INSTITUT Veolia Environnement

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Report n°2: An integrated approach to economic and social contestability in business

Intermediate conclusion: lessons from an experience of contestation

The fact that a business causes a certain amount of nuisance, arousing "challenging vigilance" in those who do not trade with it, does not necessarily mean that this opposition will increase, and change into a movement for environmentally- or health-based social contestation. The reality of the threat in the recycler's view depends on (i) whether or not previous episodes challenging the recycling business are considered, (ii) the existence of private information (research data) on the environmental and health problems that the activity could cause and (iii) the expected impact that public disclosure of this information would have on the business's social acceptability.

The way in which challenging vigilance escalates to a genuine contestation depends on a change (i) to the issues invoked when opposition to the activity is expressed, (ii) to those who take over the opposition and (iii) to the manner in which the public is swayed by debate and controversy between scientific experts over the hypothetical risks.

The suggested analysis first stressed that the strategic mechanisms used to reduce the probability of defection responses to a lack of trust between parties differing in expertise have positive side-effects to reduce the probability of a situation where a social contestation could emerge. These mechanisms reduce the risk in the branch's input market that the agent suffering from the expertise asymmetry will adopt a strategy of contestation through defection.

Secondly, the recycler fears that the precaution principle may be misinterpreted and applied wholesale, so that once there is any doubt as to whether his business is risk-free, it will be closed down completely. He may therefore prefer not to disclose the information he has, thinking that he can only stand to lose by doing so. Even if he carries out technical research on the possible risks associated with waste products, he will be encouraged to keep the information he obtains to himself, and particularly as, unless he has adequate resources, the best he will have is partial or ambiguous data, sufficient to raise questions, but not sufficient to provide clear and reliable answers.

In dealing with a problem of lack of trust, whether in internal business transactions or externally in those with whom he does not trade, an operator exposed to a low threat of economic contestation and a high threat of social contestation benefits from adopting a strategy of being selective in transferring the information he has. In order to preserve his trading activity, the recycler will reject a strategy of total transparency, since passing on full information could affect him adversely, firstly by disturbing the way his trading transactions work; and secondly because the information could be used strategically by protestors aiming to close down the recycler's business in the area in which he currently operates.