Business and Environmental Protection: An Introduction

Research in Human Ecology
Business and Environmental Protection: An Introduction1
Jorge Rivera
Department of Strategic Management and Public Policy
George Washington University
2125 G. Street, NW
Washington, DC 20052 USA2
Magali Delmas
Donald Bren School of Environmental Science & Management
Donald Bren Hall 3422
University of California
Santa Barbara, CA 93106 USA3
This special issue of the Human Ecology Review pre-
1994; Shrivastava 1995b; Russo and Fouts 1997; Hart 1995).
sents research papers and opinion pieces that seek to improve
They also proposed that companies that have adopted a pro-
the understanding of the interaction between business and the
environmental strategy could also impose a cost on their
natural environment in different parts of the world. From all
competitors by influencing regulators to adopt more stringent
the research manuscripts submitted, we selected three papers
regulations (Vogel 1995; Christmann 2000) and reduce liabil-
for publication. We also present in the Forum section the
ity risks (Shrivastava 1995b; Reinhardt 2000).
opinion pieces of six recognized academic and industry lead-
However, empirical studies on the link between environ-
ers in the business and natural environmental field. Finally,
mental and financial performance have shown conflicting ev-
we include a review of the book Corporate Environmentalism
idence (Margoliss and Walsh 2001; Russo and Fouts 1997;
and Public Policy (Lyon and Maxwell 2004).
Konar and Cohen 2001, Hart and Ahuja 1995; Klassen and
McLaughlin 1996; King and Lenox 2002; Rivera 2001; Khan-
Development of the Field
na 2001). This may be explained in part by the difficulty of
measuring environmental and financial performance (Mar-
In the 1990s, research on business and environmental
goliss and Walsh 2001; Koehler and Cram 2001; Toffel and
protection focused, for the most part, on identifying a posi-
Marshall 2004; Johnston and Smith 2001) and by the empiri-
tive link between corporate environmental performance and
cal difficulty of assessing the causality between financial and
profitability arguing that it can pay to be green (Starik and
environmental performance (Koehler and Cram 2001; King
Marcus 2000; Porter and van der Linde 1995). This research
and Lenox 2001; Margolis and Walsh 2001). An additional
stream positioned itself in opposition to the traditional view
challenge to researchers is that corporate environmental man-
that improvements in environmental performance are associ-
agement efforts may be only indirectly related to profitability.
ated with increased costs (Walley and Whitehead 1994;
More recent streams of research have identified addi-
Palmer et al. 1995). The proponents of a win-win environ-
tional motivations for proactive corporate environmentalism
mental management paradigm argued that green strategies
such as institutional pressures and managers’ motivations.
could enhance firms’ competitive advantage by attracting en-
Researchers within the institutional theory paradigm empha-
vironmentally aware consumers (Hart 1995; Sharma and Vre-
size the role of social and cultural pressures imposed on or-
denburg 1998; Shrivastava 1995a; Reinhardt 1998; Stead and
ganizations that influence the adoption of environmental or-
Stead 1995). They posited that the development of pollution
ganizational practices and structures beyond the profit-mak-
prevention technologies, as opposed to end-of-pipe technolo-
ing rationale (Hoffman and Ventresca 2002; Hoffman 1999;
gies, could allow companies to increase the productivity and
Delmas and Toffel 2004; Rivera 2004). Empirical studies in
quality of their manufacturing process (Porter and van der
the neo-institutional stream point out the key role played by
Linde 1995; Corbett and Van Wassenhove 1993; Reinhardt
government agencies, the media, industry associations, and
2000; Shrivastava 1995b; Nehrt 1996; Stead and Stead 1994;
environmental groups to pressure corporations to adopt
Majumdar and Marcus 2001; Rondinelli and Berry 2000) and
proactive environmental management practices (Hoffman
help firms generate technological and organizational innova-
1999; Delmas 2002; King and Lenox 2000; Rivera and
tions that would give companies a competitive edge (Roome
deLeon 2004; Darnall 2003).
