Proactive Environmental Proactivity

Transcription

1 Business Strategy and the Environment Bus. Strat. Env. 15, (2006) Published online in Wiley InterScience ( A Review of Determinant Factors of Environmental Proactivity Javier González-Benito* and Óscar González-Benito Departamento Administración y Economía de la Empresa, Universidad de Salamanca, Campus Miguel de Unamuno, Edificio FES, Salamanca, Spain ABSTRACT This paper reviews the literature in order to identify the determinant factors of a company s environmental proactivity. It starts by arguing that environmental proactivity can be manifested through diverse practices and strategies and goes on to comment upon several variables that seem to influence the decision to implement such strategies. Some of these variables depict internal company features and others describe the general environment in which operations are carried out. Stakeholders pressure is distinguished as a central determinant factor and it is argued that all the other variables affect either the intensity of this pressure or the company s capacity to perceive it. All the factors identified herein should be taken into account, at least as control variables, in those studies aiming at explaining and contextualizing environmental strategies. Copyright 2006 John Wiley & Sons, Ltd and ERP Environment. Received 30 June 2004; revised 12 December 2004; accepted 12 January 2005 Keywords: environmental proactivity; environmental strategy; determinant factors; literature review Introduction COMMITMENT TO THE NATURAL ENVIRONMENT HAS BECOME AN IMPORTANT VARIABLE WITHIN THE current competitive scenarios. This has encouraged many companies to initiate voluntary transformations to bring themselves nearer to ecological principles. Such transformations have given rise to diverse environmental strategies ranging between two extreme positions: environmental reactivity, typical of companies that only implement the minimal compulsory changes to meet regulations, and environmental proactivity, typical of companies that voluntarily take measures to reduce their impact on the natural environment (see, e.g., Hunt and Auster, 1990; Roome, 1992; Winsemius and Guntram, 1992). A question then arises: what leads companies to develop proactive environmental strategies? Or, in other words, what are the determinant factors of a stronger environmental implication and commit- * Correspondence to: Javier González-Benito, Departamento Administración y Economía de la Empresa, Universidad de Salamanca, Campus Miguel de Unamuno, Edificio FES, Salamanca, Spain. javiergb@usal.es Copyright 2006 John Wiley & Sons, Ltd and ERP Environment

2 88 J. González-Benito and Ó. González-Benito ment? Several authors have approached these questions and have studied the role played by diverse characteristics of companies and their social and economic environment. The purpose of this paper is to review and integrate this literature and to provide a preliminary scheme of those variables that stand as main determinants or predictors of environmental proactivity. The interest of this study lies in that (1) it allows us to identify the typical features of a proactive company, (2) it provides a list of variables that should be taken into account in those studies aiming at explaining and contextualizing environmental strategies and (3) it helps to identify attributes that should be developed and barriers that should be eliminated in order to promote a greater environmental proactivity of companies. The paper is structured into three more sections. The following section deals with the concept of environmental proactivity and presents a functional classification of the practices through which it can be manifested. The next section reviews the main determinant factors identified in the literature. A distinction is made between company features, external factors and, as a central factor, stakeholders pressure. The last section summarizes the main conclusions of the paper. Environmental Proactivity and Environmental Management Practices Environmental proactivity, understood as the voluntary implementation of practices and initiatives aimed at improving environmental performance, can become manifest through different strategies, each characterized by a series of environmental practices (see, e.g., Hart, 1995; Vastag et al., 1996; Aragón- Correa, 1998; Henriques and Sadorsky, 1999; Buysse and Verbeke, 2003). Figure 1 gathers a representative set of such practices typically mentioned in the literature on environmental issues and, in an attempt to establish a functional classification, distinguishes between three categories. (1) The planning and organizational practices reflect the extent to which an environmental management system (EMS) has been developed and implemented. That is, they denote the extent to which the company has defined an environmental policy, has developed procedures for establishing environmental objectives, for selecting and implementing environmental practices and for assessing the outcomes of such practices or has allocated environmental responsibilities. The system itself does not mitigate environmental damage, but it establishes mechanisms that allow the company to advance in this sense in a rational and coordinated way. (2) The operational practices imply changes in the production and operations system, which plays an essential role in environmental issues (Gupta, 1994; Angell and Klassen, 1999; Inman, 1999; Sarkis, 2001). The operational practices can be classified into two groups: product-related and processrelated practices. The first group includes practices focused on designing and developing more environmentally conscious products. For example, it comprises the design efforts for eliminating polluting and hazardous materials in products, for reducing resource consumption in production as well as in product usage or for facilitating disassembly and hence reusability, recyclability and remanufacturing (Shrivastava, 1995b; Sarkis, 1998). The second group, process-related operational practices, focuses on the development and implementation of more environmentally conscious manufacturing and operational methods and processes. Some of them affect internal processes and encompass remediation and control practices (e.g. installation of emission filters or waste separation and preparation systems) together with prevention practices (e.g. use of renewable energy resources or acquisition of clean technologies). Other practices affect external processes, and influence supply and distribution activities and, in general, company interactions with other elements of the value chain. It is worth mentioning the purchasing of ecological products, the inclusion of envi-

