Is government influence a friend or a foe?

“The reality—now part of mainstream thinking—is that environmental standards drive innovation and contributes to competitiveness. They encourage efficient production and minimize the massive costs of cleaning up pollution. Sustainable development looks at the long-term, but it calls for action now”.[1] Stavros Dimas.

As you can see from the EU’s website,, there has been a vast array of directives and legislation which have been introduced to stimulate sustainable development within the EU.  They question is whether this legislation has promoted sustainable development or has it curbed innovation and increased costs for all involved?

An example of EU legislation is as follows:

The EuP Directive is one of the EU’s policy main instruments for improving the energy and environmental performance of products within the EU. It aims to improve the environmental performance of products throughout the life-cycle starting from the early stages in product design.  Overall, the eco-design framework has been seen to bring benefits, e.g. energy savings products.

The Integrated Product Policy (IPP) enforces eco-design requirements on businesses which produce energy-using Products.

The above set of examples are specifically targeting companies that produce energy-using products, however there are many more which have impacted on other sectors of the economy.   For example, the EIA Directive, requires an environmental impact assessment to be carried out on certain public and private projects before they can be approved.

Also since 2005 the EU has been specifically focusing on developing ways of promoting more sustainable waste management.  Their aim here is to minimise the impact of waste on the environment and limit the use of resources as much as possible.

Naturally these directives have many implications for businesses, for example, businesses that respond too slowly are likely to incur significant cost increases through penalties, while businesses who comply in a timely manner can gain a competitive advantage as well as a potential reduction in costs.

Furthermore some may argue that government’s influence reduces innovation and results in additional costs for businesses.  However I believe the best approach in confronting legislation is through consideration of the opportunities and threats to each industry, which must be considered within the context of the organisation’s strengths and weaknesses.  For example Porter et al (1999), highlight that firms must be open to new ideas and be willing to come up with innovative solutions, otherwise it is likely that the costs of compliance will not be offset.  Internationally competitive industries are therefore proving to be much more resourceful and innovative in their response to environmental regulation than industries that were uncompetitive to begin with.

Therefore I’d like to ask you, whether you believe government’s influence and their life cycle-based approach encourages businesses to manage their resources and products in a more sustainable way or are market based policies better suited to stimulating sustainable development within our economies?

[1] Quote by EU Commissioner for Environment taken from the following website:

Posted in government policy, sustainable development
One comment on “Is government influence a friend or a foe?
  1. jeremy says:

    Nice post Kate. In my view, business has to drive innovation, but government can play an important role in providing a context (socio-legal framework) within which this innovation might be encouraged.

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