This chapter examines Porter and van der Linde's idea that governmentimposed environmental regulations can enhance competitiveness by pushing companies to come up with innovative ways to use resources more productively and potentially develop green FSAs. In this way, environmental regulations can actually benefit the firms being regulated. Porter and van der Linde recommend that senior managers respond to environmental regulations by adopting a resource productivity approach (embedding new environmental initiatives into the production system), rather than a pollution control approach (just dealing in new ways with whatever waste the production system generates). The authors note that raising resource productivity is good for both the firm and the environment. These ideas will be examined and then criticized using the framework presented in Chapter 1.

Significance

In a classic 1995 HBR article, Michael Porter and Claas van der Linde argue that government-imposed environmental regulations can trigger innovative solutions to environmental problems, which may in turn lead to cost efficiencies or value enhancement. These positive effects at the firm or industry level are often sufficiently high to offset any costs associated with these regulations for the companies involved. The authors thus suggest that stringent environmental standards may lead to new FSAs.

If environmental regulations can indeed benefit firms, then senior managers should stop reflexively opposing new environmental regulations or attempting to delay their implementation, as such behaviour benefits mainly lawyers and consultants thriving under an adversarial regulatory regime with a strong litigation orientation, while doing nothing to solve the environmental problems at hand.