The Environmental Ethical Commitment (EEC) of the

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Procedia - Social and Behavioral Sciences 36 (2012) 565 – 572

AcE-Bs 2011 Bandung ASEAN Conference on Environment-Behaviour Studies, Savoy Homann Bidakara Bandung Hotel, Bandung, Indonesia, 15-17 June 2011

The Environmental Ethical Commitment (EEC) of the Business Corporations in Malaysia Maliza Delima Kamarul Zaman* Faculty of Business Studies, Universiti Teknologi MARA,UiTM, 40450, Shah Alam, Selangor, D.E., Malaysia

Abstract This study is about environmental ethical commitment (EEC) of manufacturing companies in Malaysia. The independent variables were the ecological concern, the regulations, perceived behavioral control which consists of self-efficacy, ethical climate, financial aspect, stakeholder pressure and stakeholder information and also the personal moral obligations. From regression analysis, only three factors namely the regulation, financial aspect and stakeholder information were able to explain the EEC in Malaysia. Finally, environmental ethical consideration would be beneficial to companies as it offers advantages and having claimed to save the industry as well as the world. © Elsevier B.V.Ltd. Selection and/or under responsibility of Centre for Environment-Behaviour © 2012 2011Published Publishedbyby Elsevier Selection andpeer-review peer-review under responsibility of Centre for EnvironmentStudies(cE-Bs), Faculty of Architecture, Planning & Surveying, Teknologi MARA, Malaysia Behaviour Studies (cE-Bs), Faculty of Architecture, Planning &Universiti Surveying, Universiti Teknologi MARA, Malaysia Keywords: Environmental ethical commitment; ethics; natural environment

1. Introduction The environmental concerns were detected from 1940s and have evolved since then. In the 1940s the general concerns were on limited natural resources where the human nation faced inadequate food production and depletion of non-renewable recourses. In 1960s the general concerns of the people were

* Corresponding author. E-mail address: [email protected]

1877-0428 © 2012 Published by Elsevier B.V. Selection and/or peer-review under responsibility of Centre for Environment-Behaviour Studies(cE-Bs), Faculty of Architecture, Planning & Surveying, Universiti Teknologi MARA, Malaysia doi:10.1016/j.sbspro.2012.03.062

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Maliza Delima Kamarul Zaman / Procedia - Social and Behavioral Sciences 36 (2012) 565 – 572

on by-products of production and consumption with the issues of air and water pollution, waste disposal and chemical contamination. It was in 1980s that global environment change was experienced where we faced climate change, acid rain, ozone depletion, biodiversity, deforestation, water management and globalization and the problems seemed to arise until the present day (Impak, 2009). The focus of this study is about the business ethics and its natural environment. It is how the manufacturing companies manage their environment ethical commitment as regards to the natural environment. It is about environmental ethics. According to Kauffman (2001) ethical managers have to evaluate the strengths and weaknesses of a decision regarding impacts to the environment because “ethics” is a discipline that deals with good and bad implying a moral duty or obligation. The manufacturing operations with regards to the environment as emphasized in this study creates a variety of possibilities for adverse effects on humans and other living things, both direct and indirect. It is therefore, the purpose of this study is to discuss and empirically test several propositions regarding the environmental ethical commitment of the manufacturing companies in Malaysia. 2. Literature Review Malaysia has never reported equivalent major environmental disasters but the environment issue is equally appalling. The new industrial revolution has experienced Malaysia with high environmental pollution (Habtemicheal, 1996). According to Wah (1992), environmental problems are experienced everywhere in Malaysia that covers city dweller, villagers and the communities deep in the forest due to industrialization and modernization. Wah (1992) further explains that industrialization affects shop floor workers in the cities most severely. Annually three to four hundred of 200,000 Malaysian industrial workers reported deaths at the work place, and another 13,000 are disabled and this is due to the fact that industrialization caused “sinister killers” that consisted of poisonous chemicals, gases, dust, excessive heat, noise and vibrations that are slow and sometimes unrecognizable. The number of occupational health problems will increase by the rapid industrialization and urbanization as Malaysia experiences more common environmental problems where in 1997 and 1998, Malaysia experienced the worst haze episode and a major water crisis respectively (Lubis, 1998). 2.1. The manufacturing Implications As we go along the concept of environmental ethics, it is evidenced that industrial activity particularly manufacturing operations has huge implications towards the natural environment. Although industrial development has brought immeasurable wealth and prosperity to the human nation for the past 200 years (Shrivastava, 1995), Klassen (2000) argues that all manufacturing activities have ramifications for the rate and level of environmental degradation. The interactions of manufacturing activities and the natural environment create enormous unfavorable issues. All these activities have widespread consequences for corporations and communities as they are normally technical and complex (Shrivastava, 1995). Besides manufacturing activities, basic activities such as continuous consumption, marketing, manufacturing, processing, discarding and polluting have the same potential harm (Saha and Darnton, 2005). This interrelated ecosystem contaminates soil, ground or surface used by humans, wildlife and livestock, it contaminates air by toxic or irritating combustion products, it disturbs ocean ecosystem due to oil spills, ocean dumping and ocean mining, it disturbs climate due to a rising concentration of chemical pollutants in the atmosphere (Ayres, 1996). All stages of materials processing such as extraction, physical separation and refining, recombination, macro-forming, fabrication and construction, use and disposal (Ayres, 1992) produce waste and lead to pollution problems and according to Ayres (1996) all these materials normally returned to the environment in different form from its extraction.


