The impact of business operations on the environment has emerged to be a major concern especially in the developed economies. This is accompanied by the rising external pressures and internal motivation for environmentally sustainable business practices (Delmas & Toffel 2005, p.4).
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Various causes have significantly contributed to the current environmental crisis. Those who argue for environment-friendly business practices have presented notable common causes that relate to natural environment protection. They claim that the causes emanate because of the escalating demands for natural resources by corporations.
Further, the intense machine utilization which emits harmful substances that degrade and consequently damage the natural environment is another factor which necessitates corporation to protect and equally care about the natural environment.
The consumers’ strong inclination and preference to merchandises which are inexpensive yet prove not to be environmental friendly as opposed to expensive environmental friendly products has also been suggested as a factor that obliges corporations to partake activities that protect the natural environment (Selin & VanDeveer 2006, p.11).
However, many people have noted lack of any important relationship between the environment and corporations. The lingering argument is that environmental responsibility is politically-oriented and corporations should always focus on their respective core businesses.
As a result, this paper attempts to answer the question “Should a corporation care about and protect the natural environment?” Apparently, environmental protection can be an opportunity to strengthen the relationship between a corporation and its stakeholders as well as a strategy to create competitive advantage.
The environment and corporate stakeholders
The execution of environmental management practices in any corporation is influenced by stakeholders like consumers, suppliers, legislators, employees and customers. In particular, consumers are becoming more environmentally conscious while the increasing green market segment prefers ecologically sound goods and services.
Indeed, these consumers are eager to sacrifice some economic development for environmental protection. Suppliers also exercise substantial pressure on business partners particularly for adoption of environmental certificates and establishment of management systems like ISO 14001, Eco-Management and Audit Scheme.
Since the stakeholders are the key success factors to any corporation, environmental management leads to better practices which can influence the competitive position of a corporation by imposing investment demands, new costs and efficiency (Williamson, Lynch-Wood & Ramsay 2006, p.320).
For instance, environmental initiatives may stem from concerns expressed by customers expecting the corporation to behave in a socially responsible manner within the society they operate in. In such a situation, the response that a firm gives to such concerns will determine its success within that society. This success has been observed in Toyota Motor Corp. which uses environmental sustainability initiatives to win customer loyalty.
Adopting environmental protection measures offers corporations the opportunity to cater for and protect the natural environment while at the same time helping them to improve their competitive advantage. Bansal and Roth (2000, p.722) observed that corporations take ecological measures for reasons of competitiveness, legitimation and social responsibility.
It is also suggested that environmental management can lead to broader range of benefits such as cost saving, efficiency, waste reduction, positive image, marketing advantages, better media coverage, strong relationship with stakeholders, lower insurance premiums, improved staff motivation and improved overall quality.
As Simpson, Taylor and Barker (2004, p.169) noted, the ability of corporations to gain competitive advantage is related to issues of marketing, operations strategy, product development as well as the processes and technologies of manufacturing.
Developing competitive advantage through environmental protection
There are two common theories in business context for acquiring competitive advantage. First is the industrial organization theory that is based on the work of Meyers (1992, p.257-259) and the second one is the resource-based theory (Barney 1991, p.92).
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Various researches that relate environmental management to competitive advantage in corporation derive from organizational theory which suggests the organization of business operations in a value chain. The theory also highlights the difference between differentiation advantages and cost advantages.
Porter (1985, p.31) insisted that value creation activities performed by the corporation to design, manufacture, market and support a product result from competitive advantage. Most of the primary activities will probably improve with the use of environmental management techniques such as waste control.
A good example is lean production used by manufacturing firms and has been associated with competitive advantage. Cost advantages stem from pollution control, prevention technologies as well as corporate practices that increase production efficiency through waste management. Differentiation advantages result from enhancing product features to be environmentally friendly and creating new environmentally-friendly products alongside marketing the correlated environmental benefits.
Resource-based theory views the corporation as a unique collection of resources including assets, capabilities and knowledge. The firm can use these resources to envisage and execute strategies that enhance their effectiveness and efficiency. The competitive advantage results from rare resources that come from organizational circumstances.
Thus, environmental management initiatives can lead a corporation to acquire competitive advantage especially when it cannot be easily copied by others. However, environmental management should not only be considered as a social or legal responsibility, but as a venture that will enhance the efficiency of a corporation and give a competitive edge.
Apparently, a corporation should care about and protect the natural environment. This is not only for the sake of legal and social fulfillment as may tend to suggest, but for the sake of the business per se. In fact, environmental management is a good approach to strengthening the relationship between the firm and the important stakeholders. It helps in creating a competitive advantage by meeting the demands of any strategic endeavor.
Bansal, P & Roth, K 2000, “Why companies go green: A model of ecological responsiveness”, Academy of Management Journal, vol.43, no.4, pp.717-736.
Barney, JB 1991, “Firm resources and sustained competitive advantage”, Journal of Management, vol.17, no.1, pp. 99-120.
Delmas, MA & Toffel, MW 2005, Institutional pressure and environmental management, ISBER Publications, California.
Meyers, C 1992, “The corporation, its members, and moral accountability”, Business Ethics: A Philosophical Reader, Macmillan Publishing Co., New York.
Porter, ME 1985, Competitive advantage, The Free press, New York.
Selin, H & VanDeveer, S 2006, “Raising global standards: Hazardous substances and e-waste management in the European Union”, Environment, vol.48, no.10, pp.6–18.
Simpson, M, Taylor, N & Barker, K 2004, “Environmental responsibility in SMEs: Does it deliver competitive advantage”, Business Strategy and the Environment, vol.13, no.4, pp.154-171.
Williamson, D, Lynch-Wood, G & Ramsay, J 2006, “Drivers of environmental behavior in manufacturing SMEs and the implications for CSR”, Journal of Business Ethics, vol.67, no.6, pp.317-330.