What business thinks about the environment

These sometimes conflicting pressures show up clearly in the results of the latest survey conducted for Fortune by Daniel Yankelovich, Inc. Some 270 chief executives of companies listed in Fortune‘s annual 500 directory were personally interviewed at length to ascertain their opinions about various aspects of the environment problem, as it affects them both as citizens and as leaders of business.

These chief executives are well aware that the environment has moved to the forefront of national concern. Six out of ten said the environment is a problem of “the highest priority,” and is getting worse on virtually all fronts; traffic, air pollution, congestion, water pollution, and garbage disposal were most frequently mentioned. When the executives were asked to rank the environmental question among ten issues, the average response of the panel as a whole was to put it about fifth in importance, well ahead of tax reform and health care, but well behind Vietnam, inflation, and law and order. As one Los Angeles industrialist put it: “We won’t have to worry about pollution if we don’t solve some of these other problems first.”

Almost seven out of ten executives said they did not believe the environment is directly affecting their own health or that of their family, but a minority had strong feelings. A Pittsburgh executive complained about the putrid smell of sulphur from a nearby plant that wafts over his house each morning. A steelman is irritated by the noxious exhaust fumes that engulf his car as he sits idly in congested traffic every evening on the way home from work. An Ohio executive is distressed by the black ash that settles on his picturesque white frame house, keeping it in a perpetual state of untidiness. Reflecting the view of many others, a San Francisco executive said, grimly, “I’m aware of the condition of the environment daily and hourly.”

When it comes to remedial action, a dominant sentiment is caution. The executives are concerned that government, in response to public pressure, will dictate the immediate spending of huge sums, which, rather than solve the basic causes of environmental problems, will sap the financial vigor of their companies. As a Cleveland executive put it, “We can’t correct this thing overnight. We need a reasonable program, reasonably financed. We’d all go broke if we tried to do it in one year.”

There is also concern that the public may not fully comprehend the extent of its responsibilities—and sacrifices—once the national commitment is ongoing and irreversible. “I don’t think the American public at any level has really calculated the cost,” says an executive in the rubber industry. “We have got into the habit of putting productivity increases into increased wages and fringe benefits. The public has to be told that if we are going to clean up the air, the water, etc., this is going to cost money, and probably going to mean that from here out we are going to divert increased productivity to improving the quality of life rather than the quantity of possessions.”

They want to be led

Like other citizens, the chief executives express some strong personal opinions on specific issues. More than half think that industry should spend more money to find an alternative either to the internal-combustion engine or to the automobile itself. Almost eight in ten favor some kind of effort to curb further population growth. But the building of the controversial supersonic jet is something else. Here the executives’ pride in America’s technological superiority overwhelms any other consideration. More than seven out of ten favor building the SST, though many who approve also indicate their anxiety over the possibility of window-shattering sonic booms.

The business leaders aren’t nearly so certain about solving the environmental problems created by their own corporations, their plants and factories. They know they must do something, but how and how much puzzles and disturbs them. It may come as quite a surprise that the elite of business leadership strongly desire the federal government to step in, set the standards, regulate all activities pertaining to the environment, and help finance the job with tax incentives. Business, which has led the U.S. into unrivaled prosperity, wants in this case to be led. “I never thought I’d get to the point where I’d want the government to come in,” said one executive, “but I don’t think there’s any other way.”

The executives were asked two questions about the role of the federal government in the area of pollution and the environment. First, would you like to see it step up its regulatory activities, maintain them at the present levels, or cut them back? The responses:

– Step up regulatory activities (57%)
– Maintain (29%)
– Cut back (8%)
– Not sure (6%)

Only in the South and among transportation and utility executives was there a notable reluctance to see the government step up its regulatory activities. Among the Southerners, most–53 percent–thought the government should maintain its activities at the current level, though 36 percent did favor a step-up. The same sentiment was generally reflected by the transportation-utility sector.

Second, do you favor a single national agency to establish standards on air and water pollution control, land use, etc., or should local standards prevail? The responses:

– Single national standard (53%)
– Local standards (35%)
– Not sure (12%)

Again, southern executives as well as those connected with transportation and the utilities took the position that local standards should prevail.

