netherlands, Dutch regulators have begun negotiating agreements, called covenants, with companies owning licensed facilities. Essentially contracts between the companies and the national government, covenants are voluntarily entered into, but once signed, are enforceable under civil law. They consist of a sectoral agreement to targets and goals backed up by company-specific environmental business plans. To date, covenants have been negotiated with the packaging, metallurgic, chemical, and dairy sectors, among others.23 The business plans require a company to initially assess its ability to reduce emissions, and to continually strive to meet the goals and targets. If a company fails to meet the conditions of the covenant, it faces a unilateral tightening of its pre-existing licence along with a civil enforcement action. In some respects, this new strategy is legally stronger than the traditional one since it relies on civil remedies, which with their lower standard of proof are often easier to pursue than criminal prosecutions.24 Covenants are a legal-voluntary hybrid. Powerful legal incentives for participation and compliance are retained. But the covenant negotiating process encourages a more constructive flow of information than the traditional licensing process, and companies are pushed to look for operational efficiencies as well

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as environmental gains.The Dutch covenant approach takes companies beyond minimum standards to continual improvement. 5.Treat different companies differently Dealing with the challenge of fiscal restraint is a critical element in any successful regulatory strategy. All of the programmes discussed above have addressed this to varying degress, but one of the most interesting responses is found in the State of Victoria in Australia. While pollution prevention, product stewardship, performance-based standards, and covenants all aim to reduce administrative costs, the State of Victoria's Accredited Licence system goes the furthest in this effort. It does this by treating different companies differently25 In line with the command and control approach, the State of Victoria's 1970 Environmental Protection Act requires all facilities emitting pollution to hold a discharge licence. However, in 1993 the Act was amended to enable the government to grant performance-based "accredited licences" to individual companies. The accredited licence consists of whole-of-plant discharge limits (in contrast to outlet-specific discharge limits), and requires submission of an annual performance report, reporting of incidents, and an up-to-date site plan. Because an accredited licence neither specifies the operating parameters of specific pollution control devices nor involves detailed monitoring, the government exercises far less control over the site than under a general licence. This results in cost savings to both government and the company. However, not all companies are eligible for such a licence. To qualify as an "accredited licensee" a company must have in place an environmental management system, an environmental auditing programme, and an environmental improvement plan. A company may choose the environmental management system it prefers (e.g., British Standard 7750 or International Standards Organization 14001) so long as the system is approved by the government. The environmental auditing programme must include both system and compliance elements. An environmental improvement plan, written jointly with government and members of the public, must include the following elements: compliance with regulation, benchmarking against industry and government emission standards, monitoring, community participation, plans for up-grading, assessment of new technology, and emergency plans. Seven companies have been granted accredited licences since the programme began.26 Through this initiative, the State of Victoria Environment Protection Agency takes on the role of auditor rather than monitor. This frees up resources to deal with more problematic actors. Of course, if an accredited licencee is [170]

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found to have abused this privilege, it is immediately dropped back into the general licensing scheme with its attendant costs and penalties. Companies with accredited licences save money through reduced licensing requirements and associated paperwork. Government gains greater efficiencies while improving environmental protection by focusing on the more problematic companies. 6. Involve the public Involving the public in decisions affecting the environment has become a requirement in almost all jurisdictions. By involving the public up-front in the regulatory process, companies and government not only gain from the expertise that a community holds, but also encourage a constructive atmosphere of problem-solving before problems arise. Thus a longer-term relationship can develop between a community and the company, and a degree of trust may develop between the community and the government. The Dutch government recognized this challenge early on, since the Dutch public has for some time demanded access to the traditional licensing process. In many cases this access has been granted, but at a high administrative cost since the system was not designed to accommodate the public. The results have included delays and frustrations. The covenant approach includes non-governmental community organizations in the negotiations leading to the covenants. In some cases, the covenants are worked out between companies and the non-governmental groups even before they reach the government. Once the covenants are in place, the nongovernmental groups are involved in monitoring to ensure that companies live up to the agreements. In a similar departure, the British Columbia Pollution Prevention Pilot Project has established public advisory committees for each of the pilot sites. These committees have the power to approve the terms of reference guiding the site's specific pollution prevention planning process. The public is therefore involved in the establishment of the planning process as well as in the negotiation of the site plan itself. In this way the project aims to combine better environmental performance with better relations between the companies and the communities in which they operate.27 Experience with the project so far suggests that public involvement in the traditionally closed process of government/industry licensing negotiations is an effective way of building stronger community ties, more credibility for government and industry efforts and, most importantly, a higher level of protection of the environment. A New Regulatory Strategy The preceding six principles provide the foundation for a new regulatory strategy - a strategy which leads to both environmental protection and industrial Chapter thirteen: Beyond Command and Control

