RACHEL'S HAZARDOUS WASTE NEWS #379
---March 3, 1994---
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PR FIRMS PROMOTE COST-BENEFIT ANALYSIS
An insider's newsletter serving the public relations (PR) industry says the environmental movement is "maturing" and "coming of age." As a result, says O'DWYER'S PR SERVICES REPORT, environmentalists are forming "partnerships" with major polluters, and are increasingly funded by polluters. In February, O'DWYER'S devoted an entire issue to what they call "environmental PR firms," including discussion of the main "winning strategy" PR firms use for their clients. The newsletter offers a candid, if unflattering, assessment of the environmental movement, and of polluters. (Polluters is our term; O'DWYER'S calls them "companies.")
In an editorial, O'DWYER'S points out the basic relationship between polluters and the environment: "The lessons of the recent recession have taught PR people that no matter how idealistic a company sounds, it puts the bottom line ahead of cleaning up its mess," the editorial says. And such companies are finding that cold cash will buy them good will from the environmental movement, O'DWYER'S says in a page 1 story.
"Cash-rich companies, PR people say, are funding hard-up environmental groups in the belief [that] the imprimatur of activists will go a long way in improving their reputation among environmentally aware consumers," O'DWYER'S says.
"Though activists may at first balk at working with corporate America, nonprofit groups are beginning to realize that private sector cash can increase an organization's clout and bankroll membership building programs," O'DWYER'S says.
O'DWYER'S quotes Dale Didion of Hill & Knowlton (Washington, D.C.), the nation's 3rd largest "environmental PR firm." Didion says companies are learning that they can "hire members of the environmental group's staff to help on certain projects." "This is a tremendous benefit for a company that wants to have access to top green experts," Didion said. "Companies can avail themselves of talented researchers, scientists, and analysts at very reasonable prices," Didion said. Didion did not name any environmental groups that had hired out their staff to polluters, and he did not return our phone calls.
O'DWYER'S says there are two other benefits of such "cooperation" between environmentalists and polluters. "The exchanges offer a good strategic fit for companies targeting certain demographics, especially young people..." And: "Because most large environmental groups are international, relationships can pave the way for companies to make connections with green organizations overseas."
Getting a relationship started between a polluter and an environmental group "takes a lot of planning and hard work," O'DWYER'S says. "It might be in both parties' interests at first to keep their relationship out of the news," Didion says. "Work out early how and when the relationship will be announced to the media--and what measures should be taken if word leaks out prematurely," Didion recommends.
It's important for a polluter to pick the right group to work with, says Didion. "Some national groups aren't adequately represented on local levels," says O'DWYER'S. "Groups like the Sierra Club and the Izaak Walton league, however, have chapters everywhere that might be useful in a grassroots PR campaign," O'DWYER'S points out. O'DWYER'S offers no evidence that these groups have formed partnerships with polluters.
O'DWYER'S suggests some "cost-free and virtually risk-free" ways for polluters to "test the waters" when entering into a relationship with an environmental group. "Help them raise money," says Didion. "Offer to sit on their board of directors. That can open up a good symbiotic relationship."
Didion also suggests "dialoguing" as an effective technique. He says Hill & Knowlton is "active in setting up dialogue groups between key representatives of environmental groups, Chambers of Commerce and the Federal Government." Another effective tool is for the polluter to fund an "issue-specific publication for the nonprofit group." "The company gets substantial input into the content because the publication has its name on it," Didion says. "A similar tact [sic] is to bankroll a conference on a topic of mutual interest," O'DWYER'S says.
Throughout, O'DWYER'S mentions only two environmental groups that have formed partnerships with major polluters: World Wildlife Fund is teamed with Chevron, and Environmental Defense Fund is teamed with McDonald's and General Motors, according to O'DWYER'S.
O'DWYER'S says the polluters' key strategy for the 1990s will be the claim that America can't afford a clean environment. A page 1 story says, "...winning PR campaigns are those that educate people about the economic costs involved in improving the environment."
O'DWYER'S recommends a simple money analysis of environmental costs and benefits: "Does a community benefit from a plant that pollutes but employs? Does the cost of sick days and hospitalizations due to exposure from the dirt outweigh a payroll? Successful PR people will be those that can blend the cold-hearted reality of 1990s economics with the 1970s touching, though somewhat naive, concern for Mother Earth," an editorial says.
O'DWYER'S says candidly that companies are "challenging federal mandates to install pricey pollution control gear that has no productivity benefits when it may be cheaper to close up shop and move to pollution-havens like Mexico."
