Analyzing effects of regulatory compliance in manufacturing

Publication Date01 May 1998
AuthorPhillip E. Miller,Michael M. McKinney
[ 108 ]
Industrial Management &
Data Systems
98/3 [1998] 108–112
© MCB University Press
[ISSN 0263-5577]
Analyzing effects of regulatory compliance in
Phillip E. Miller
Assistant Professor of Management, Department of Management and
Marketing, East Tennessee State University, Johnson City, Tennessee, USA
Michael M. McKinney
Assistant Professor of Management, Department of Management and
Marketing, East Tennessee State University, Johnson City, Tennessee, USA
The current state of environ-
mental laws has placed busi-
ness in a quandary regarding
compliance with the myriad
regulations directed at every-
thing from the manufacture
of new products, substances,
or chemicals to the genera-
tion and disposal of waste. A
variation from the guidelines
imposed may result in liabil-
ity, civil and criminal, for the
unwary violator. In addition to
possessing knowledge of
current regulations affecting
operations, managers must
also track numerous future
changes applicable to their
processes in order to avoid
missing the effective date of a
new requirement. In general,
vast resources must be
expended in complying with
the environmental laws.
Perhaps the industry that
most feels the sting of the
environmental regulations is
manufacturing. This paper
will address the results of a
survey completed by over 200
manufacturing firms located
primarily in Tennessee to
determine effects of compli-
ance with environmental
regulations on business
It seems that any normal human activity may
have some type of environmental impact. For
example, products such as soda cans or waste
paper have all originated as natural resources
and are typically returned to the earth either
by disposal in landfills or through incinera-
tion. The by-products of industrial activity in
our water and air have contributed signifi-
cantly to the degradation and depletion of
natural resources. In the USA, over 200 mil-
lion tons of municipal solid waste was gener-
ated in 1990 and this figure has doubled in the
last 30 years, corresponding to 4.3 pounds of
waste generated per person, per day (US Envi-
ronmental Protection Agency, 1992).
Given these statistics, there is a growing
interest in industry to practice environmen-
tally-conscious design and manufacturing.
Traditional “end-of-pipe” solutions of dealing
with pollution have been an inadequate
means of protecting the environment. Cen-
turies of industrial activity have resulted in
vast amounts of water pollution, air contami-
nation, solid waste generation and noise
pollution. Regulating the amounts of releases
from industry has traditionally been viewed
as a solution to environmental problems.
Thus, the initial great surge of environmental
concern in the late 1960s and early 1970s dealt
with localized and site-specific problems.
Presently, industries are more aware and
responsive to consumers’ demands and expec-
tations, and are developing and utilizing
technologies to manufacture environmen-
tally friendly products. In other words, pollu-
tion prevention has been creeping up the
pipe. Research and experience have shown
that industry cannot continue to merely treat
the symptoms of environmental problems.
Instead, a more comprehensive means to
reduce pollution is believed by many to be
through prevention, thus attacking the
source of pollution throughout every stage of
the product life cycle: raw material extrac-
tion, transportation, manufacturing, product
use, recycling, and disposal. This paper will
address one part of the life cycle by examin-
ing the problems that managers have in deter-
mining the total effect that regulatory compli-
ance with current and potential (future)
environmental laws will have on production
Literature review
In the 1970s, environmental efforts involved
the creation of numerous policies which
focused on manufacturing issues. The 1980s’
legislative environmental involvement was
characterized by isolated pollution preven-
tion initiatives. Thus far in the 1990s, efforts
have been directed toward an integrated
systems approach which involves manufac-
turing, product design, and the overall corpo-
rate organization. Furthermore, the environ-
mental strategies of several large firms have
been evolving to include life-cycle concepts in
order to identify opportunities to minimize
environmental impacts throughout a prod-
uct’s complete life-cycle – from cradle to
Since the mid-1900s, the US Congress has
been involved in enacting federal legislation
to protect the environment. However, the
nation’s executive environmental commit-
ment was not evident until January 1, 1970
when President Nixon declared that the US
government would no longer be a leader in
environmental degradation when he signed
the National Environmental Policy Act
(NEPA). During that year, the passage of the
Clean Air Act by Congress signified the
beginning of environmental awareness in the
US government. By December 1970, the US
Environmental Protection Agency (EPA) was
established to enforce the mounting environ-
mental legislation. Since 1970, numerous
additional major environmental laws have
been passed.
The number of federal regulations contin-
ues to grow, increasing from 16, 502 in 1954 to
over 200,000 today (Ray, 1993). In 1992, the
annual budget for administering all federal
regulations was estimated to be $500 billion.
Of this amount, $115 billion went into the cost
of administering environmental regulations,
$29 billion for safety regulations, $256 billion
for economic regulations, and $100 billion for
paperwork and reporting costs. The budget
for implementing federal regulations in 1993
was double the 1992 defense budget, and the

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