Corporate environmental commitment - Wiley Online Library

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Rachid M Zeffane, and Michael J Polonsky, Department of Management, University of Newcastle, NSW, Australia, and Patrick Medley, Environmental Management Services, Coopers & Lybrand Consultants, Sydney, Australia.

This article attempts t o develop an operational measure of the notion of Corporate Environmental Commitment (CEC), through an examination of CEO’s perceptions of their firms’ behaviour regarding .a number of environmental items. This is done by identifying a number of salient items in the literature and integrating them into a survey instrument. The mail survey was administered t o the key informants of the 1000 largest organisations in Australia of which 306 responded. Iterative Factor-Analysis of the data revealed that the questionnaire items (55 items i n total) could be statistically collapsed into four factors representing the overall degree of ‘Corporate Environmental Commitment’. The four factors were (1) the degree to which environmental audits are emphasised as an environmental evaluation tool (Audit); (2) the existence and role of a clear and well disseminated environmental policy (Policy); (3) consideration of environmental impacts in assessing future corporate activities including investments & projects (Future Activities) and (4) incorporation of environmental issues i n corporate appraisal systems (Appraisal Systems). Internal consistency within each of the four factors revealed significant reliability of all factors. It i s suggested that the use of the four-factor method uncovered in this study bears significant practical relevance, allowing firms t o assess their environmental commitment (EC) at the corporate level.

INTRODUCTlON In the 199Os, an increasing number of organisations are proactively addressing their environmental activities. They are attempting to prevent environmental problems before they occur. Proactive behaviour not only prevents potential environmental problems from arising but it also allows organisations to take advantage of environmental ‘opportunities‘ as they arise (Shearer, 1990). Environmental thinking i s increasingly being integrated into all levels of the organisational decision-making process. Management is focusing not only on end-of-pipe solutions to minimise waste, but they are also developing waste minimisation programmes to reduce the amount of waste being produced. Concerns regarding environmental degradation, pollution, resource depletion, population growth, and destruction of flora and fauna have become widespread in the broader community. These trends have resulted in an increasing number of firms, around the world, becoming more involved in activities that promote conservation and sustainable development. The strategic reasons for this environmental interest are varied and range from; a commercial self-interest, protection of company image, compliance with regulations and a desire to be more socially responsible (Vinten, 1991). These issues have made ’going green’ is an integral component of the everyday operations of most organisations. The increasing societal awareness of environmental problems is exerting pressures on all industrial sectors

(Winsemius and Guntram, 1992; Polonsky et a/., 1992). This change has meant that organisations are being forced to dev.elop an appreciation for the environment. As more consumers demand more products and services that satisfy individual needs while not damaging the earth, green issues have moved from out of their traditional home in corporate offices, to be better integrated into all levels of the organisation (Vandermere and Oliff, 1991). The degree to which a firm can be considered to be environmentally committed i s dependent on its environmental behaviour. It could be argued that environmental comm itment (EC) requires organisational concern that permeates all levels and activities. If this is the case, it would be reflected in the various functional activities and in the overall organisational culture and structure. Environmental issues vary widely in their scope, effects, risks, social and economic consequences. Corporate greening requires organisational commitment, as well as an inclusion of that commitment into the overall company strategy, decision-making and corporate culture (Carson and Moulden, 1991; Colby, 1991; Friedman, 1991; Garlauskas, 1975; Hunt and Aster, 1990). Management i s forced to focus not just on controlling pollution, but on preventing environmental problems. This perspective means that EC extends far beyond the actual end-products and becomes an integral component of the corporate ethos. According to Taylor (1992), the concept of ‘green management’ involves viewing the organisation in its entirety rather than as a

BUSINESS STRATEGY AND THE ENVIRONMENT

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RACHID ZEFFANE, MICHAEL POLONSKY, and PATRICK MEDLEY

objectively evaluate how effectively all objectives are achieved, especially those that do not have evaluation criteria established; and 3) it may be difficult for the key informant to objectively evaluate the implementation of an organisation’s environmental policy. With the above considerations in mind, the sample and methodology are then examined in conjunction with the salient factors diagnosing varying levels of EC at the corporate level.

collection of smaller entities, and remembering that the company i s part of the larger community. In the ever changing business environment, managing environmental issues has become increasingly difficult in today‘s corporate setting of strict regulations, expensive litigation and close public scrutiny (Green0 and Robinson, 1992). One environmental management tool specifically designed to evaluate environmental risk is the environmental audit. It has gained favour with many companies in North America and Europe (Spearot, 1991). The more proactive companies have accurately judged the mounting governmental and public attention on environmental protection and begun placing greater emphasis on environmental risk management as an effective tool to evaluate, monitor, and control the environmental externalities of its activities (Moriyama, 1991; Friedman, 1991). In practice, many organisations may view the risks associated with non-compliance of environmental legislation as being so significant, that they have developed a clear environmental policy, backed up with environmental audits to identify compliance issues. However, this stance spells ‘reaction’ rather than ‘proaction’. Proactive behaviour would ensure that EC wil l be driven by internal rather than external concerns and thus w i l l be integrated into the organisation culture. Such commitment would take into account the link between environmental performance and the busineq environment. In that perspective, the strategy designed to meet the objectives of environmental management needs to be formulated at all levels within the organisation, including the need to improve environmental performance and behaviour (Garlauskas, 1975). In an attempt to develop an operational concept of corporate environmental commitment (CEC), this article will in the first instance examine the salient aspects of organisational activities that identify environmentally committed organisations. The range of initial aspects considered were derived from a thorough examination of the relevant literature discussing environmental issues and companies’ commitment to these issues. The article will then focus on aspects of EC as perceived by key informants, i.e., CEO’s of 306 of the largest companies in Australia. It is assumed that key informants (such as CEO’s) are better equipped to provide information on the degree of EC of the total organisation. It should be noted that practitioner and academic research has suggested that individuals tend to ’exaggerate’ the degree to which they behave in a socially responsible manner. This i s not deemed to be a problem in this study, as the objective is to develop a measurement construct rather than comparing behaviour across sectors. Even if sectorial comparisons were to be made it i s assumed that respondents would be ‘consistent‘ in their exaggerations and thus differences could still be analysed. This work therefore does not examine actual environmental activities undertaken by firms. The examination of the implementation and effectiveness of programmes is important to ensuring that commitment is translated into action. This i s beyond the scope of this research, for several reasons including: 1) i t may be difficult to compare organisations’ performance relative to their objectives, as most organisations will have different environmental objectives; 2) it may be difficult to ~~ _ _ _

