The Sophistication of Environmental Management

No.63
November 1999
Research Fellow Takafumi Ikuta

1. Increasing environmental awareness is a global trend, and in order to adapt to the coming environmentally sustainable society, it is crucial that businesses independently test and aim for the sophistication of environmental management. From the perspective of Japanese stakeholders' behavior regarding the promotion of businesses' environmental friendliness, previous trends saw pressure primarily from the government and local residents. However, recent movements in Japan have followed European and American trends, where investors, stockholders, and consumers evaluate a company's environmental friendliness and adjust their investment and purchasing behavior accordingly.
2. Many Japanese businesses are in the midst of concluding the establishment of environmental ethics and environmental management systems and are now attempting to sophisticate their environmental management through trial and error. To this end, it is necessary for businesses to construct a feedback system by introducing, evaluating, and understanding the effectiveness of various environmental management tools, and translating the acquired information back into management. Specifically, "life-cycle management" would be necessary for the manufacturing industry. Externally, it is desirable for businesses to not just create environmental creditworthiness through communication with stakeholders, but also to create new business opportunities by providing environment-conscious products and services.
3. The key to the sophistication of environmental management is the improvement of evaluation methods for environmental performance. While environmental accounting and environmental efficiency targets are being tested, presently such measures are mostly for use by in-house administration, and thus, the improvement of explanatory ability for the sake of stakeholders is also called for. Specifically, improving comparability, understanding life cycle costs, merging notions of economic impact with environmental conservation effects, and other measures will be issues in the future.
4. Concrete effects of the sophistication of environmental management include avoiding environmental risk, rationalizing environmental measures, and improved external trust. Furthermore, in the long-term sophistication will also contribute to the maintenance and improvement of business competitiveness. Businesses must now break away from passive environmental management built on notions of risk-response and business protectionism; businesses' future success lay in taking the initiative in environmental management, and leading stakeholders through environmentally conscious business development in order to work toward the solution of environmental issues.

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