B U S I N E S S
But Rocco and his CEE contemporaries, professionals who make a living cleaning up other people's messes, saw more than blackened trees and scarred landscape - they saw opportunity. Although it may take generations to remediate all of the damage, the change to a market economic system in post-communist Europe has paved the way for increased environmental protection, even at the corporate level.
Traditionally, corporations, engineers and business executives have been the bane of environmentalists' existence. Not so now. Newly privatized corporations and production facilities are incorporating cleaner technologies and improved environmental management practices into their corporate strategies. The Lucchini Steel Plant near Warsaw, for example, is upgrading its production facilities to meet EU environmental standards with the support of EBRD. In the process, they are significantly enhancing product quality and reducing production costs. Investments of $18 million have already reduced atmospheric emissions by 30 percent; at the same time the plant has doubled its production capacity.
According to Rocco, a businessman who has given papers to both the Harvard Business School and U.S. Congress on the globalization of environmental markets, clean production has become more than just an environmental philosophy. It is now part of the corporate re-engineering process that goes along with privatization. "And it's not for environmental reasons," adds Rocco, whose environmental consulting firm TRC Companies is involved in Polish projects worth over $40 million in 1995. "Clean production means not only decreased waste, it means cheaper, higher-quality products."
The greening of corporate Central Europe has been most pronounced in the Visegrad countries of Poland, Hungary and the Czech and Slovak republics. This is largely due to expanding national economies and a resuscitated privatization process. In order to meet stricter requirements set out by new environmental legislation, without curbing production, industrial concerns are purchasing clean technologies and adopting sound environmental policies.
It is new environmental laws integrating progressive economic incentives into environmental protection that have "encouraged" this corporate about-face. The most recent improvements came in Hungary, where a framework environmental law was passed in June 1995. It places reporting requirements on polluters and makes monitoring and enforcement not only possible, but probable. This, coupled with legislated environmental impact studies, allows the government to assess the damage a given activity will have on the environment and deal out the appropriate permits, fines, charges and fees to compensate for it.
"Hungary's new environmental protection act is not only stricter than the old one, it provides implementable economic mechanisms that will improve enforcement and put money into our national environmental protection funds," says Robert Reiniger, head of the National Authority for the Environment in Hungary.
Identifying priority environmental problems in CEE is the easy part; it's finding the necessary funding that has proven difficult. Increased domestic funds earmarked for environmental protection are an important piece of the puzzle. The National Fund for Environmental Protection and Water Management in Poland, for instance, now provides over 20 percent of the nearly $1 billion the country spends on environmental protection annually.
Although these funds can't hope to cover the complete cost of clean-up, they do act as catalysts to encourage commercial investment in environment-related projects. Mees Pierson recently announced they are teaming up with EBRD to establish an environment-focused venture capital fund worth $40-65 million. This Central and Eastern European Infrastructure Resources Partners fund will look to invest capital in companies undertaking environment-related projects in the Visegrad countries and the Baltics.
"If western investors are expecting to come in and earn returns of 20-30 percent," says Jordan Green, an investment banker and spokesperson for Mees Pierson, "then this region is ready: legislation, regulation and enforcement have all increased, and EU harmonization is pushing the whole process along."
The market has responded positively to these signals. The Emerging Environmental Marketplace published recently by the REC indicates there are now over 1500 environmental goods and services providers active in the Visegrad countries alone. They are hoping to cash in on a lucrative market that is estimated at more than $2.5 billion a year, and is expected to grow at an annual rate of 20 percent. One of the main growth areas is improving the environmental performance of export dependent manufacturing concerns.
While corporations still have a long way to go before anyone can call them "environmentally friendly," greener corporate vocabularies are translating into a cleaner, healthier environment for Central and Eastern Europe.