"It's the job of PR firms to make sure federal, state, and local governments along with host communities understand the economic trade-offs involved in complying with environmental requirements," O'DWYER'S says.
Cost-benefit analysis is a mathematical technique developed in the 1930s by the U.S. Army Corps of Engineers to justify dam projects. The goal was to sum all the costs and all the benefits of a dam project; if the total benefit (to any and all parties) exceeded the total costs, the project got a green light.
Human deaths were not considered to be part of the equation during dam construction. (Workers killed during construction are simply ignored in cost-benefit analyses of dams.) But in a regulation to control toxic substances, human deaths are center stage. Let's look at how cost-benefit analysis can be used to show that regulations to save human lives are absurdly costly.
The heart of the technique is called "discounting." This is a familiar concept to all financial managers. A dollar in hand today is worth more than a dollar to be earned tomorrow. Future value of a dollar is smaller than the present value of a dollar. How much smaller? A typical "discount rate" for determining the "present value" of future dollars is 8 percent per year.
Here's a hypothetical example. Let's say government proposes a regulation intended to prevent groundwater pollution by the lawn pesticide industry. Assume the lawn pesticide industry will have to spend $100 million today to comply with the regulation. The regulation will prevent groundwater pollution that would take 150 years to seep through the soil into groundwater. So the benefits of this regulation occur 150 years in the future. Assume 1000 lives would be saved. If we calculate the costs per life saved at today's prices, it's $100,000,000/1000, or $100,000 per life saved. Many people would consider one hundred thousand dollars a reasonable cost per life saved. For example, many people (or their insurance companies) spend a comparable sum each year to save their lives in hospitals. Many people would even consider larger sums reasonable, say a million dollars per life saved or even more. The Air Force, for example, might spend $4 million or more on a system to eject a pilot from a fighter plane going down in flames.
But here's the trick. During the Reagan/Bush years the Office of Management and Budget (OMB) required agencies to discount the lives saved. This sounds absurd but it is true. (The Clinton OMB has not changed this policy, but has it "under review.") Therefore in the example we gave, the 1000 lives saved 150 years in the future must be discounted at 8% per year to get the "present value" of those lives. You can calculate this yourself. (For a full set of formulas, see RHWN #197and #199.) The basic formula is:
Nt = No*(e**(k*t))
where: * means "multiplied by" ** means "raised to the power of" (e.g., 3**2 = 9) Nt = present value of the original amount at time t in the future No = the original amount (in this case 1000 lives) e = the base of natural logarithms (2.71828) k = the discount rate (in this case -0.08, or negative 8%) t = time (in this case 150)
Any scientific calculator from Radio Shack can perform the calculations, starting inside the innermost parentheses and working outward:
Nt = 1000 * (2.71828**(150*(-0.08)))
Conclusion: Nt, the present value of 1000 lives saved 150 years in the future, discounted at 8% per year, is 0.006 lives saved. If we now re-calculate the cost per life saved using the "present value" of the 1000 lives saved, we get $100,000,000/0.006 = $16.7 billion per life saved. This makes the hypothetical lawn pesticide regulations seem absurdly costly.
Discounting human lives is a technique that has found great favor among the antis because it makes government regulations appear to be phenomenally expensive.
The "environmental PR firms" rely heavily on this technique
because it serves their strategic goal of demonstrating that
regulations are ridiculously expensive. Keith Schneider of the
NEW YORK TIMES used this technique in his path-breaking series of
anti-environment articles a year ago (see RHWN #330, #331, #332
and #333). Schneider presented a table of data showing, for
example, that EPA's regulations to curb pollution by the
wood-preserving industry would cost $5.7 trillion dollars per
life saved (3/24/93, pg. A16). A trillion is a million million.
EPA had estimated that the cost per life saved would be as low as
$800,000. But Schneider did not present EPA's estimate; instead
he presented OMB's estimate, which OMB developed by "discounting"
future lives saved--as if our children's lives are worth less
than our own. Schneider presented the information without
mentioning that it was based on "discounting" lives saved.
Naturally, it made the wood preserving regulations seem absurdly
costly, and it made Schneider the darling of the
anti-environmental movement and their PR allies. O'DWYER'S says
"The five-part series THE NEW YORK TIMES published last Spring
was a watershed event in green reporting."
--Peter Montague, Ph.D.
Descriptor terms: public relations; pr; wise use movement; antienvironmental movement; o'dwyer's pr services report; environmental movement; environmental defense fund; chevron; mcdonald's; general motors; gm; world wildlife fund; polluters' secret plan; regulation; cost of regulation; cost-benefit analysis; risk assessment;