3 Review of Determinant Factors of Environmental Proactivity 89 ronmental performance criteria in supplier selection processes, the consolidation of shipments, the use of reusable or recyclable packaging and cleaner transportation methods or the establishment of recuperation and recycling systems (Wu and Dunn, 1994; Handfield et al., 1997; Sarkis, 1998; Min and Galle, 2001). (3) As pointed out by Waddock et al. (2003), the increasing transparency demanded of companies in matters of social responsibility compels them to inform not only about their financial performance but also about their environmental and social impact. The communicational practices aim at communicating to the company s social and institutional environment the actions taken in favor of the natural environment. Practices like these have been considered as one more side of the environmental commitment (see, e.g., Aragón-Correa, 1998; Florida and Davison, 2001). Nonetheless, it is important to take into account that in themselves they do not contribute to improving environmental performance, that is to reducing resource consumption and polluting emissions. Rather, they tend to pursue commercial objectives and try to establish cordial relationships with the variety of stakeholders around the company. These practices are therefore well appreciated by stakeholders and are sometimes the main way through which some of them form an opinion about the environmental performance of the company. As represented in Figure 1, environmental proactivity can be understood as a triangle whose sides represent the three categories of practices distinguished above. The most reasonable order for implementation has been depicted with arrows. The planning and organizational practices and, in general, the establishment of an EMS set the base and organizational structure necessary to implement operational practices on a coordinated and systematized basis. In fact, Melnyk et al. (2003) observed that the existence of a formal EMS is associated with the consideration of more environmental options or practices. Once operational practices are implemented, the company can inform about its environmental advancements and efforts to its social and economic environment through communicational practices. However, it is important to take into account that, given the popularity reached by standards such as the ISO14001 and the possibility of companies obtaining a certification of compliance, planning and organizational practices can exert a significant impact on public opinion. Similarly, communicational practices are implemented precisely to cultivate the links with the social and economic environment and could therefore be used with more or less complacent and propagandistic objectives. These two categories of practices are hence easily perceivable by external stakeholders and have the potential to influence their opinions. They both have therefore the potential to influence business performance rather than environmental performance since they can reduce pressure and attract green customers. However, the practices which can actually change the environmental performance of the company, that is which can reduce resource consumption and waste generation, are the operational practices, which are in turn less perceivable by the social and economic environment. According to these observations, which are graphically represented by the lower arrows in Figure 1, it makes sense to think that more opportunistic strategies might exist based fundamentally on implementing planning and organizational and communicational practices and deploying a minimum of operational practices. Thus, the company might become environmentally differentiated for the social and economic environment whereas environmental performance had hardly been improved beyond regulatory requirements. 1 In this sense, the measure of a sincere environmental proactivity should not only be based on the external and more perceivable environmental practices (e.g. environmental certifica- 1 As pointed out by Christmann and Taylor (2001), certifications such as ISO14001 do not require (at the operational level) more than compliance with local government regulations, and they might therefore represent a superficial commitment to environmental preservation.

