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Corporate Social Responsibility and Environmental Management Corp. Soc. Responsib. Environ. Mgmt. 18, 80–90 (2011) Published online 9 June 2010 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/csr.242

Corporate Environmentalism in a Small Emerging Economy: Stakeholder Perceptions and the Influence of Firm Characteristics Kalim U. Shah* The University of Trinidad and Tobago, Arima Trinidad, West Indies

ABSTRACT This study presents a neo-institutional perspective of the perceptions of corporate environmentalism held by stakeholder groups relative to each other and the influence that specific firm-level characteristics, such as size, ownership, compliance record, and location, have on these perceptions. Empirical evidence is gathered from the emerging economy context of Trinidad and Tobago and its pollution-intensive oil, gas, and petrochemical sectors. Results indicate that non-governmental and community-based organizations (NGOs/ CBOs) are most critical and business chains least critical of corporate environmentalism. All stakeholders perceive larger firms and those with strong compliance records as having stronger corporate environmentalism, while government stakeholders perceive foreignowned firms, business chain perceives urban-based firms, and NGOs/CBOs perceive stateowned firms as having stronger corporate environmentalism. These preliminary findings can guide corporate managers in handling stakeholder relations and can guide policymakers seeking to circumvent industry-stakeholder friction in emerging economies. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment. Received 21 January 2010; revised 5 April 2010; accepted 13 April 2010 Keywords: corporate environmentalism; stakeholder management; developing countries; institutional theory; Trinidad and Tobago; corporate social responsibility

Introduction

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ORPORATE ENVIRONMENTALISM COMES IN MANY SHADES, COLORED BY COUNTRY AND INDUSTRY CONTEXT, motivations, intents, and desired outcomes. Mintzberg (1987) refers to corporate environmentalism as ‘a pattern in action over time intended to manage the interface between business and the natural environment’. Sharma (2000) refers to it as ‘outcomes in the form of actions firms take for regulatory compliance and to those they take environmental impacts of operations’. In this paper, we interpret it as ‘the degree to which firms exhibit organization-wide recognition of the legitimacy and importance of the biophysical environment in the formulation of organizational strategy, and the integration of environmental issues into the strategic planning process’ (Banerjee, 2002). *Correspondence to: Kalim U. Shah, The University of Trinidad and Tobago Center for Environmental Studies and Applied Life Sciences, 74-98 O’Meara Industrial Park, Arima Trinidad, West Indies. E-mail: [email protected] Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment

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Unlike quantitative measures of environmental performance, the corporate environmentalism construct relates to all organizational levels. This is of strategic importance to business managers since environmental concerns should translate into multi-level strategy for ‘corporate greening’ to occur (Coddington, 1993). While objective environmental measures are needed to assess a firm’s actual environmental impact, universal indicators can be quite difficult to develop, as there is considerable disagreement as to what constitutes environmental impact and how it is measured. Emissions monitoring, for example, is a functional activity or measure, whereas corporate environmentalism is more comprehensive in scope, encompassing the firm’s environmental orientation and its environmental strategic focus (Banerjee, 2002). Several researchers point out that the perception of corporate environmentalism is often more critical to managers than archival measures (Schmidheiny, 1992; Cordano and Frieze, 2000). This study therefore focuses on the perceptions of corporate environmentalism by various stakeholder groups, taking the position that it is a phenomenon gauged by the ‘eyes of the beholder’. When the beholder is a key stakeholder in the firm, that perception can impact on a firm’s reputation, its industry standing, its relationship with regulators, and its competitiveness with rivals. Lack of awareness of stakeholder demands by businesses is a clear obstacle to implementing corporate environmental practices (Welford and Frost, 2006). As the business environment becomes more complex and interlinked, successful environmental strategy will become more dependent on stakeholder support, which will only be gained when firms understand how their stakeholders perceive them (Scott, 1995; Barney, 1997; Kanter and Brinkerhoff, 1981). This paper identifies key stakeholders groups and gauges their perception of corporate environmentalism in oil, gas, and petrochemical firms in a small emerging economy setting. From the neo-institutional perspective, the role of salient firm characteristics as antecedents of stakeholder perceptions is also investigated (Adams, 2002) and provides new information to business and policy-makers to aid in fostering less antagonistic relations between stakeholders and industry. New empirical evidence is obtained from Trinidad and Tobago, thereby also contributing to the remarkably narrow body of literature on corporate environmentalism in smaller emerging economies. We expect that the differing institutional pressures and players present in this context can shed more light on how institutional drivers motivate corporate environmentalism, hence enhancing the existing scholarly literature.