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_ ~ _ _ _ _

~~

THE NOTION OF CORPORATE ENVIRONMENTAL COMMITMENT (CEC) The general management literature discusses several ways of examining corporate commitment in relation to specific issues. In this literature there appears to be debate as to whether commitment is behavioural or attitudinal Uaros et a/., 1993). Though none of the studies in this area specifically examine CEC, constructs developed to examine commitment in other areas are relevant and quite inspiring to the environmental debate. For instance, in the past decade or so, a great deal of attention and research efforts have been invested in identifying the various causes and implications of organisational commitment (Cohen, 1991; jaros et a/., 1993). The main thrust of that research was to afford reasonable explanations of the development process of organisational commitment defined as the strength of an individual’s identification and involvement with an organisation. Following on from the above discussion, therefore any definition of EC requires both behavioural and attitudinal attributes. To create a responsible workplace, organisations need to consider both social and economic performance. In particular, firms attempting to be responsible should invest in commitment rather than compliance to specific environmental regulations (O’Reilly et a/., 1991). In this light, positive organisational commitment i s said to improve organisational efficiency and effectiveness by contributing to resource transformations, innovativeness, and adaptability (Williams and Anderson, 1991). At the same time, it would result in the organisation complying with societal values and norms. Therefore shifting the objectlactors in the notion of commitment from individuals to organisations would result in the same positive corporate traits, (including sensitivity, consciousness and compliance to the environmental issues) at the organisational level. In essence, the concept of EC needs to bring about an increased realisation that organisations’ subscription to desirable environmental considerations tends to constitute crucial elements of organisational performance and survival. In this perspective, a number of factors emerge as the most common elements that might assist in diagnosing EC at the corporate level.

SALIENT FACTORS A range of fundamental issues of environmental management have been discussed by various authors. One of the key papers in the management literature to examine this area i s that of Hunt and Aster (1990). Their work specifically attempts to devise a typology to examine the development ~~

~


CORP 0RATE ENVIRONMENTAL COMMITMENT

of environmental management. While their typology does not explicitly examine CEC, it makes the insightful proposition that the action of programme-design and commitment of an organisation should be considered as two separate components of their environmental management criteria. In that respect, Hunt and Aster identify three broad factors necessary for environmental commitment, 1) General Mindset of Managers, 2) Resource Commitment, and 3) Suppodlnvolvement of Top Management. They do not expand on the various sub-components of these facets nor the methods available to measure the degrees of corporate involvement of each factor. To assume that these general factors are all that is necessary for EC to exist, requires that the structures necessary for the effective implementation are also in place. In their three criteria there is no consideration for the evaluation of objectives nor the process in which these are established. While Hunt and Aster do consider programme design to be an important component of the environment management process, they do not integrate this factor into CEC. This is important, for it has been argued that for any firm to be truly committed it must have an implementation programme that integrates all key issues (See for example Friedman, 1992). A recent and relatively more structured approach to examining environmental management is the British Standard on Environmental Management Systems (857750). This system established five main areas necessary for an effective environmental management system (Hunt and Johnson, 1993). These areas include the establishment of: Environmental Policy; Clearly Established Programmes; Environmental Management Systems; Environmental Audits; and Clearly Established Objectives. While these components are ,more prescriptive in nature than those discussed by some of the earlier authors, they indicate that managerial support is essential for an effective environmental management system. The importance of these components has also been echoed by practising environmental managers. One such manager to endorse this view is Frank B. Friedman of Occidental Petroleum (Friedman, 1991). Friedman developed criteria that contains all of the factors in both the Hunt and Aster typology as well as the British Standard components (See Table 1). It could be argued that some of his factors could be 'grouped' so that they could be utilised as a measure of EC. The determination of these groupings or factors will reasonably allow CEC conceptualised in a concise fashion. In an extensive empirical study, Polonsky, Zeffane and Medley (1992) found five EC factors. These were: 1) Existence of Environmental Policy and Policy Implementation; 2) Environmental Considerations in New Investments and Ventures; 3) Environmental Considerations in Corporate Objectives and Performance; 4) Commitment of Board and Board Members; and 5 ) Environmental Opportunities. A summary of the criteria established by the Polonsky, et a/. (1992), Hunt and Aster (1990) and Friedman (1991) frameworks are listed in Table 1.

Table 1: Criteria Used to Determine Extent of Corporate Environmental Commitment ~~

-

Hunt and Aster (1 990)

Friedman (1 992)

Polonsky, Zeffane and Medley (1992)

General Proenvironmental Mindset of Managers

Policy Established by the Board and Senior Executives

Existence of Environmental Policy and Policy Implementation

Resource Commitment to Environmental Activities

Funds are Allocated to Ensure Effective Policy Implementation

Environmental Considerations in New Investments and Ventures

Top Management Supports and is Involved in the Environmental Management Process

Responsibility for Environmental Performance is Allocated at the Line Management Level

Environmental Considerations in Corporate Objectives and Performance

Environmental Performance Objectives are Established

Environmental objectives are Incorporated to all Operations and Functional Areas

Commitment of Board and Board Members

Environmental Programmes are Integrated with Other Programmes

Most Advanced Procedures, Processes and Control Methods are Used

Environmental Opportunities.