The way a large number of business leaders see it, substantial voluntary action on behalf of a single company is wasteful of corporate assets and ineffective in cleaning up the environment. They believe action on pollution must be collective. Otherwise, they argue, the costly efforts of a few companies won’t even be noticed if corporate neighbors are still fouling the air and water. “We won’t get this situation cleaned up except by laws that are enforced,” said a Pittsburgh executive. “If I correct my plant problems, but my competitor doesn’t, that company has a competitive advantage. I have committed huge sums; they haven’t. In fairness to my stockholders, therefore, I can’t make that first move.” The executive added emphatically: “I see no hope except for legislation.”

George Mattson—NY Daily News/Getty Images

While conceding the necessity for government action, the corporate leaders face the prospect with some trepidation. They fear that standards will be established without sufficient study, only to be revised over and over again. As a Detroit official put it: “We don’t want to be shooting at a moving target.” The nervousness is predicated to some extent on the handling of the recent cyclamate controversy. Some executives feel the government was excessively zealous and applied an extreme and unnecessary standard in arriving at the decision to ban all cyclamates. The government took that action when cancer appeared in test animals after they were given cyclamates in massive doses far beyond normal human consumption. In much the same manner, businessmen worry that the government will impose harsh standards, costly to implement, and possibly beyond what is necessary, to clean up America’s towns and cities. Warns a mining executive: “The costs of reducing the last traces of air pollution-which may not be harmful-may be disproportionately more than it is really worth to society. In the last analysis, of course, the public will ultimately pay for it.”

Many executives are worried lest pressure groups stir up a public alarm that could lead to extreme–and in their opinion–unwise measures being demanded of their companies. More than a few are suspicious of the academicians and conservationists who, they feel, do not appreciate the practical problems. The panel was asked: Do you feel that the conservationist groups represent general public opinion or are they simply a pressure group? The responses:

– Pressure group (47%)
– Represent general public opinion (38%)
– Not sure (15%)

In some instances, the question drew angry replies from executives who feel that some–but not all–conservationist groups are using the currently voguish environmental issue to achieve political power. The San Francisco-based Sierra Club particularly came under attack. “I think that group has just gone crazy,” said an Ohio executive. “If you listen to them we’d have no industry at all—just forests and streams.” Describing a situation in which conservationists are attempting to block industrial development of an area on the Great Lakes, this executive declared: “They’d rather have sand dunes than huge new mills to serve the needs of the entire Middle West. That doesn’t make sense to me.” Another accuses the Sierra Club of raising money by making sensational accusations against big business. “They make news through unfounded charges they don’t have to prove,” said a New York executive. “They’ll spend $100,000 for propaganda-like full-page ads in the New York Times—but not one cent to get the facts.”

A series of questions bore on the judgments the executives might make when expenditures on environmental controls affect profits. Should the protection of the environment be taken into consideration even if it means:

– Inhibiting the introduction of new products (88% should, 8% should not, 4% not sure)
– Forgoing an increase in production (84% should, 9% should not, 7% not sure)
– Reducing profits (85% should, 9% should not, 6% not sure)

Almost seven out of ten said their companies are participating in some type of antipollution effort. The question was: Does your company participate in any community or industry-wide antipollution (or environmental-preservation) programs? The responses:

– Community (22%)
– Industry-wide (10%)
– Both (37%)
– Neither (26%)
– Not sure (5%)

The executives were also asked whether their companies have a special antipollution budget or program of their own. Though, overall, less than half (44 percent) said they did, it must be noted that bankers, insurance executives, etc., have no compelling reasons for establishing such a program. Among the nation’s largest industrialists and retailers, 66 percent have company programs and spend money. But that figure drops to 51 percent among industrial and retail companies with under $1 billion in annual sales, and to 46 percent among utilities and transportation companies.

Of those companies that have antipollution budgets, an overwhelming number (81 percent) said they are spending more on a percentage basis than five years ago, and 63 percent plan to continue spending even more in their next fiscal year. It is still a small part of over-all expenditures; just over half said they committed 3 percent or less of their total capital budget last year for pollution control. Fortune asked: What percentage of your 1969 capital budget was spent on pollution control? The responses:
Less than 1 percent (19%)

– 1-3 percent (32%)
– 4-5 percent (14%)
– 6-10 percent (15%)
– 11-15 percent (3%)
– 16-20 percent (3%)
– More than 20 percent (3%)
– Not sure (11%)

According to 86 percent of the executives, federal, state, and local regulations forced some of the spending. But a striking number of companies are spending funds for more than just stopgap purposes. Almost seven out of ten are allocating funds not only for present problems but also for research and development to prevent future pollution; among the largest industrialists virtually all of them are earmarking funds for R. and D.

