Wilbur Stevens looks in dismay at the mound of toxic waste piled high in a closed- off area near his factory as he drives past the dumping ground on his way to another busy day at his office in the Los Helios factory of Alapco Chemicals, where he is general manager

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Wilbur Stevens looks in dismay at the mound of toxic waste piled high in a closed- off area near his factory as he drives past the dumping ground on his way to another busy day at his office in the Los Helios factory of Alapco Chemicals, where he is general manager. Los Helios is a major industrial location in the southern part of Valdina, a small country in Central America that has close ties with the United States and is heavily dependent on US aid for its continued survival. Alapco Chemicals had established its factory in Los Helios in 1934 and has since expanded its opera- tions considerably. The main products of the Los Helios factory are pesticides and insecticides that are in great demand by Valdina farmers, whose crops are in danger from grave damage by weeds and pests that flourish in the hot and humid climate. Alapco is the only important producer of these products in the country and enjoys a monopoly over the market.

Although the company has shown consistent growth in both sales and profitability over the past decade, recently its environmental record has begun to be questioned by environmental groups, especially those based in the United States. The environmental problems of Valdina are undeniable. The air pollution in the country, especially in the area near Los Helios, is among the worst in the world. The country's forests have been almost completely decimated by indiscriminate logging both for revenue and for clearing land for new communities and industry in the small country. The nine main beaches of the country are so polluted by industrial and municipal waste that they have been declared unfit for swimming. One beach has been totally closed to the general public for the past five years.

A group of environmental activists has focused the blame on the government of Valdina and on local and foreign industry. Until two years ago there was no systematic legislation or even regulation of the environmental aspects of industrial and other forms of economic and development activities. The only regulation was in the form of some weak and often outdated factory codes, which were rarely enforced. Further, the government did not have a separate agency for environmental control; any issues raised were handled by the ministry concerned with a particular industry.

Growing international attention and the increasingly visible effects of the en- vironmental deterioration in Valdina had ultimately goaded the government into action. In 2010, environmental legislation was passed that contained guidelines to be observed by both industry and agriculture. Globe-Watch, an active environmental action group in Washington, DC, had helped the government draft the legislation, which in its final form turned out to be fairly streamlined and quite stringent.

Enforcement of the legislation, however, was another matter. The government of Valdina, strapped for cash and deep in debt, did not have the resources to establish a system of periodic inspections and follow-ups to ensure that the guidelines were actually being followed. Moreover, being dependent on industry, especially the multinationals, to raise revenues, the government hardly had the political will to take stern measures to enforce its decree. As a result, much of the legislation remained merely on paper and any implementation was done voluntarily. Voluntary action was also limited because following the safeguards meant substantial capital outlay to purchase and install pollution-control equipment in factories or modify a plant or processes to ensure that they caused less environmental damage.

Alapco was one of the main polluters, partly because of the sheer size of its operation (it had the largest single plant in Valdina), partly because of the nature of the chemical-manufacturing process, and partly because some of its processes were quite old and had not been modified to control their effect on the environment. Again, because Alapco was the only producer of some of the chemicals needed by Valdina's farmers and because the company's top executives had extremely close connections with the government, no action was taken to enforce the new regula- tions, and things remained pretty much as they were for the next year, until Wilbur Stevens arrived in Los Helios as the new general manager of the plant.

Stevens was a brilliant engineer who held a master's degree in chemical engi- neering from Carnegie-Mellon University and an MBA from the Massachusetts Institute of Technology. He had worked with a tire company in Great Britain and with a chemical firm in Germany before returning to the United States as opera- tions manager for Alapco's plant in Peoria, Illinois. In Peoria, Stevens had made an excellent impression on the senior management and workers. His management style and unique abilities had been major factors in turning around the plant's performance within three years from subpar productivity to one of the best among Alapco's fifteen plants. As a result, Stevens had been identified by top management as a potential candidate for the highest levels of the company hierarchy. As a part of the plan to groom him for senior management positions by giving him greater responsibilities and exposing him to an international situation, Stevens was ap- pointed general manager and chief executive officer of the company's plant at Los Helios in Valdina.

On reaching Los Helios, Stevens was struck by the dominance Alapco enjoyed in the country. He was regularly invited to receptions given by senior government officials, and nearly every request he made on behalf of the company was quickly processed with a positive response. The plant was also operating with a reasonable degree of efficiency, considering its rather outmoded technology. Alapco's senior management had, as a matter of policy, continued to use this technology, taking the view that it was adequate to meet the current needs of the market in Valdina and that the introduction of new technology would result in high costs that the company would not be able to recover under the present conditions and market structure in Valdina.

Stevens soon began to feel quite comfortable in his new position. Valdina had an excellent school for the children of the many American expatriates, and his family had adjusted to the new conditions quite well. After a few months, however, he re- ceived a group of visitors from Washington who left him feeling uneasy. They were members of a delegation from Globe-Watch, and they informed Stevens that their group had helped the government of Valdina formulate the environmental policy and that they were, on their own, following up on that legislation. At first Stevens was annoyed and stated that this was a matter between his company and the government of Valdina and that if his plant was violating any of the regulations, it was for the government of Valdina to say so and not any third party. Further, he added, not a single letter or any other communication had been received from the government of Valdina on this issue, and he therefore believed that his plant was complying with all government requirements. The environmentalists were very direct. They showed Stevens a list of environmental violations that Alapco's plant in Los Helios was actually committing every day and compared the Los Helios operations to the operations of Alapco's plants in other areas, especially in the developed world. The presentation made clear that Alapco was following two different environmental standards: one in developed countries and one in developing countries. As far as Valdina was concerned, the reason for the double standard was the absence of the government's ability or willingness to enforce the legislation.

Stevens saw the point. He had been aware of this problem but he had not seen it in the same light as the environmental group; that is, as an ethical and moral responsibility of his company to their host country. Yes, there were toxic waste dumps just outside the plant and barely three miles from a densely populated resi- dential area. A tropical storm could blow off the waste and cause serious damage. The emissions from the Alapco factory chimneys in Valdina were far higher in pollutants than those at any of the other Alapco plants. The Valdina plant had no effluent-treatment facility and all the chemical waste was routinely dumped into the sea. The problem was that, in Valdina, all this seemed natural. Everyone was doing it and no one complained. Nevertheless, Stevens realized that this casual neglect of environmental safeguards was fundamentally wrong and that the company should do something about it.

He called the company's headquarters in Lansing, Michigan, and suggested that Alapco should take unilateral action to improve the environmental standards of its Valdina plant and bring them into line with the company's other factories. He also submitted a cost estimate and pointed out that while there would be a slight erosion in the profits of the company, the benefits to the host country would be great. The head office, however, did not appear very enthusiastic. Although the members of the senior management team did not say so directly, the message seemed to be, "If we don't have to do it, why should we?"

Stevens was quite disappointed by this reaction. Maybe there is another way out of this mess, he thinks as he drives past the waste dump outside the factory.

 

DISCUSSION QUESTION:

1) What would you do in this situation if you were:

1)Wilbur Stevens?

2)Director of Globe-Watch?

3)Minister for industries of the government of Valdina?