Competitive environmental strategies: When does it pay to be GREEN?

California Management Review

Volumn 48, Issue 2, 2006, Pages

  Orsato, Renato J ^a,b  

^a INSEAD   (France)

^b UNIVERSITY OF TECHNOLOGY SYDNEY   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33645505015     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166341     Document Type: Conference Paper

References (80)

1. The debate was triggered by the publication of the article: Michael Porter, "America's Green Strategy," Scientific American (April 1991), p. 96.
2. The early stages of the debate can be found in: Richard A. Clarke et al., "The Challenge of Going Green," Harvard Business Review, 72/4 (July/August 1994): 37-50;
3. Noah Walley and Bradley Whitehead, "It's Not Easy Being Green." Harvard Business Review, 72/3 (May/June 1994): 46-52.
4. See also the most elaborated article of Michael Porter and Claas Van der Linde "Green and Competitive: Ending the Stalemate," Harvard Business Review, 73/5 (September/October 1995): 120-133;
5. and the subsequent criticism of Karen Palmer, Wallace Dates, and Paul Portney, "Tightening Environmental Standards: The Benefits-Cost or the No-Cost Paradigm?" Journal of Economic Perspectives, 9/4 (1995): 119-132.
6. In this article, the term "environmental investment" relates to a wide array of practices of firms aiming to reduce direct or indirect environmental impacts of organizational processes, as well as impacts associated with the entire life cycle of products or services.
7. Forest Reinhardt, "Environmental Product Differentiation: Implications for Corporate Strategy," California Management Review, 40/4 (Summer 1998): 43-73.
8. Forest Reinhardt, "Market Failure and the Environmental Policies of Firms: Economic Rationales for 'Beyond Compliance' Behavior," Journal of Industrial Ecology, 3/1 (1999): 9-21.
9. In the United States: Andrew King and Michael Lenox, "Does It Really Pay to be Green?" Journal of Industrial Ecology, 5 (2002): 105-117.
10. In Europe: Marcus Wagner, "Does It Pay to be Eco-efficient in the European Energy Supply Industry?" Zeitschrift für Energiewirtschaft, (2003): 309-318;
11. Marcus Wagner, Stefan Schaltegger, and Walter Wehrmeyer, "The Relationship Between Environmental and Economic Performance of Firms: What Does the Theory Propose and What Does the Empirical Evidence Tell Us?" Corporate Environmental Management (2003).
12. More recently, Sharma and Aragon-Correa presented an overview of the influences of corporate environmental management in the competitiveness of firms. Sanjay Sharma and Alberto Aragon-Correa, A Corporate Environmental Strategy and Competitive Advantage (Cheltenham: Edward Elgar Publishing, 2005).
13. Benjamin Bonifant, Matthew Arnold, and Frederick Long, "Gaining Competitive Advantage Through Environmental Investments," Business Horizons, 38/4 (July/August 1995): 37-47.
14. California Management Review, 43/3 (Spring 2001).
15. California Management Review, 46/2 (Winter 2004);
16. Sharma and Aragon-Correa, California Management Review op. cit.
17. Michael Porter, "What Is Strategy?" Harvard Business Review, 74/6 (November/December 1996): 61-78
18. A generic overview of the various schools of strategic management is presented by Henry
19. Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari: A Guided Tour through the Wilds of Strategic Management (New York, NY: The Free Press, 1998).
20. Michael Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York, NY: The Free Press, 1980).
21. Michael Porter, "Towards a Dynamic Theory of Strategy," Strategic Management Journal, 12 (1991): 95-117.
22. Work on the resource-based view of the firm in strategic management began with the articles of: Birger Wernerfeit, "A Resource-Based View of the Firm," Strategic Management Journal, 5 (1984): 171-180;
23. Richard Rumelt, "Toward a Strategic Theory of the Firm," in Robert Boyden Lamb, ed., Competitive Strategic Management (Englewood Cliffs, NJ: Prentice Hall, 1984);
24. Jay Barney, "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, 42 (1986): 1231-1241.
25. A "situational" review of the resourcebased view can be found in Jay Barney and William Hesterly, "Organizational Economics: Understanding the Relationship Between Organizations and Economic Analysis," in Stewart Clegg, Cynthia Hardy, and Walter Nord, eds., Handbook of Organization Studies (London: Sage, 1996), pp. 115-147.
26. The concept of organizational processes employed here encompasses both the activities of controlling manufacturing, production, or industrial processes, as well as generic management processes, which relate mainly - but are not limited to - (bureaucratic) activities performed by the various members of an organization. For an overview of classic organizational processes, see Richard Hall, Organizations: Structures, Processes, and Outcomes (Upper Saddler River: Prentice Hall, 1999).