“We accepted progress blindly”

Forty-one percent of the panel concede that, in the past, corporate America accepted technological advances without adequately considering the consequences to the environment. “Until fifteen years ago, we accepted progress blindly,” said one executive. “Now we are more and more conscious that technology must be accompanied by environmental control.” Even so, some business leaders warn that it isn’t entirely possible to see the ill effects of new technology in the making, regardless of the effort. “Things develop that you didn’t expect,” said one New York manufacturer. “DDT was considered a boon to mankind just a few years ago.” Another philosophizes: “Tomorrow is dictated by what you learn today; our knowledge is evolving scientifically.”

Even the most optimistic of businessmen believe it will probably take another decade–others, thirty years and more–significantly to turn the problem around. At the moment, however, business leaders aren’t very impressed with the efforts of their peers. The panel was asked to rate the performances of eight basic industries, using a scale from 10 to 1 (poor). Here are the results:

– Electric utility (6.0)
– Oil exploration (5.1)
– Steel (4.8)
– Detergents (4.7)
– Automobile manufacturing (4.6)
– Oil refining (4.5)
– Coal (4.5)
– Pulp and paper (4.4)

As the results indicate, no industry gets very high marks. Only the electric-utility industry scored a clearly positive response. In all other cases there was general recognition that individual industries have done less than a satisfactory job.

To combat pollution, most (75 percent) agree that the major breakthroughs must be made in manufacturing and processing as opposed to basic product changes. But their R. and D. efforts cost money, and more than any other factor businessmen say that costs limit their efforts. Forty-one percent of the panel mentioned this, while 32 percent cited lack of technology. Presently the majority of businesses (58 percent) find the costs of fighting pollution cutting into company earnings, while others (24 percent) are passing on the costs to consumers through higher prices. Either way, most businessmen say financial assistance from the government in the form of tax credits would provide the best incentive. The question: What do you think would be the single most effective–and least effective–incentives to business to do something more about pollution? The responses:

– Tax credits for pollution-control costs (59% most effective, 2% least effective)
– Industry-wide action (11% most effective, 7% least effective)
– Government grants matching company expenditures (10% most effective, 5% least effective)
– Government subsidies (5% most effective, 15% least effective)
Passing on costs to consumers (4% most effective, 47% least effective)
– Improvement in the working environment (1% most effective, 16% least effective)

Curiously, many businessmen are somewhat sensitive about accepting government money. Rather typical is the case of a New York executive who found tax credits quite acceptable, but rejected the idea of government subsidies, saying: “No one wants to be in the relief line.”

People are the culprits

While conceding their responsibility, corporate leaders feel they should not be singled out as the only culprits. They point to the municipalities, which some of them believe do far more to pollute the waters than their own companies. They also think the public ought to do its part, too. Executives frown on the suggestion that their companies bear secondary responsibilities for such things as the prevention of litter caused, for instance, by tin cans and glass containers. Less than one executive in five believes his company has responsibility for the secondary effects of his business. “The trouble is people,” declared a mining executive. “They can misuse anything. Hell, they won’t even read directions, let alone follow them. If the directions say use a capful of detergent, they figure that if a capful is good a cupful is better.”

Finally the panel was asked which American city has the best–and the worst–living environment. The executives were easily in agreement on the worst—New York. There wasn’t nearly as strong a consensus about which city has the best environment, although 69 percent of the panel mentioned western cities most frequently. The results:

Worst Environment:
New York City (61%)
Los Angeles (14%)
Chicago (6%)
Newark (3%)
Detroit (1%)
Philadelphia (1%)
Jersey City (1%)

Best environment:
San Francisco (26%)
Denver (14%)
Minneapolis-St. Paul (5%)
Phoenix (5%)
Atlanta (5%)
Dallas (4%)
Los Angeles (4%)