Emerging Economy Context: Trinidad and Tobago The Republic of Trinidad and Tobago is an oil- and gas-rich country in the southern Caribbean just off the South American mainland. Despite its small size, it is a major international player in the energy sector, trading mainly with the United States, Canada, the United Kingdom, Brazil, and Germany. Over 50% of national gross domestic product (GDP) is derived from the energy sector and between 2003 and 2007 alone, US investments in energyrelated projects is estimated at nearly $3 billion (Lorde et al., 2009). The oil and gas industry comprises of upstream oil and gas production and exploration, and downstream processing and petrochemical manufacturing by firms dependent on large inputs of cheap oil and gas feedstock. The country is a top global producer of ammonia and methanol with continuous foreign and state investment in downstream diversification. With the fifth largest natural gas reserve in the Western Hemisphere, by 2006 Trinidad and Tobago was supplying the US market with 70% of its imported natural gas (the US imports 16% of its total natural gas needs) (Lucie-Smith, 2006). These sectors are heavily concentrated with most production volume coming from multinational (US, Canadian, British, German, Australian, and Indian multinationals among others) and state-owned firms. Small and medium enterprises (SMEs) flourish in downstream production and manufacturing. Unfortunately, as can be expected from this level of industrial activity, Trinidad and Tobago is also the fifth largest carbon dioxide emitter per capita in the world (United Nations, 2007). Freshwater and marine pollution, watershed degradation, air pollution from factory stacks and manufacturing particulates, and solid and hazardous wastes from the oil, gas, and chemical sectors are the other major issues. The Environmental Management Authority (EMA) is the focal regulator gaining its authority through the Environmental Management Act of 1995. As in many other developing countries, environmental regulations suffer from poor implementation and enforcement because of the lack of sufficient resources, lack of research, uncoordinated agency efforts, and lack of political will Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment

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by government officials (Blackman, 2000; Potoski and Prakash, 2004; Ramlogan and Persadie, 2004). Simultaneously however, Trinidad and Tobago has seen tremendous growth in public environmental awareness, attributable to increased media attention to environmental issues, increased NGO activity, and enhanced environmental education programs (Ramlogan and Persadie, 2004).

Theory and Hypotheses Neo-institutional theory provides a natural starting point to explain the pressure exerted on firms by various stakeholder groups and to identify certain characteristics of firms that may influence the perceptions held by these groups. This theoretical framework is useful since it emphasizes that managers of firms make decisions based not only on economics but also in response to external norms, values, and traditions of the society in which they exist (Hoffman and Ventresca, 1999). Intentionally or unintentionally, decisions are made in an effort to gain or maintain the firm’s social legitimacy (DiMaggio and Powell, 1983; Scott, 1995). Social legitimacy is derived when firms select and implement strategies aligned with the goals and approvals of external stakeholders. This, in turn, can increase firm survival and profitability. DiMaggio and Powell (1983) classify isomorphic institutional influences as coercive, normative, and mimetic. Coercive pressures, usually imposed by governments, require firms to pursue specific behaviors by relying on legal sanctions or threats (Meyer and Rowan, 1977). Normative pressures arise from values and norms of conduct promoted by professional networks, industry associations, and academic institutions. Normative pressures usually exert influence on organizations by relying on peer pressures and embarrassment of non-compliers (Hoffman and Ventresca, 1999). Mimetic pressures are demands that firms face to appear legitimate and competitive by imitating the behavior of the most profitable and respected companies in their industry (DiMaggio and Powell, 1983).

