Introduction
Environmental management, as one would infer from the title only, is not the mere management of the environment that surrounds us. There is more to this term than just this. It is the management of the interaction that human beings do with the environment and the impact that they put upon the environment through their actions. Mostly, the impact that an individual may grace upon an environment is negligible and cannot be accounted for in a large chunk. Therefore, businesses, which have a social responsibility towards the environment, are held accountable for taking care of the environment and practicing environmental management. Businesses primary motive is to earn profits and to maximize their returns and therefore they are working towards this interest only. Amidst achieving this aim, it is essential for businesses to practice environmental management so that there is a check and balance as to how they achieve their aims. (VanRoom, 2004) If it had not been for environmental management, businesses would have been earning great profits on the cost of harming the environment we live in. The article that has been chosen has been written by Mario G. Cora in the year 2007 and it emphasizes on the fact that businesses should not be overwhelmed by the term environmental management and vision it as a burden because it has been seen that it is one of the best tools to create value for the business itself. Value creation for the business helps in developing the brand equity and establishing a reputable name for the company and its product. Thus, environmental management, done through various ways and seen through many perspectives can surely help the business go a long way.
Summary of the Article
The article starts with differentiating between the regular thinking of environmental management as an expense as opposed to the author’s notion of it being an investment. Author calls it an expense in the short term but value creation in the long term. Environmental management has been called no less than financial management because it involves deciding upon whether investment risk should be taken for specific capital given a certain time horizon. The author quotes many other sources and conveys various ways in which environmental management can be practiced in beneficial ways for the organization. Partnering with community organizations, using ERP system for a complete and integrated picture on environmental issues and investing in redevelopment projects are some of them. Environmental costs have been considered as necessary that is “one that is helpful and appropriate”. These costs have been called investments because first, they can be capitalized over time and increase the “assets” column of balance sheet and second, they tend to improve the quantity as well as quality of goods and services that a company provides thus improving value of the organization. Moreover, increasing on “present value” is better than paying higher costs in the future. Traditional environmental management is mostly inactive and becomes reactive when compliance is necessary. On the other hand, proactive approaches are for businesses which want to create value for the company. It can be practiced by making environmental policies beforehand, implementing and managing an environmental management system. Last but not the least, certification with ISO 14000 can help the company align environment with its business.
Discussion
Main Environmental Management Concepts/Ideas
The first major concept discussed is that of the difference between environmental management and business management. If environmental management is practiced, it contributes well to the finances of the company, thus making business management easy. The role of environmental management has been discussed as being a guide to how businesses should positively affect environments or restrain from negatively affecting it. Environmental management standardizes the process and thus makes following the rules easy.
Economics versus finance has been debated. Finance has been called as taking care of allocation of resources over time whereas economics is just concerned about allocation of scarce resources among the many recipients. Environmental management has been called as equivalent to financial management as it also involves the decision of whether specific capital should be invested and then measure it against a given time horizon. Therefore, environmental management can also be capitalized over time, thus ultimately emerging as a value creator for the business. Sustainable development has been discussed from both a macro and micro point of view. When it comes to businesses, they exist in a macro environment and thus, sustainable development does not limit the company’s competitiveness and ability to create wealth. Environmental professionals have been addressed and been shown the high relation that environmental management has with financial management. (Brady, 2005).
A literature review follows which highlights many concepts of environmental management. Firstly, it talks about companies which do product life cycle assessment on the basis of environmental demands of its products. It does eco-design of its products i.e. it designs its products to be environmentall friendly so as to stimulate environmental demand and thus then it determines on which stage it is on when it comes to the product life cycle. Secondly, complete systems like ERP have been dedicated to environmental management and on alerting the employees on environment around them. Thirdly, redevelopment projects which will focus on environmental projects will be initiated. Moreover, strategic partnerships bring the best of resources and capabilities of both the partners and help capitalize on the strengths on both, benefitting the environment too. (Barrow, 2006).
Other environmental management concepts that are prominent are the vast differences between the traditional versus the proactive approach. Traditional approach is simple compliance with regulations posed by the government. But proactive approach deals with investing in the present value so that it capitalizes with time and there is an increase in present value. Making an environmental policy which defines the strategies for the upcoming time period is one of the proactive approaches. Implementing and managing an environmental management system is also essential if companies want to be proactive.
Comparison and Contrast
In comparison to other sources, mostly books, the article has done great justice in integrating many ideas on environmental management and its role as a value creator for the organization. There are books which further elaborate on the difference between finance and economics, a part also been dealt in the article. Finance is the study of allocation of resources over time whereas economics just studies the efficient allocation of resources without regard for time. Other books also stress on the fact that economics is a normative subject, which will depend from the perception of person to person whereas finance is a subject which has definite rules which do not vary according to one’s thinking. And environmental management has been categorized as financial management, thus giving certainty and more solid backup as to the benefits it can give to the company. (Piper, 2003).
Moreover, one of the books gives the name of green marketing to the efficient use of environmental management. This term has not been used in the article explicitly but the tactics that have been discussed in the article are similar to what will fall in the category of green marketing. Using green marketing is in a way doing product differentiation for your own company and its products, thus highlighting it in the eyes of the consumers, thereby adding value to it. This value can be later capitalized by increasing the price of the brand. Furthermore, books stress on the huge amount of cost savings that can take place if environmental management is practiced. These books emphasize on the fact that companies make a lot of money by selling old scrap useless material to the right people, thus saving costs that would have been otherwise incurred in disposing this waste and then giving penalties for polluting the environment. (Hitchcock, 2006).
