Europe readies environmental standards.

• Author: Doyle, Julian
• Position: Includes related article - Management Strategy

Europe readies environmental standards

Environmental issues are at the top of the political agenda worldwide. Certainly this is true in the EC, which has recognized since 1987 that pursuing environmental objectives is an end in itself, rather than merely a part of the process of economic expansion.

Less recognized is that U.S. firms and their affiliates have substantial advantages in coping with this new environmental order. Consider the following:

* U.S. firms are familiar with a complex and sophisticated system of environmental controls. * U.S. firms know how to work in stages, which regulators like, in order to achieve realistic improvements. * U.S. firms have experience in costing out the effect of environmental requirements in situations where the impact may vary because of the local infrastructure, the enforcement timetable, or the viability of the plants involved. * U.S. firms recognize the need to have an environmental policy, to have a senior executive implementing it, and to keep employees and customers aware of it. * U.S. firms know how to evaluate the environmental record of a potential partner, acquisition, or investment. * U.S. firms have experience in operating under a federal system.

As a result, U.S. executives may be better prepared than they think for the new EC requirements. However, political pressure, combined with a legal obligation to set high environmental standards, are expected to prompt EC proposals that are more and more demanding.

Radical departures are already being made. Only two years ago, the idea of an energy tax was a subject of ridicule. Now, discussions of a "green taxation" have introduced proposals for a mixed carbon and energy tax aimed at stabilizing carbon dioxide emissions at 1990 levels by the year 2000.

However, there are limitations to what the Commission can achieve. A North/South divide exists in terms of the stage of economic development by each member state. This, in turn, produces disparities in economic and social priorities. Moreover, environmental standards differ widely. Countries like Germany, Belgium, and Denmark are pressing for stricter standards, which the poorer member states claim they do not have the resources to achieve.

There is an obvious danger in member states operating at different speeds on environmental matters. There is an additional danger when many of these environmental problems extend across borders. For example, the former West Germany, which works to high environmental standards, will be faced with enormous problems in financing and implementing such standards in its new eastern sector.

The Commission has proposed a two-stage policy to ensure that the environmental goals to be set will be viable for all the member states. Compulsory targets will be set initially. Once members have reached this...