Reporting Structures Exist in the Organisation

Internal Compliance System Monitors Performance

Environmental Performance is Reported to Top Management

Each division has its own Environmental Monitoring System

Environmental Management Involves all Functional Areas

Environmental Information System is Implemented

~~

All Employees have Environmental Training Forward Looking Environmental Attitude in all New Areas

ENVIRONMENTAL AUDITS Much of the recent literature indicates that the environmental audit process constitutes a prime factor designating the degree of EC (Vinten, 1991). It is an important and complicated process that assists the organisation in a number of planning, implementation and design areas. According to the International Chamber of


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Commerce, environmental audits facilitate management control of environmental protection and assess compliance with company policies, including those to meet regulatory requirements (Vinten, 1991; Shafer, 1992; Quirke, 1992). Given the broad spectrum of issues incorporated in an environmental audit, it is becoming an increasingly specialised activity with firms using both internal people and specialised consultants (Boivin and Gosselin, 1991). One of the primary aims of the auditing process is to support a management system that will provide information on environmental performance against predetermined targets, thus ensuring that those targets are met (Vinten, 1992). Audits usually access all of a firm’s environmentally related activities. Audits also assist in improving management control systems and ensuring that environmental policies meet all regulatory requirements. Another significant benefit from a thorough, ongoing environmental auditing programme is its ability to identify future trends within the organisation and find ways to exploit them.

ENVIRONMENTAL POLICY One of the most critical areas in determining EC is the mindset of management and employees. This mindset is partly developed through the distribution of a clearly designed environmental policy and the associated programmes. Having an environmental mindset should ensure that any organisational environmental policy i s comprehensive in its scope. An important component of EC i s the defining of organisational responsibility for all functional areas. This includes involving key members (including top executives and Board Members) in the implementation of environmental policy, in addition to having a centralised environmental decision-making structure at the highest organisational level. Successful environmental programmes also incorporate an integrated reporting structure, ensuring different functional areas communicate with one another. Large companies such as AT&T, 3M, and General Motors have long since put environmental staff in place, completed basic assessments and set corporate-wide goals (Snyder, 1992). However, a survey of 220 large US companies by Booz-Allen & Hamilton reported that, while 90% of the companies were organised to address environmental concerns, only 7% felt comfortable with the environment challenges they face. Some 75% indicated that they have a published policy on which to base environmental decisions. But, of those organisations that had published policies only half had these for more than two years. Most companies said that they were less than satisfied with their environmental programmes and only 11o/o considered their policies innovative (Barron, 1992). Shimell (1991) described how the few British companies that had a structured corporate environmental policy were implementing them. She noted that the environmental management approach taken in the US and in Europe differed. According to her observation, companies in the UK tended to be less environmentally conscious than those in Europe and the US. More specifically, the majority of the companies she studied saw

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the environmental audit as a mere substitute for a structured environmental pol icy. While having a well designed policy is important, it may be necessary for it to be disseminated to all stakeholders who can affect the organisation’s environmental performance, this would include those internal and external to the organisation. How a company addresses environmental issues, and how i t communicates its efforts to the various stakeholder groups, can affect its success in the marketplace (Gilman, 1992).

EVALUATION PROGRAMMES The depth of integration within the organisation and its environmental responsibility requires that organisations have an integrated evaluation process. Thus, there is a need to have environmental representation at several levels of the organisation (Bashaw, 1992). The mindset of the organisation, discussed earlier, should be consistent with the organisational objectives. In organisations with a committed mindset, management are more likely to give the evaluation of environmental activities the same importance and scrutiny as other performance objectives. This does not always happen, for example in one firm which could be claimed to have a low environmental mindset, an employee alleged that he was given a lower performance evaluation which resulted in his dismissal, because he would not remove sensitive environmental documents relating breaches of his employer (Chiampou, 1992). Ensuring that the organisation‘s activities and their evaluations of these activities are congruent with their corporate objectives, employees’ activities, public policy and societal norms are essential for controls to be effective. While evaluating present and past activities i s an essential component of the environmental management process, given the forward looking nature of environmental management, new activities must also be evaluated. To this end some organisations have even devised a check-list to assess how well their company is identifying and managing its future environmental liabilities. Given this concern, firms are carefully evaluating the environmental ‘viability‘ of new activities, including mergers & acquisitions. N o t only are firms concerned as to their present activities, they are also compelled to consider the environmental ramifications of the purchase of assets, especially property. There is a trend toward more requests for more comprehensive audits of project-related sites. If investments involve the purchasing of sites, many firms are beginning to realise the need to conduct internal reviews of environmental practices at each site, thus integrating the new assets into the environmental audit process (Bashaw, 1992). This forward looking approach also affects many organisations not directly involved in the environmental debate, including financial institutions and banks. Leading lenders are shunning corporate borrowers who have a poor environmental record at any subsidiary anywhere in the world (Hector, 1992). In the U.S, recent court rulings on the Superfund Act of, 1980 have held banks liable when their customers pollute. Known formally as the Comprehensi’,’e Environmental Response, Compensation, and Liability Act (CERCLA), the superfund law shifts the


CORPORATE ENVIRONMENTAL COMMITMENT

burden of paying for environmental clean-ups from the government to the owners, past and present, of polluted property. Some banks are in fact, reducing their loans to small and medium size businesses in industries that handle dangerous chemicals or produce contaminated waste (Hector, 1992). It is more and more common for insurers to require a full environmental audit by a reputable team of environmental auditors before committing themselves to underwriting companies (Quirke, 1992).

