For every unseasonably warm day this year, the noose around manufacturers' necks to produce environmentally friendly products gets tighter and tighter.

Need evidence? Consider this: In 2004 the business sector shouldered 65% of environmental regulatory costs, with manufacturers paying an average of $4,850 per employee, according to a 2005 U.S. Small Business Administration report.

Those figures were before the Restriction on Hazardous Substances directive in Europe and China took effect, before the European Union's Registration, Evaluation and Authorization of Chemicals initiative was enforced, and about three years ahead of more stringent EPA emissions standards for diesel and heavy-duty engines.

And that's just the tip of the iceberg. In his Jan. 23 State of the Union address, President Bush called for tighter fuel economy standards, while the auto industry already is embroiled in a legal battle with California, Vermont and other states over scheduled emissions limits. So, yes, environmental regulations are a costly reality that manufacturers must contend with, which means the question now turns from "How do we prevent new standards?" to "How can we mitigate the cost of environmental compliance?"

One way manufacturers can soften the regulatory blow, say industry experts, is by being more proactive in developing products with a minimal environmental impact. "If you're chasing after compliance, you're probably not going to be effective in managing the process," says Nabil Nasr, director of the Center for Integrated Manufacturing Studies at the Rochester Institute of Technology. Manufacturers should continually be conducting their own research and testing on products before regulations are even proposed, Nasr adds.

Part of this beat-them-to-the-punch approach includes embracing green technology as a marketing advantage. Manufacturing giants General Electric, DuPont and Toyota have been at the forefront of selling green. In doing so, many of these companies also work with the government to help develop policy. For instance, earlier in the year a group of manufacturers and big business, which includes GE and DuPont, formed an organization that calls for a cap on carbon dioxide emissions.

"Sometimes manufacturers are in an especially advantageous position where they can take the lead and push for more regulations and stricter standards, and they can take advantage of that," says Terry Tremwel, research director for the Supply Chain Management Research Center at the University of Arkansas' Sam M. Walton College of Business.

A Step Ahead

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