In addition to that, other sources have also stressed on the consumer aspect of environmental management. It focuses on the fact that with time, consumers are getting more sophisticated and are attracted to products that are environmentally responsible. They would prefer a product which is “green” rather than one which is not. This change of attitude in consumers is a great force which should encourage the companies to think of environmental management as an investment, meant to add value, rather than as a necessary expense. (Darabaris, 2008).
Gaps in the Articles
The article is a comprehensive study on how environmental management can be used as a tool for creating value within the business. There are however some gaps in the article that could have made it even more detailed and deep in its study.
The author has recognized many ways in which proactive environmental management is practiced. In addition to these methods, some others are also present. The role of the government must be highlighted as well which is an important part of this three sector world. The government, rather than using command and control, can leave the market to use its own mechanisms and settle the way it wants to. One of the ways in this market based mechanism is that of tradable permits in which organizations can sell and buy the right to pollute. In this way, companies that have this prediction that they might pollute more than they are allowed to can buy the right to pollute from a company which will pollute less than its stipulated right. This way the total number of pollution remains constant and even less. And it is a good way for the companies to keep a check and balance on their pollution levels. Companies can try to pollute less than they are allowed and then sell it to some other company in need of this right, thus making the extra cash out of being effective in environmental management. This ultimately will lead to value creation since the company might be increasing on the “assets” column of the balance sheet with the extra cash that it gets. (Steger, 2004)
The government can use another tactic that is information disclosure to make sure companies do environmental management. Another name for this tactic is regulation by publicity or regulation by embarrassment. In this tactic, the government publishes information which contains details about the amount of pollution that has been done by each and every company. If companies will be listed as one of the top pollutants, it will harm their company reputation and brand equity to a great extent. Thus, practicing environmental management will save the company from embarrassment in this regard and thus will retain the value that it has created for itself in the market and in the eyes of the consumers and regulators. (VanRoom, 2004).
Personal Attitude, Strong and Weak Points, Good Indication of the Present State of Knowledge and Ideas on the Issues, Learning from this Article
My personal attitude towards what is said in the article is that it is very right in its concept of maximization of value creation. It’s always beneficial to be right and in the case of environmental management, doing it before rather than suffering later is better. The increase in present value is sure to be there if environmental policies are made and worked upon. The costs of not doing environmental management in the present are not just financial but also intellectual. That is, it is not just the company’s money which goes out to pay the penalties but it is the company’s goodwill as well which goes down the drain.
The strong points of this article are that it has given a thorough literature review, which clearly supports whatever the article is proposing. The literature review helps give the reader enforcement on what the author is saying. Moreover, the author has made sure that he does not discuss terms without discussing their definitions first. So the article is comprehensible for a layman and non-environmental professionals as well. The weak points of this article are that the value creation perspective has only been seen from the company’s point of view. It has not been touched upon in terms of the consumers and the governments. Moreover, visuals in the article would have given it an attractive look.
The article is quite a good indicator of the present state of knowledge and ideas on the issue. it discusses compliance with ISO 14000 as the ultimate source of being effective at environmental management. It also focuses on EMS (Environmental Management Systems) and ERP (Enterprise Resource Planning), concepts which are relatively new and technology based. The present state of knowledge focuses on the use of technology to do environmental management. But the article has missed out on the Stages of Corporate Environmental Responsibility which form a major part of today’s knowledge and ideas. (Scroufe, 2007)
The article has taught me quite a few things about how environmental management can be so beneficial for the business sector if practiced with commitment and sincerity. I was quite surprised to find that the whole of as big a system as Enterprise Resource Planning can be dedicated to environmental management only. Such an investment looks very risky and the layman would believe that the costs would outweigh the benefits, but the article made me learn that modern developments have made this possible for companies as the costs have been lowered and the benefit is humungous that is, the portrayal of a “total picture” of environmental, health and safety issues.
Conclusion
In conclusion, it can be said that environmental management is a term which has within it loads of profitability, increase in business value and sustainability for a company if it is exploited in the right manner. The practice of environmental management should be proactive so that even if expenses are incurred after the implementation and maintenance of environmental policies, they seem less in comparison to the benefits. A proactive approach gives a steady and stable idea to the company as to the costs it can incur in relation to environment, whether it is the present time or the future state. Moreover, if the employees of the company are integrated into the proactive approach of environmental management, there is bound to be quick progress in this direction since the people will feel involved and thus, will feel individual responsibility towards the program, thereby making the internalization a success for the company. Whether it comes to land pollution, water pollution or air pollution, companies are powerful entities that exist in the society and thus they have the authority which can be used for very purposeful measures for the betterment of these kinds of pollution thus benefitting the environment. This is a three sector world owned by the government, society and the business sector. Each sector has to give something to the other two sectors, making a mutual and dependent relationship. Thus, it is the responsibility of the business to do effective environmental management so as to preserve the environment for the present society and its future generations.
References
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