2.2. The scenario of the manufacturing industry The 21st century witnessed the technology advancement especially in the communication, manufacturing and the service industry (Ahmad and Sadeq, 2001). Chiang and Tseng (2005) argue that the manufacturing industries and its strategy have been triggered by intensified competition in the global arena. The strategy should be sufficient and maximum with its coordinated objectives and strategic plan that lead to the long term survival of the corporations (Tseng and Chiu, 2004), together with the environmental protection that suggest guidance for future operations (Ward, et.al., 1996). Manufacturing industry has been recognized as a critical driver of environmental performance (Cairncross, 1992; Hart, 1995; Schmidheiny, 1992). This is because in running its activities, manufacturing processes are actually scarring the globe, contaminating and threatening the environment, warming the planet, thinning the ozone layer, disappearing the forests, decreasing the health of our water and air (Shaw and Barry, 1992) and also polluting the river quite severely (Harvey, 1994). The stated pollution issues were studied to be the factor that precedes corporations’ poor financial performance (Hart and Ajuha, 1996). Manufacturing firms have played an active role in environmental sustainable development. Shrivastava (1995) stresses that corporations are the primary engines of economic development. Schmidheiny (1992) emphasizes that manufacturing companies have financial recourses, technology knowledge and institutional capacity to implement ecological solutions. However, in the effort to achieve sustainable development, manufacturing industries are exposed to several obstacles. The obstacles are technological, financial, labor-forced related, regulatory, customerrelated, supplier-related and managerial (Ashford, 1993), conceptual, organizational, knowledge availability, technical and economic obstacles (Dieleman and de Hoo, 1993). According to Skinner (1969) some important trade-offs decisions in manufacturing sector are; top managers need to continuously review the corporate strategy and recognize the alternatives in order to decide in any decisions area. The decisions areas include plant and equipment, production planning and control, labor and staffing, product design/ engineering as well as organization and management. In plant and equipment decision area the alternatives include make or buy, one big or several smaller ones, locate near markets or locate near materials, invest mainly in buildings or equipment or inventories or research, general-purpose or special-purpose equipment and temporary, minimum tooling or “production tooling”. Above all, there are many reasons of industrial activities to contain an ethical dimension. Trevino (1986) highlights that ethics problems do exists and emphasizes that managers do think about ethical dilemmas. This is because the manufacturing activities could jeopardize the health and welfare of the ecosystems and bring significant ramifications for the environment (Flannery and May, 2000). It is the nature of corporations to create environmental impacts and the corporations also will do their best to reduce these impacts (Saha and Darnton, 2005) as it is claimed to be the right thing to do (Bansal and Roth, 2000). Manufacturing industry can gain benefit by producing safe products to result in loyal customers, employee pride and motivation, good reputation and better recruiting status while doing the wrong thing of producing an unsafe product can result in public scrutiny, negative press, legislation, regulation, litigation and could increase cost of production (Harrison and Lewellyn, 2004). 2.3. The environmental ethics managers Thirteen years ago, manufacturing managers were claimed to neglect the corporate strategy and top executives tend to avoid the policy making process (Skinner, 1969). During those years, the observation, measurement and manipulation of managers’ ethics were not allowed (Trevino, 1986). However, executives’ personalities and experiences are important as they can affect the organizational outcomes (Bantel and Jackson, 1989; Miller and Droge, 1986). Along with that, Primeaux and Stieber (1994) and