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efficiency. The principles build on the command and control approach, adding flexibility and responsiveness. This enables regulators, companies, and the public to meet their particular goals within the overall objective of environmental protection. The guiding principles may be summed up as follows: preventing pollution rather than trying to control it after its creation; ensuring that the polluter pays for the benefits gained by creating that pollution; focusing on performance in order to encourage innovation, which may lead to enhanced competitiveness; encouraging continual improvement, leading to cost savings and new sources of revenue as well as environmental improvement; treating different companies differently to reward good company efforts and focus government resources where they are needed most; and involving the public to ensure that community values are reflected in the environmental protection programme. Individual regulatory programmes necessarily reflect the varying cultural contexts of their different jurisdictions. They may, as illustrated, take various forms. Yet whatever the form, the underlying strategy must be based on a coherent and comprehensive set of principles that respond to the challenges of the late 2Oth century. These six principles offer a solid foundation for meeting that challenge, and set the stage for the regulatory strategy that will be needed in the 2 ist century. Bradley D. Wylynko is a Canadian environmental lawyer now working in Australia. At the time of writing, he was serving in the deputy minister's office of the British Columbia Ministry of Environment, Lands and Parks. He negotiated and drafted EC's Product Stewardship Programme, and supervised the development of EC's Industrial Pollution Prevention Programme. He also drafted the Guidelines and Standards Policy, a new ministry-wide policy used in setting industrial emission limits. The opinions and views expressed in this paper are solely those of the author and do not necessarily reflect the opinion or views of either the EC Ministry of Environment, Lands and Parks, or of the editors/publishers of this book. Notes i

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Personal communication, Rob Service, FMC plant manager, March 2, 1998. FMC also switched from using diatomaous earth to polyester filters in recycling its work solution. This resulted in a cost savings of $80,000 per year and a 50 per cent reduction in solid waste generation. See also C. McKean, "P2 Planning

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Success," At the Source (Sarnia: Canadian Centre for Pollution Prevention, spring 2 3

4

5

6

7 8 9

co

[i

[2

1997). See, for example, the US Clean Water Act, Pub. L. No. 92-500, 86 Stat. 816 (1972). See, for example, British Columbia's Waste Management Act (RSBC) 1996, c.482); and the Canadian Environmental Protection Act (Revised Statutes of Canada 1985, c. 16[4th Supp.]). "International Panel Concludes Dioxin is Known Human Carcinogen," Risk Policy Report 3:2 (Washington: Environmental Protection Agency, 1997), p. 6. For a review of this debate, see, C.Van Strum and P. Merrell, No Margin of Safety: A Preliminary Report on Dioxin Pollution and the Need for Emergency Action in the Pulp and Paper Industry (Washington: Greenpeace, 1987). In 1984, in response to scientific uncertainty on this issue, the US EPA released a draft report entitled "Estimating Exposure to Dioxin-like Compounds," reviewing data on the topic. For a discussion of the scientific uncertainty of the role of dioxins and furans in pulp mill effluent, see also D.VanNijnatten andW Leiss, "Environment s X-File: Pulp Mill Effluent Regulation in Canada,"Working Paper Series 97-1 (Kingston: Queen s University, Sept. 1997), pp. 1-34. J. Houghton, I. Meira Filho, B. Callander, N. Harris, A. Kattenberg and K. Maskell, eds., Climate Change 1995, The Science of Climate Change: Contribution of Working Group i to the Second Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge: Cambridge University Press, 1995), pp. 40-41. British Columbia Business Council, Press Release, "Business Council Criticizes the Federal Government over Canada's Climate Change Commitment in Kyoto," December 12, 1997; A. Mcllroy, "Canada to cut emissions by 6%," The Globe and Mail, December n, 1997. A. Mitchell and M. Winfield, "The Accord is a Tragedy for Canada's Environment," The Globe and Mail, February 2, 1998, p. Ai9. See, for example, data from The Environmental Monitor (Toronto: Environics International, January and July 1997). For a review of the debate, see A. Stebbing, "Environmental Capacity and the Precautionary Principle," in Marine Pollution Bulletin 24:6 (1992), pp. 287-295; and M. MacGarvin, "The Implications of the Precautionary Principle for Biological Monitoring," in Helgolander Meeresuntersuchungen 49:1-4 (1995), pp. 647-662. Second International Conference on the Protection of the North Sea, Ministerial Declaration (London, Nov. 1987), p. i, as reported in J. Cameron and J. Abouchar, "The Precautionary Principle: A Fundamental Principle of Law and Policy for the Protection of the Global Environment," Boston College International and Comparative Law Review 14:1 (1991), pp. 2-25. See also the 1987 London Dumping Convention. Bergen Ministerial Declaration on Sustainable Development in the ECE Region (May 16, 1990), p.i. The document resulted from a conference entitled, Action for a Common Future, organized by the Government of Norway, May 8-15, 1990, in Bergen, Norway. The Rio Declaration on Environment and Development, UN Doc. A/CONF.