4 90 J. González-Benito and Ó. González-Benito NATURAL ENVIRONMENT OPERATIONAL PRACTICES PRODUCT DESIGN Substitution of polluting and hazardous materials/parts Designs focused on reducing resource consumption and waste generation during production and distribution Designs focused on reducing resource consumption and waste generation in product usage Design for disassembly, reusability and recyclability PROCESS DESIGN Emission filters and end-of-pipe controls Process design focused on reducing energy and natural resources consumption in operations Production planning and control focused on reducing waste and optimising materials exploitation Acquisition of clean technology/equipment Preference for green products in purchasing Environmental criteria in supplier selection Shipments consolidation Selection of cleaner transportation methods Recyclable or reusable packaging/containers in logistics Ecological materials for primary PLANNING AND ORGANISATIONAL PRACTICES Explicit definition of environmental policy Clear objectives and long-term environmental plans Well defined environmental responsibilities Full-time employees devoted to environmental management Natural environment training programs for managers and employees Systems for measuring and assessing ENVIRONMENTAL PROACTIVITY COMMUNICATIONAL PRACTICES Periodic elaboration of environmental reports Sponsoring of environmental events / collaboration with ecological organizations Environmental arguments in marketing Regular voluntary information about E M S C E R T I F I C A T I O N SOCIO-ECONOMIC ENVIRONMENT Customers Regulators Institutions Community Higher effect on natural environment Higher effect on socio-economic environment Figure 1. Environmental practices through which environmental proactivity is manifested tions or environmental reports) but also on an analysis of the environmental transformations accomplished in the operations and production system. A Scheme of Determinant Factors The previous section indicates that environmental proactivity can be manifested through different strategies and responds to different objectives. Nonetheless, in all cases it involves the voluntary implementation of a set of environmental practices. The purpose of this section is to review some of the factors or variables that have stood out as determinants of companies environmental proactivity in the literature. The intention is not to be conclusive about the concrete effect of each factor; rather, it is to summarize the causal reasoning and evidence associated with the factors and to provide a list of basic variables that should be taken into account in those studies aiming at explaining and contextualizing environmental strategies.

5 Review of Determinant Factors of Environmental Proactivity 91 Planning and Organisation COMPANY FEATURES - Company size - Internationalisation - Position in the value chain - Managerial attitude and motivations - Strategic attitude Operations ENVIRONMENTAL PROACTIVITY STAKEHOLDER PRESSURE - External and internal stakeholders - Primary and secondary stakeholders Communication EXTERNAL FACTORS - Industrial sector (Environmental risk, concentration, cohesion) - Geographical location Figure 2. Determinant factors reviewed in the paper Figure 2 presents a summary of the variables that are analysed. Although some other variables have been studied as relevant factors in the literature, we have selected those that have received the main attention from researchers and that have been considered in a larger number of papers. Some of the variables in Figure 2 can be considered organizational characteristics and have been grouped as company features. This group comprises five factors: company size, degree of internationalization, position in the value chain, managerial attitude and motivations, and company strategic attitude. Other variables describe the general environment surrounding the company and have been labelled as external factors. Two variables have been studied within this group: industrial sector and geographical location. Finally, as will be argued later on, one determinant factor stands out as fundamental and central to all the others: the pressure exerted by the company s different stakeholders. Given that there are stakeholders within the company as well as in its social and economic environment, this variable is not included in either of the former groups. It must be mentioned that the different factors analysed in this paper are not independent and present important relationships with each other. Although in this paper we primarily focus on the direct relationships between factors and environmental proactivity, it is necessary to empirically study all the factors jointly in order to isolate the main causal relationships. Company Features Company Size and Resource Availability Company size, measured by the number of employees or turnover, is one of the structural variables that most seems to influence the implementation of environmental practices. The arguments used to explain this effect focus on different aspects: (1) large companies have more resource availability to devote to environmental management; (2) they receive more pressure from their social and economic environment and are frequently the primary objective of local governments and environmental nongovernmental organizations; (3) their scale allows them to face the indivisibilities associated with environmental management, that is those required investments in technology, human resources or

