February 26, 2007

Governments' rush to regulate could harm industry competitiveness

By: Colin Isaacs

With a federal election likely and two more provincial elections certain this year, a new provincial government trying to establish its reputation with restless voters in Alberta, and enhanced powers for the city of Toronto and to some extent for all Ontario municipalities, the

months ahead present some significant risks for industry in the area of environmental regulations.

When environment is riding high in the opinion polls, governments are inclined to quickly introduce regulations to show that they are tough on the environment. Unfortunately, such regulations are often poorly drafted and based on a faulty understanding of the relationship between business and the environment.

In addition to climate change (addressed in this column in the December 4-11, 2006 issue of Ecoweek), issues such as air pollution, surface and ground water pollution, waste management and toxic substances are very much part of the immediate public policy agenda. To control risks and potentially significant compliance costs, both industry collectively and companies individually need to implement much more proactive strategies than most have done in the past.

Quick action is needed on two fronts: external and internal. Government relations activities need to be reinforced federally and in key provinces and cities. Budgets for adequate policy research and consultation have declined, in some cases virtually to zero.

As a result, governments may not properly assess the economic impact on industry of new environmental policies and regulations. Unless industry lobbyists are constantly hammering on government doors, the political goal of winning re-election is likely to trump informed consideration of harm to Canada's industry and economy.

At the same time, if industry adopts a confrontational approach to political imperatives and public will, it is setting itself up to be the big loser. The momentum is clearly with those who are advocating significant improvement in Canada's environmental performance. Industry should seek to participate positively in that movement, bringing forward a range of environmental programs and policy options that will have a positive impact on Canada's international competitiveness.

Individual companies need to undertake an assessment of where they are at risk. To begin with, heating plants could be regulated under new air pollution controls, water consumption may be limited in drought-threatened areas, and wastewater discharges--whether to receiving bodies or to municipal sewers--may be more stringently regulated. In addition, all types of packaging are under consideration for mandatory reduction and building codes are being beefed up.

To complicate matters even further, the federal government, claiming that it is getting tough on toxic substances, may yet introduce some poorly thought out rules for the purpose of political grandstanding.

By far the best approach for an individual company is to position itself sufficiently far ahead of any likely regulations that whatever any government does has little or no impact on the company's competitive position. Achieving such positioning is often easier than it might initially seem to be.

Colin Isaacs, head of the CIAL Group and publisher of the Gallon Environmental Letter, reviews environment-related trends in policy (government and corporate) and legislation for EcoWeek. Comments may be E-mailed to cisaacs@compuserve.com.

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