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13

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151/5/Rev. i (June 13, 1992). Also available on line at http://sedac. ciesin.org/pidb. For an excellent analysis of the principle pre-Rio see Cameron and Abouchar, "The Precautionary Principle" (note io),pp. 2-25. "EU Defends Precautionary Action Before WTO," Environment Watch: Western Europe 6:22 (Nov. 21,1997), p. i. For an example of how the precautionary principle is being incorporated into licence requirements, see the British Columbia Ministry of Environment, Lands and Parks, "Guidelines and Standards Policy," (1997), available on-line at http://elp.gov.bc.ca:8o/ epd/epdpa. For example, Dow Canada designed and built an $8oo-million ethylene plant without an effluent discharge pipe. The design makes it 20 per cent more efficient than other facilities producing the same product. Personal communication, K.Tsang, process engineer, Dow Canada, December 15, 1996. S. Johnson and G. Corcelle, The Environmental Policy of the European Communities (London: Graham andTrotman Publishers, 1989), pp. 265-266. Government of Canada, Canada's Green Plan for a Healthy Environment (Ottawa: Ministry of Supply and Services, 1990), p. 16; Ministry of Environment, Lands and Parks, New Approaches to Environmental Protection in British Columbia: A Legislative Discussion Paper (Victoria: Province of British Columbia, 1992), p. 14. The programme won the 1997 Leadership Award for Product Stewardship from the North American Hazardous Waste Management Association. See the Post-Consumer Paint Stewardship Program Regulation (BC Reg. 200/94); Post-Consumer Residual Stewardship Program Regulation (BC Reg. 333/97)Personal communication, Jim Marr, pollution prevention analyst, BC Ministry of Environment, Lands and Parks, February 23, 1998. Michael Porter and Claas van der Linde, "Green and Competitive: Ending the Stalemate," Harvard Business Review (September/October, 1995), pp. 120-134. Porter and van der Linde, p. 129. BC Reg. 470/90. "Voluntary Accords Seen as Way to Protect Environment While Remaining Competitive," International Environmental Reporter (Washington: The Bureau of National Affairs, July 26, 1995), p. 586. It should be noted that this is a hotly debated point. Since the standard of proof is lower, it may be easier to convince a court to find guilt, typically a very difficult exercise in environmental cases. However, since the action is a civil action, rather than a criminal action, the penalty cannot include incarceration. Thus the company may be found guilty, but only face a fine (which is often tax deductible). State of Victoria Environmental Protection Agency, "Accredited Licencee Guidelines for Applicants," EPA Information Bulletin $424 (February 1996). See J. Clements, "Environmental Management Systems and How they Fit into the Program of the EPA (Victoria: EPA), unpublished but available on-line at http://www.epa.vic.gov.au. Personal communication, Scott Hamilton, project manager, Industry Service Branch,Victoria EPA, March 2, 1998. Bradley D.Wylynko

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The province is committed to a process that "enables companies to incorporate pollution prevention within the context of their strategic business plans and develop stronger ties with their community." Introduction to Pollution Prevention Planning for Major Industrial Operations in BC (Victoria: British Columbia Ministry of Environment, Lands and Parks, 1996) doc. no. ENV 509 864.0396, also available on line at http://elp.gov.bc.ca:8o/epd/epdpa/pppm/pphome.html.

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fourfteen Environment and Value at Nortel Networks Northern Telecom's corporate environmental leadership leads to competitive advantage Margaret G. Kerr At Nortel Networks (Northern Telecom), we believe that minimizing the impact of our products and operations on the environment is part of our ethical responsibility as a global corporate citizen. Clearly, we owe it to the communities in which we do business around the world to comply with local legislation and guard against environmental accidents. Wherever we can, we also want to serve as a positive force, actively contributing to environmental improvement. We've learned over the years, however, that environmental protection is not just the "right thing to do" — it actually translates into competitive advantage for the company. Advantage has been gained in areas such as lower operating costs, product and service differentiation, and improved corporate image. Most importantly, environmental protection can create customer value. Nortel Networks is the leading supplier of digital telecommunications networks in the world. We're a global company, now in our second century of business, and we're headquartered in Canada. Our employees — about 70,000 strong — operate in more than 100 countries. Today, nearly 40 per cent of our business comes from outside North America. In 1997 our revenues were $15.45 billion.1 Over the past few years, we've undergone a significant shift in our approach to environmental management. Nortel Networks has a strong infrastructure of environmental professionals at our manufacturing locations. At the corporate level, however, our team is very small. The traditional approach would be to confine the corporate team to a policing function: making sure that Nortel Networks is in compliance with all relevant regulations, and providing due diligence oversight on behalf of the Board and senior officers. While due diligence is still an important part of our work, we've been consciously reorienting our approach to focus on putting the customer first. In short, we've come to see environmental management as an integral part of the business of the company, not as a discrete activity that sits off on the side somewhere. From Quality Management to Environmental Management The evolution of environmental management at Nortel Networks accurately reflects the changes in thinking that have occurred in industry as a whole. Our approach to environmental management has been influenced - sometimes consciously, sometimes less consciously - by the evolution of quality management. The history of the quality movement began with the recognition that [176]

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"quality control" didn't have to mean the costly practice of weeding out and scrapping defective products before they were shipped to customers. "Doing things right the first time" could lead to better products at lower costs. Companies started considering the manufacturing process as a system, and looking for opportunities to reduce errors, scrap, rework - and costs. In recent years, notions of quality have been migrating to a broader concern with customer value management. Companies are focusing on getting close to the customer, and being driven by the customer's needs and expectations. They're also trying to get closer to the market by learning how their product quality, service quality and price stack up relative to the competition. They're moving from a narrow, internal focus to an ever-widening understanding of the broader context, the larger systems of the business's operations. They're thinking about capturing a larger share of the customer, as well as a larger share of the market, creating a base of loyal customers. There has been a progression in thinking about environmental management that has some rough parallels with this evolution. It's a progression first from after-the-fact control to upstream prevention through a systematic management approach based on the principle of continuous improvement. It then expands to an understanding of how environmental activity can add value to customers, and differentiate a company from its competitors in the marketplace. It's no secret that for a good part of the 19808, most of those in industry who thought about environmental issues at all tended to have an image of costly problems that would have to be "fixed" when they became too pressing. "Environmental management" was really pollution control: putting scrubbers on smokestacks, treating polluted wastewater, and ensuring that hazardous waste was managed as safely as possible. These activities were a bottom-line cost to the company, things that industry was forced to do by increasingly stringent government regulations or chose to do in response to public pressure, but very definitely detrimental to the company's profitability. At some point in the 19805, industry began to realize that it really should be thinking about pollution prevention rather than pollution control. And in so doing, an idea from quality management was imported: the idea that "prevention" required a more sophisticated understanding of systems. Industry needed to look at manufacturing processes as a system and figure out where there was waste, inefficiency or unnecessary pollution. This was brought home to Nortel Networks in the late I98os/early 19905 by our CFC elimination project.2 We started out thinking that our challenge was to find a less harmful alternative to the CFC-I 13 solvent we used to remove flux residue from printed circuit boards. But instead of switching to a different solvent, we ended up redesigning our technology and processes to eliminate the need for cleaning altogether. And we showed that environmental protection could actually save money. In addition to eliminating the use of this ozone-depleting solvent years ahead of the deadline set by the Montreal Protocol, we managed to realize an attractive return on investment that considerably heightened senior manage Chapter fourteen: Environment and Value at Nortel Networks