6 92 J. González-Benito and Ó. González-Benito certifications, which are similar for all the companies regardless of their size, and (4) the environmental efforts of large companies have a positive impact on a larger number of customers. The empirical evidence is notable. Arora and Cason (1996) found a positive and significant relationship between firm size and participation in voluntary environmental programmes, and King and Lenox (2001) observed that the larger a production facility the higher the probability of adopting the ISO14001 standard. Min and Galle (2001) confirmed the importance of size in the adoption of environmental practices in the purchasing function and Murphy et al. (1995) detected that the larger the company the greater the importance given to the role of logistics in environmental management by managers. Álvarez et al. (2001) also confirmed a positive relationship between size and environmental proactivity in a service sector. In a more disaggregated study, Melnyk et al. (2003) observed that the availability of resources, measured by sales volume, positively affects the implementation of some environmental practices. Company size also arose as a significant explanatory variable of some environmental approaches in the study of Aragón-Correa (1998), and Levy (1995) observed that larger multinationals tend to have more extensive environmental policies and programmes. As discordant notes, it is worth mentioning the works of Russo and Fouts (1997) and Klassen and Whybark (1999b), which have indirectly related company size and environmental proactivity and have not registered significant correlations. In spite of these papers, there exists significant support for the idea that company size is an important variable in the environmental debate. Internationalization Forming part of an international corporation can foster the implication of a company in environmental management according to the following arguments: (1) multinational companies can benefit from knowledge transfer between different divisions and plants (Dunning, 1995; Gupta and Govindarajan, 2000), thus facilitating the joint adoption of new practices and the quick imitation of the most advanced subsidiaries; (2) multinational companies tend to define their environmental policies so that they meet the most stringent requirements prevailing in the relevant countries where they compete (Magreta, 1997; Rugman and Verbeke, 1998), which leads us to think that in many countries the environmental policies systematically reflect certain proactivity, and (3) although they might not be large, companies within international groups, owing to corporate size and experience, can benefit or suffer from some of the effects discussed for the previous factor (greater availability of resources, higher pressure from the social and economic environment and economies of scale). With respect to the empirical evidence, Christmann and Taylor (2001) confirmed that multinational ownership positively affects compliance with environmental regulations and the likelihood of adopting ISO14001 for Chinese companies. These authors consider that the internationalization of the company should not only be viewed, as suggested in some papers (e.g. Daly, 1994; Leonard, 1988), as a mechanism for moving polluting operations to countries with low environmental regulations. Nonetheless, they observed that there are important differences between companies operating in developing countries that sell their output to local customers and those that sell to other multinationals or export most of their output. In a subsequent paper (Christmann and Taylor, 2002), these authors point out the great pressure to which multinational companies are subjected and defend the convenience of developing proactive environmental initiatives to mitigate such pressure. In a study of environmental proactivity, Buysse and Verbeke (2003) noted the importance of internationalization. Most of the companies that these authors identified as environmental leaders belonged to multinational corporations. The percentage of internationalized companies decreased as the strategy became less proactive. Kennelly and Lewis (2002) also register a significant correspondence between degree of internationalization and environmental performance, which suggests a higher environmental

7 Review of Determinant Factors of Environmental Proactivity 93 proactivity in multinationals. Finally, Álvarez et al. (2001) observed that chain affiliation of Spanish hotels, which in many cases implies forming part of multinational groups or at least a large corporative size, positively influences the implementation of environmental practices. Position in the Value Chain The position or echelon occupied in the value chain or, in other words, the proximity to the final consumer within the supply chain, can be intuited as an important factor influencing the environmental proactivity of a company. This is fundamentally due to the fact that consumer pressure is high for the manufacturers of finished products and loses strength the higher the manufacturer s position in the supply chain. However, this pressure is becoming stronger and stronger and moving up the supply chain and many final manufacturers are now demanding assurance of environmental commitment from their suppliers. This is the case of automotive assemblers, for example (Industry News, 1999; Wilson, 2000). Nonetheless, manufacturers of intermediate products and extractors of raw materials can still camouflage many of their activities behind the trademarks that consumers identify. In the same way that the supply chain buffers the pressure, it also buffers the effect of the environmental efforts of the company on public opinion. Although empirical evidence is scarce, it is worth mentioning that Buysse and Verbeke (2003) use this reasoning to explain why environmental proactivity does not respond to a higher pressure of external primary stakeholders. These authors consider that this result is due to fact that they survey intermediate manufacturers, which do not have direct contact with final consumers. Arora and Cason (1996) found that customer contact, measured by level of advertising expenditures, is a significant predictor of participation in pollution prevention programmes. Managerial Attitude and Motivations The support and commitment of top management is considered an essential factor for the development of proactive environmental strategies on the basis of two arguments: (1) the resources required for the implementation of environmental practices will be more easily available if the major person responsible for these resources supports the plans and (2) many environmental initiatives require the collaboration and coordination of different departments and divisions and this is easier to manage when such initiatives are endorsed from the top. In this sense, Hunt and Auster (1990) and Berry and Rondinelli (1998) consider top management support as a key element for the implementation and success of proactive environmental strategies. On the empirical plane, Quazi et al. (2001) observed that top management concern for the natural environment strongly discriminates between companies that have adopted the ISO14001 standard and companies that have not. Del Brio et al. (2001) found that the higher the commitment of managers and their awareness of the advantages, disadvantages and tools of environmental management, the higher the formal importance they give to this question within the organization. Such importance is manifested through the establishment of environmental departments or the appointment of managers to be in charge of environmental issues. Another group of papers considers that the key question is not simply the existence of top management support for environmental initiatives. Rather, they propose that, depending on the managers beliefs, expectations, perceptions and opinions, the company will become inclined to implement a certain set of environmental practices (Fineman and Clarke, 1996; Cordano and Frieze, 2000; Flannery and May, 2000; Banerjee, 2001). In this sense, Bansal and Roth (2000) analyse environmental motivations, which they consider to be of three types: competitiveness, which responds to the objective of improving returns and generating competitive advantages through environmental management; legitimization, which involves the implementation of environmental practices to adapt the company to the

