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Over the last three decades the environment has increasingly found its way onto the agenda. Individuals all over the world are more conscious of environmental issues, nations are more concerned about the sustainability of their economic activities and the international community has defined an agenda following the United Nations Conference on Environment and Development. Agenda 21, the programme which emerged from that conference, is an attempt to direct the energies of national and international agencies towards environmentally sustainable development. South Africa has, in some respects, entered the environmental age rather late. The struggle against apartheid so consumed the national consciousness in the 1970s and 1980s that environmental issues seemed secondary. In the 1990s, however, there has been a growing understanding in South Africa that environment is a key aspect of economic and social development, and there has been a rising consciousness of environmental issues. Enviromental organisations are growing, enviromental education is improving and environmental policy is becoming more coherent. However, environmental concerns are not well-integrated with all facets of life, and environmental policy is underdeveloped in many critical ways. In this book we have looked at various aspects of industrial development and at ways in which environmental issues can be more successfully addressed in the industrial sphere. In this conclusion we reflect on the main lessons of the research presented in the various chapters and on the gaps that have been left by this work. Chapter 4 of Agenda 21 focuses on changing unsustainable patterns of production and consumption. It states that:
South Africa’s self-adopted title of the “Rainbow Nation” indicates its unity in diversity. Unfortunately, this notion embraces not only the positive aspects of political and cultural pluralism but also the negative aspects of enormous economic inequality. South Africa is a world in one country in many respects, and the idea of excessive demands among rich segments of the world alongside the inability to achieve basic needs among the poorer segments is strongly represented within the borders of the country. In even the smallest towns one finds the level of disparity, which Agenda 21 points to on a global scale. In the light of these disparities, Chapter 4 of Agenda 21 argues that the fundamentals of consumption and production patterns underlying the functioning of economic systems need to be reviewed and questioned in the search for sustainable development pathways. Agenda 21’s conclusion is that achieving the goals of sustainable development may require “reorientation of existing production and consumption patterns that have developed in industrial societies and are in turn emulated in much of the world”. This book has begun to consider these questions in the context of South African industrial strategy. As a first toe in the water of environmentally sustainable industrial policy it is not a comprehensive review, nor does it purport to have developed all-embracing solutions. Hopefully, however, it does begin to address the exhortation from the same chapter of Agenda 21, that research institutions should “assess the relationship between production and consumption, environment, technological adaptation and innovation, economic growth and development, and demographic factors and… consider how economies can grow and prosper while reducing the use of energy and materials and the production of harmful materials”. The chapters in this volume have primarily looked at the production side of this equation. Admittedly, this means that there has been almost no consideration of consumption issues. This is certainly a gap: consumer demand drives production, and aspirations of certain material lifestyles and levels of resource consumption are seldom questioned. Particularly in South Africa, burgeoning consumer expectations following the end of apartheid are seldom questioned. Yet, these issues need to be critically examined and openly debated. The consumption side of the equation, including demographic questions, should be taken further. A production-centered approachDespite this and other gaps, the chapters in this book do provide a new look at the real questions of sustainable development, and the environmental management needed to get there. The industry-based approach lays the groundwork for examining where and how existing production patterns should be reorientated, and it does this in a way that is compatible with existing studies on production and industrial strategy more broadly. Whereas other studies look directly at the environment—and the various media such as air, soil and water—our starting point has been industrial policy. In this way we have begun to integrate environmental questions with industrial debates, rather than vice versa. How, if at all, do the chapters in this volume provide a new look at sustainable production? The focus in this volume is not solely on assessing environmental damage, discussing new technological approaches or recommending new pollution control regulations; rather, the focus is on the question of how industry and its associated institutions need to change to meet sustainable development challenges. The main attempt of the authors has been to consider the incorporation of environmental management into industrial strategy, rather than to consider how environmental management strategy can incorporate the industrial sector. This means that the focus of attention is largely on