THE ENVIRONMENTAL COMMITMENT DIAGNOSTICS SURVEYS The data used in this study was collected in Coopers & Lybrand’s second annual environmental management survey. Developing an operational concept of CEC, like developing any new construct requires following a specific scientific approach of 1) specify the domain of the construct, 2) generate sample items, 3) collectdata, 4) purify the measure, 5) collect additional data, 6 ) assess reliability, 7) assess validity, and 8) develop norms (Churchill, 1979). This study first examined environmental management literature discussed above, to identify the important considerations in evaluating firms’ activities. This material was supplemented by the expertise and experience of Coopers & Lybrand staff and the researchers. it was necessary to use the two latter groups, due to the limited environmental management constructs available in the literature that could be used to access EC (Polonsky et a/., 1992). One of the sources of information which was relied upon in this study was the survey instrument used by Coopers & Lybrand in, 1991 (Polonsky, Zeffane and Medley, 1992). While this instrument was designed to follow rigorous marketing research standards it was found that there were some measurement deficiencies in the instrument. One of the key deficiencies was that data lacked the robustness necessary to determine a complex measure of commitment. The instrument was improved to enable it to be used as a measure of CEC. Specifically the survey questions were reviewed and appropriately altered. The description of the survey questions used in the analysis and the type of questions used are outlined in Appendix 1 and 2. Appendix 1 lists those questions which were integrated into the factor analysis process and Appendix 2 lists the questions that were not included in the analysis. The survey utilised four types of questions: Multiple Choice Questions, Check-lists, Rating (or Likert type) Scales and Dichotomous Questions. The earlier, 1991 instrument relied more heavily on Dichotomous questions and Check-lists. The, 1992 survey instrument featured 29 questions, with sub-questions. Considering the sub-components (i.e. sub-questions) there were 69 questions in total. This was further complicated as several of the check-list questions enabled respondents to choose more than one answer, resulting in over 100 potential variables. In this analysis of corporate commitment only the rating and five point Likert scales were utilised (i.e., a total of 55 questionnaire items).

THE SAMPLING FRAME The target sample was the 1000 largest organisations in Australia, based on the number of employees within each company. CEOs were sent the survey along with a letter detailing the objectives and rationales of the survey. Since the survey was administered by a highly reputable consulting organisation, there is every reason to believe that the CEOs saw the benefits of participating in the survey as an opportunity to diagnose existing issues as well as develop potential solutions. The respondents were distributed across industries (see Appendix 3 for industry breakdown). The industries were dispersed across industrial sectors as can be seen in Table 2, with the secondary and tertiary sectors of the economy almost equally represented. The primary sector is the smallest sector represented with only 8.5% of the sample coming from that group.

SECTOR

II

I

Primary

26

8.5

Secondarv

145

47.4

Tertiary

140

44.1

I

Less than 500

I 501-1000

I

0.65

No Response

1001-2000

I

I I


I

83 86 48

I

I I

27.12 28.10 15.69

I

I

I

I

I

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RACHlD ZEFFANE, MICHAEL POLONSKY, and PATRICK MEDLEY

The above table shows that 72% of the organisations had more than 500 employees, as would be expected given the frame of this study. Given the diverse sample it i s assumed that all types of large organisations are represented. There were no pre-survey announcements nor were there any follow-ups. All CEO's were asked to return an attached form, in a separate envelope, if they were interested in receiving the.summary results of the study. The respondents were asked to return the surveys within four weeks. Within that time-frame 273 surveys were received. A further 33 surveys were received after the deadline and were also included in the sample. Utilising a paired T-test it was found that only eight of the mean responses of early and late respondents differed. These differences were expected given over 50 paired T-tests were undertaken. Thus it is assumed that since only minimal differences in late and early respondents occurred non-response bias i s not a problem. The overall response rate for the survey was 30.6 "10, this is assumed acceptable given that the CEO's were targeted and are key respondents.

critical factors (Kim and Muller, 1978; Cureton and D'Agostino, 1983). The factor analysis was then re-run forcing a four factor solution indicated by the concomitant scree test. The factor loadings of the four factors were analysed. All variables not having a factor loading of greater than .4 or loading on more than one factor were dropped and the factor analysis was re-run. This process was repeated three times until four clear factors were derived.

THE RESULTS As discussed above, the factor analysis of the survey items results in four main factors of EC being identified. The iterative factor analysis process resulted in 5 of the 55 variables being dropped from the analysis. These variables are listed in Appendix 2. Tables 4 through 7 list the variables that loaded on each factor and their corresponding factor loading. These factbrs are listed below in order of their explanation of variance.

DATA ANALYSIS PROCEDURE AND RESULTS As the purpose of this study was to determine an operational measure of corporate commitment, it was decided that factor analysis would be the most appropriate method of analysis. This is because factor analysis assists in reducing the numerous constructs defined in the literature. Given the similarity in methodology used in this study and that of Polonsky et a / . (1992) it was expected that there would be five major areas (or factors) of EC. As was mentioned earlier the instrument used in the Polonsky et al. study was significantly modified. The revised instrument covered the same basic issues as those addressed in Polonsky et a/., though it was redesigned to include additional Likert type scales. Moreover, the literature was reexamined before redesigning the insfrument, which ensured that no critical components had been overlooked. Thus the final survey instruments (used in this study) was a significant improvement over the earlier instruments. Consequently, the results of this study are not systematically comparable to those of Polonsky et a/. (1992). All variables that were not related to what were considered to be aspects of EC were omitted before the factor analysis. Amongst those variables were the demographic variables relating to the organisations, information about past involvement in the study, etc. All non rating or Likert type variables were also omitted from the analysis. This resulted in all dichotomous and check-list type questions being omitted, leaving 55 variables eligible for factor analysis.

0

The Degree of emphasis on Environmental Audit as an evaluation tool. Environmental Policy and the extent of its dissemination. Considerations of Environmental Impacts in Assessing Future Corporate Activities Incorporate of Environmental Issues in the Corporate Appraisal System.