27. th century. During that period, a large number of handbooks and academic papers were published on the topic. Today, TQM principles and methods are pan of the normal curriculum in management schools and textbooks. For an overview of quality and quality principles in management, see A. Blanton Godfrey and Joseph M. Juran, Juran's Quality Handbook (New York, NY: McGraw-Hill, 1998).
28. Sandra A. Waddock, Charles Bodwell, and Samuel B. Graves, "Responsibility: The New Business Imperative," Academy of Management Executive, 16/2 (2002): 132-148.
29. Michael Berry and Denis Rondinelli, "Proactive Corporate Environmental Management: A New Industrial Revolution," Academy of Management Executive, 12/2 (1998): 38-50;
30. Reinhardt (1999), Academy of Management Executive op. cit.
31. Sandra A. Waddock and Charles Bodwell, "Managing Responsibility: What Can Be Learned from the Quality Movement?" California Management Review, 47/1 (Fall 2004): 25-37.
32. Robert Kaplan and David Norton, Strategy Maps (Boston, MA: Harvard Business School Press, 2004);
33. Robert Kaplan and David Norton, The Strategy-Focused Organization (Boston, MA: Harvard Business School Press, 2001). Research in this area has tried to link environmentrelated intangibles to the financial bottom line.
34. See, for example, Frank Figge, Tobias Hann, Stefan Shaltegger, and Marcus Wagner, "The Sustainability Balanced Scorecard: Linking Sustainability Management to Business Strategy," Business Strategy and the Environment, 11 (2002): 269-284.
35. See also Francesco Zingales, Anastasia O'Rourke, and Renato J. Orsato, "Environment and Socio-Related Scorecard: Exploration of Critical Issues," INSEAD working paper, 2002/47/CMER.
36. Magretta offers an excellent account of value creation in organizations. Joan Magretta, What Management Is: How It Works and Why It's Everyone's Business (London: Profile Books, 2003).
37. Data presented here have been drawn from extensive research in the automobile industry and developed by Orsato. Renato J. Orsato, "The Ecological Modernization of Industry: Developing Multi-disciplinary Research on Organization and Environment," doctoral dissertation, UTS, Sydney, Australia, 2001. Selected examples are also based on data collected during the period 1999-2004 as part of the action-research program at the International Institute for Industrial Environmental Economics (IIIEE).
38. The framework should not be seen as a "stage model," such as those presented by Hart and by Dunphy and Griffiths, among others. Stewart Hart, "Beyond Greening: Strategies for a Sustainable World," Harvard Business Review, 75/1 (January/February, 1997): 66-76;
39. Dexter Dunphy and Andrew Griffiths, Sustainable Corporation: Organisational Renewal in Australia (Frenchs Forest, Australia: Allen & Unwin, 1998). These stage models normally focus on the societal needs for more eco-friendly corporate behavior, rather than on principles of strategic management to guide corporate environmental strategies, as this article does. Stage models also presuppose that firms would go from low to high ambition strategies. For instance, the classic framework of Hunt and Auster specifies a five-stage development continuum ranging from organizations that address environmental concerns with band-aid solutions (beginners) to organizations that implement fully integrative systems (proactivists). They presuppose that almost every company can pass through those stages. In the framework presented here, on the other hand, there is no pathway from "low" to "high" strategies. The strategies do not present increasing degrees of complexity but rather are dependent on and, therefore, applicable to certain conditions. In this respect, the framework can be characterized as a "choice model" rater than a "stage model."
40. Charles Hunt and E. Auster, "Proactive Environmental Management: Avoiding the Toxic Trap," Sloan Management Review, 31 (1990): 7-18.
41. Michael Porter, The Competitive Advantage of Nations (London: The MacMillan Press, 1990).
42. Porter and Van der Linde, The Competitive Advantage of Nations op. cit.
43. Paul Hawken, Amory Lovins, and Hunter Lovins, Natural Capitalism: The Next Industrial Revolution (London: Earthscan, 1999).
44. See also previous work on resource productivity developed by E. von Weizsäcker, Amory Lovins, and Hunter Lovins, Factor Four: Doubling Wealth-Halving Resource Use (Sydney: Alien & Unwin, 1997).
45. For a review of the concept of eco-efficiency, see Chris Ryan, Digital Eco-sense: Sustainability and ICT-A New Terrain for Innovation (Melbourne: Lab 3000, 2004).
46. See also the special issue on "Eco-efficiency and Industrial Ecology" in the Journal of Industrial Ecology, 9/4 (Fall 2005).
47. A review of the main concepts and research areas of industrial ecology can be found in Frank den Hond, "Industrial Ecology: A Review," Regional Environmental Change, 1/2 (2000): 60-69;