Institutional Pressure from Stakeholders Business-chain stakeholders (e.g. suppliers and service providers). The reduction of business risk by collaborating with firms that exhibit stronger corporate environmentalism can increase the competitiveness of business-chain stakeholders. How much pressure they can exert on firms to follow others with strong environmental reputations is questionable. In circumstances where the industry is highly concentrated and there are fewer options to switch business partners, their ability to apply pressure is limited. While business-chain stakeholders may desire their business partners to be in regulatory compliance, they may be unwilling or unable to exert penalties as regulators might; and unable to push their partner firms to go beyond regulations as NGOs/ CBOs might. Although there is evidence that supply-chain partnerships may improve corporate environmental practices (Cheung et al., 2009), the concentrated industry structures in some emerging economies may therefore provide an institutional environment that limits business-chain stakeholders from applying pressure on firms to improve their corporate environmentalism. While some researchers point to the ability of business-chain stakeholders to lead public boycotts of products and services, lawsuits and protests in industrialized countries (Henriques and Sadorsky, 1999) such actions can have severe and resounding political consequences in developing countries. NGO/CBO stakeholders: Although not directly involved in the firm’s economic transactions, they can apply strong normative institutional pressure on firms to improve their corporate environmentalism (Klassen and McLaughlin, 1996; Mitchell et al., 1997; Waddock and Graves, 1997). While NGO/CBO pressure may not be tied to regulatory penalties, other mechanisms at their disposal such as public shaming can have telling effects. In developing countries, the heightened sensitivities to inequities and the frequency of political interference in regulatory enforcement can cause NGOs/CBOs to be more immediately concerned about issues such as livelihoods, health, and land resource rights rather than, for example, a factory’s heavy metal loads in effluent discharge. Effectively, therefore, they perceive a firm’s corporate environmentalism as how much it visibly goes ‘the extra mile’. NGO/CBO stakeholders have the capacity to mobilize public opinion in favor of or in opposition to a firm (Freeman, 1984) and can utilize public protests to get across their points of view. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment



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Regulatory stakeholders (e.g. Environmental Management Authority). These are the agencies and departments within the national governance structure charged with the responsibility of enforcing regulatory compliance and penalizing wrong doers (Fineman and Clarke, 1996; Carmins et al., 2003). Firms that fail to comply with environmental regulations or maintain satisfactory communications with regulatory stakeholders risk incurring non-compliance penalties (Henriques and Sadorsky, 1996) and having their operating permits revoked. The amount of coercive pressure that regulators can apply in the developing country context is questionable since lack of resources and political will often make regulatory implementation a challenge to authorities. The conditions under which the EMA operates in our case study of Trinidad and Tobago are no different. Based on these arguments we propose:

Hypothesis 1: It is likely that all three stakeholder groups hold significantly different perceptions of a firm’s corporate environmentalism (as reflected in the ratings of corporate environmentalism they give to firms).