Upon further analysis it was found that the variables within . each factor consistently measure the same component of commitment. As can be seen in Table 3 the Cronbach's Alpha of each factor is indeed within the acceptable range, above .8 indicating that the questions do measure the same construct. Table 3: Variance Explained by Each Factor and Factor Characteristics

I

Variance Described by each factor

Mean Value

Standard Deviation

Cronbach Alpha

POLICY

10.3

11.788

11.349

0.9596

FUTURE

7.2

11.343

6.351

0.8812

APPRAISAL SYSTEM5

3.3

6.833

5.354

0.8710

Total

64.3

Factor

ACTIVITIES

ITERATIVE FACTOR ANALYSIS In order to maximise the patterns of convergence the 55 eligible variables were factor analysed using the Varimax rotation of the factor matrix. This resulted in 11 factors which had an eigen value greater than one, the default cut-off values used in SPSSX. Though on a careful analysis of the scree test it was found that there were only four

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Factor analysis has confirmed that the factors identified by

this instrument do indeed exist and incorporate the main components of a strong strategic management planning activity, as suggested by Friedman (1992) and Hunt and Aster (1990). Such a finding is significant, for when using factor analysis in a confirmatory fashion, it i s hoped that the analysis of the survey data will validate the underlying



dimensions developed in theory (Kim and Muller, 1978). If this confirmatory result did not occur then the validity of the underlying theory would have to be questioned. Table 4 Degree of Emphasis on Environmental Audit as an Evaluation Tool (Audit) Variable

I

Factor Loading The audit addressed the compliance with legislation

0.87217

The audit addressed opportunities forwaste minimisation

0.86436

18F

The audit addressed product use and disposal

0.83956

18J

The audit addressed risk management and minimisation

0.8 1258

18C

The audit addressed Compliance with anticipated future legislation

0.80086

180

The audit addressed site contamination

0.79629

181

The audit addressed energy efficiency svstems

0.78449

The audit addressed internal communications and training

0.77244

The audit addressed accident response planning

0.75080

The audit addressed compliance with development consents

0.74437

The audit addressed resource use

0.73533

The audit addressed management structures

0.70595

The audit addressed raw material procurement

0.69086

How recent was the last environmental audit

0.66941

The audit addressed media and public communications

0.62921

Environmental auditing is an essential part of the development process of our organisation’s environmental programme.

0.57629

The audit addressed transport fleet management

0.57592

18A

18H

18M

18K 188

18C 18L

18E

I

1 1 I I 1 I

17

18N

1

environmental scientists, environmental engineers, chemical engineers, and environmental chemists (Straka, 19911. The firm’s audit team would examine the facility’s site plants, conduct a site inspection, inspect the specific plant processes and equipment subject to regulation, and interview facility personnel to evaluate past and present operating procedures (Spearot, 1991). Table 5: Environmental Policy and the Extent of its Dissemination (Policy) Variable

Factor Loading

88

The environmental policy has been clearly disseminated to managers

0.88005

7D

Our environmental policy includes a commitment to waste management

0.86554

7c

Our environmental policy includes a commitment to protection of the atmosphere

0.84889

8A

The environmental policy has been clearly disseminated to board members

0.841 30

8C

The environmental policy has been clearly disseminated to employees

0.83664

Our environmental policy has been established through a thorough consultative process

0.80548

6B

I

5

The first factor, Audit, relates to the organisation’s need to understand where it is at a given point in time. Without a clear understanding of where the firm is, there i s little chance of it moving in a given direction. The environmental audit process could be considered a form of ’self monitoring‘. Given the broad scope of environmental issues, it i s necessary that numerous functional areas become involved in the auditing process. These groups often include

7A 8E

7B

I

Our environmental policy incorporates measurable objectives

I

0.76739

Does your organisation have a formal written environmental policy, and if so when was it introduced?

0.75329

Our environmental policy includes a commitment to the concept of ecologically sustainable development

0.73435

The environmental policy has been clearly disseminated to suppliers

I

0.67231

The environmental policy has been clearly disseminated to contractors

0.66969

Our environmental policy includes a commitment to maintenance of biological diversity

0.66277

The environmental policy has been clearly disseminated to the general public

0.62354

The environmental policy has been clearly disseminated to shareholders

0.59864

Given the changing nature of corporate environmental behaviour firms need to continually reevaluate their position and determine if they have made progress or need to modify their behaviour, though policy evaluation is only usually undertaken towards the end of the management planning process. For an environmental management system to be


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effective i t needs to be fed back into the management system. This feedback allows the organisation to compensate for ‘differences’ in expectations and behaviour, thus enabling it to better achieve environmental objectives. ~

Table 6: Consideration of Environmental Impacts in Assessing Future Corporate Activities (Future Activities) Variable

268

27 26D

26A

Factor Loading

I

I1

I

Environmental impacts are constdered when evaluating operational investments

0.81852

Environmental impacts are considered when evaluating capital expenditure

0.79364

Environmental implications of new business activity are always considered within this organisation

0.77302

Environmental impacts are considered when new products launches

0.75333

Environmental impacts are considered when evaluating acquisitions

0.72133

~

~

25

The effects of environmental impacts on the organisation’s financial Performance are considered

0.56998

28A

To our organisation, increasing

0.45037

environmental concern represents an opportunity

24A

Directors and Managers are aware of environmental legislation which the company must comply with

0.42901

The second factor found was the establishment of corporate direction, i.e.) Policy. Environmental policy is clearly one of the areas requiring long range corporate planning. Having a concise environmental policy follows directly from the firm’s evaluation of their present and past behaviour. A starting point for a company with little or no environmental awareness is usually an environmental audit. With increasing EC, environmental planning and responsibility eventually permeate the entire corporate organisation. Some of the activities pertinent to the development of environmental policy are, the environmental audit, stakeholder consultation, effective policy development, creation of performance measures, evaluation of criteria for inputs and outputs, customised environmental reporting system, and ongoing monitoring (Eckel, Fisher and Grant, 1992). An effective environmental policy should be properly laid out, disseminated to the entire workforce and have substantial top management support. Establishingpolicy i s not complete unless it i s well disseminated throughout the organisation, thus ensuring that policy is able to be effectively implemented. Environmental management systems are designed to control all present and future organisational activities, the examination of past performance is a critical component of the environmental management process. In many situations ~

