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By Pat Rizzuto
March 6 — Information disclosure coupled with public and regulatory pressure play key roles in spurring chemical manufacturers to reduce their releases of hazardous waste, air pollutants and other contaminants, a professor of sustainable science, technology and commerce said at a chemical regulatory conference.
Voluntary government programs and industry self-regulation initiatives have helped but don't appear to have played the central role in the chemical industry's ability to almost de-couple economic growth from harmful environmental consequences, Thomas Lyon, a professor at the University of Michigan's Ross School of Business and its School of Natural Resources and Environment, said March 4.
“You've made really great progress. You should feel very proud of that,” Lyon told chemical manufacturing officials attending GlobalChem, an annual conference organized by the American Chemistry Council and the Society of Chemical Manufacturers & Affiliates (SOCMA).
Lyon showed a chart that compared earnings with environmental costs. Between 2002 and 2010, the chemical industry's earnings (before interest, tax, depreciation and amortization) increased 102 percent, while its environmental costs as a percentage of growth increased only 2.5 percent.
Of 11 industrial sectors, including telecommunications, food production, beverages, electric utilities and mining, only the automotive sector had a smaller environmental impact compared with its earnings growth, according to Lyon's presentation.
“Relative to other industries, chemical manufacturers are making very good progress,” he said.
Lyon analyzed factors—information disclosure and the threat of regulations—that researchers have found pushed chemical manufacturers to reduce their environmental footprint while increasing production.
Lyon also examined voluntary government and industry efforts, which researchers have found to be less effective than hoped.
The disclosure efforts, regulatory threats and voluntary initiatives followed incidents such as the 1980 evacuation of some 1,000 New York residents living near the Love Canal abandoned hazardous waste site and the 1984 leak of poisonous gas in Bhopal, India, where thousands of people died or suffered permanent injuries, Lyon said.
Few of the regulations anticipated to result from the Toxic Substances Control Act have been implemented, but the threat of the regulations was a powerful driver to improve performance as were regulations under other statutes, he said.
“Regulatory threats seem to matter,” Lyon said.
He pointed to the Toxics Release Inventory, a chemical pollutant disclosure program long studied by academic researchers.
Publicly owned companies reporting toxic releases lost an average $4.1 million in stock value the first day the Environmental Protection Agency released TRI data in 1989, Lyon said, referring to a 1995 study by James Hamilton that appeared in the Journal of Environmental Economics and Management.
If the company received media attention for its TRI releases, the average loss was $6 million, Lyon said.
A subsequent study found that companies with the largest stock price decline on the day TRI information became public subsequently reduced emissions more than their industry peers, Lyon said. That study by two Vanderbilt University researchers appeared in the same journal in 1997.
Research indicates that voluntary government pollution reduction efforts and the chemical industry's efforts to cut emissions through its voluntary Responsible Care program have helped, but do not seem to have been the primary motivator for action, Lyon said.
The Responsible Care program has, however, sought to improve its performance by tightening third-party auditing requirements since the release of such findings, he said.
The Responsible Care program also has reduced accidents, he said. Lyon cited a 2012 Journal of Regulatory Economics study by Shanti Gamper-Rabindran and Stephen Finger that found participation in Responsible Care reduced the accident rate per 100 plants by between 69.3 percent and 85.9 percent, depending on the type of accident analyzed.
The historical research is relevant because chemical manufacturers will remain in the spotlight as governments and the public seek sustainable economic growth and as companies face “unrelenting demands for transparency from stakeholders,” Lyon said.
“Regulation remains central,” he said.
The European Union's registration, evaluation and authorization of chemicals (REACH) regulation is spurring proposed changes in the Toxic Substances Control Act, Lyon said.
On March 3, leading industry officials urged passage of an updated TSCA.
REACH is just one of many global regulations demanding increased transparency by chemical manufacturers, speakers said throughout the three-day GlobalChem conference.
The Environmental Protection Agency also is using chemical disclosure through efforts such as its Design for the Environment program, Lyon said.
The EPA announced a new phrase and logo on March 4 that corporate participants in its Design for the Environment program can use to label consumer and institutional products.
Qualifying products must contain chemicals the EPA has found meet specified environmental or human health criteria that make the ingredients less harmful to people or the environment than other chemicals that provide the same solvent, surfactant or other function.
Wendy Cleland-Hamnett, director of the EPA's Office of Pollution Prevention and Toxics (OPPT), described another information disclosure effort when she spoke at GlobalChem March 3.
The agency is working to increase the chemical information available to the public through its ChemView database, she said.
OPPT will soon meet with invited chemical industry officials and staff from environmental health organizations to discuss how the agency can add some additional health and safety information to ChemView without violating any companies' confidential business information, Cleland-Hamnett said.
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