Institutional Pressures and Firm Characteristics Firm size. Empirical evidence in the current literature provides evidence indicating a positive correlation between larger firms and higher environmental performance (King and Lenox, 2000; Sharma, 2000; Bansal, 2003). Some stakeholders may assume that larger, more visible firms are asset- and resource-rich compared to smaller firms, hence they can be expected to devote more resources to environmental activities leading to higher compliance levels. They may also enjoy economies of scale when implementing environmental protection measures. Larger firms may therefore be better prepared to withstand the coercive pressures from regulators and normative pressures from the wider society (Bansal and Bogner, 2002). Compliance record. Firms may experience increased normative pressure from stakeholders who are able to access their public records of compliance, usually held by regulatory authorities. Some stakeholders may utilize these records to apply increased scrutiny to firms that are historic polluters while they may reduce pressure and attention on those that have fewer past violations on their records (DiMaggio and Powell, 1983; Scott and Meyers, 1983; March and Olsen, 1996). This compliance record may or may not be of importance to stakeholder groups. For instance, the record may be the definitive evidence of regard for regulators but only a starting point for NGOs/ CBOs who might hope for environmentalism beyond the few existing regulations. Firm location. Urban-situated firms may experience more intense institutional pressures than those situated in rural areas. Urban stakeholders tend to be more assertive, better educated, better informed, and more organized and structured than rural stakeholders (Delmas and Toffel, 2004). Urban stakeholders may also gain quicker political attention through their economic and political influence. Rural stakeholders may be less capable of applying pressure to firms because of their relatively lesser economic and political importance. Rural stakeholders may also suffer from community fragmentation based on promises of employment and local economic benefits. Some stakeholders may therefore expect urban firms to succumb to the more intensive institutional pressures and exhibit stronger corporate environmentalism. Firm origin. To some stakeholders in developing countries, foreign subsidiaries are expected to adhere to the more stringent environmental norms of their industrialized home countries. They may also have easier access to cost-efficient pollution-prevention technologies and innovative environmental expertise (Wheeler, 1999; Christmann and Taylor, 2001). Although an opposing ‘race-to-the-bottom’ view points to instances where foreign-originated firms lower their operating standards in less environmentally regulated countries, there is growing evidence that far more foreign subsidiaries raise local operating standards (Garcia-Johnson, 2000; Neumayer, 2001; Shah and Rivera, 2007). Firm ownership. State enterprises are thought to be less efficient than their private sector counterparts due to the protection from market forces afforded to government enterprises through the disbursement of subsidies, tax breaks, and other fiscal incentives. In a similar manner, the shield around many state enterprises can serve to numb them from the calls of some stakeholders to be more environmentally responsible. Although civil society may apply strong institutional pressures on them to improve, they may not have the motivation to respond as quickly as private sector firms that depend on the market for their survival (Darnall, 2003). Furthermore, especially in developing countries, state regulators are reluctant to apply coercive pressure on state enterprises as this can be seen as embarrassing to politicians. Based on these arguments, it is suggested that: Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment


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K. U. Shah Hypothesis 2: It is likely that firm-specific characteristics (size, ownership, origin, compliance record, location) influence the different perceptions of a firm’s corporate environmentalism held by stakeholder groups.

Research Methodology Sampling and Data Collection All firms coded as ‘Oil and Gas’ and ‘Petrochemical’ were identified from the national Business Establishment Registry (Central Statistical Office, 2004). After exclusion of firms with less than ten employees and service firms without actual physical plants, a pool of 231 firms remained; 131 firms responded to the survey (a response rate of 56.7%). T-tests conducted between respondent and non-respondent firms along known variables, such as age and size, confirmed sample representativeness (t-prob. < 0.001). The possibility of self-selection bias was eliminated by comparing responders’ and late responders’ (as a proxy for non-responders) corporate environmentalism ratings as suggested by Christmann (2000). T-test results proved non-significant (t- prob. < 0.001). From firms, data on the firm’s characteristics including size, ownership, location, compliance record, and origin were collected. Firms were also asked to identify their most important business chain, government and NGO/ community stakeholders. Secondary sources such as company reports and news media reports provided additional checks to ensure the validity of the stakeholders identified by each firm. From stakeholders, data were collected using a questionnaire that asked a series of questions designed for the respondent to rate the firm’s level of corporate environmentalism (Table 1). One stakeholder from each of the three stakeholder groups as identified by each firm (and checked through secondary sources) was randomly selected to complete the questionnaire.

Corporate environmentalism scale Question Items

Factor loading

Environmental Orientation: Internal 1 Firm makes a concerted effort to make every employee understand the importance of environmental preservation. 2 Firm has a clear policy statement urging environmental awareness in every area. 3 Environmental preservation is a high-priority activity in the firm. 4 Preserving the environment is a central corporate value in the firm Environmental Orientation: External 5 The financial well-being of the firm does not depend on the state of the natural environment. 6 The firm has a responsibility to preserve the environment. 7 Environmental preservation is vital to the firm’s survival. 8 The firm’s responsibility to its customers, stockholders, and employees is more important than its responsibility toward environmental preservation. Environmental Strategic Focus: Corporate 9 The firm has integrated environmental issues into its strategic planning process. 10 In the firm, ‘quality’ includes reducing the environmental impact. 11 The firm links environmental objectives with other corporate goals. 12 The firm is engaged in developing products and processes that minimize environmental impact. 13 Environmental issues are always considered when new products are developed or new services offered. Environmental Strategic Focus: Functional 14 The firm emphasizes the environmental aspects of its products and services in advertising. 15 The firm’s marketing strategies for products and services have been influenced by environmental concerns. 16 In the firm, product-market decisions are always influenced by environmental concerns. Cronbach’s alpha