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~~

firms may have difficulty modifying existing environmental practices, therefore any ‘irresponsible’ practices that are a component of normal operating activities may be difficult to change. When entering new activities or ventures there is usually no past environmental behaviour on which the firm must build, therefore firms may find it easier to modify their environmental practices in new ventures. Future activities represented the third factor found in the data analysis. The last step of the management system would be an evaluation of behaviour, i.e., another audit, ,and feedback into the system. Environmental issues need to be taken into consideration by -management when conducting strategic and performance evaluation programmes (Hutchinson, 1992). It is therefore important that organisations have the ability to evaluate the firm’s activities taking into consideration the set of environmental objectives established by their organisational policies and mission statements. The evaluation process must cover all areas set out in the firm’s environmental policy. As policy covers a broad spectrum of areas, so must any evaluation process. Most organisations are faced with the challenge of attempting to determine how to measure or grade their environmental management performance. Therefore the establishment of measurable objectives is an essential component of CEC.As anticipated the setting of objectives was the fourth factor determined. On a more practical basis, environmental assessments vary depending on whether they are performed for strategic planning, compliance, prevention, acquisition review or other purpose. Thus it is with these objectives in mind that. assessment procedures must be designed when establishing controls within the environmental management process. For assessment to be effective a system of environmental performance measures must be integrated with a systematic reporting system. In general, the inclusion of environmental issues in performance evaluation entails a detailed gathering of both internal and external information. In practice, however, systematic inclusion (and assessment) of environmental performance may prove difficult and quite intricate (Eckel et a/., 1992). Further, environmental performance measures cannot always be developed independently of other corporate activities, but are part of a dynamic planning and control process of key activities, including the human resource and financial activities. It i s these objectives that will be evaluated in the auditing process, to ensure that the system works effectively. It can be seen that from a theoretical perspective the four factors examined do indeed measure key components of CEC. While the further refinement of the instrument i s an area that may need further examination, the instrument appears to reflect and represent all the critical environmental management issues.

CONCLUSIONS AND DISCUSSIONS Despite the exploratory nature of this study, the results of the empirical data provide encouraging clues in identifying the constructs that measure organisations‘ EC. These results bear both practical and research implications.

~~

~


CORPORATE ENVl RON MENTAL COMMITMENT

Variable

FdClOr

Loading

15A

Environmental performance is incorporated into managers’ performance evaluation

0.74842

158

Environmental Performance is incorporated into staff performance evaluation

0.74503

13

Environmental training programmes are an important feature of our organisation

0.59603

Environmental objectives are modified as regularly as other operating objectives

0.52207

16A

Environmental objectives are clearly established for all areas within the organisation

0.51 185

10

Our organisation’s environmental managedofficer dedicates percentage of their time to environmental matters

0.47201

168

I

-

PRACTICAL IMPLICATIONS If organisations are to evaluate their commitment to the environment they need to have access to a self-assessment tool that they can apply in evaluating their environmental activities. While this study examines EC at one point in time, individual firms examining their own behaviour need to longitudinally evaluate such behaviour. Evaluation of behaviour at any one point in time may, however, serve as a benchmark, but does not reflect the dynamic nature of firm‘s influence on the natural environment. The constructs (i.e., the four factors) discussed in this study provide organisations with a tool that can be used in this fashion, perhaps as a checklist. It should be re-emphasised that examining EC is more than simply ensuring that an environmental management system is in place. Simply having an environmental management system in place, does not ensure the firm’s environmental objectives are appropriate nor does it examine CEC. Commitment t,o the environment requires that firms do more than simply design and follow a ’rigorous’ environmental management system. It requires that firms have structures, practices and policies in place that allow specific environmental objectives to be achieved. Furthermore, being environmentally committed requires that the corporation makes all stakeholders aware of the firms’ environmentally ’committed’ position. Much of the environmental management literature focuses on environmental management system, but only pays lip service to the broader issue of EC at the corporate level. The results of this study partially fill this gap. For decades, economic growth has been taken for granted, not until recently has society begun to face the environmental consequences of this growth. After a decade that has seen the most stringent environmental regulations, companies now see preserving the environment as a

corporate priority. Yet it is unclear whether the existing corporate strategies and associated environmental management systems will allow firms to convert their increased concern into truly corporation-wide EC. It i s suggested that using the constructs (i.e., factors) uncovered in this study to develop broad guidelines, will assist firms in evaluating their EC. These will also assist them in diagnosing the degree to which environmental concerns are entrenched into the corporate culture. in addition this tool will enable firms to integrate constructs related to commitment into their environmental management systems. In practice,. the efficient management of the firm’s environmental activities is more complicated than implied by simple environmental rationales. A number of individuals’ actions, both of employees and management, determine a firm’s environmental performance. in many cases, environmental management remains driven by regulation, which can restrict an organisation’s ability, especially its flexibility, to act. However, in terms of commitment, the objective must be cultural enhancement of the environmental issues, rather than mere compliance. These tangible aims convey to all parties how the various organisational activities affect the environment and what can be done to reduce or remove the detrimental impacts (Beaumont, 1992). Organisations need to devise and develop control and coordination mechanisms most appropriate to their circumstances, to help synchronise their management philosophy with environmental concerns. Aligning environmental requisites basically means staying in step with the trends of the more proactive corporations of the nineties.

IMPLICATIONS FOR FUTURE RESEARCH While this study was designed to develop a measure of CEC additional research in this area is still required. The factors uncovered with this instrument would benefit from, additional testing, refinement and benchmarking of results. Furthermore, there is a need for additional examination of corporate commitment internationally and the instruments’ applicability in measuring it. The existing research examining CEC is superficial and extremely fragmented. Hence there still i s a great need for research that compares environmental performance with commitment. Future research would also need to consider how corporate mindset can be changed to become more environmentally responsible. While there i s extensive literature 1ookin.g at organisational change, none of it has been applied to the environmental area. If the ultimate aim of the environmental management literature is to improve organisational behaviour, there needs to be more research that managers can effectively apply. Furthermore there is a need to develop a multidisciplinary approach to envjronmental management, which requires that the areas-of management, engineering and the environmental sciences develop an integrated approach to the issue. As long as each discipline attempts to tackle the environmental problem independently of each other, comprehensive solutions to organisational problems will not evolve.