industry itself and the changes required there, and not on the broader requirements of environmental management. It has also meant a fairly international approach: two chapters focus explicitly on international trade and external environmental pressures. These chapters present clear indications that the attention of environmental management in industrialised countries is turning to production and consumption issues, and they analyse how these will affect South African industry. There are many overlaps between a focus on industry and a focus on environmental management processes themselves, and the authors in this volume have not artificially confined themselves to only the former realm. Despite this, in its overall approach, the slant has been towards an examination of industrial production and industrial strategy, and this slant has provided some insights into new approaches that can be used to bring South Africa’s industrial sector closer to a pathway of environmentally sustainable development. As indicated, this volume does not hope to be comprehensive. The field—that of both the country’s economic and natural resource base—is too vast to contemplate that. This means that key areas have been neglected. A number of important new concepts in, and their impacts on, industrial environmental management have not been addressed. These include ideas such as “design for the environment” and “industrial ecology”. Further, certain economic sectors of vital significance to industrial behaviour have been ignored, an important one being the financial and insurance sector, which should receive greater attention. Characterising the failuresThe research in the book leans towards broad examinations of key areas which determine the sustainability or otherwise of the industrial sector. To learn as much from these initial studies as possible—given the fact that they examine only the tip of the iceberg—it is necessary to generalise to a degree. The research has pointed out common problems or blockages to improving the environmental performance of South African industry. We discuss these characteristic failures below. We then go on to make recommendations in various areas. These attempt to bring notions of sustainable development within the ambit of industrial strategy in general, and within the context of a strategic state in particular. The failure to recognise and internalise externalitiesThe first broad failure is the inability of the South African economy to place the full value, including the social and environmental value, on industrial inputs and outputs. A key element in making the industrial sector sustainable is ensuring that environmental externalities are internalised within the cost functions of companies. This would be done through the application of the polluter-pays principle and through the environmentally “correct” pricing of the country’s—and hence the economy’s—natural capital. Although a range of instruments of industrial strategy and public policy can influence industry, the bottom line is that industry responds best to its economic context and, thus, the full cost of inputs and outputs should be reflected in their price. Two key inputs in this regard are energy and water; on the output side a range of polluting activities need to be explicitly valued and charged for. As Van Horen shows, with reference to the external costs of electricity generation, the current cost estimation of this ubiquitous input excludes certain externalities. The external costs of air pollution alone are estimated to be in the region of 14% of electricity prices. Users of electricity, justifiably basing their use primarily on a cost basis, are thus basing their decisions on an artificially low price structure—artificial, because the health and environmental impacts of electricity generation are not included in the cost of their product. This makes a sustainable level of use of electricity highly unlikely in the industrial economy. A similar situation pertains to pollution, with a number of examples revealing that the sink (waste-receiving) functions of the environment are also undervalued. The failure to incorporate externalities is not only due to inadequate environmental and economic policies, but also to regulatory failures. For example, in the small, medium-and micro-sized business sector many companies are not aware of effluent charges, or the environmental reasons for them, and are not adequately informed about them or made to comply by local authorities. Therefore, even though there is an instrument which goes some way towards meeting the polluter-pays principle—that is, effluent charges—it is not enforced and has little effect in certain sectors of industry. Staying within the SMME sector, Coleman provides a striking example of the potential use, and failure, of an economic instrument. She shows how the R8,50 (about US$2) refundable deposit on car batteries has worked to increase the level of battery recycling, and also shows how easily it can fail to work when the deposit system breaks down. This is a useful example of the value of economic instruments but it is also a cautionary tale. It points to the fact that economic instruments, such as those designed to address the polluter-pays principle, are only as effective as the integrity of the system set up to manage and enforce them. Often touted as administratively “easy” instruments to use, this example demonstrates that they, too, need solid administrative and regulatory supervision to be effective. A further dimension is raised by the International Federation of Chemical, Energy and General