United States
Environmental Protection
Agency


Office of Policy,
Economics, and
Innovation (1801)
EPA100-R-00-019
March 2000
Innovations  in Environmental
Management


 Helping Companies Cut Costs and

  ) Printed on paper that contains at least 20 percent postconsumer fiber.


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»  Rewards for Environmental Excellence





    Help On Compliance





•  Reductions in Paperwork





9  Flexibility for Better Results





    Partnering for Improvement

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                                                                 Innovations in Environmental Management
Innovations  in  Environmental  Management
Helping Companies Cut Costs  and  Improve Performance
                    Innovation—a new idea, method, or device. The will to innovate is strong within
                    the private sector. It sparks creative thinking, influences management decisions,
                    and ultimately leads to improvements that can boost efficiency and the quality of
                    goods and services. But with responsibilities for protecting public health and the
                    environment, innovation is important for the way the U.S. Environmental
                    Protection Agency (EPA) does business, too.
                    I n recent years, EPA has pursued
promising innovations to strengthen protection capabilities.
We've looked at traditional environmental programs and asked:
How can they be improved? Can we get more protection more
efficiently? As a result, major programs, like Superfund, are
being reformed, and innovative approaches, like market-based
trading, are creating more flexible, cost-effective alternatives for
achieving environmental goals.

By focusing on results, we're finding new approaches for prob-
lems and improving upon the programs and policies that have
brought the country so much environmental progress over the
past 30 years. As we look to improve, we're also constantly
reminded that change takes time. EPA is an agency involved in
complex issues  and our decisions and actions often have signifi-
cant implications for many diverse interests. So changes—and
results—may not always come as fast as we'd like. But as this
report shows, we can work through problems, improve upon the
current system, and lay the groundwork for continued progress.

EPA is committed to creating a stronger, more cost-effective
system of environmental protection for the 21st century, and
we believe the ingenuity and creativity of the private sector can
help us do so. But first we know we have to do a better job of
explaining the changes taking place so companies begin to
understand the improvements that have been made and how
they can take advantage of them. We  also want them to know
that the door for new ideas is wide open at EPA. The following
report was developed with that goal in mind. It provides an
overview of how we're working to make environmental pro-
grams work better and cost less. We hope it will lead to more
collaboration and more new ideas that are good for business,
good for the environment, and good for the citizens that live
and work in communities throughout the country.

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   Innovations in Environmental Management

Rewards
                 for Environmental Excellence


                                              hile environmental managers
                              have spent much of the past 30 years focused on compliance,
                              many now find themselves focused on a broader set of perform-
                              ance goals. They're interested in cutting waste, conserving mate-
                              rials, and improving efficiency—results that add business value,
                              improve competitiveness, and help protect the environment.

                              EPA recognizes this trend and we're supporting it through vol-
                              untary programs that give companies tools, information and
                              other resources to run their operations more efficiently. We're
                              promoting use of environmental management systems (EMSs)
                              that enable companies to track and manage their responsibili-
                              ties more systematically. We're also looking at ways to reward
                              environmental performance. That's something the current sys-
                              tem rarely does now. Companies are expected to comply with
                              regulations, and they're subject to enforcement action if they
                              don't. But they're generally offered little or nothing if they

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                                                                             Innovations in Environmental Management
decide to do more. We see this as a missed opportunity for
encouraging companies to improve.

To provide this encouragement and help spur more innovation,
we're developing a new "Performance Track" that will distin-
guish between different levels of performance in a way that isn't
done now. The goal is to reward and recognize top environmen-
tal performers and provide meaningful incentives that can moti-
vate others to improve. As currently envisioned, we will offer a
standard package of incentives, including public recognition, for
facilities that meet certain criteria. These criteria are likely to
include having a record of compliance, an EMS, measures for
demonstrating environmental performance, and a system for
reporting performance to the public. EPA would offer these
incentives for a certain period of time, and in order to continue
receiving them, facilities would have to periodically reaffirm that
they are still meeting the program's performance criteria.
Once this track is up and running, we will develop additional
incentives for the facilities that not only meet the above crite-
ria, but that routinely do much more. This second track will
reward significant environmental achievement among the very
top performers. Because the group will be smaller, EPA antici-
pates being able to offer a higher level of public recognition,
and tailored incentives that address their individual needs in a
more specific and meaningful way.

