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Comprehensive summary of all articles for the course Business Strategy and Sustainability.
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BUSINESS STRATEGY & SUSTAINABILITYSUMMARIES
Week 1
Ä Bansal, P., & Roth, K. 2000. Why companies go green: A model of ecological responsiveness.
Academy of Management Journal, 43(4), 717-736.
CORPORATE ECOLOGICAL RESPONSIVENESS: set of corporate initiatives aimed at
mitigating firm’s impact on the natural environment. These initiatives can include changes to the firm’s
products, processes, and policies, such as reducing energy consumption and waste generation, using
ecologically sustainable resources, and implementing an environmental management system.
The authors first present a preliminary model with 4 drivers of corporate ecological response:
• Legislation
o Escalating penalties, fines, and legal costs
• Stakeholder pressures
o Customers, local communities, environmental interest groups, natural environment
itself
• Economic opportunities
o Intensify production to reduce impact lowers costs of inputs and waste disposal
o Revenues increase with green marketing, sale of waste products, outsourcing firm’s
environmental expertise
• Ethical motives
o “the right thing to do”
Use inductive methodology, the data sets they used comprise:
• Food retailers
• P&O subsidiaries
• Auto manufacturers
• Oil companies
• Japanese companies
• Single case studies
The authors identify 3 motivations for ecological responsiveness:
1. Competitiveness: the potential for ecological responsiveness to improve long-term
profitability
, a. Includes energy and waste management, process intensification (higher output from
same resources), ecolabeling and green marketing, development of “ecoproducts”;
b. Firms motivated by competitiveness expected that their ecological responsiveness led
to sustained advantage and hence improved their long-term profitability (through
improved reputation, process efficiencies, product reliability);
c. Under the motivation of competitiveness, social initiatives are adopted only if they
serve to enhance a firm’s financial performance.
2. Legitimation: desire of a firm to improve the appropriateness of its actions within an
established set of regulations, norms, values, or beliefs
a. Complying with legislation, establishing an environmental committee/manager,
developing networks with local communities, environmental audits, establishing an
emergency response system, and aligning the firm with environmental advocates;
b. Not proactive but reactive (compliance) towards external constraints to avoid
sanctions;
c. Firms focused on the stakeholders most influential in prescribing or articulating
legitimacy concerns;
d. Meet standards rather than exceeding them.
3. Ecological responsibility: motivation that stems from the concern that a firm has for its social
obligations and values
a. Concern for the social good;
b. Single individual who championed their ecological responses.
The study reveals also the contexts of these motivations:
• Issue salience: extent to which a specific ecological issue has meaning for organizational
constituents. Certainty, transparency, and emotivity determine an issue’s salience.
§ Certainty: degree to which the impact of the issue on the natural environment
can be measured
§ Transparent: issues easily attributable to a polluting firm
§ Emotivity: issues that elicit an emotional response from organizational
constituents
o Salient issues viewed as having a potentially significant impact on firm profitability
because government agencies were more likely to impose fines, and customers were
more likely to be aware of negative ecological effects.
o Competitive advantage was not likely to be realized when issue salience was low.
Proposition 1. Issue salience will be positively associated with legitimation and competitiveness.
• Field cohesion: intensity and density of formal and informal network ties between constituents
in an organizational field.
o The data indicated that the frequency of interactions and resource dependencies
increased interconnectedness within the field, as organizational members transferred
their understanding of the organizational environment, including the natural
environment, to each other. Proximity further facilitated these transfer;
o Negative images of the industry’s ecological impact and activities of industry
associations helped develop field cohesion;
o Industry members had difficulty innovating products and processes because these
innovations ratcheted up the standards for others. Consequently, these firms mimicked
the initiatives of their peers. These firms were motivated strongly concerns of
legitimacy;
o Firms in fields with high cohesion were less likely to be motivated by competitiveness:
o Firms’ cohesion implied that firms shared the same understanding of acceptable
organizational practices. Superior performance was discouraged because made other
members “look bad”
,Proposition 2. Field cohesion will be positively associated with legitimation and negatively associated
with competitiveness and ecological responsibility
• Individual concern: degree to which organizational members value the environment and the
degree of discretion they possess to act on their environmental values.
o Personal values can influence ecological responses
§ Help to decide which signals are good
§ Induce organizational members to champion ecological responses
§ Top management is more receptive to changes in the organizational agenda if
these fit with their own personal values.
o Individual concerns for the environment led to motivation of ecological responsibility;
o Individual concern also led to a legitimation motivation if the concerns of the individual
were congruent with those of constituents within society.