Workers’ Unions. As Coleman points out, the federation’s analysis shows that a consequence of the underpricing of natural resources and of industrial pollution is a skewing of the relative costs of labour. Proper resource pricing would make it apparent that labour costs are comparatively less expensive when all externalities are taken into account. In the context of an industrial strategy and a macroeconomic policy that are both geared towards employment generation this is an important consideration. A policy that promotes more labour-intensive production, by the use of sound environmental and financial principles, should be seen as a first-best strategy choice. However, this will not be easy to achieve. As Van Horen’s study shows, getting to the “true” value of environmental externalities is not easy. We need better approaches to the assessment of external costs for energy in particular but other natural resources as well, especially scarce water resources. We also need a better understanding of the implications of the polluter-pays principle and other means of internalising externalities, and a deeper consideration of managing public sector responsibilities and instruments in this regard. The use of the market in this process is also unclear: what are the points of market failure and how can they be addressed with as little disruption as possible? As Gibson and Van Seventer show in their modelling study, we must also be well-aware of the economic consequences of such strategies. They demonstrate that it is macroeconomically desirable to avoid green trade restrictions which are externally imposed by internalising environmental externalities. Taken together with Van Horen’s study, the implication is that the South African economy has significant external costs. The choice is whether, and how, to make these costs apparent to the industrial economy and consumers. Inadequate government regulationThe studies in this volume are littered with examples of breakdowns in the regulatory system. As Lazarus discuss, South Africa is not short of environmental law as much as it is short of effectively wielded environmental law. The waste situation is a particularly good example, with insufficient personnel to carry out the enforcement of waste legislation and very minor penalties for conviction of an offence under the Environment Conservation Act, the most pertinent legislation. The situation is clearly in need of dramatic improvement. Despite the evidence in Goldblatt’s chapter of the uncontrolled production and disposal of hazardous waste, Lazarus point out that there have been no convictions yet under the Environment Conservation Act. Coleman shows that this ineffectual enforcement extends down to the smallest level of business, with clear evidence of illegal dumping of small businesses’ hazardous waste by private contractors with a “no questions asked policy” on the destination of the waste, while Butler’s case study on the Thor Chemicals debacle is a demonstration that things can go wrong at a much larger level—with tragic and long-lasting consequences. The Thor study shows the gaps, confusion and inadequacies of current legislation, enforcement and prosecution better than any theoretical study. The responsible authorities were simply not able to effectively protect workers, the public and the environment from damage and they were not able to effectively prosecute after the fact. As discussed below, we need to seek innovative and cost-effective ways to improve this regulatory system, including economic instruments; government, industry, labour and community voluntary agreements; managed self-regulation and voluntary reductions; and better information provision. We also simply need larger, better-trained and better-resourced enforcement authorities with the political will to administer the law effectively. Alongside this is a need for the integration of environmental considerations with planning and industrial location decisions, discussed by Lazarus. We also need a policy and legislative environment conducive to certainty and to consistent enforcement. On a similar note, we argue that the various arms of government are missing the opportunity to seize environmental opportunities. There is extensive scope within general institutional and policy restructuring underway at present to incorporate environmentally beneficial elements. One example of this is that government’s increased support for the SMME sector could include environmental management support for SMMEs and assistance with finding environmental business opportunities at the small end of the industrial sector. SMMEs are a good example of the need to integrate environmental considerations into broader industrial strategy and policy. It is unlikely that environmental support can be maintained separately from other support services to industry on this scale, and, thus, it should be included in the general support being offered to SMMEs. Similarly, the development of new housing could be incorporating best-possible environmental features in order to avoid future costs. Insufficient pressure from civil societyThe studies seem to indicate that unions and civil society are not sufficiently active or powerful to shore up weak government regulation. The Thor case is both a demonstration of the initially weak position of workers and unions in the absence of adequate information, and of the dramatic results that can be achieved when sufficient union and civil society pressure is applied. It also demonstrates the potential of alliance politics based on shared environmental concerns. Furthermore, local