With human-caused climate change accepted science, the polluter pays principle brings the idea of consequences for those causing pollution. In its basic sense, the polluter pays principle states that those who produce pollution should pay to manage and stop it from damaging the environment - or human health. Examples of the polluter pays principle in action include
- Customers having to pay for plastic bags at stores
- An oil company footing the bill for oil spill cleanup
- The "Gas Guzzler Tax" on cars that do not meet fuel efficiency standards
The polluter pays principle is widely accepted across the globe, with many countries using it as a key cornerstone and/or the basis for environmental policies. The countries making up the European Union (EU) and Organization for Economic Cooperation and Development (OECD), which also includes non-European nations like the U.S., Japan, Australia and Chile to name a few, have offered strong support for the polluter pays principle borne out in taxation and other policies relating to corporate climate impact. In fact, in its most common form, the polluter pays principle is enforced as a Pigouvian Tax, which is a tax on activities that generate negative side effects.
How does the polluter pays principle apply to supply chains?
Supply chains include elements of production and distribution - and all the freight and logistics miles in between - meaning there are plenty of opportunities for pollution. The polluter pays principle can then apply to supply chains throughout the cycle, with potential connections occurring through
- How raw materials are gathered
- How products are manufactured
- The impact of the produced products on the world
- How waste is disposed of
- How products are transported to retailers and customers
So a company's supply chain tends to involve just about every way the polluter pays principle can apply, offsetting pollution caused by shipping, manufacturing and waste disposal. On top of that, with the global nature of many supply chains, a company may face financial consequences in multiple locations. That's why taking measures to implement green practices like a circular supply chain model can make a lot of sense not only for the environment, but to keep taxes and penalties down.
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