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merit's interest in pursuing environmental initiatives. We spent $i million on research and development, but in the three-year duration of our "Free in Three" project alone, we saved about $4 million. The savings came from decreased solvent purchases, the elimination of cleaners and their associated operating and maintenance costs, and reductions in solvent waste for disposal. Through our work with engineering and manufacturing personnel on the elimination project, our environmental staff were exposed to the current thinking about quality management systems. They started to see that we had been thinking about environmental management more as a checklist of tasks to be accomplished than as an ongoing system of continuous improvement. We realized that we needed to develop a "systems view" of the way we managed our environmental activities. Our revised environmental policy stresses the importance of a systematic approach, and institutionalizes our corporate Environmental Management System (EMS) Standard.3 Finalized and piloted in 1994, the EMS Standard is now being adopted by manufacturing and research locations throughout the company. Based on the principles of quality management and continual improvement, our EMS Standard was designed to reflect the requirements of iso 14001. By mid-1998, nine Nortel Networks sites had achieved registration under iso 14001. Contributions to Competitive Advantage Our experience has been that the implementation of an EMS contributes to competitive advantage in two ways. First, it forces us take a hard look at all of our processes and root out costly inefficiency and waste. Second, as more of our customers include evidence of a systematic approach to environmental management in their supplier selection criteria, our implementation of the EMS Standard shows that we're listening and responding. British Telecom, for example, keeps a list of suppliers with environmental management systems that meet their standards. Nortel Networks was one of the first companies to make the grade. While the EMS standard sets out a systematic framework for managing environmental impact, it does not prescribe what to do. In the initial stages, we focused on setting and achieving measurable targets for reducing the environmental impacts of our manufacturing processes. As the concepts of product stewardship or product lifecycle management have taken hold we've become more conscious of the environmental impact of our products themselves. We have committed to minimizing the environmental impacts of our products throughout their life cycle, from design through to the end of their useful lives. In developing our product lifecycle management initiatives,4 we're more driven by the needs and expectations of our customers than we have been before. By maximizing the environmental and economic efficiency of our products at each stage in their lifecycle we're adding value for our customers and [178]

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reducing costs for Nortel Networks. Following are three brief examples of what we've worked on in the product design, manufacturing, and distribution stages: Interventions in the product architecture stage — the very first stage of product design — can have a major impact on the resource efficiency of a product. The designers of our Nortel PowerTouch telephone have taken a modular approach to design — one that allows customers to upgrade their telephones without buying new ones and scrapping the old. The PowerTouch consists of a standard base, and an upgradeable slide-in module that can add features such as incoming caller identification, call waiting, or a larger screen and better graphic display. The module can be replaced over time to provide the latest features available, at half the price of replacing the phone. This also reduces the volume of obsolete product sent for recycling or to landfill. A change in the way we think about supply management is proving the value of looking for opportunities to reduce environmental impact and cost in all parts of the value chain. We're piloting a project with our main chemical supplier at a Nortel Networks site in Ottawa under which we're purchasing the supplier's services for a fixed fee, rather than purchasing the chemicals themselves. In addition to the cost of the necessary chemicals, the fee covers services such as chemical process expertise, chemical management, storage and disposal. Under traditional supply arrangements, it's in the supplier's interest to encourage Nortel Networks to use more chemicals. The new arrangement provides an incentive to the supplier to help Nortel minimize chemical use, to develop more efficient chemical processes, and to find alternatives to hazardous chemicals. Minimizing the cost and environmental impact of product packaging is a key concern of our customers. Packaging innovations such as collapsible carts, aluminum carriers, plastic "clamshell" packages, and standardized pallets and boxes — all reusable — are helping us reduce costs and packaging volume. A single change in our distribution practices is saving an estimated $5 million annually: we're now assembling switching products before they're shipped, rather than packaging and shipping components separately for on-site assembly. What is known as "plugs in place" shipping not only requires less packaging, but also allows for faster installation. Our increasing application of product lifecycle management concepts is paying off in tangible benefits for customers, for Nortel Networks, and for the environment. We've also learned that environmental performance can contribute to competitive advantage by enhancing a company's image. The CFC story didn't really end when we became, in January 1992, the first multinational company in the electronics industry to eliminate CFC-IIS from operations worldwide. In subsequent months, we received several prestigious environmental awards, and positive media attention, which essentially is free advertising for the company. While we think of it as old news, we're still getChapter fourteen: Environment and Value at Nortel Networks