230
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Rivera and Delmas
Scholars that rely on theories from organizational psy-
King and Lenox 2000; Rivera and deLeon 2004). These chal-
chology have also provided important contributions to the re-
lenges vary across institutional contexts and may be serious
search on business and environmental protection. This stream
enough to make these initiatives unattractive to policy mak-
of research highlights how top managers’ environmental be-
ers and corporations (Delmas and Terlaak 2002).
liefs, values, and attitudes — used to assess firms’ competi-
Empirical evidence exploring the link between the adop-
tive alternatives and their outcomes — play a critical role in
tion of voluntary programs and higher corporate environmen-
determining corporate environmental management choices
tal performance is still thin, pointing to the need for more
(Cordano and Frieze 2000; Egri and Herman 2000; Anderson
work in this area. Until now, some seminal studies suggest ei-
and Bateman 2000; Egri 2000; Winn and Angel 2000). Pro-
ther no correlation or a negative association between corpo-
environmental attitudes and commitment by top managers
rate environmental performance and participation in volun-
also appear to positively affect the environmental behavior of
tary initiatives (Khanna and Damon 1999; Anton et al. 2004;
middle and lower-level employees (Ramus and Steger 2000;
King and Lenox 2000; Rivera and deLeon 2004). These neg-
Egri and Herman 2000).
ative results may be explained by the absence of mechanisms
Most recently, another research stream has concentrated
to reduce free-riding behavior by voluntary programs such as
on studying voluntary programs that promote the adoption of
performance-based standards, third-party monitoring, and
environmental management systems and encourage the cre-
sanctions (King and Lenox 2000; Rivera and deLeon 2004;
ation of partnerships between profit and non-profit stake-
Reinhardt 1998).
holders. These include, for example, environmental manage-
Finally, it is important to highlight that despite the
ment systems (EMS) such as the international environmental
booming of emerging market economies in Asia and to a less-
management standard ISO 14001, voluntary agreements be-
er degree in Latin America, very little research on corporate
tween firms and regulatory agencies or NGOs, and industry
environmental management has studied the behavior of cor-
self-regulation. This body of work has analyzed firms’ moti-
porations in developing countries (Rivera 2002; Utting 2002;
vations to voluntarily adopt such practices or to participate in
Christmann and Taylor 2001; Wehrmeyer and Mulugetta
these new relationships with stakeholders.
1999). The literature remains almost exclusively focused on
Empirical studies suggest that firms adopt ISO 14001
understanding the behavior of manufacturing firms in indus-
mostly in response to pressures from regulators, customers,
trialized nations (Rivera 2002; Rivera 2004; Starik and Mar-
and the civil society (Andrews et al. 2003; Coglianese and
cus 2000)
Nash 2001; Bansal and Bogner 2002; Christmann and Taylor
The conventional wisdom in emerging market econo-
2001; Delmas 2002; Kollman and Prakash 2002), although
mies is that given the economic limitations of businesses,
some evidence shows that EMS could also improve firm
governments, and consumers, the trade-off between environ-
efficiency and competitive advantage (Delmas 2001; Sroufe
mental protection and competitiveness is more significant
2003).
than in industrialized nations. For policy makers and business
Research on voluntary environmental programs has fo-
managers, this “conventional wisdom” generally implies that
cused on understanding business motivations to adopt such
the enactment of mandatory environmental regulations
initiatives (Delmas and Terlaak 2001; Marcus, Geffen, and
should be postponed until a more advanced level of econom-
Sexton 2002). It has been identified that these programs can
ic development has been achieved (Wheeler 1999). Not sur-
provide tangible benefits to their participants, including en-
prisingly, the majority of firms operating in these countries
hanced reputation and price premiums (Arora and Gangopad-
exhibit poor environmental management practices. We are
hyay 1995; Rivera 2001), technical assistance (Wu and Bab-
very pleased that this special issue contributes towards filling
cock 1999; Khanna 2002; Delmas and Terlaak 2001) regula-
this important gap in the corporate environmental manage-
tory flexibility, and preemption of regulations (Segerson and
ment literature by including research articles and forum pa-
Micelli 1998; Lyon and Maxwell 2004; Delmas and Terlaak
pers focused on voluntary initiative in both developing and
2001; Rivera 2002). However, the use of voluntary environ-
developed countries.
mental programs as alternative environmental policy instru-
ments introduces fundamental challenges to the ways in
Description of the Papers
which corporations and non-profit organizations think about
Included in this Special Issue
the institutions that society has developed to resolve environ-
mental problems (Hoffman et al. 2002). Voluntary initiatives
In their article, “How Do Public Disclosure Pollution
can be marked by high transaction costs and significantly af-
Control Programs Work? Evidence from Indonesia,” Black-
fected by free-riding behavior (Marcus, Geffen, and Sexton
man, Afsah, and Ratunanda shed light on the incentives for
2002; Delmas and Mazurek 2004; Delmas and Keller 2004;
pollution reduction provided by one of the most innovative
Human Ecology Review, Vol. 11, No. 3, 2004
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Rivera and Delmas
public disclosure programs established in the developing
within academic institutions in the U.S. Alfred Marcus’ man-
world: the Program for Pollution Control, Evaluation and
uscript “Reviving Regulation,” explores how altruism, profit-
Rating (PROPER). Their findings suggest that in concert with
seeking, and regulations drive companies to become more en-
stakeholder pressures, the information about environmental
vironmentally sustainable. He argues that incentive-based
management opportunities provided by PROPER auditing
regulations are key to deal comprehensively with the complex
process is a critical driver of pollution-reduction efforts
environmental problems confronting society.