EPA sees this program as a major step toward creating a more
performance-based system for driving continuous environmen-
tal improvement. We will announce the features of the first
track in  spring 2000, and following public comment and con-
sultation, expect a summer 2000 launch. We will begin work-
ing with others to design the second track—for the very top
performers—immediately afterwards.
What It Takes  To Be a Leader
Leadership can mean  many different things to different people. As EPA develops the
"Performance Track," we have to decide what actions merit distinction  and what ben-
efits participants should receive as a result.  We'll draw upon what's been learned
from pilot projects, such as the Environmental Leadership Program. This 1-year pilot
project was launched in 1995 to investigate  the qualities associated with environ-
mental  leadership.  Participants were required to have a strong compliance history and a state-of-the-art EMS and to con-
duct environmental audits. Additionally, they were expected to involve their employees in environmental management, to
share their environmental expertise with others, and to provide  information about their performance to the community and
general public. In return, the companies gained recognition from EPA that could be used in their marketing efforts. They
were exempted from routine regulatory inspections, and they received a grace period to correct violations that didn't
involve  criminal action or endanger public health or the environment. The 12 companies participating also gained some
intangible benefits. Ocean State  Power, for example, expressed appreciation for the recognition provided by the pro-
gram, noting they "gained increased public confidence in our community and  in our region" as a result.

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4      Innovations in Environmental Management


                                                       On  Compliance



                                                                                       hile compliance is a given for
                                                          leading companies, it's still a major focus for the majority. So,
                                                          we're looking for ways to help companies achieve compliance
                                                          and stay there. One way we're doing this is through an audit pol-
                                                          icy that encourages companies to conduct their own environ-
                                                          mental evaluations. The idea is to have companies find and fix
                                                          problems on their own, rather than at the direction of a regula-
                                                          tor.  If they do, we'll waive or reduce the potential enforcement
                                                          penalty as long as the company was not involved in criminal
                                                          behavior.  During the past 4 years, 675 companies have come
                                                          forward to disclose potential violations at more than 2,700 facili-
                                                          ties. Many have already had penalties waived or reduced.

                                                          This approach gives companies a chance to come into  compli-
                                                          ance without the stigma of an enforcement action and many of
                                                          the  associated costs. The National Association of
                                                          Manufacturers and  the Corporate Environmental  Enforcement
This policy applies to fines that would be assessed for failure to comply. It doesn't include the portion that is levied to recoup any competitive advantage
a company might have gained while noncompliant.

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                                                                              Innovations in Environmental Management
Self-Policing Pays Off

Companies that take advantage of EPA's audit policy may find it pays off in a big way.
That's been the case in the telecommunications industry. In 1997, GTE used this
policy to resolve spill prevention and right-to-know violations at 314 facilities in 21
states. They paid a $52,000 penalty, the amount they saved while noncompliant. But in light of their outstanding coopera-
tion in resolving this matter, EPA waived nearly $2.4 million in potential penalties. Last year, 17 more telecommunications
companies followed their lead. Together, they found and promptly corrected more than 2,000 violations at more than 600
sites. They were fined approximately $178,000 (the economic benefit they gained while noncompliant), but may  see
waivers totaling more than $6 million.
Counsel have praised the audit policy, and four out of five
companies responding to a survey said they would use it again.