consumer pressure was hardly raised as an issue in any of the chapters. This is probably indicative of an environmentally unaware or unconcerned public exerting a weak influence on industrial processes. However, local consumer pressure was not an issue explicitly looked at by any of the authors and may be underestimated or still developing. The experience of developed countries shows that direct pressure from end-consumers is a potent force driving industrial environmental improvements—whether and how it will arise locally is still unclear. Bethlehem’s research does point to the importance of international consumer pressures being transmitted to local companies via market forces and indirectly via environmental regulations in South Africa’s trading partners. From a different angle, a number of chapters (such as Bethlehem, Butler and Lazarus have shown that many South African companies lack a serious environmental agenda. Environmental activities tend to be rearguard efforts, in response to prodding by the state, environmental groups or the international market. Very few South African companies place environmental performance at the centre of their strategic agenda, or innovate effectively in this regard. Too often environmental responsibilities are located in companies’ risk assessment offices or in their marketing departments. This is in sharp contrast to international efforts which tend to place environmental responsibilities more centrally in each of the companies’ activities, especially in production. A recent article illustrates this contrast. The article (The Star, 24 October 1996) reviewed efforts by auto producers internationally to introduce environmental innovations, including reductions in fuel consumption, use of recycled and lighter materials and the search for alternative energy sources. Some South African companies interviewed for the article claimed to also be concerned with the environment. As their contribution they cited the fact that they generate large quantities of recyclable materials, such as computer paper and plastic, in the course of running the business. A moment’s consideration of this statement reveals that the company is claiming credit not for reducing resource consumption or introducing innovations, but merely for using resources which are recyclable. We are not even told whether the company in fact recycles its computer paper! But more to the point, the company is trying to utter a magic word—”recycling”—rather than pursue a serious environmental agenda. This kind of claim is shallow and relies on a poorly informed public. Ways need to be found to encourage South African companies to place environmental issues squarely on their production agendas, to invest appropriately and to develop the ability to innovate in this sphere. Various kinds of pressures and incentives can contribute to the process, including more active government involvement and growing pressures from local and international stakeholders. A greater supply of technically skilled environmental managers will also be needed. Inadequate informationA final broad failure of environmental management concerns the provision of adequate information to all the actors involved. As discussed already, information on the environmental costs of production, in the form of price signals, are largely missing from the economy. Explicit information is similarly absent. Goldblatt shows the dire situation in the waste sector where there is inadequate knowledge of the types, quantities and environmental pathways of pollutants released into the environment. There is also inadequate legal access for private citizens to the information that does exist, and inadequate compulsion on companies to collect and divulge improved data. The right to know and the transparency of information are central tenets of a democracy and are particularly relevant to environmental matters where the issues at stake often have social implications. Those potentially affected by environmental externalities should have the right to know and to be informed about them. In particular, those most directly affected should have absolute rights to knowledge about possible environmental hazards. Workers, at the frontline of the hazards of production (as shown by Butler and Magane, are one such grouping who should have the right not only to know but to be informed. Underlying many of the chapters is a sense of an inadequate information base on which to found decisions and devise industrial environmental strategies. This is an area that needs serious attention to ensure that satisfactory knowledge underpins environmental decisions and guides the setting of environmental priorities. Van Horen’s research is a good example of the difficulties created by a paucity of environmental information. A number of the impacts of electricity generation could not be quantified and valued because of insufficient data. These included significant issues such as air and water pollution from coalmining, the acidification effects of coalburning and the water quality impacts of electricity generation. Good decisions depend on good information—unfortunately, the collection of policy-relevant information has not been well-integrated with the environmental management system at either a firm or a government level. Policy directions and recommendationsThe various chapters of this book make recommendations for environmental policy and management. Here, we take another look at the major recommendations that are made and go on to a discussion of the more overall policy directions that arise from the research.