0.35 0.82 0.84 0.79 0.75 0.79 0.76 0.72

0.85 0.83 0.81 0.82 0.83 0.85 0.87 0.79 0.94

Table 1. 16-item scale used to measure corporate environmental performance of firms Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment



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Questionnaires were developed following Dillman’s total design methods to maximize response rates (Dillman, 1978) and requests for interviews were made up to four times over a two-month period, as necessary. Each firm survey was conducted in face-to-face interviews with the Chief Executive Officer or other top executive of the organization.

Statistical Analysis Techniques To test Hypothesis 1, an analysis of variance (ANOVA) suitable for repeated measures was used, as three different stakeholder groups rated each firm. Testing was based on the significance test using Fisher’s F-distribution for detecting evidence of differences among the population means. While the F value provides evidence as to whether or not the mean corporate environmentalism ratings across stakeholder groups are equal, it does not provide evidence to identify which groups may differ. For this, the analysis of variance is followed by the Bonferroni multiple comparisons test to help identify these differences. To test Hypothesis 2, three ordinary least squares regressions were conducted, each using the particular stakeholder’s corporate environmentalism rating of firms as the dependent variable and firm characteristics as explanatory variables. The selection of explanatory variables (firm characteristics) were derived from neo-institutional reasoning and prevalent causal variables from previous studies (Christmann, 2004; Russo and Harrison, 2005) and derived from neo-institutional perspectives as described earlier. All three regression models were subject to the Cook-Weisburg test and White’s test for heteroskedasdicity, which turned up insignificant (p < 0.05). No multico linearity problems arose when bivariate coefficients were checked. The measurement of variables is explained below.

Dependent Variable Measure The corporate environmentalism of each firm was determined using the respective stakeholder ratings. The scale, originally developed by Banerjee (2002), assesses four areas of environmental performance: (1) internal environmental orientation, (2) external environmental orientation, (3) corporate strategic focus and (4) functional strategic focus. A total of 16 items across these four areas comprise the environmental performance rating (Table 1). Each item uses a seven-point Likert-type scale where one equals ‘strongly disagree’ and seven equals ‘strongly agree’. The overall corporate environmentalism score (percent) for each firm is obtained by calculating the average for the three stakeholder ratings. The Likert scores for all 16 items included in the scale are tallied up for each of the three stakeholders, and then divided by the maximum possible score and multiplied by 100 to yield a percentage rating. Scale validity was determined using factor analysis with varimax rotation, which confirmed the uni-dimensionality of the scale (Table 1). A Cronbach’s alpha equal to 0.94 also indicated good internal reliability for the scale.

Explanatory Variables Firm size was measured as the natural logarithm of the number of employees. According to standard ordinary least squares regression practice, the natural logarithm was used to normalize firm size (Greene, 2000). Firm location was recorded as a dummy variable equal to one if the firm was within a five-kilometer radius of an urban community and zero if not. Firm Origin was recorded as a dummy variable equal to one for firms originating from foreign industrialized countries and zero for local firms. Firm ownership was recorded as a dummy variable equal to one for privately owned firms and zero for state-owned firms. Compliance record was recorded as a dummy variable equal to one for firms with a less-than-average number of violations over the last three years and zero otherwise (average number = 3.3).

