Why Do (or Don’t) Companies Go Green?

Why do some companies “go green,” while others are satisfied to go grey? Why do some develop robust sustainability programs while others sit back and watch?

Yesterday, as part of my Business Ethics Speakers Series at the Ted Rogers School of Management, I had the pleasure of hosting Hamish van Der Ven, a Ph.D. candidate from the University of Toronto. The title of Hamish’s talk was “Big-Box Retail and the Environment: Why Some Firms Innovate and Others Stagnate.” His main contention was that the main factor at play is the socialization of high-level executives at multi-stakeholder sustainability networks. In other words, what matters is whether the leaders of the company in question make use of opportunities to sit down with a range of folks to talk about sustainability.

The main competing theory of why companies go green is the theory that it all has to do with profitability. Companies go green, on this theory, because they buy into the “business case” for sustainability. That is, they come to believe that reducing energy usage, minimizing packaging and waste, and so on, will be good for the bottom line. Alternatively, they come to believe that being perceived as environmentally-progressive will win them customers, and increase profits that way.

But as Hamish rightly points out, that explanation suffers from a serious defect. Every company is subject to those pressures — they all want to cut costs and reduce waste and attract environmentally-concerned consumers— but only some of them actually put much effort into sustainability programs that will do those things. If the business case is such an important motivator, why don’t all companies buy into it?

Much more significant, Hamish argues, are the opportunities executives take, or don’t take, to open themselves up to internalizing new social norms. The process of socialization involves precisely the process of internalizing social norms. And that happens through social interaction.

And when leaders change their thinking, they tend to do a lot to change corporate culture. As the head of CSR for one major corporation told me, “We talked a lot about going green, but then one day the CEO called and said ‘Make it happen,’ so it happened.”

Of course, this isn’t just just a story about how policy-makers and activists can influence companies by influencing leaders. It’s also a story about how leaders can implement change in their own organizations. As Hamish put it, “If you sit down with people who think differently, you start to see things in a new light. We cannot expect change to result from [instead] sitting around a table with people who think just like you.”

——–
Update, Dec. 14, 2013: Hamish has now published a paper based on this research. “Socializing the C-suite: why some big-box retailers are “greener” than others,” Business and Politics Ahead of print (Dec 2013)

5 comments so far

  1. company2keep (@company2keepinc) on

    I considered Hamish’s position to be a good argument of support for the UN Global Compact. In spite of the occasional criticism directed toward the Compact for its tolerance of members who don’t fulfill their membership obligations, the opportunity for social interaction with others who think differently is perhaps one of its best features.

    Cathie Guthrie

  2. Marvin Edwards on

    As long as going green is profitable we can rely on the market to help us do it. It just becomes a matter of spreading the information.

    In cases where it impacts competitiveness, you may need law to level the playing field. An example would be controlling the discharge of harmful chemicals into the air or water. Or outlawing the use of lead paint, etc.

    • Chris MacDonald on

      Marvin:

      But Hamish’s initial observation is that that’s not true: all the big box chains have the same information, presumably, but that is apparently not enough to get all of them to go green.

      Chris

      • Marvin Edwards on

        Right. Sorry, just trying out the problem in my head.

        It would seem then that those citizen groups hoping to encourage big-box companies to go green should better inform the reluctant executives of the market benefits that their competitors have gained, either from a bottom-line or public relations standpoint.

  3. Vicky on

    This is an excellent summary of the researches done by Hamish van der Ven regarding the topic of the relationship between environmental sustainability and the enterprise. In my point of view, I do agree with some main points of Hamish’s study. Both you and Hamish pointed out the importance of socialization, or communication within the company, especially among the senior executives, in the process of incorporating sustainability in the business. The study puts a strong emphasis on the role of the leader in making sustainability become a reality (van der Ven, 2014).

    I do indeed agree that the role of the leader is very important in engaging sustainability in every day’s business conduct; however, it is not the only key. The view and idea of the leaders regarding the corporate social responsibility (CSR) in the organization are vital for CSR to develop, as they dictates the many tactics and activities that the company will take in the future, because eventually, the company will function according to the strategy of the leaders (Mostovicz, Kakabadse & Kakabadse, 2009). That is why socializing between top managers is a necessity, because it can help broaden the worldview of the leaders in the organization and allow them to see the importance behind the idea of CSR as well as to innovate different the approaches that the company can take for this issue.