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ting requests to write articles, give speeches, or be the subject of television coverage of CFG elimination efforts. For several years, we were deeply engaged in a process of sharing what we've learned with other countries, especially "developing" countries. Between 1992 and 1995, Nortel Networks played a lead role in technology co-operation projects in Mexico, India, China, Turkey, and Vietnam. These projects were supported by World Bank funding, and involved close collaboration with local government and our partners in the International Co-operative for Ozone Layer Protection (now the International Co-operative for Environmental Leadership). Over the years, we've come to believe strongly that international co-operation between governments and industry is a highly practical way of resolving shared environmental problems. We've been devoting substantial amounts of time and energy to this because we believe that it's part of our responsibility as a global corporate citizen. But our reasons are not entirely altruistic. Technology co-operation is a marketing tool: it is building goodwill and strong relationships with customers in emerging markets. Our willingness to bring first-tier technology and our experience with environmental management to developing countries — helping them avoid some of the costly mistakes we've made - is a key driver in many of our joint ventures. Our commitment to the environment is a part of the value proposition we offer to potential customers. Increasingly, our willingness to work with customers to solve shared environmental problems is helping us build customer satisfaction and loyalty in developed markets as well. For example - for years we've been taking back obsolete equipment from Bell Canada and routing it through a Nortel materials re-using recycling facility. We actually have three such facilities in North America and one in the UK, all of them revenue generators. We're now finding that companies such as BT and Mercury Cable and Wireless Communications in the UK, as well as Telia of Sweden, are actively seeking suppliers who will take on the responsibility of disposing the equipment they sell at the end of its useful life. Several European countries already have product take-back legislation (also called "producer responsibility" legislation) in place, and the European Union is considering enacting uniform standards. We're now putting our experience with product recovery to good use in highly successful programmes with BT and Mercury Cable and Wireless Communications. Our commitment to the environment is helping us build strong and, we hope, longlasting relationships with these key customers. Product recovery is an excellent example of how we can provide new customer services while reducing the environmental impact of our products. At Nortel we've gradually come to see that environmental leadership can help us provide superior customer value. Environmental programmes that are put in place because they're the "right thing to do" or because governments require them are vulnerable. They're subject to the whim of legislators, swaying public priorities, and financial cycles. For long-term sustainability and impact, envi[ 180]

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ronmental activities must be seen by decision-makers at all levels of the organization to be clearly supportive of business objectives and a contributor to competitive advantage in the marketplace. We're certainly a long way away from having environmental considerations take a front seat whenever a decision is made or an activity undertaken within Nortel. But that's our long-term vision. Dr. Margaret G. Kerr is Senior Vice-President, Human Resources Strategy at Nortel Networks. From 1987-1998, she was the senior environmental officer at Nortel Networks, with responsibility for all corporate environmental programmes. Notes 1 2

3 4

All financial figures are stated in US dollars. E.H.Rose and A.D.FitzGerald, "Case Study - Free in Three: How Northern Telecom Eliminated CFC-IIS Solvents from Its Global Operations," Pollution Prevention Review (Summer 1992), pp. 297-310. More information can be found at Nortel's environmental Internet page: http://www.nortel.com/cool/environ/habitat.html See n. 3.

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fifteen Aiming Low • Although iso 14000 is the weakest of available approaches to improved corporate environmental management, It may yet be a useful global tool for sustainability • Saeed Parto Most corporate leaders interpret sustainable development as sustained growth with increased profitability and see it as an opportunity for further growth along the conventional paths of doing business.1 Similarly, the corporate version of environmental protection consists mainly of pollution minimization programmes with a preference for those offering financial benefits.This prevalent misinterpretation of sustainable development has led to satisfaction with initiatives that reduce but do not reverse the social, economic, and ecological damages of business activity. As Paul Hawken has observed, the result is that even "if every company on the planet were to adopt the best environmental practices of the leading' companies,... the world would still be moving toward sure degradation and collapse."2 Sustainable development requires "sustainable human communities [that] act like natural ones, living within a natural ebb and flow of energy from the sun and plants ... redesigning all industrial, residential, and transportation systems so that everything we use springs easily from the earth and returns back to it."3 To accommodate this type of transformation, current institutional arrangements will need to be augmented significantly or changed. This is the practical context in which we must assess the usefulness of the available tools, the need for new ones, and the opportunities to apply them. One such tool is iso 14000, the suite of voluntary environmental management standards being developed for global application by the Geneva-based International Organization for Standardization (iso). ISO 14000 Environmental Management Standards The iso is an independent, non-government organization. The process to develop iso 14000 has included input from governments and, to a lesser degree, non-government organizations. However, iso 14000 represents primarily a corporate response to global public concern about the environment. It is also a corporate response to the declining authority of governments in a globalizing economy. In a wider context, iso 14000 reflects and reinforces an increasing corporate role in setting the agenda for efforts to address global concerns. iso 14000 is the result of a series of developments that began in the early 19905. In 1991, at the invitation of international organizations representing global corporate interests,4 the Strategic Advisory Group for the Environment [182]

