Porter Hypothesis put to the test

When I read the heading, "Group warns of climate ‘policy overkill’" in today's FT, I sensed the "Group" was directed at the "business group". For once, something right...

Reading something like "over-zealous government policies to deal with the problems of climate change could drive industrial production overseas and lead to higher carbon emissions overall" reminded me about the Porter Hypothesis. I felt very familiar with the article as it was also something that we have discussed before in Cambridge. Today's article has put the hypothesis to test.

Michael Porter, the guy behind the hypothesis said that "strict environmental regulations can induce efficiency and encourage innovations that help improve commercial competitiveness."

We can pretend that stricter regulations can stimulate innovation but on the other hand, there is also the temptation for businesses to choose the easy way out and move to less regulated countries especially to developing countries that are not only cheaper to operate but will also welcome FDIs with wide open arms. Can it be a matter of time these countries catch up with stricter environmental regulations? Probably. But this "matter of time" is enough for companies to decide if they will continue moving on again or comply.

This again, is attested by another article in the same papers by US Treasury Secretary Paul Hankson who accused the Chinese of "ignoring basic environmental standards in extracting African resources." Many would think that Paul Hankson will be the darling of the African governments for standing up for the rights of the people and the environment. But South Africa's Trade and Industry minister retorted that "US was subjective in its focus on human rights.." while Ugandan President made the following critical remark, "Uganda received $1 per kg of coffee it grew, before the beans were roasted and ground in London and sold for $20. “For each 1kg of coffee, we are donating $19."

At the end of the day, businesses will sum up their activities with bottom line figures. It is an onerous task ahead of Change Agents to move corporate mountains and effect changes, if any, in a well-established system.

Today the business group has fired the first salvo and stamped their disapproval about the climate change policy in the UK. I liken them to saying, "Let's not rock the boat yet, there are no ice sheets melting out there."