Among the myths taken as fact by the environmental managers of most corporations is the belief that environmental regulations affect all competitors in a given industry uniformly. In reality, regulatory costs — and therefore compliance — fall unevenly, economically disadvantaging some companies and benefiting others. For example, a plant situated near a number of larger noncompliant competitors is less likely to attract the attention of local regulators than is an isolated plant, and less attention means lower costs.

Additionally, large plants can spread compliance costs such as waste treatment across a larger revenue base; on the other hand, some smaller plants may not even be subject to certain provisions such as permit or reporting requirements by virtue of their size. Finally, older production technologies often continue to generate toxic wastes that were not regulated when the technology was first adopted. New regulations have imposed extensive compliance costs on companies still using older industrial coal-fired burners that generate high sulfur dioxide and nitrogen oxide outputs, for example, whereas new facilities generally avoid processes that would create such waste products. By realizing that they have discretion and that not all industries are affected equally by environmental regulation, environmental managers can help their companies to achieve a competitive edge by anticipating regulatory pressure and exploring all possibilities for addressing how changing regulations will affect their companies specifically.

The passage suggests which of the following concerning the relationship between the location of a plant and the compliance costs it faces?

A plant is less likely to face high compliance costs if it is located near larger plants that are in violation of environmental regulations.

An isolated plant is less likely to draw the attention of environmental regulators, resulting in lower compliance costs.

A large plant that is located near other large facilities will most probably be forced to pay high compliance costs.

A small plant that is located near a number of larger plants will be forced to absorb some of its neighbors' compliance costs.

A plant will often escape high compliance costs if it is located far away from environmental regulatory agencies.


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