25


REFERENCES Barron, T,, (1991), ’Enviro-Programmes Gaining Priority on Corporate Agendas’, Sdys Survey, Environment Today, Vol.2, No.5, pp.53-57. 2. Bashaw, J.R., ( 1 992) ’Environmental Site Assessment‘, Occupational Health & Safety, Vo1.61, N0.3, pp.32-33.. 3. Beaumont, J.R., (1992) ’Managing the Environment: Business Opportunity and Responsibility’, Futures, Vo1.24, No.3, pp.187-205. 4. Boivin, B., Gosselin, L., (1991) ’Going for a Green Audit’, CA Magazine, Vo1.124, No.3, pp.61-63. 5. Carson, P., and Moulden, J., (1991) ’Green Is Gold’, Small Business Reports, Vo1.16, No.12, pp.68-71. 6. Chiampou, K.M., (1992) ’Environmental Public Policy and the NAEP Code of Ethics’, journal of Environmental Regulation, Vol.1, No.3, pp.291-296. 7. Churchill, C.A., (1979) ’A Paradigm for Developing Better Measures of Marketing Constructs’, journal of Marketing Research, Vol.16, pp.64-73. 8. Cohen, A., ( 1 991) ‘Career stage as a moderator of the relationships between organisational commitment and its outcomes: A metahnalysis’, lournal of Occupational Psychology, Vo1.64, pp.253-268. 9. Colby, J.,( 1 991), ’Environmental Management in Development: The Evolution of Paradigms’, Ecological Economics, Vo1.3, pp.291-313. 10. Cureton, E.E. and D’Agostino, R.B., (1983) Factor Analysis: An Applied Approach, Lawrence Erlbaum Associates, Hillsdale, NJ, USA. 11. Eckel, L., Fisher, K., and Russell, C., (1992) ’Environmental Performance Measurement’, CMA Magazine, Vo1.66, No.2, pp.16-23. 12. Friedman, F.B., (1991) Practical Guide to Environmental Management, The Environmental Law Institute, Washington DC. 13. Garlauskas, A.B., (1 975) ’Conceptual Framework of Environmental Management‘, lournal of Environmental Management, Vo1.3, No.2, pp. 185-203. 14. Gilrnan, A.L., (1992) ’Managing Environmental Liabilities’, Chain Store Age Executive, Vo1.68, No.2, pp.79. 15. Creeno, J.L. and Robinson, S.N., (1992) ’Rethinking Corporate Environmental Management‘, The Columbia Iournal of World Business, Vo1.27, No.314, pp.222-232. 16. Hector, G., (1992) ‘A New Reason You Can’t Get a Loan’, Fortune, Vo1.126, No.6, pp.107-112. 17. Hunt, C.6. and Auster, E.R., (1990) ‘Proactive Environmental Management: Avoiding the Toxic Trap’, Sloan Management Review, (Winter) Vo1.31, No.2, pp.7-18. 18. Hunt, D. and Johnson, C., (1993) ’The Systems Approach to Environmental Management and Environmental Auditing’, Business Strategy and the Environment, (Spring) Vol.2, No.1, pp.37-43. 19. Hutchinson, C., (1992) ’Environmental Issues: The Challenge for the Chief Executive’, Long Range Planning, Vo1.25, No.3, p.50-59. 20. laros, S.J., Jermier, J.M., Koehler, J.W. and Sincich T., (1993) ’Effects of Continuance, Affective, and Moral Commitment on the Withdraw Process: An Evaluation of Eight Structural Equation Models’, Academy of Management journal, Vo1.36, No.5, pp.951-41. 21. Kim, J. and Muller, C.W., (1978) Factor Analysis: Statistical Methods and Practical Issues, Sage Publications, Beverly Hills, CA USA. 22. Moriyama, H.I., (19911 ‘The Environmental Audit’, Directors & Boards, Vol.15, No.4, pp.21-25. 23. O’Reilly, C.A., Chatman, J. and Caldwell, D.F., (1991) ‘People and organizational culture: A profile comparison approach to assessing person-organization fit’, Academy of Management journal, Vo1.34, N0.3, pp.487-516 24. Polonsky, M., Zeffane, R. and Medley, P., (1992) ‘Corporate Environmental Commitment in Australia: A sectorial Approach’, Business Strategy and the Environment, (Summer) Vol.1, No..?, pp.25-40. 25. Quirke, B., (1992) ’Environmental Auditing: What’s It All About?‘, 1.

26

Management Accounting, Vo1.70, No.3, pp.34-35. 26. Shafer, D.A., (1992), ‘Preparation, Not Perspiration is Key to Hazardous Substance Spill Response’, Environment Today, Vo1.3, No.9, p.47-57. 27. Shearer, J.W., (19901, ’Business and the New Environmental Imperative’, Business Quarterly, Vo1.55, No.3, pp.48-52. 28. Shimell, P., (1991) ’Corporate Environmental Policy in Practice’, Long Range Planning, Vo1.24, No.3, pp.10-17. 29. Snyder, J.D., (19921, ‘Companies. Invent New Methods to Measure Enviro-Performance’, Environment Today, Vo1.3, No.4, p.51-53. 30. Spearot, R.M., (1991), ’Environmental Liability: What You Don’t Know Can Hurt You’, Corporate Controller, Vo1.4, No.1, pp.20-23. 31. Straka, T.E., (1991) ’Nuts and Bolts of Pollution Audits’, National Underwriter, Vo1.95, No.46, pp.55-68. 32. Taylor, S.R., (19921, ‘Green Management: The Next Competitive Weapon’, Futures, Vo1.24, No.7, pp.669-680. 33. Vandermere, S. and Oliff, M.D., (1991) ‘Consumers Drive Corporations Green’, Long Range Planning, Vo1.23, No.6, pp.10-16. 34. Vinten, C., (1 992) ‘The Creeningof Audit’, lnternal Auditor, Vo1.48, NO.5, pp.30-36. 35. Vinten, G., (1991) ‘The Blossoming of the Environmental Audit‘, lndustrial Management and Data Systems, Vo1.91, No.4, pp.19-25. 36. Winsemius, P. and Cuntram, U., (1992) ‘Responding to the Environmental Challenge’, Business Horizons, Vo1.35, No.& pp.12-20. 37. Williams, L.J and Anderson, S.E., (1991) ‘Job satisfaction and organizational Commitment as predictors of organizational citizenship and in-role behaviors’, journal of Management, Vol. 17, NO.3, pp.601-617.