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Table 1: ISO 14000 Elements and Publication Timetable Environmental Policy is not addressed in separate ISO guidelines but ISO 14001 encourages each participating organization to develop a policy and objectives to outline the entity's commitment to environmental responsibility. Environmental policy sets the operational scope for the EMS and is, therefore, an instrumental element of the implementation process. Environmental Management System (ISO 14001, ISO 14004) guidelines cover "...that part of the overall management system which includes organizational structure, planning activities, responsibilities, practices, procedures, processes and resources for developing, implementing, achieving, reviewing and maintaining the environmental policy." [Released in 1996] Environmental Performance Evaluation (ISO 14031) is a process guide for measuring, analyzing, assessing and describing the organization's environmental performance against agreed targets based on the entity's environmental policy objectives. [To be released in 1999] Environmental Auditing (ISO 14010,14011,14012,14015) guidelines set out general principles of environmental auditing, guidelines for auditing environmental management systems and the qualification criteria for environmental auditors. ISO 14015 deals specifically with Environmental Site Assessment. [Released in 1996 (ISO 14010, ISO 14011, ISO 14012); to be released in future (ISO 14015)] Life Cycle Assessment (ISO 14040,14041,14042,14043) focuses on evaluating environmental attributes associated with a product, process, or service.They address impacts along the entire continuum of a product's life from raw material extraction, through manufacturing processes, distribution and transportation, use, recycling, to final disposal. [Released in 1997 (ISO 14040); to be released in 1998 (ISO I4041);and 1999 (ISO 14042, ISO 14043)] Environmental Labelling (ISO 14020,14021,14022,14023,14024,14025) guidelines describe methods for identifying products which meet specified environmental requirements of a product class including procedures, terms and definitions, symbols, and testing techniques. [Released in 1998 (ISO 14020); to be released in 1999 (ISO 14021, ISO 14022, ISO 14023, ISO 14024, ISO 14025)] Environmental Aspects in Product Standards (Draft ISO Guide 64) aims to raise environmental awareness in ISO's product standard writers.The guide recommends the use of life cycle thinking and recognized scientific methodologies to develop product standards which promote improved environmental aspects and account for environmental Impacts. [Released in 1998] Terms and Definitions (ISO 14050) is a terminology standard to ensure clarity and consistency in terms and definitions used by ISO and its member organizations .[Released in 1998]

(SAGE) was set up by the ISO to review the possibility of developing international environmental standards for organizations. SAGE made a direct reference to sustainable development, which it defined as "operating activities [that] meet the needs of present stakeholders (share-holders, employees, customers, and communities) without impairing the ability of future generations to meet their needs."5 The outcome of these developments was the iso 14000 suite of environmental management standards (see Table i). The iso 14000 environmental management standards6 are guidelines Chapter fifteen: Aiming Low

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designed to create standardized global procedures for corporate environmental management.7 These procedures are intended to help each organization to take stock of its environmental aspects, establish its own objectives and targets, commit itself to effective and reliable processes and continual improvement, and bring all employees and managers into a system of shared and enlightened awareness and personal responsibility for the environmental performance of the organization.8 The most important component of the iso 14000 suite is iso 14001, which provides specifications for companies or other bodies implementing an environmental management system. This is the only element of iso 14000 that may be certified, iso 14001 certification applies only to operation processes, not products. No product label, advertisement or other promotional material should give the impression that a product is "iso 14001-certified" or "iso 14001-registered." iso 14001 is not a label signifying a "green" or "environmentally friendly" product9 (see Table 2). Initial Responses to ISO 14001 Some major transnational corporations have already decided to seek iso 14001 certification. Toyota and Sony Corporations, for example, have announced plans to obtain iso 14001 certification within two years for all their sites worldwide. The Ford Motor Company has begun the process and has achieved iso 14001 certification for some of its facilities. Many other corporations have started assessing their operations to identify iso 14001 certification needs. In Canada, despite a restrained response to the standards, a survey conducted by KPMG in 1996 found that 47 per cent of the respondents from the manufacturing sector were considering iso 14001 certification.10 Governments have also been taking an interest in iso 14001. In a report to the House of Commons in 1995, the Office of Auditor General indicated that organizations of all types and sizes could benefit from adopting the standards." The report concluded that at the minimum, conformance to iso 14001 is proof that the organization is aware of requirements of applicable environmental regulations while a more conscientious environmental management system could satisfy the test of due diligence generally applied in environment damage prosecutions. The report further indicated that an advanced environmental management system based on concern and respect for the ecosystems and people could address questions of sustainable development. A number of large corporations have decided to establish environmental management systems based on iso 14001 but to wait until the dust has settled before applying for an external independent audit leading to certification. Still others have recognized the longer-term financial benefits of adopting an environmental management system but are unwilling to advertise it because of the increased risk of exposure to external pressure from environmentalists who might see it as grounds for demanding more of the proclaiming organization.13 For some observers, enthusiasm about the spread of iso 14001 is tempered [184]

