Managing the transition to proactivity.

• Author: Pilko, George
• Position: Meeting the Environmental Challenge

A proactive approach to environmental management requires considerably more judgment and strategic thinking than simply being in compliance with regulations.

CEOs face an ongoing challenge in translating their vision for the company into reality. Delineating a proactive vision is difficult enough, given that environmental, health, and safety (EH&S) issues have traditionally occupied the back burner of simple regulatory compliance. Changing corporate culture to achieve a proactive EH&S stance is many times more difficult.

During the 1980s, U.S. industry made a major shift in its view of quality issues and how these issues should be managed. Before this shift, many companies saw quality as the responsibility of quality inspectors; today, most companies view quality as a primary strategic thrust, the responsibility of line management, and critical for long-term success.

A similar shift is now occurring in how American firms view and manage EH&S issues. Several trends mandate this change:

* Growing public expectations. The American people continue to raise their expectations and often hold industry accountable for going beyond EH&S regulations. The fact that Exxon was in compliance with regulatory requirements in Valdez doesn't matter. The public would like to see risks eliminated, regardless of the cost.

* Increasingly stringent regulations. In the five years from 1990 to 1995, every major piece of federal environmental legislation will be reivewed by Congress and expanded in scope.

* Stricter enforcement. Local, state, and federal agencies are expanding their enforcement efforts, including dramatic increases in the use of major fines. In many cases, criminal penalties are being assessed against corporate officials.

* Toxic tort lawsuits. U.S. courts have made it easier for plaintiffs to recover perceived as well as real damages for environmental trangressions.

* SEC disclosure requirements. The SEC now requires companies to disclose in their financial statements all environmental liabilities-from past operations that will be incurred in the future, if those liabilities are material to the financial condition of the company. Until recently, most companies avoided this kind of reporting.

From 1970 to 1990, the primary EH&S strategy of most U.S. companies was simply to remain in compliance with changing regulations. Most executives now realize that this strategy is necessary, but not sufficient, for the 1990s.

Most CEO and directors today believe in the value of being proactive -- that is, doing what is prudent from an...