Note: The authors would like to thank Coopers & lybrand (Sydney, Ausfra/ia) for their assistance in providing the data used in this project. We also would like to thank the anonymous reviewers at BSE for their useful comments in the revision of this work.

BUSINESS STRATEGY A N D THE ENVIRONMENT

Rachid M Zeffane Department of Management University of Newcastle NSW, 2308, Australia Michael J Polonsky Department of Management University of Newcastle NSW, 2308, Australia Patrick Medley Environmental Management Services Coopers & Lybrand Consultants Sydney, Australia


Appendix 1: Questionnaire Characteristics of Variables Included in Factor Analysis

I

I

Questions

Does your organisation have a formal written environmental policy, and if so when was it introduced!

I Choices I Interval I 6

Factor Variable Loaded On Policy

5

Our environmental policy i) has been established through a consultative process. ii) incorDorates measurable obiectives.

Rating

Our environmental policy includes a commitment to: i) Ecologically sustainable development ii) Maintaining biodiversity iii) protection of the atmosphere iv) Waste management

Rating

The environmental policy has been cieady disseminated to: i) board Members ii) managers iii) employees iv) contractors v) suppliers vi) shareholders vii) ieneral oublic

Rating

Our organisation’s environmental managedofficer dedicates - percentage of their time to environmental matters.

Interval

7

A-S

Environmental traininz oroerammes are an imDortant feature of our ornanisation

Ratinz

5

A-S

Environmental performance is incorporated into: i) managers performance evaluations ii) staff oerformance evaluation

Rating

5

Environmental objectives are i) Clearly established for all areas within the organisation ii) modified as regularly as other operating objectives

Rating

Our last environmental audit was undertaken in __

Rating

6

The audit addressed: i) compliance with legislation ii) compliance with development consents iii) compliance with anticipated future legislation iv) site contamination v) raw material procurement vi) product use and disposal vii) resource use viii) opportuniries for waste minimisation ix) energy efficiency systems x) risk management and minimisation xi) management structures xii) internal communications and training xiii) media and publicity communications xiv) transport fleet management xv) accident response training

Rating

5

Environmental auditing IS an essential part of the development process of our organisation’s environmental programme.

Rating

5

Audit

Directors and Managers are aware of environmental legislation which the company must comply

Rating

5

F-A

Policy Policv

5 Policy Policy Policy Policv

5 Policy Policy Policy Policy Policy Policy Policy

A-S A-S

5 A-S A-5 Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit Audit

with

The effects of environmental impacts on the organisation’s financial performance are considered

Rating

Environmental impacts are considered when evaluating: i) acquisitions ii) capital expenditure iii) operational investments iv) new oroduct launches

Rating

To our organisation, increasing environmental concern represents an opportunity

Rating

1 5

F-A

5

F-A F-A F-A F-A F-A


5

F-A

27

RACHID ZEFFANE, MICHAEL POLONSKY, and PATRICK MEDLEY *

Appendix 2: Questionnaire Characteristics of Variables not Included or Dropped out of Factor Analysis

I

Questions

Type

Number of Choices

Our organisation has a Board Member responsible for environmental issues and he/she spends approximately - percentage of hidher time dealing with environmental matters

Interval

7

Which of the following activities relating to environmental issues form part of the normal duties of the Board Member/Manager/Officer?

Checklist

8

Does your organisation have a separate functional unit responsible for environmental issues, and if so, how does it allocate its budnet?

28

Rating

1 4

Plants and facilities in all locations have a formal coordinator responsible for environmental performance.

Rating

5

Funds are set aside sDecificallv to cover the costs incurred in an environmental audit.

Ratina

5

Directors and Managers are aware of their personal liabilities and penalties under environmental legislation.

Rating

5

To our organisation increased environmental concern represents a threat.

Rating

5

lndustrv

Number

Percentaae of Total Samde

( 1 1 Agriculture, Forestry, Fisheries, Conservation

4

1.3

(13) Mining, Quarrying

22

7.2

( 5 ) Construction

a

2.6

of Food Products

27

8.8

(8) Manufacture of Footwear, clothing and Textiles

10

3.2

(9) Manufacture of metal goods and Engineering Processes

25

8.2

(101 Manufacture of Mineral, Chemical and Petroleum Products

32

10.5

(1 1) Manufacturer of Timber Products and Furniture

4

1.3

(12) Other Manufacturing

39

12.7

(2) Business Services

2

0.7

(3) Communication

17

5.6

(4) Community Services

3

1.o

(6) Finance and Financial Services

24

7.a

(7) Manufacture

I

I

(14) Prooem

1 3

I

1.0

(15) Public Administration

3

1.o

(1 6 ) Tourism, Hospitality, Entertainment and Personal Services

9

2.9

(17)Transportation and Storage

14

4.6

(18) Utilities

15

4.9

(19) Wholesale/Retail

26

I 8.5

(20) Other

19

6.2


I

1