Results and Findings Of the 131 respondent firms, 84% were SMEs, nearly 70% were located in less urbanized areas of the country, 53% were locally owned and 15% were privately owned. Frequency distributions, cross-tabulations, and comparison Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment


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Variable

Stakeholder Group (mean, SD) Government/Regulators

Corporate Environmentalism rating Size Large SMEs Location

Urban Rural

Origin

Foreign Local

Ownership

State Private

Total Sample N (%)

Business Chain

Community/NGO

55.6 (18.1) 70.27 (14.06) 52.94 (17.47) t test = 4.19*** 60.94 (16.01) 53.79 (18.25) t test = 2.74* 60.8 (16.76) 51.03 (18.03) t test = 3.196** 64.1 (19.6) 54.14 (17.47) t test = 2.257*

60.16 (17.38) 68.1 (17.0) 58.74 (17.14) t test = 2.25* 66.6 (16.7) 57.33 (17.0) t test = 2.889** 62.37 (18.5) 58.23 (16.23) t test = 1.364 65.18 (16.27) 59.3 (17.48) t test = 1.368

46.41 (18.34) 56.2 (18.4) 44.65 (17.85) t test = 2.651** 51.69 (16.6) 44.09 (18.67) t test = 2.217* 49.61 (17.81) 43.75 (18.13) t test = 2.495 55.71 (21.1) 44.84 (17.44) t test = 2.434*

60.16 (17.28) 49.45 (17.4) t test = 3.499***

66.03 (16.79) 52.3 (15.0) t test = 4.843***

52.44 (18.2) 38.33 (15.23) t test = 4.7***

131 (100) 20 (15.3) 111 (84.7) 40 (30.5) 91 (69.5) 61 (46.6) 70 (53.4) 19 (14.5) 112 (85.5)

Compliance record average violations

75 (57.3) 56 (42.7)

Table 2. Descriptive statistics ^ Prob < 0.10; * prob < 0.05; ** prob < 0.01; *** prob < 0.001 t-prob: test Ho: No significantly different means

of means of each explanatory variable are provided in Table 2. These results suggest that regulatory stakeholders perceive significant differences in corporate environmentalism between large and small firms (t-prob. = 4.19, p < 0.001); firms with below and above average violations (t-prob. = 3.499, p < 0.001); foreign and local firms (t-prob. = 3.196, p < 0.01); urban and rural firms (t-prob. = 2.74, p < 0.05; and state- and privately owned firms (t-prob. = 2.257, p < 0.01). Business-chain stakeholders perceive significant differences in corporate environmentalism between firms with below and above average violations (t-prob. = 4.843, p < 0.001); urban and rural firms (t-prob. = 2.889, p < 0.01; and between large and small firms (t-prob. = 2.25, p < 0.05). CSO/NGO stakeholders perceive significant difference in corporate environmentalism between firms with below and above average violations (t-prob. = 4.7, p < 0.001); large and small firms (t-prob. = 2.651, p < 0.01); urban areas and rural firms (t-prob. = 2.217, p < 0.05); and between state- and privately owned firms (t-prob. = 2.434, p < 0.05).

Differences in Corporate Environmentalism Mean (std. dev.)

NGOs/CBOs Business Chain

Government/regulators

Business Chain

−9.16 (18.67) t-value = −5.61*** 4.57 (20.69) t-value = 2.53

−13.75 (22.47) t-value = −7.00***

Table 3. Comparison of corporate environmentalism ratings between stakeholder groups * p < 0.05; ** p < 0.01; *** p < 0.001; a: n = sample size of each stakeholder group is 131 firms df of each comparison = 130 Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment



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To test Hypothesis 1, the three stakeholder groups were compared using an ANOVA with the corporate environmentalism rating as the dependent variable. The overall multivariate F [(423) = 55.57, p < 0.001] for this analysis was significant, suggesting that at least one stakeholder group differed from the others. Table 3 includes the differences in mean corporate environmentalism ratings between government regulators, business-chain groups and NGOs/CBOs that participated in the study. Bonferroni multiple comparisons provided evidence that corporate environmentalism ratings of firms given by government/regulators differs significantly from NGO/CBO stakeholders (t-prob. = 5.61; p < 0.001) but interestingly, does not differ significantly from business-chain stakeholders. NGO/CBO ratings are significantly lower than the corporate environmentalism ratings given to firms by all three other stakeholder groups.

