More and Stricter Regulations
Moving beyond compliance can be a source of competitive advantage

Governments

Without regulations, pollution and waste of resources would undoubtedly be worse than they are today. Because a clean environment is typically not valued in monetary terms, rules are required to protect it. Governments at various levels (global, EU, national, local) issue rules and legislation that limit pollution and promote environmental sustainability, in four different ways:

  • Eliminate – e.g. through a ban on the use of toxic chemicals
  • Discourage – e.g. by putting a cost on carbon emissions through the Emissions Trading Scheme
  • Encourage – e.g. through subsidies for renewable energy and tax breaks for cleaner cars
  • Require – e.g. by introducing minimum standards for energy efficiency of consumer products

Policy development can be somewhat erratic due to changes in the political landscape, but the general trend is towards both more and stricter environmental regulations. This development is a source of both risks and opportunities for companies. On the one hand, regulations can render a company’s product obsolete (fluorescent light bulbs), but on the other hand, rules can also create new markets and boost demand for more sustainable products (hybrid cars, solar panels).

To take advantage of environmental regulations, and avoid potential downside risks, companies need to:

  • Ensure compliance with existing regulations
  • Predict possible changes and upcoming regulations, and anticipate by proactively improving the environmental performance
  • Engage with policy makers to ensure a level playing field, or urge for stricter regulations to raise the cost of doing business for competitors and achieve a competitive advantage