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Skinner (1988) claim that managers do make mistakes like other occupations do as they barter their ethics for a money price in relation to their ethical business evaluation. This is because managers are often lack of experience and skill to understand the full cost of pollution (Jaffe et. al., 1995). Weaver et. al. (1999) claim that most top managers would likely agree that they are committed to ethics but the commitment can easily be lost as they were in ethics dilemmas where managers tend to visualize environmental issues in legal rather than in moral terms (Flannery and May, 2000). However, corporations are now starting to change their perspectives with highly committed top management exercised well integrated practices to ethics (Weaver et.al., 1999). These kind of committed and ambitious managers (Logsdon, 2004) are highly needed in the modern society (Egri and Herman, 2000). Nevertheless, today’s managers face with many challenges. In order to achieve optimal level of environmental performance, Logsdon (2004) suggests a few considerations that comprises of environmental realities, the fundamental ethical principles and also the stakeholder needs. Managers also find difficulties to manage change and human resource (Dechant and Altman, 1994). According to Porter and van der Linde (1995), there are numerous barriers to “change” as managers often deal with insufficient information that trapped in limited time and attention. This is because managers consider environmental issues as complex, scientific, undetectable, incalculable (Shrivastava, 1995) and highly expensive (Cordano and Frieze, 2000) thus enable them to pin point faults and recognize what to alter to the business system in order to respond to environmental issues (Schmidheiny, 1992; Shrivastava, 1995). 2.4. The Environmental Ethics Motives There are various factors for corporations to clearly deal with the issue of the natural environment. Many factors, motives or drivers have been demonstrated by many researchers in order to achieve environmental success that could maintain the “health” of the corporations. Among the frequent factors are stakeholders, regulations, cost aspect and ethical motives. Regulations have been highlighted to be listed among other factors by Klassen (2000) and Sharma (2000). Regulations and stakeholders have been stressed by Weaver et.al. (1999). Some of the motives are environmental infrastructure, management values and firms reputation (Logsdon, 2004), environmental performance, management strategies, ownership, scale, sector, business relationship, management education and experience (Dasgupta et.al., 1997), individual organizational, political/economic, social/cultural, ecological levels (Starik and Rands, 1995), management ethics, protection and conversation of physical facilities, aesthetics (Handfield et.al., 1997), concern over liabilities and firm competitiveness (Porter and van der Linde, 1995). Bansal and Roth (2000) argue that understanding these motives is critical because it could lead to behavior prediction and expose ecological sustainable mechanism to researchers, managers and policy makers. These motivations are important to committed community as it has been proven beneficial. Motivated by stringent regulations, the greening effort and reallocation of the most polluting activities to the emerging market economies has resulted the pollution in developed economies to be relatively low (Hart, 1997). Besides that, Winter (1995) focuses on three reasons for corporations to introduce a sound environmental management. The reasons are to accept the responsibility, knowing the vast opportunities and avoid or reduce the risk that eventually could conserve the natural resources, increase income and also to increase corporation’s environment reputation. Some of the benefits are to achieve cost leadership and competitive advantage (Shrivastava, 1995), boost profitability (Sroufe et. al., 2000), improve public relations (Dechant and Altman, 1994) and improve ecological and business performance (Porter and van der Linde, 1995 and Theyel, 2000). A survey conducted in Newman and Breeden’s article (1992) revealed that companies were offered with wide range of opportunities while dealing with core and primary environmental products and


services. These opportunities include improve or lower cost on waste disposal, gain reputation for environmental responsibility, reduce operating cost, be more effective operations, venture in new environmental packaging, gain new marketing for existing products and new green products, gain revenues from pollution control products and finally corporations could somehow sell their pollution compliance capacity. Stisser (1994) argues that in order to retain competitive position, some products and services must be widely known as environmentally friendly or green products. 3. Methodology 3.1. Theoretical Framework Independent Variables