Model 1: Government/regulators Constant Compliance Record Location Origin Ownership Sizea N F-value R2 Adj.-R2

53.546*** (20.41) 11.541*** (4.21) 4.007 (1.31) 6.301* (2.24) 7.372 (1.84) 17.187*** (4.51) 131 12.13 0.327 0.300

Model 2: Business Chain

Model 3: Community/NGOs

63.098*** (23.88) 14.161*** (5.13) 5.014* (1.63) 0.831 (0.29) 5.818 (1.45) 9.397** (2.45)

44.688*** (15.42) 9.247** (9.24) 4.314 (4.31) 4.331 (4.33) 9.323* (9.32) 11.123** (11.12)

131 8.87 0.262 0.239

131 6.38 0.213 0.197

Table 4. Corporate environmentalism and firm characteristics for each stakeholder group, OLS regression models *** p < 0.001; ** p < 0.01; * p < 0.05; ^ p < 0.1; t-values in parentheses; a Control variable

The results of the three OLS regressions are displayed in Table 4. For Model 1, the overall model fit indicates that the explanatory variables significantly account for 30% of the variance in corporate environmentalism (adjusted R-square = 0.3; p < 0.001). Findings suggest that government stakeholders’ perception of corporate environmentalism is significantly related to past environmental record (p < 0.001), firm size (p < 0.001) and firm origin (p < 0.05). The positive regression coefficients suggest that government regulators perceive that large firms with lessthan-average number of environmental violations, who originate from foreign industrialized countries, are more likely to exhibit stronger corporate environmentalism. For Model 2, the overall model fit indicates that the explanatory variables significantly account for 24% of the variance in corporate environmentalism (adjusted R-square = 0.239; p < 0.001). Findings suggest that businesschain stakeholders’ perception of corporate environmentalism is significantly related to past environmental record (p < 0.001), firm size (p < 0.01) and firm location (p < 0.05). The positive regression coefficients suggest that business-chain stakeholders perceive that large firms with less-than-average number of environmental violations whose operations are in urban areas are more likely to exhibit stronger corporate environmentalism. For Model 3, the overall model fit indicates that the explanatory variables significantly account for 20% of the variance in corporate environmentalism (adjusted R-square = 0.197; p < 0.001). Findings suggest that NGO/CBO stakeholders’ perception of corporate environmentalism is significantly related to past environmental record (p < 0.01), firm size (p < 0.01) and firm ownership (p < 0.05). The positive regression coefficients suggest that NGOs/ CBOs perceive that large firms with less-than-average number of compliance violations that are state enterprises are more likely to exhibit stronger corporate environmentalism. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment


