Corporations can profit from being environmentally friendly

July 15, 2008

Though many policymakers have argued that environmental regulations can negatively impact an organization's bottom line, a new study by George Mason University researcher Nicole Darnall shows that companies that develop green production processes can not only offset the costs of regulations, but can also reap further benefits.

The study, which looked at more than 2,600 manufacturing facilities operating in seven different countries, showed that more stringent environmental policies are related to diminished company profits. However, organizations that improve their environmental performance by enhancing their internal efficiencies and developing new green products and technologies can offset the cost of regulation or even accrue a net gain.

"The primary reason why the United States and many other countries do not have national climate change policy and do not implement more stringent environmental legislation is due to the costs the regulations would impose on firms," says Darnall, assistant professor of environmental science and policy. "The results of this study are important because realizing that these costs can be offset—or eliminated entirely—is further evidence that policymakers could support the advancement of more ambitious environmental policy goals without putting undue financial burdens on corporations."

The study showed that businesses can profit in two important ways. First, by improving their internal production processes to reduce waste, companies are more likely to enhance profits. "Many companies paint their products with solvent-based paints. By switching to water-based paints these businesses can eliminate toxic wastes in their production process and the need to meet certain environmental regulations. They also can speed up the time it takes to get their product to market and avoid long term liabilities associated with toxic waste disposal," Darnall says.

The second way companies can profit from going green is by developing innovative green products and technologies and entering new markets. Businesses that do so are poised to take advantage of increased market demand for green products and make less environmentally friendly technologies obsolete.

According to recent research, 15 percent of consumers routinely pay more for green products, and another 15 percent seek green products if they do not cost more. "There are people who pay premium prices for these kinds of products," says Darnall.

Corporate buyers also are demonstrating a growing demand for purchasing green products. "Companies don't want to inherit waste from their suppliers. As a result, many companies are using green production as a condition of purchasing a supplier's products."

The study is the first to look broadly at international companies. Understanding these relationships globally is particularly important since more companies now operate internationally and must adhere to multiple regulations.

"Many policymakers believe environmental regulations are a win-lose proposition—society benefits from a cleaner environment, but businesses are at an economic disadvantage," says Darnall. "This research shows it can be a win-win. Companies that develop greener production practices benefit society, and can also green their bottom line."

Source: George Mason University

Explore further: Mafia and multinationals milk Italy's green energy boom

Related Stories

Mafia and multinationals milk Italy's green energy boom

July 26, 2015

Thousands of solar panels glint in the sun, but the prized farmland beneath lies barren. While the Italian island of Sardinia revels in a renewable energy boom, the long arm of organised crime risks sullying its clean power ...

Plastic, sustainable and quick: Road idea seeks takeoff

July 20, 2015

The word "plastic" has a general—and rather unpopular—connotation of everything that is not green and not sustainable. (Plastics supporters point out that only 4 percent of the world's oil production is used for plastics ...

Hydrogen bus trial shows promise

July 24, 2015

Heavy transport that emits heat and water instead of diesel exhaust is within WA's reach, a Murdoch University researcher says.

Going green: Microalgae as a feedstuff for grower steers

July 21, 2015

Algae are organisms so environmentally adaptable that they flourish in wastelands, sewage and saline bodies of water. They can grow in high densities, in the dark and in the presence of high concentrations of nitrogen and ...

Help for Indian small farmers in a changing climate

July 13, 2015

Between January and March this year, 257 farmers committed suicides just in the state of Maharashtra, India, according to an article published on June 27. These farmers, taking the brunt of an untimely rain and hailstorms, ...

Recommended for you

Global index proposed to avoid delays on climate policies

August 4, 2015

Professor David Frame, Director of Victoria's Climate Change Research Institute (CCRI), has co-authored a paper published today in the high profile international scientific journal Nature Climate Change. The paper argues ...

Study calculates the speed of ice formation

August 3, 2015

Researchers at Princeton University have for the first time directly calculated the rate at which water crystallizes into ice in a realistic computer model of water molecules. The simulations, which were carried out on supercomputers, ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.