Should companies increase expenditure to meet environmental challenges?
Is it possible to implement various outlined above? In many business, today there stiff competition and declining margins with the result that company’s capacity to respond to environmental challenges would increase the expenditure. The question is that whether companies afford the environmental cost. At macro level or national level it may be possible to implement recommendations in regard to business moving towards strict environmental policies. But it is possible at the level of individual corporation to become competitive while maintaining environmentally sound practices? The U.S giant company, Texaco has been investing huge money for environmental companies and reduction in emission and the total investment exceeds its assets base. Will it not affect the shareholders value? The cost of adopting environmentally sound practices would continue to increase in view of new regulations required too be met by the industry being mandated every now and then. And there seems to be no end to such regulations in near future. Even without new regulations, the present ones are always under revision for stricter standards.
All this means more costs for the company. It seems therefore, that costs for environmentally sound practices may be prohibitive for the companies but this does not mean that the managers should not care for environmental issues and return to old ways, meeting at the most legal requirements to escape penalties. There is certainly a trade off between environment and economic concerns and it is advisable that the managers who have a difficult task should concentrate on this aspect. It is probable that solutions which would lead to long term resource conservation and ecofriendly practices will be ones that are equitable to both the environment and business.
Therefore managers should look for a situation in which business becomes profitable, protecting shareholders interest and value and at the same time maintaining high environmental standard. The trade off is such in which environmental benefit is weighed against the value destruction of company. Focus on value should enable the manager to make choice in respect of environmental issues. A choice can be strategic when a manager finds that impact of environmental investments to come to front line by becoming leaders in a particular business. Instead of only following legal or mandatory requirements, he moves towards innovations, even shows a zeal and missionary approach towards environmental issues. Or he may choose to stay behind and just remain concerned about compliance of legal requirements.
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