among participants. These results contribute to the literature
In “Innovation, Global Change and New Capitalism: A
on public disclosure programs that views external institution-
Fuzzy Context for Business and the Environment,” Nigel
al pressures as a key incentive for enhanced environmental
Roome argues that environmental sustainability is based on a
performance. In developing countries where institutional
strategic connection between innovation and corporate social
pressures are weak and environmental expertise is scarce,
responsibility accomplished in collaboration with a wide
voluntary disclosure programs can be more effective if they
range of other actors. He proposes that as businesses con-
provide technical assistance to participants.
front interconnected environmental social, cultural, and eco-
The article by Bruce Paton entitled “Two Pathways to
nomic issues, a new dialectic is established worldwide
Energy Efficiency: An Energy Star Case Study” evaluates the
around competing models of the role of business in society.
mechanisms within the Energy Star labeling program that are
Focusing on the lifestyle of environmental researchers and
used to promote energy savings. It identifies two different
professionals, Mark Starik’s essay, “Holistic Environmental
mechanisms: a converging mechanism that pushes all firms
Leadership: Living Sustainably Beyond 9-to-5,” provides an
within an industry to adopt a similar level of environmental
interesting guide for researchers and other professionals to
performance and a separating mechanism that drives only
engage in pro-environmental behavior.
some firms within the industry to differentiate their products
Richard Welford’s “Business and Environmental Protec-
based on their environmental performance. The paper sug-
tion: A View from Asia” highlights the acute environmental
gests circumstances in which each type of mechanism may be
problems produced by the economic boom in China, India
more feasible and more desirable to create. In particular, it
and other Asian countries. His essay stresses that to effec-
highlights that regulatory threats and government procure-
tively solve these problems, policy makers need to rely on
ments may facilitate the success of converging mechanisms.
multiple environmental policy instruments (direct regula-
Firms will have incentive to innovate and differentiate their
tions, economic incentives, voluntary initiatives, and interna-
product if they can protect their innovation from imitation.
tional standards) tailored to the unique socio-economic con-
In “A Comparative Institutional Approach to Environ-
text of these countries. Finally, in “Certification: A Catalyst
mental Regulation: The Case of Environmental Degradation
for Partnerships,” Chris Wille illustrates in detail the innova-
Along the U.S.A.-Mexico Border,” Bryan Husted develops a
tive collaborative strategy implemented by Rain Forest Al-
transaction-cost framework that considers the differences in
liance to promote corporate environmental and social respon-
countries’ socio-economic contexts when selecting instru-
sibility by auditing the behavior of timber and agricultural
ments of environmental regulation. Using the case of Mexico
companies in both developed and developing countries.
and the United States, the manuscript highlights the impor-
To conclude, we would like to recognize the anonymous
tance of avoiding a joint environmental policy that ignores
reviewers whose assistance was key in developing this spe-
the stark discrepancies in political support and administrative
cial issue. Many thanks to all of them for kindly providing
capacity enjoyed by environmental agencies on both sides of
their time and knowledge to carefully evaluating the manu-
the border.
scripts submitted. We are also grateful to Linda Kalof, the ed-
The Forum section of this special issue presents the
itor of HER, who provided us with invaluable support and
opinion essays and commentaries from six path breakers in
guidance.
the business and environmental protection field. In his essay
“The Sustainability Generation: Preparing Future Leaders,”
Endnotes
Garry Brewer discusses the challenges and opportunities cre-
ated by environmental concerns to management education.
1.
Both guest editors contributed equally to the special issue and to this
He describes the need for education programs that bring to-
introductory manuscript.
gether business management and environmental science
2.
Author to whom correspondence should be directed:
skills. He elaborates on the many challenges that academic
E-mail: jrivera@gwu.edu
institutions face to prepare future leaders for the transition to
3.
E-mail: delmas@bren.ucsb.edu
a more sustainable future and describes pioneering efforts
232
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Rivera and Delmas
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