Chemical companies can select different strategies for how they
manage their response to environmental regulatory requirements. For example, Mike Rosenberg in his book “Strategy
and Sustainability” (click here for a synopsis of the book) suggests four possible
strategies:
1. Just meet the regulatory
requirements (the low road);
2. Meet the requirements, but also
monitor for possible actions needed (wait and see);
3. Meet the requirements and monitor
for needed changes, but also publicize to stakeholders what is being done (show
and tell); and
4. In addition to meet, monitor,
and publicize, have a strategy that positions the company as a “green” company,
attempting to lead its industry in environmental-friendly products (pay for
principle).
To get a better feel for what Rosenberg suggests, I applied his
ideas to developing a strategy for the chemical company Mexichem.
Mexichem is a chemical company with headquarters in Mexico. It has 18,000 employees and in 2016 had $5.4
billion in revenues. Its major products include: polyethylene, polyvinyl chloride,
polypropylene, and fluorine-based products.
Rosenberg suggests that the selected strategy (one of the
four listed above) should be based on analysis of four factors:
1. The industrial sector that the
company is in;
2. The geographical regions in
which the company operate;
3. The impact that environmental interest
groups might have on the company; and
4. What the company has been doing
in the past and presently with respect to environmental compliance management.
Here is some “light” analysis I did in each of these factors
to help me select a strategy for Mexichem:
Mexichem’s industrial sector. Because Mexichem’s industrial sector, the
chemical sector, produces chemicals, which can adversely affect the environment,
chemical sector regulations are extensive, and penalties high for non-regulatory
compliance.
Regions in which Mexichem operates. Mexichem operates in 37 countries (all
continents, except Antarctica) with 120 production plants. Mexichem is a global company.
Possible interest groups’ effects on
Mexichem. Environmental interest
groups have for a long time been very active in monitoring and commenting upon
chemical companies’ environmental records.
These groups are a major source of information on chemical companies’
environmental performance.
Mexichem’s past and present efforts. Mexichem’s annual report indicates an active
program in environmental compliance.
Based on this analysis, I believe Mexichem’s best strategy
for dealing with its environmental regulatory program is strategy number 3,
show and tell. Not only should Mexichem
meet all regulatory requirements (as all companies should do) and monitor/measure
how it is doing in meeting these requirements, Mexichem should be proactive in
publicizing what it is doing (the show and tell strategy). The forth strategy (pay for principle) is best
suited for those chemical companies that provide products sold directly to the
public, e.g., personal care products. Mexichem
products are mostly not used in products sold directly to the public so a pay
for principle strategy likely would bring little additional marketing and other
benefits. It seems to me, based on
reading Mexichem’s reports, that Mexichem is in fact using the show and tell
strategy.
The above about Mexichem is a simplified application of some
of Mike Rosenberg’s ideas in his book on how companies should go about selecting
a strategy for their environmental regulatory (sustainability) program. However, I am impressed that applying his ideas
helped me choose a strategy for Mexichem that seems to be the strategy that Mexichem
is using. Using Rosenberg’s ideas in
his book and his lectures (e.g., he has a course on Coursera based on his book)
might be useful for chemical companies.
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