Specialized compliance assistance centers are another way we're
helping environmental managers meet their compliance respon-
sibilities. EPA has developed partnerships with industry, envi-
ronmental groups, universities and other government agencies
to establish these new information resources for specific indus-
tries. The centers provide quick, easy access to a variety of envi-
ronmental information, including federal regulations,
compliance tools, training opportunities, and pollution preven-
tion case studies. They're Internet-based, so information is avail-
able 24 hours a day. Several also offer toll-free hotline and
                                  fax-on-demand services.
                                            on t
                                  m& PaSe shows, they're
                                  now accessible to envi-
                                  ronmental managers in
                                  several major business
                                  sectors as well as local
                                  governments.
Many organizations routinely interact with businesses on envi-
ronmental and other management issues, providing loans, issu-
ing business permits and providing other services. Given a
choice, we know most companies would prefer to interact with
more familiar organizations than with regulatory officials. So
we're focusing on becoming a more effective "wholesaler" of
compliance assistance information. This means providing infor-
mation for these other organizations to actually deliver. As part
of this strategy, we're also focusing on developing more regula-
tory checklists and other tools that can help environmental
managers understand requirements well before they take effect.
These are simple ideas, but they could go a long way in making
compliance easier to manage.

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      Innovations in Environmental Management
Compliance Assistance Centers: Now Open  on  the Web
The following centers can be accessed through EPA's web site at http://www.assistancecenters.net
Or they can be accessed directly at the addresses noted below.
CCAR-Greenlink® (for Auto Service & Repair): www.ccar-greenlink.org
National Agriculture Compliance Assistance Center: www.epa.gov/oeca/ag
ChemAlliance (for Chemical Manufacturers): www.chemalliance.org
National Metal Finishing Resource Center: www.nmfrc.org
Printers' National Environmental Assistance Center: www.pneac.org
Printed Wiring Board Resource Center: www.pwbrc.org
Paints and Coatings Resource Center: www.paintcenter.org
Transportation Environmental Resource Center: www.transource.org
Local Government Environmental Assistance Network: www.lgean.org

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             Innovations in Environmental Management     7
    ons


               in  Paperwork








                       hile providing assistance is an
important part of assuring compliance, reducing unnecessary
regulatory paperwork and red tape is important, too. The sheer
volume and complexity of requirements can be overwhelming
and a major obstacle to improving environmental performance.
So in 1995 we did something we'd never done before—we con-
ducted a line-by-line review of all our regulations.

That job wasn't simple, but it was overdue. In our efforts to keep
up with the stream of legislation passed by Congress during the
past three decades, we had never paused to review existing regula-
tions. Once we did, we found provisions that were redundant or
no longer necessary. As a result, the environmental section in the
Code of Federal Regulations was cut by 1,500 pages. But we think
it had another important effect: creating a greater awareness
among EPA managers and staff about the need to streamline reg-
ulatory procedures. As several examples in this section show, we've
cut paperwork and red tape in many environmental programs.

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       Innovations in Environmental Management
Over $1.3  Billion Saved at Superfund Sites
Cleaning up hazardous waste sites can be a complex and expensive process. Early on, companies responsible for
Superfund cleanups were frustrated by the slow pace and high costs. In recent years,  EPA took on a number of far-reach-
ing administrative reforms to turn this program around. We've addressed every aspect of Superfund: from assessing risk
and assuring public involvement to conducting cleanup and taking enforcement action. As a result, cleanup is now faster,
fairer and more efficient. On average, the time and costs associated with cleanup have fallen by 20 percent. More than
three times as many cleanups have been completed in the last 6 years than in all  previous years  combined. Overall,
since 1996, we estimate the cost-savings from more efficient cleanups to be more than $1.3 billion.
                                Less Cost and Paperwork for Auto Makers

                                Car manufacturers have seen the results of streamlining when they certify new mod-
                                els for compliance with air emissions requirements. The changes we've made are
                                saving the industry $55  million a year, while also providing Americans with cleaner
                                air. Under the old requirements, a large-volume manufacturer would typically spend
                                $8.4 million and 120,000 hours filling out 13,000 pages of certification paperwork.
                                Testing was done before the cars were sold—an approach that didn't catch emis-
sions problems once the cars hit the highway. Working with the industry, we developed a better process that targets vehi-
cles in use. This approach improves the environment in two ways: by improving detection of actual  performance problems
once cars are in use and  by providing performance data that  can help manufacturers produce better emissions control
equipment.  More important from the automakers' point of view, applications are now half as long, saving the typical com-
pany 60,000 hours and $4.2 million for each new model.
Faster, More Efficient Registrations for Pesticides

Pesticide companies produce a variety of products that benefit consumers. But before any new product is placed on the
market, it has to be proven safe for use. Every year, companies send thousands of applications to EPA to register or
change existing products. Today, that  process is faster, easier, and just as protective. Products that pose very low risk
due to their inherent low toxicity have been exempt from review. New options allow companies to proceed with certain
registration steps, such as making minor labelling changes, as long as they notify EPA first. And management improve-
ments have quickened the pace of regulatory reviews—as an example, the average time companies spend waiting for a
decision on acute toxicity testing has fallen from 24 to 4 months.

