Strategic Ramifications of Corporate Environmental Policy

During the last few years, the minerals industry has been confronted by increasingly stringent environmental regulations that are significantly altering the economics of the industry. Heightened media attention, threats of litigation and decreasing support by the general public have exacerbated the industry's difficulties. Regardless of their merit, environmental issues present a serious threat to the continued viability of mining companies. Firms have reacted to these regulations by escalating their environmental activities to meet the new requirements. They have simultaneously adjusted their corporate schedules to reflect the substantially longer time periods required to obtain construction and operating permits and ensure compliance with legal requirements before mine abandonment. Companies have also been forced to adapt to a considerably greater amount of uncertainty and expense associated with the development of mineral projects. This has resulted in a significant erosion of the profitability of some mining companies. Most of the changes in corporate environmental activities have been reactive. Pending regulations present formidable but uncertain technical requirements for compliance, and future regulatory developments are difficult to predict. This problem is aggravated by depressed market prices for many mineral commodities. Past expansions of environmental standards have led to the closure of mines and processing facilities due to economic hardship, as occurred in the smelting segment of the US copper industry in the 1980s (Cro¬zier, 1992).