The chapters themselves provide more detail on the recommendations in each area. Taken together, however, these chapters also suggest a larger agenda to ensure that more comprehensive and determined action is taken in industrial environmental management. Some of the chapters have suggested that there are too few pressures and incentives for all sections of industry to improve their environmental performance. But how does government go about ensuring that industry is managed in a more environmentally responsible manner and that improvements are made on a continuous basis? Do we promote more government controls, or should we favour self-regulation? Are there alternatives to these two approaches? The history of Thor Chemicals suggests that even when government is actively involved in a particular case, its intervention will not necessarily be effective, especially where there is a high degree of discretion or where officials are not sufficiently trained. And then there are many more cases, which are less high-profile than Thor and about which the authorities have little or no information. The ability of the state to regulate the environmental impacts of all economic activity is obviously limited, and is especially limited in the South African context where the state is constrained in its access to material and human resources. But what does this suggest? Do we pursue a self-regulation approach which puts much of the onus on industry to monitor its own performance? Can such an approach ensure that the public and the environment are adequately protected? To what extent can the players also be the referees? And, yet, industry’s participation in the implementation of national policy is imperative. More than that, improvements in environmental management will be severely hampered if industry does not actively take the initiative. Industry has a number of key resources at its disposal, including information about the outcomes of its processes (or, at least, the potential to collect such information), skilled personnel (or the ability to attract them) and the in-depth knowledge of their own process of production that can lead to innovation. The question is: how can industry’s resources and skills be mobilised for better environmental management? The approach that we adopt is one which sees legal and administrative regulation as a critical but limited tool, and which promotes a process of partnership between the public and private sectors. In this approach, regulation is seen as critical to establishing the parameters in which industry operates but as unlikely to promote the kinds of innovation and continuous learning that will result in long-term environmental improvements. How would such a partnership approach be effected? We see a key tool being a series of sector-based agreements between industry and government on environmental goals in a particular sector. This is not a new idea, but rather one which is borrowed from experiences in a number of other countries, notably the USA and the Netherlands. We argue, however, that it is a mechanism which is particularly well-suited to South African conditions. The second and third suggestions are aimed at improving the capacity of the state to intervene creatively in environmental policy by integrating the various arms of government more effectively. These proposals are discussed below. Macro-level recommendations
Once the targets have been agreed, government plays a coordinating and monitoring role to ensure that the agreed targets are met. Government can also offer to publicise successes and may offer other incentives such as preferential finance for investment in appropriate technologies. As the particular targets are met, government and industry representatives are able to identify further issues to be tackled or further programmes of cooperation. Government may also be asked to improve aspects of its performance such as the quality of its inspectors. In the South African context, it may be important to involve other stakeholders in identifying the problems that are to be addressed. Organised labour, community and environmental groups would often have strong interests in the way in which problems are identified and prioritised. Indeed, workers and communities are often aware of problems that management is not. However, it would be important to manage this process in a way that avoided creating an overwhelming list of demands by which industry feels besieged. If voluntary agreements are to work they must be focused enough to succeed in a relatively short period. It is in no one’s interests to create overambitious targets or long shopping lists that ultimately cannot be achieved. We believe that a series of voluntary environmental agreements (which include specific objectives and targets) would be useful in South Africa. The advantage of this type of partnership approach is that it supplements regulation but requires few government resources. The strategy also builds on strengths that South Africa already has, including strong tripartite traditions and experience in developing industry plans. Indeed, the Department of Trade and Industry is increasingly pursuing a sector-based approach to policy, as is seen in its current series of cluster studies. Sector-based environmental agreements would take that approach further. It is unclear exactly who should coordinate such efforts, but the departments of Environmental Affairs and Tourism, Trade and Industry and Water Affairs and Forestry would certainly have to be central. Indeed, a joint project could be developed between all three departments. On the private sector side, there is already an institution which represents industrial environmental managers in the form of the Industrial Environmental Forum, and there are also numerous sector-based employer bodies which could act as effective partners for such a programme. In order for such agreements to work, however, government would have to have a clear idea of which problems it would like to address in a particular sector, so that it can negotiate effectively with industry. In developing such positions, government could draw on its own inspectors and officials in the various departments, and could gather the views of trade unions and environmental groups. Specific research could also be commissioned. Government would also need a champion to drive the process and dedicated government officials to coordinate and drive the process. It is also possible that these agreements could be initiated at the provincial level.
Conclusion: Towards a focus on industry and the environmentThis volume has addressed a number of key areas in the industry and environment debate. However, this work only goes a short way towards answering the complex questions that are involved in promoting an environmentally sustainable industrial sector. We hope that this book will, however, promote a specific policy focus on industry’s environmental impact as distinct from other aspects of environmental policy. A focus on industry and environment could help to encourage further research, more active policy formulation and more determined approaches to the management of industry’s environmental impact. |
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