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                                           Innovations in Environmental Management
                                                              9
    ,
                    T|"  1"    '
TfexiDmty

                                    for Better  Results
                                              J
             ' ust like you, EPA wants to pro-
vide the very best products and services possible. So we're try-
ing new approaches that can help companies cut costs and gain
flexibility while achieving the same or even better results. These
new approaches are important if we are to build on the
progress of the past 30 years, and continue growing more profi-
cient in achieving environmental goals.

A look at the priorities of the past three decades shows how far
we've come. In the 1970s, the focus was almost entirely on pol-
lution control, which generally meant installing "end-of-pipe"
technology. During the 1980s, managers began striving to not
only control pollution, but to prevent it before it was created.
The 1990s have given rise to an even broader goal—sustain-
ability—a concept that requires continuous environmental
improvement and respect for economic and social well-being.
It's what many in the private sector now refer to as the "triple
bottom line," and it challenges EPA to create new approaches
that address and support these interests.

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10
        Innovations in Environmental Management
One tool we're finding effective is market-based trading. In con-
trast to the more traditional approach of addressing pollution
through technology-based standards, trading harnesses the
power of the free market for environmental gain. It gives regu-
lated parties the option to buy or sell environmental "credits,"
depending on their circumstances. If you can exceed the per-
formance level required by law, then you have a commodity to
sell in the marketplace. Conversely, if you can't meet environ-
mental goals cost-effectively, you can comply by purchasing
those excess credits in the marketplace. For almost a decade
we've been using trading programs to help control air pollution
from a variety of sources. Based on its proven effectiveness, it's
now being used increasingly to solve other environmental prob-
lems, like water pollution and wetlands loss.

We're also trying new approaches to environmental permitting.
Under the nation's environmental laws, companies typically need
a variety of permits that specify how environmental responsibili-
ties will be managed. The application process takes time, and any
change in operation can prompt further regulatory review. As a
result, companies can be delayed in making production changes
needed to bring new products to market. Recognizing such
problems, we're looking for ways to make permitting faster and
more efficient without compromising the environmental and
public health protection that permits provide.
Acid  Rain  Allowances on  the  Chicago  Board  of Trade
For real evidence of just how much environmental management has changed over
time, look at the annual auction of acid rain allowances on the Chicago Board of
Trade. For the past 5 years, this auction has been part of an EPA program to reduce
acid rain by cutting  sulfur dioxide (S02) emissions from power plants. The goal is to cut emissions by 50 percent by
2010. Through the auction, electric companies, brokers and private citizens can buy and sell S02 allowances. Each
allowance gives a plant the right to emit one ton of S02, as long as it doesn't violate health standards for clean air. This
year, all available allowances were sold for a total of more than  $53.5 million. Overall, the national cost of compliance is
about half that initially estimated for conventional control methods when the goals were first set.
One new approach is permitting on a facilitywide basis. A facil-
ity usually has a permit for every smokestack and wastewater
pipe on the premises. But a facilitywide permit consolidates
multiple requirements into a single document. This approach
eliminates the need for permit revisions and review as long as
total emissions stay below the overall facility limit. The result
for environmental managers is less paperwork and  regulatory
delay—an important consideration for companies in quick-to-
market industries where timing can mean a big difference in
market share. Intel, Merck, and Anderson Windows are
among several companies working with EPA to test facility-
wide permits. Company officials have estimated this approach
could save them millions of dollars a year in lost production
time. Along with cost savings and market advantages, compa-
nies may also benefit from new efficiency or pollution preven-
tion improvements. These opportunities may become more
visible once a comprehensive, facilitywide evaluation of permits
is undertaken. So far, facilitywide permits are being developed
for air quality requirements, but they may be used for other
requirements in the future.