Dependent Variable

Ecological concerns Regulation Aspect Perceived behavioral control x Self-efficacy x Ethical climate x Financial cost x Stakeholder

Environmental ethical commitment

Personal moral obligation for environmental consequences

Fig. 1. Theoretical Framework of the Study 3.2. Sample

The appropriate unit of analysis to investigate the concept was the manufacturing companies in Malaysia. The population of interest in this study was the manufacturing corporations. This was because each industry had its own unique environmental issues and concerns. The operation of manufacturing industry was said to produce hazardous waste and if it was not taken into consideration it can jeopardize the health and welfare of living species and damage their habitats. The activities of manufacturing companies could affect people and animals and the environment would be considered to be undesirable by societal norms and rules (Flannery and May, 2000). The population was defined as all the listed companies in Federations of Malaysian Manufacturers Directory 2005, Malaysian Industries, 36th Edition and with systematic sampling a total of 326 companies were managed to be selected as the sample. Every 5 th companies listed were selected as the sample and finally the questionnaires were sent to 326 selected manufacturing companies and usable questionnaires were received from final 150 manufacturing companies in Malaysia.

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4. Results and Discussions The data was tested using the linear regression analysis and the results are shown in tables below. Table 1. Regression Result for Environmental Ethical Commitment Unstandardized Coefficients B

Std. Error

(Constant)

.207

.466

Model 1

Standardized Coefficients Beta

t

Sig.

.443

.658

Ecological Concern

.124

.120

.100

1.031

.304

Regulation Aspect

.232

.116

.200

1.988

.049

Ethical Climate

-.078

.105

-.072

-.747

.457

Self Efficacy

.008

.132

.007

.064

.949

Financial Aspect

.227

.111

.209

2.049

.042

Personal Moral

-.005

.113

-.004

-.045

.964

Stakeholder Pressure

-.033

.087

-.028

-.382

.703

.444

.148

.319

2.987

.003

Stakeholder Info

Multiple regression analysis revealed that from eight independent variables only three independent variables were able to significantly explain the amount of variation of the environmental ethical commitment in Malaysia. The independent variables were regulation aspect, financial aspect and stakeholder information as they were significantly improved the ability to predict EEC. The result was expected as the study dealt with highly sensitive issue of environmental ethics and the concept was relatively new in the business literature as well as to the manufacturing industry in Malaysia. Nevertheless, the study surprisingly managed to reveal that thereof the proposed factors; the regulation aspect, financial aspect and stakeholder information were positively correlated and significantly substantiated. This indicated that regulation aspect, financial aspect and stakeholder information were the factors to influence Malaysian managers to be committed towards the environmental ethics concept. 5. Conclusion Based on the result, it was not surprising to note that Malaysian manufacturing companies were environmental ethically committed by having regulation, financial aspect and stakeholder information factors supported. It was empirically convincing to claim that Malaysia as one of the developing countries concerned about the natural environment parallel with the development of her industrial base. The findings of this research provided valuable information about the concept of environmental ethics in Malaysia. The supported factors would encourage them to obey the regulations imposed by the government, to have financial capability to support environmental ethics effort, and also to value information from the stakeholders. All this information will be of help to the manufacturing companies in developing their mission statement and management strategy in order to operate their business towards the best health of the natural environment. As conclusion, EEC was not, however and easy concept, but considerable understanding believing, planning and skills were required to make EEC concept to be a factor of environmental excellence. The


findings also had implications for foreign investors who are presently or potentially interested in developing countries such as Malaysia as their market. In fact, EEC also offered significant advantages for those wishing to export their product globally. Many countries in the world were focusing on “green product”. By implementing the EEC concept in the manufacturing activities enabled Malaysian manufacturing industry to grab the opportunity to be a global player.

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