Proposition 3. Individual concern will be positively associated with ecological responsibility and
legitimation
The authors assume that in the new model motivations can be mixed and that the notion of equifinality
could be applied to ecological setting. This means that a corporation’s ecological agenda competes with
other functional agendas for resources. They posit 3 profiles that lead to high responsiveness:
1. Caring profile
a. The influence of individual concern on ecological responsibility is moderated by issue
salience;
b. Issue salience provides a legitimising context for the individual’s introduction of
change. The individual can imprint the endeavours with his or her values and direct the
firm toward ecological responsiveness.
2. Competitive profile
a. The interaction between the individual concern and low field cohesion promotes a
mixed motive of ecological responsibility and competitiveness, and this mixed motive
results in potentially high responsiveness;
b. The combined interest in ecological responsiveness and competitiveness leads to green
products and processes.
3. Concerned profile
a. The interaction of field cohesion and issue salience induces a more intense legitimation
motivation. The field is cohesive, and all field members respond.
b. The field must be responsive to ensure survival of its members.
Anthropocentrism vs. Ecocentrism.
Limitations:
• Inductive research
• Generalizable only to the extent that the theoretical dimensions are captured in this study.
• Tried to uncover firm’s motivation after the firm had made its decision to act.
Ä Friedman, M. 1970. The social responsibility of business is to increase its profits. New York
Times, September 13.
Businessmen that talk about “social responsibility” are preaching pure socialism. Business cannot have
responsibilities, only people can have them. So, the main step is to understand what the social
responsibility of business implies for whom. Most of the discussion is directed towards corporations,
and so speak of corporate executives, who have direct responsibility to their employers. The manager
, is the agent of the individuals who own the corporation or establish the eleemosynary institution, and
his primary responsibility to them.
The corporate executive is also a person in his own right – might have many other responsibilities that
he recognizes or assumes voluntarily. These responsibilities are “social responsibilities” where he is
acting as a principal. However, this means that he is to act in some way that is not in the interest of his
employers.
Insofar as his actions in accord with his “social responsibility” reduce returns to stock holders, he is
spending their money. Insofar as his actions raise the price to customers, he is spending the customers’
money. Insofar as his actions lower the wages of some employees, he is spending their money. So the
executive is exercising a distinct “social responsibility” only if he spends the money in a different way
than they would have spent it. This means that he is imposing taxes and deciding how the tax proceeds
shall be spent.
This rises a political question on two levels: principle and consequences. On political principle, the
actions just mentioned are governmental functions. The businessman would have to be simultaneously
legislator, executive, and jurist.
The whole justification for permitting the corporate executive to be selected by stockholders is that the
executive is an agent serving the interests of his principal. This justification disappears when the
executive imposes taxes and spend the proceeds for “social” purpose, becoming a public employee. If
so, they should be selected through political process. This is the basic reason why the doctrine of “social
responsibility” involves the acceptance of the socialist view that political mechanisms, not market
mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses.
On consequences, can the executive in fact discharge his alleged “social responsibilities?”. Difficulty
of exercising “social responsibility” illustrates the virtue of private competitive enterprise – they can do
good but only at their own expense.
The argument that problems are to urgent to wait political processes, and the action of businessmen can
be quicker has to be rejected on grounds of principle. Is an assertion that those who favour the taxes
and expenditures in question have failed to persuade a majority of their fellow citizens to be of like
mind and that they are seeking to attain by undemocratic procedures what they cannot attain by
democratic procedures. In a free society, it is hard for “good” people to do “good,” but that is a small
price to pay for making it hard for “evil” people to do “evil,” especially since one man's good is
another’s evil.
Stockholders trying to get other stockholders to contribute, is still imposing taxes and spending
proceedings. Individual proprietor instead is spending his own money and side effects will be minor. In
practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other
grounds rather than a reason for those actions. This is one way for a corporation to generate goodwill
as a by-product of expenditures that are entirely justified in its own self-interest. The use of this cloak
harms the foundations of free society. Businessmen are far-sighted in matters internal to their business.
Short-sighted for the outside business one, that can affect the possible survival of the firm.
Political principle that underlies market mechanisms is unanimity. There are no “social” values, no
“social” responsibilities in any sense other than the shared values and responsibilities of individuals.
The political principle that under lies the political mechanism is conformity. It is appropriate for some
to require others to contribute to a general social purpose whether they wish to or not.
Unanimity is not always feasible.
Social responsibility differs form collectivist doctrine only by professing to believe that collectivist ends
can be attained without collectivist means.
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