Nature of Failure
The market failure, which is going to be analyzed, is the failure of organizations to treat pollution. The emissions from power plants, the increase in the consumption of energy and general increase in population have resulted in a corresponding increase in pollution and a change in climate. Researchers generally believe that waste and emissions from factories are the biggest contributors to pollution. A recent study showed that seventy-five of the total waste being distributed to landfills is originated from manufacturing and other businesses. Many journalists have identified this as failure of the market and also a failure to comply with global initiatives like the ‘Kyoto Treaty’. This market failure has a far reaching impact, beyond the scope of the market itself and affects the general public. So a remedy for this trend should be manufactured or else this failure would lead further scrutiny of the market.
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Organizations have started to take initiatives to ‘Go Green’ and comply with the regulatory policies listed by the government. Going ‘Green’ relates to producing a relatively clean energy, treating waste before disposing it, reducing the carbon imprint and reducing the hazardous emissions. There are two recommendations offered to protect the ecosystem from industrial pollution; natural resources practices and sustainability solutions. The first step in implementing any solution to improve the waste disposal and pollution content is to identify the outlets and quantity of pollution that is being generated by the ‘Market’. (Shaw Group Inc, 2011)
The natural resources practices include procedures like delineation and mitigation of wetlands, improving the infrastructure to aid the coastal restoration, enhancing the watershed management by better project management, assessing the endangered species in the disposal vicinity, modifying the aquatic ecology by introducing fisheries management, regular analysis of water, assessment of toxicology and other risk assessments. This approach mainly focuses on monitoring, evaluating and managing the toxic content being released in the environment.
The second approach considers educating organizations on the principles of sustainability and then letting enterprises implement them into their processes. The processes that can be adopted are water quality trading, carbon trading, mitigation banking of the ecosystem, conservation banking and wetland mitigation. Most of these consist of innovative yet cost effective approaches. A few key elements pertaining to a successful sustainability programs are reevaluating the consumption and purchasing trends, analyzing the form of pollution to determine the recycling possibilities, selecting the most suitable recycling option available. Furthermore the sustainability department is formed that analyzes the detrimental impacts of the identified forms of environmental pollution and this analysis is interpreted and a report is developed from these results that would aid the market decision-makers to make the most beneficial decision.
The two recommendations represent the number of options available to the Market Leaders to address the market failure. However, it is understandable that these procedures would not be able to completely eradicate the nature of the problem but it will go a long way towards reducing the impact and effects of the market failure.
As this issue relates to the environment, the state would be very keen to step in to rectify the situation. However, organization would not be too keen to use the help of the state for this failure as that would lead to negative consequences for the ‘Market’. The following literature would briefly discuss these consequences.
The issue of waste management can prove to be very critical for an organization. Reducing waste signifies that the amount of waste to be disposed would lessen. Waste reduction is a good initiative for organizations to promote their brand as well. This is a process that a lot of people can and would support. The organizations that do not give importance to pollution management and allow the government step in to compensate for market failure are at a risk of losing the general public. Any organization that demonstrates conscientiousness towards the health of the environment would be well supported by the people of that community. On the contrary, not catering to this specific market failure would transcend into loss of sales, brand image and possibly employee’s loyalty. Furthermore, proper treatment of waste is required by the ‘the clean water act’, ‘Endangered species Act’, ‘Rivers and Harbors Act’ and the ‘Kyoto Protocol’ and if an organization chooses not to comply with these acts then it also generates a risk of being fined or banned.
The literature above provides a good motivation for stakeholders of the market to rectify the failure of the market.