    On the other hand, in an interview, Professor Pitts of Oxford University and Stanford Law School stated that the CSR process is both a top-down and a bottom-up process. This means that while the leaders’ idea on matters like environmental sustainability is important, engagement with all the stakeholders instead of only the shareholders is a more vital act for CSR to be thoroughly integrated. CSR, or environmental sustainability, both requires the company to have a commitment to “integrated decision-making”. Hence, not only the top management board should communicate more often about this issue, but also broad dialogue with workers, community members and other elements of the society are necessary (Fisher, 2010).

    The reason why environmental sustainability or corporate social responsibility requires an integrated management system rather than just a top-down management system is that it can help aligning the act of environmental sustainability to the value of the society and the company’s employees. One of the reasons why a company decides to pursue sustainability is in order to attract the customers who care about such issue. Hence, involving other stakeholder rather than just the senior managers in the decision making process will help the company see how the society will react with its activities for sustainability, and how it will bring benefits to the company in the long run.

    As for policy makers and activists, influencing the senior managers alone might not be the best action, as the stakeholders other than the senior managers can also influence the top management board in matters like sustainability. For example, customers in Vietnam boycotted Vedan, a Japanese company producing and selling spices in the country, for polluting the river and water sources in the area near its factory. The boycott was strong enough to shift the operating strategy of Vedan in Vietnam (Tran, 2008).

    The employees are also crucial for the success of sustainability activities of the business. Communicating and integrating this group of stakeholder into the decision process will help the employees understand the meaning and intention behind the environmental sustainability acts thus ensure them to implement the strategies better. CSR can also be used today as a tool to recruit, retain and engage employees, because now the new, younger generation of employees aspires to something more meaningful from their job than just wealth. They care about how their actions, translated through the company’s activities will impact and contribute to the society (Mirvis, 2012). Communicating and socializing with this group of stakeholder will not only help them understand more about the CSR strategy, but also help to empower the employees to innovate, take action and fulfil their needs for social responsibility. Also, everyone can strive to be a leader through the form of constantly increasing one’s self-awareness, as leadership is not limited to only the position in the organization (Mostovicz, Kakabadse & Kakabadse, 2009). Even when the direction of the company is decided by the executives, it is necessary that people in the organization can express self-leadership through gaining the responsibility of helping the executives reaching their goals. Thus, expanding the scope of socialization to the employees is just as necessary as elevating it among the top-tier.

    Because of these above reasons, I believe that though the socializing between senior managers are important for companies to “go greener”, the act of socialization should go deeper than just the top tier of the company. Socialization is indeed the key for environmental sustainability as well as corporate social responsibility strategy to thrive in the business; however, it should involve every key stakeholder, both internal and external, of the company, so that the company and the society can get the best outcomes from these actions.

    References:
    Fisher, W. (2010). Corporate Social Responsibility: Wisdom or Window Dressing?. Truth-out.org. Retrieved 25 January 2015, from http://truth-out.org/archive/component/k2/item/88894:corporate-social-responsibility-wisdom-or-window-dressing
    Mirvis, P. (2012). Employee Engagement and CSR. California Management Review, 54(4), 93-117. doi:10.1525/cmr.2012.54.4.93
    Mostovicz, I., Kakabadse, N., & Kakabadse, A. (2009). CSR: the role of leadership in driving ethical outcomes. Corporate Governance: The International Journal Of Business In Society, 9(4), 448-460. doi:10.1108/14720700910984990
    Tran, L. (2008). ENVIRONMENT-VIETNAM: River Pollution Scandal a Wake-up Call | Inter Press Service. Ipsnews.net. Retrieved 25 January 2015, from http://www.ipsnews.net/2008/12/environment-vietnam-river-pollution-scandal-a-wake-up-call/
    van der Ven, H. (2014). Socializing the C-suite: why some big-box retailers are “greener” than others.Business And Politics, 16(1). doi:10.1515/bap-2013-0024


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