Green Planning Reports Archives: Newsletters
Volume VII (Spring 1995)

Voluntary Agreements: The Dutch Example

As the debate over the economic consequences of environmental regulation continues, the Dutch have moved ahead of the rhetoric. The government and industry have written and are implementing more than fifty covenants-voluntary agreements between industry and government. Covenants are policy management tools used by industry to meet national environmental goals established in the Netherlands' 1989 National Environmental Policy Plan (NEPP). The successful structure and process of covenant preparation is enabling the Dutch to recover environmental quality, by giving businesses the role of determining how goals are met.

Covenants provide a concrete implementation program with clear goals and targets for the eight themes within the NEPP: climate change, acidification, eutrophication, dispersion, waste disposal, local nuisance, water depletion, and sustainable resource management.

During covenant negotiations, industry and government agree to reduction targets that each sector will meet within the eight themes. In the chemicals industry covenant, for example, SO2 emissions will be reduced ninety percent by the year 2010, given a 1985 baseline. Individual companies then create their own environmental plans. Each plan is reviewed to ensure that the aggregated plans meet sector targets.

Covenants work with economic incentives as well as regulation, if necessary. They are not an alternative to regulation and they do not take precedence over existing law. However, once a corporation creates an environmental plan that meets NEPP targets, those companies are exempted from other regulations. Traditional command-and-control regulations are imposed on those companies that choose not to sign the covenant for their industry.

The covenant process involves corporations from the beginning, and lets them decide how targets will be met. Since the targets are specific, corporate leaders know exactly what is expected from them. There is no guesswork involved, since both parties are working from a mutual agenda during negotiations. The process allows companies to go beyond anticipating regulations, facilitating strategic long-term planning and investment.

The U.S. EPA has also had success with voluntary programs, such as its 33/50 program, which uses Toxics Release Inventory (TRI) data to identify potential participants to reduce 17 TRI pollutants by 33% by 1992 and 50% by 1995. While these programs set a good precedent, isolated gains in environmental recovery have a limited impact in the long run, and only address a small portion of environmental issues. Without full participation of all industry members, from supplier to manufacturer to distributor and consumer, the programs' gains quickly diminish. EPA seems to understand the need for a comprehensive approach, and recently introduced the Common Sense Initiative, an industry-by-industry approach to environmental policy. This initiative, however, currently lacks goals and solid targets.

Many large corporations, such as Intel, 3M, Dow Chemical, DuPont, Hewlett Packard, Xerox, and a few highly innovative smaller ones like Patagonia, have moved ahead of the U.S. Government and taken the lead in environmental management by investing millions of dollars in innovative pollution prevention and product stewardship programs, for example. Some are discovering that these comprehensive environmental management strategies allow them to realize cost savings, and at times, to produce substantial profits.

Though a few companies are implementing proactive environmental measures, most U.S. corporate environmental managers are primarily concerned about environmental regulations that are continually changing. The ever-changing U.S. regulatory climate encourages industry to weigh the tradeoffs between cost and environmental control rather than focus on the goals of regulations.

With increasing environmental compliance costs and continuing environmental pressures, industry is beginning to understand the benefits of long-term planning to improve environmental efficiency and to recover dollars spent on ineffective, short-term solutions. Since corporations are responsible for making profits, government must help create the incentives for long-term planning.

The Dutch covenant process is a revolutionary new framework that can put an end to the age-old dichotomy between environmental protection and economic progress. It is a tool, however, that works best within the framework of a national environmental policy.

Individual U.S. efforts to improve environmental quality have started in the private and public sectors. However, for significant improvements to take place, we need forward-thinking political and business leaders to capitalize on these innovative efforts by pushing for a national strategy that will encourage businesses to work with government to improve environmental quality while maintaining profitability.