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Table 2: Standard Setting Institutions, Terminology, and Procedures12 The International Organization for Standardization (ISO) develops standards with direct participation and input from many national standards bodies worldwide. Canada's national standards body is the Standards Council of Canada whose mandate is to promote and oversee voluntary adoption of standards through the work of such bodies as the Canadian Standards Association. According to ISO 14001 (and ISO 14004) released in 1996, an environmental management system consists of five main elements: environmental policy planning implementation and operation checking and corrective action (measurement and evaluation), and management review (review and improvement) ISO 14001 is the only standard in the ISO 14000 suite which requires certification. The remaining standards are referred to as "support documents" (see Table 1). In Canada, the Standards Council of Canada is the sole accreditation body for thirdparty registrars (certification or registration bodies) that certify an organization's conformance to the ISO 14001. Certification or registration — the choice of term varies from country to country — is awarded to an organization that successfully passes an environmental management system audit conducted by an accredited third party registrar. The company can then advertise itself as "ISO 14001 certified" or "ISO 14000 certified." An organization may choose to self-declare its conformance to ISO 14001. ISO's rationale for allowing self-declaration is based on the expectation that many organizations may wish to adopt the methodology of ISO 14001 for environmental management but to avoid the cost of maintaining an externally audited and certified system. To ensure adequacy of the environmental management system and its procedures ISO 14001 requires that the organization conduct periodic environmental management system audits. The auditors' role is confined to ensuring that an environmental management system exists and that there are relevant procedures in place to achieve objectives as outlined in the environmental policy. Neither external nor internal audits call for evaluation of the organization's environmental performance. ISO 14001 is voluntary and may be adopted by organizations of all types and sizes. To conform, an organization must describe what it does through a system of documentation, do what is documented, and be able to prove it in a systems audit. An organization may start the certification process at any time. ISO does not impose deadlines for certification nor timelines for the process. These are determined by the organization's management. Once the organizational preparations for certification have been made, an accredited registrar will audit the environmental management system to ensure conformance to ISO 14001 specifications. Periodic audits will ensure continued conformance with the requirements of the standards.

by uncertainties about the extent to which it will be used as the primary international benchmark for environmentally responsible management of organizations.14 There are two main concerns in this regard. First, the inability of developing country firms to adopt iso 14001 due to financial and technical expertise constraints will make business more difficult for those firms that Chapter fifteen: Aiming Low

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depend on trade with developed countries. This trade barrier may be overcome by developing country authorities who decide to facilitate widespread adoption of iso 14001 through direct financial assistance to their domestic industries and through a general relaxation of the already weak environmental regulatory regimes so that it would be easier and cheaper to "comply with applicable regulations." But such an outcome would not increase the level of global environmental performance by industry.15 A second main concern of iso 14001 critics is that it has significant weaknesses even in comparison with other, well-established approaches to corporate self-regulation. For example, unlike the European Eco-Management and Audit Scheme,16 iso 14001 does not require external reporting on environmental performance. And unlike the Responsible Care programme,17 iso 14001 does not require consultation with host communities or compliance with regulatory requirements. Indeed, although iso 14001 encourages companies to make regulatory compliance a policy objective, a company may break the law and retain certification as long as it is making continual improvements toward regulatory compliance. Certification is awarded to companies that can demonstrate they have implemented a "system" fitting the description of an environmental management system. Assessment of an organizations operational efficiency and target-driven environmental performance is not required for conformance to the standards. The Eco-Management and Audit Scheme and British Standards Institution's Bsyyso18 promote "continuous improvement," with reference to "improvement of environmental impacts." In contrast, iso 14001 encourages "continual improvement" of the environmental management system as a means to reduce environmental impacts. While performance improvements are an anticipated result, iso 14001 is not aimed directly at performance improvement. Instead the focus is on procedural improvements somewhere in the organization. In this respect, iso 14001 fails even to meet the Total Quality Environmental Management requirement for continuous improvement in actual environmental results. I9 The procedural focus and general absence of performance requirements are minimalist characteristics that arose predictably from the history of the iso 14000 initiative. Two elements of this history are instructive. First, in response to the threat to corporate interests posed by the United Nations' announcement in 1991 of a Conference on Environment and Development during the Earth Summit (Rio de Janeiro, 1992), organizations such as the International Chamber of Commerce and the Business Council on Sustainable Development successfully re-oriented the Rio proceedings away from attempts to devise internationally binding corporate environmental standards.20 Emphasizing the role of technology and economic growth as bases for environmental improvements, Chamber and World Business Council representatives promoted self-regulation and increased eco-efficiency as means of ensuring environmental improvements without restricting the application of liberal trading and investment policies.21 This approach also avoided attention [186]

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to equity issues raised by non-government organizations concerned about the widening gap between the poor and the rich within and between the countries of the world. Second, for the iso 14000 environmental management standards to be as widely adopted as the iso 9000 quality management standards, they needed to be based on the consensus of the participating members.22 Several early drafts for these standards, submitted mainly by western European representatives, were discarded after objections raised mainly by US representatives. Subsequent draft standards were watered down by iso Technical Committees until the US representatives were firmly on board. The ensuing consensus was thus reached at the cost of accepting minimal obligations. Procedures on compliance and performance auditing and environmental statement auditing were dropped from the list of standards in June I995. 23 At the same time it was decided to promote iso 14000 as a means to "increase competitiveness and market share." Therefore, the standards had to become "practical, usable and useful. The objective for the standard is to facilitate a company's recognition of its environmental obligations while retaining and/or improving its market share/business performance."24 This now predominant but narrow interpretation of the purpose of the standards is biased in favour of a global agenda widely subscribed to by powerful corporate interests and contrary to the intentions of SAGE, as outlined in its interpretation of sustainable development (see above). For those skeptical of transnational' intentions vis-a-vis global sustainability requirements, iso 14001 represents a bold attempt to formalize and legitimize the status quo through superficial standardization of the environmental aspects of corporate industrial activity, iso 140015 lack of target-driven performance objectives and accountability in terms of mandatory external reporting is often cited by critics as proof that the standards will do little to avert the historical trend of global environmental damage closely associated with transnational industrial activity. To reverse this trend, transnational corporations need to set their environmental performance objectives much higher than the minimalist requirements of iso 14001 promote. While conformance to iso 14001 by transnational corporations is better than doing nothing at all, conscientious managers will need to view iso 14001 as a step in a series of initiatives to steer industrial activity away from undermining the viability of ecosystems and toward adopting organizational practices that advance ecological sustainability. Further steps toward sustainable industrial development require looking beyond the narrow confines of iso 14001 to build institutional arrangements at local and global levels that address sustainability as the common goal. Progress toward this goal needs to be monitored and reported in a transparent fashion to all stakeholders.To succeed, there needs to be close and continuous collaboration between governments, industry, and community-based citizens' groups. Attainment of sustainability will be dependent on organizations capable of incorporating social and ecological needs into business decisions. This is not Chapter fifteen: Aiming Low