48. More recent developments can be found in the Journal of Industrial Ecology or the biannual meeting of the International Society for Industrial Ecology (ISIE).
49. An analysis of potential for industrial ecosystems can be found in Catherine Hardy and Thomas E. Graedel, "Industrial Ecosystems as Food Webs," Journal of Industrial Ecology, 6/1 (Winter 2002): 29-38.
50. An example of industrial ecosystem project with partial success is the Landskrona project in Sweden. For details, see 〈www.iiiee.lu.se〉 .
51. Jennifer Nash and John Ehrenfeld, "Codes of Environmental Practice: Assessing Their Potential as a Tool for Change," Annual Review Energy Environment, 22 (1997): 487-535.
52. CERES: 〈www.ceres.org〉;
53. Global Compact: 〈www.un.org/Depts/ptd/global.htm〉
54. Global Reporting Initiative: 〈www.globalreporting.org/〉.
55. Chad Nehrt, "Maintainability of First Mover Advantages when Environmental Regulations Differ Between Countries," Academy of Management Review, 23/1 (1998): 77-97.
56. In 1995, Shell wanted to sink obsolete oil rigs in the North Sea but the subsequent outcry lead by Greenpeace enticed consumers to boycott Shell petrol, resulting in a 60% downfall in sales in Germany alone. The pressure from consumers and the general public induced Shell to shift its strategy and the oil platform Brent Spar, instead of being sunk in deep-sea waters, was dismantled on land. See Lisa Dickson and Alistair McCulloch, "Shell, The Brent Spar and Greenpeace: A Doomed Tryst?" Environmental Politics, 5 (1996).
57. Ans Kolk, "Green Reporting," Harvard Business Review, 78/1 (January/February 2000): 15-16.
58. A basic explanation of the role of "agency" in business-environment relationships is provided by Renato J. Orsato and Stewart R. Clegg, "The Political Ecology of Organizations: Toward a Framework for Analyzing Business-Environment Relationships," Organization and Environment, 12/3 (1999): 263-279.
59. See also Renato J. Orsato, Frank den Hond, and Stewart Clegg, "The Political Ecology of Automobile Recycling in Europe," Organization Studies, 23/4 (2002): 639-665;
60. Stewart Clegg, Frameworks of Power (London: Sage, 1989).
61. Coop Sverige is a subsidiary of Coop Norden, owned by the Swedish, Danish, and Norwegian consumer cooperatives.
62. Information about Anglamark (in Swedish) can be found at 〉www.anglamark.com〉. See also Andrea Ostrom, "Environmental Differentiation and Competitiveness: The Case of the Food and Drink Industry," IIIEE Dissertations, Lund, Sweden, 2003.
63. See also Renato J. Orsato and Andrea Ostrom, "Eco-branding: The Case of Änglamark," INSEAD Teaching Cases, 09/2005-5314.
64. Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (London: Free Press, 1985), p. 120.
65. Forest Reinhardt has previously articulated the specific conditions for successful ecological differentiation strategies. For this reason, the examples used in this section only intend to summarize the considerations that have been sufficiently elaborated elsewhere and eventually make it easier for those who are not so familiar with the pre-requisites of ecologically differentiation of products. See Reinhardt (1998), Competitive Advantage: Creating and Sustaining Superior Performance op. cit.
66. See also Forest Reinhardt, "Bringing the Environment Down to Earth," Harvard Business Review, 77/4 (July/August 1999): 149-157;
67. Reinhardt (1999), Harvard Business Review op. cit.
68. Kontrollföreningen For Ecologisk Odling.
69. For an overview of KRAV, and the general situation of organically grown cereals used for the production of bread in Sweden, see Pia Heidenmark, "Going Organic? A Comparative Study of Environmental Product Development Strategies along Two Swedish Bread Supply Chains," IIIEE Dissertations, Lund, Sweden, 2000.
70. Information supplied by Mr. Per Gustafsson (President Ecolean Group) and Mr. Per Gassner (Environmental and Product Director).
71. 17 tones well distributed around the planet.
72. The life cycle analysis can be downloaded from the Ecoiean web site: 〈www.ecolean.se〉.
73. Several examples of Product Service Systems can be found in Oksana Mont, "ProductService Systems: Panacea or Myth?" doctoral dissertation IIIEE, Lund, Sweden, 2004;
74. Ryan, ProductService Systems: Panacea or Myth? op. cit.
75. 〈www.chemicalstrategies.org/〉, March 2005.
76. More details of the case can be found at 〈www.chemicalstrategies. org/case_studies.htm〈.
77. Porter (1996), ProductService Systems: Panacea or Myth? op. cit.
78. Charles Corbett and David Kirsh, "ISO 14000: An Agnostic's Report from the Front Line," 750 9000 + ISO 14000 News, 2 (2000) : 4-17.
79. Richard Florida and Derek Davidson, "Gaining From Green Management: Environmental Management Systems Inside and Outside the Factory," California Management Review, 43/3 (Spring 2001): 64-85.
80. Joan Magretta, What Management Is: How It Works and Why It's Everyone's Business (London: Profile Books, 2003)