DOES IT PAY TO BE GREEN? PIONEERS SUCH AS DUPONT, Dow Chemical, and Procter & Gamble have insisted for years that they reap big savings by preventing pollution instead of trying to control emissions after the fact. Still, the notion that pollution prevention is a financial boon has plenty of doubters.

Now, a study by Stuart L. Hart, director of the corporate environmental management program at the University of Michigan-Ann Arbor business school, makes a strong case for pollution prevention. Hart did a statistical analysis of the effects of pollution cutbacks in 1988 and 1989 on financial performance from 1988 to 1991, using 127 companies from the Standard & Poor's 500-stock index. After accounting for variables such as research and development intensity and size, his findings show that operating performance began to improve within the first year--and by the second year, pollution prevention was lifting return on equity, too. Of course, the biggest polluters benefited most, since they had plenty of low-cost opportunities on hand.

Based on this work, Hart believes most companies could slash emissions as much as 70% before hitting a point of diminishing returns. But since that might take 10 years, improvements in technology could mean that what isn't cost-effective today might be by then.

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