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easily achievable within the current context of business thinking. The structure within most industrial organizations is rigid, autocratic, and minimally open to government or community input. Within the current context, the most promising organizational outlook to address sustainability needs is perhaps offered by the "Ecologically Sustainable Organization" model. Ecologically Sustainable Organizations and ISO 14000 There is a growing trend and a literature, particularly in the field of organizational behaviour, associated with the need to re-orient business organizations toward ecological sustainability. This trend has benefitted from contributions by business, academic, non-government, and voluntary interests. Of particular significance to the study and evaluation of voluntary environmental management initiatives is the concept of organizational sustainability25 and the "ecologically sustainable organization" (ESO) model.26 Although still at a conceptual stage and lacking in operational details, the ESO model offers a reasonably comprehensive framework within which to evaluate organizational management tools such as iso 14000. The ESO model is based on principles similar to those expounded by iso 14000. Both models adopt a systems approach to address environmental issues. The two main differences between the iso 14000 and ESO models are the degree of required structural change within the adopting organizations and the "ecological boundary" for organizational activity. There are also differences in the explicitness of language. Overall, the ESO model offers a more integrated system and a wider scope for environmental management (see Table 3). iso 14000 is a stand-alone set of standards, adoptable even by sections or departments within an organization which itself does not conform to the standards. As a result, there are few provisions in iso 14000 to establish the necessary organizational linkages with other bodies and systems based on ecological, economic, and social necessities. Despite the promotional claims by its proponents, iso 14000 makes no attempts to address sustainable development requirements. In contrast, the ESO model rests on the premise that ecological sustainability requires ecologically sustainable societies, cultures, political and economic systems, organizations, and individuals.The operating framework for an ESO is based on natural ecology and maintains that "any sectors in which organizations interact, whether technical or institutional, are circumscribed by the carrying capacity of the natural system."28 Because of this explicitly systemic approach, the eso model provides a unique framework within which to develop practical applications aimed at orienting organizations toward social and ecological sustainability. This framework could also be used to evaluate and rank current organizational models for environmental management. Table 4 ranks the main focus of four of the best known voluntary environmental management initiatives against applications of the ESO model. An organization's adoption of any of the four initiatives is an important step [188]

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Table 3: Comparison of ISO 14000 with ESO model characteristics27 ESO Level / Characteristics

Addressed by IS014000

Ecological:

Implicit

No

Utilization of natural resource inputs at sustainable rates Processes designed for maximization of conservation and minimization of waste Development of goods and services for sustainable use and disposal/recycling Generation of only assimilable outputs, which are ecologically useful or neutral Effective mechanisms for sensing, interpreting, and responding to natural feedback Promotion of values of environmental protection, sensitivity, and performance Development of principles, strategies, and practices for ecosystem viability Individual: Inclusion of sustainability considerations in job design, selection, and training Promotion of sustainability-oriented innovation by systems and structures Reinforcement of a sustainability orientation by cultural artifacts Organizational: Initiation of and involvement in environmental partnerships Absence of targetted protests by environmental activists Utilization of environmental conflict-resolution practices Participation in industrial ecology and other waste-exchange arrangements Allocation of extensive resources to inter-organizational ecological cooperation Political-Economic: Encouragement of pro-sustainability legislation Promotion of market-based environmental policy approaches Encouragement and development of full-environmental-cost accounting systems Promotion of peak organization support for sustainable public policy Promotion of peak organization sustainability-oriented self-regulatory programs Participation in peak organizations specializing in promoting sustainability Opposition to anti-sustainability and/or promotion of pro-sustainability subsidies Social-Cultural: Involvement with social-cultural elements to advance sustainability values Involvement in educational institutions'environmental literacy efforts Provision of environmental information to various media Dissemination of sustainability information from culturally diverse stakeholders Attention to environmental stewardship values of organizational members

toward becoming socially more accountable and ecologically less damaging. However, the existing voluntary initiatives are generally limited to addressing purely "environmental" and not social questions.The ESO model has the considerable advantage of linking organizational values and practices with the societal requirements of sustainable development. The model could be used, for example, to establish benchmarks for voluntary initiatives while auditing formats based on the model could be developed to assess organizations' social and ecological performance.30 For most organizations, achievement of ESO status is a distant objective. Few Chapter fifteen: Aiming Low

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Table 4: A Continuum of Social and Ecological Performance2-

fhra