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                               Innovations in Environmental Management
                                                  11
artnermg
                            for Improvement
                                       would an environmental
                       manager do more than just what's required? Ask any one of the
                       more than 7,000 organizations that have signed up for one of
                       EPA's voluntary partnership programs. They might cite their
                       desire to cut costs and become more competitive in today's
                       global economy. They might point to the growing demand for
                       environmental stewardship in doing business with others at
                       home or abroad. They might describe their desire to be a good
                       corporate neighbor in the areas where they operate or to assure
                       a safe, clean workplace for their employees.

                       EPA partnership programs respond to these interests. They
                       provide technical assistance to help companies make improve-
                       ments, like cutting waste, conserving water and energy, and
                       increasing efficiency. They are voluntary, and each is designed
                       to address a specific problem, such as climate change, or a

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12
       Innovations in Environmental Management
Partners  for the Environment: Helping Companies  Boost  their  Bottom Line
Pick an industry and we can show you real world examples of companies cutting costs and increasing productivity as a
result of participating in EPA's partnership programs. Here are just a few examples of how companies have benefitted:
•   Climate Wise: In 1995 alone, Dupont saved  more than  $31 million by improving industrial efficiency, mostly through
    actions requiring little or no capital expenditures.
•   Energy Star Buildings and Green Lights: By switching to more efficient lighting at more than half its building space,
    Boeing reduced  energy consumption by 200  million kilowatt hours a year, cutting
    the company's annual operating costs by $12 million.
•   WasteWise: Eastman Kodak found it could save $250,000 a year by selling
    coated paper liners for reuse as label backings. Overall, the company is saving
    $3 million annually as a result  of improved waste management  practices.
business sector, such as hotels, that may not be well suited to
traditional regulatory approaches.

In all, EPA offers more than 20 distinct programs along with
regional programs that address specific regional priorities.
Together, these programs are referred to as our "Partners for the
Environment," and they're making a big difference. Consider
that, in 1998,  participants conserved 1.8 billion gallons of clean
water, eliminated 7.8 million tons of solid waste, and prevented
                                air pollution equivalent to
                                taking 65 million cars off
                                the road each year. They
                                also saved an estimated
                                $3.3 billion!

                                Along with technical
                                assistance and an oppor-
                                tunity to save money,
some participants also receive awards and other forms of public
recognition for environmental achievement. The ENERGY STAR
program, for example, gives companies the right to use a dis-
tinctive logo  that can help consumers identify energy-efficient
products. The program also presents awards. After introducing
more than 450 energy-efficient PC models in 1999, IBM was
named the ENERGY STAR Computers Partner of the Year—for
the second year in a row! The company's pride in this award is
evident for it's the first achievement mentioned in their latest
annual environmental report.

As the box above shows, our partners produce a variety of
products. Some decide to join one program while others join
several. But, they all have one thing in common—they're see-
ing firsthand that preventing pollution really does  pay.

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To Learn  More
As this report shows, EPA is working to develop new strategies that can help companies cut costs and improve environ-
mental performance. If you'd like to learn more about any of the initiatives described in this booklet or about how you might
work with the agency, contact EPA's Office of Policy, Economics and Innovation at (202) 564-4332. You also can look for
information on the Internet at  or call one of the individual programs listed below.
EPA Contacts

Audit Policy
Office of Regulatory Enforcement
(202) 564-2220

Automobile Emissions Certification
Office of Air Quality Planning and Standards
(919) 541-5615

Compliance Assistance Centers
Office of Compliance
(202) 564-5082

Emissions Trading
Office of Air Quality Planning and Standards
(919) 541-5616

Performance Track
Office of Policy, Economics, and Innovation
(202) 564-4332
Permitting
Office of Policy, Economics, and Innovation
(202) 564-4332

Pesticides Registration
Office of Pesticide Programs
(703) 305-5447

Superfund Reform
Office of Emergency and Remedial Response
(703) 603-8960

Partners for the Environment
Office of Policy, Economics, and Innovation
(202) 564-4332

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