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Discussion The results suggest that there is a significant difference in perception of corporate environmentalism held by NGO/ CBO stakeholders and other stakeholder groups. NGO/CBO stakeholders have the most critical perception while business-chain stakeholders have the most favorable perception of firms. Although government regulators held more critical perceptions that business-chain stakeholders, it was not statistically different. What might be the reasons behind such a critical perception by NGO/CBO stakeholders relative to the other groups? In Trinidad and Tobago, as in many other developing countries, the regulatory and enforcement powers of the EMA are severely hampered by political, resource, and legislative factors. These factors greatly reduce the ability of the EMA to apply sufficient coercive institutional pressure on firms to meet compliance. Over the short 14 years of its existence, this apparent lack of pressure on polluters has markedly increased the distrust of the NGO/CBO community. Additionally, the few environmental regulations enforceable on heavy industry have been delayed by severe regulatory drag by the government (Shah and Rivera, 2007). This situation has essentially set up a government-NGO/CBO relationship filled with skepticism and suspicion. These stakeholders may also view industrial firms with intensified suspicion in the known absence of sufficient regulatory pressure. This is exacerbated by poor environmental communication by business firms to external stakeholders (Collison et al., 2003). Of a firm’s characteristics identified, firm size and compliance record appear to be common influencers among all stakeholder groups. This supports findings in the literature that suggests a relationship between larger firm size and stronger environmental performance (Welford and Frost, 2006). Also, Glachant (1996) found that larger firms are able to sustain higher environmental research intensities and others have found that they are more likely to join beyond compliance initiatives (DeCanio and Watkins, 1998; Dasgupta et al., 1998; Karamanos, 2000; King and Lenox, 2000; Videras and Alberini, 1996). Similarly, the literature also supports the finding that a stronger compliance record influences favorable perceptions. Several studies suggest that historically poor compliance signals reactive rather than proactive environmental stances (Khanna and Damon, 1999; King and Lenox, 2000; Reinhardt, 2000; Khanna and Anton, 2002). Apart from the above, government stakeholders also appear to perceive foreign-owned firms as having stronger corporate environmentalism. Field observations suggest that foreign-owned firms entering the developing country market are very cooperative with regulatory authorities compared to local firms who are largely uncooperative with regulators. This may be because of the confidence foreign firms have in their environmental management, technology, and practices that might comply with stringent home-country standards or it may be due to foreign-firm managers having more experience in negotiating and relationship building with regulators. These possibilities may give regulators a favorable view of foreign-owned firms. Finally, contrary to the argument presented earlier, the results suggest that state-owned firms are perceived as having stronger corporate environmentalism than private firms. Again, field observations suggest that this stems from the weak coercive institutional pressure experienced by firms in developing countries like Trinidad and Tobago. Understanding the ineffectiveness of regulators, NGO/CBO stakeholders tend to exert excessive normative pressures on state enterprises they believe to be ignored by regulators. This has led to a situation where the state enterprises, under intensive public scrutiny, provide more information on their environmental activities. Private firms are under relatively less pressure to do so and legislative gaps largely allow for confidentiality of environmental performance information. This has caused an asymmetry in the availability of information and has made private firms appear elusive and secretive (Radiah and Radiah, 2010). NGO/CBO perceptions are therefore reflective of somewhat more trust in state enterprises that provide some information versus private firms that may provide none.

Conclusions This study contributes to the literature in four ways. First, by providing new empirical evidence about differences in stakeholder perceptions of firm-level corporate environmentalism, it assists corporate managers in answering the question of which stakeholders need attention (Mitchell et al., 1997; Vos, 2003). Clearly, the highly critical Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment



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stance of NGOs/CBOs identified and understood relative to government and business-chain stakeholders requires managerial consideration. Second, through the lens of the neo-institutional perspective, it suggests that firm-level characteristics play a significant role in shaping stakeholder perceptions, with certain characteristics being more influential on particular stakeholders than others. Firm origin, ownership structure, and location particularly affect perceptions of the legitimacy and information transparency in the eyes of stakeholders. Third, this study provides support to public policy-makers who advocate stronger institutions that minimize ‘misuse’ of the regulatory system by businesses (Dobers and Halme, 2009). Greater coercive institutional pressure from regulators can raise corporate environmentalism, aid business-chain stakeholders in deciding whom to partner with, and inform warranted and unwarranted concerns of NGOs/CBOs. Strengthened regulatory policies can also encourage firms to err on the side of caution (Jacques, 2006) and alleviate tensions with NGOs/CBOs that government policy-makers must often mediate. Fourth, this illustrates that generalizations about corporate environmentalism in developing countries should not be lumped together since the unique institutional dynamics and operating environments in small emerging economies like Trinidad and Tobago may not be congruent to lessons from, for example, China, India, and Brazil. Corporate environmentalism research must consider the small economy position of magnified economic, ecological, and resource limitations; irreconcilable opportunity costs; rapidity and intensity of industrialization; and the relative inability to influence global market conditions. Finally, the cross-sectional nature of this study required caution since causality can only be confirmed by future longitudinal research designs. The perceptual nature of the corporate environmentalism construct used here should not be confused with environmental performance, which requires actual data metrics for measurement. While it is likely that these findings can be extrapolated to other small emerging economies since institutional and regulatory parameters tend to be similar, evidence is drawn only from the energy and petrochemical industries. Further studies into other industrial sectors are therefore required.

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