8 94 J. González-Benito and Ó. González-Benito prevailing social norms and values or, in other words, to improve the relationships with stakeholders, and ecological responsibility, which responds to a feeling of social responsibility and sincere environmental concern and leads to the implementation of environmental practices to improve environmental performance. Depending on whether managers consider environmental management as an instrument to achieve competitive advantage, legitimization or, simply, greater environmental performance, they will develop different aspects of environmental proactivity (for example, different sides of the triangle in Figure 1). This idea was already present in the paper of Azzone and Noci (1998), when these authors revised the internal factors affecting the company s strategic attitude regarding the natural environment. Although the empirical evidence is not abundant, Vastag et al. (1996) observed that the environmental attitude of managers influenced the environmental management approach chosen by the company. In the same line, from an analysis of cases, Sharma et al. (1999) suggest that the selection of a more proactive environmental strategy is dependent on the managers interpretation of environmental themes as opportunities instead of threats. This proposition is empirically confirmed by Sharma (2000), who again points out the importance of managers attitude and thoughts, and by Del Brio and Junquera (2003), for the decision to certify against the ISO14001 standard. Another question that arises within this literature refers to the possible internal conflicts among managers. As pointed out by McGee (1998), each functional manager can be subjected to pressure from different stakeholders and develop different motivations, which can turn into coordination and control problems. This suggests that empirical studies should measure the prevailing motivations within a company rather than the specific motivations of a particular manager. Nevertheless, leaving this methodological question aside, it seems to be clear that the environmental attitude, expectations and motivations of managers and, especially, of top managers constitute an important variable for explaining the environmental proactivity of a company. Strategic Attitude Another variable which has been considered as relevant for the selection of environmental strategies and which is closely related to the previous factor is the company s strategic attitude. Azzone et al. (1997) understand this attitude as the way in which the company reacts or proacts to market stimuli and they consider it as a key variable for classifying environmental strategies. In a later paper, Aragón-Correa (1998) empirically confirmed that a greater strategic proactivity, understood as the company s tendency to initiate changes in its strategic policies before they are demanded, is positively related to a greater environmental proactivity. This might be due to the fact that the strategically proactive companies (1) are used to modifying their products, to developing new markets and, in summary, to undertaking new initiatives with less information and confidence about the possible effects; (2) count on more flexible technologies and are prepared to change them and (3) have organizational structures that facilitate innovation (Aragón-Correa, 1998). In the same line, González-Benito and González-Benito (2003) empirically confirmed that manufacturing proactivity, understood as the company s interest in adopting new developments and leading practices in the production and operations area, is a significant predictor of the voluntary implementation of environmental management practices. The concept of manufacturing proactivity (Ward et al., 1994) refers to the early implementation of the so-called world class practices (Voss and Blackmon, 1996), modern manufacturing practices (Bolden et al., 1997), manufacturing process innovations (Flynn et al., 1997) or best practice methods (Hendry, 1998). This set of practices comprises, for example, operations management approaches such as total quality management (TQM) or just-in-time (JIT) and initiatives such as employee involvement and development, supply partnerships or the implementation of integrated information management systems (ERP). In this sense, Florida and Davison (2001)

9 Review of Determinant Factors of Environmental Proactivity 95 observed that the most environmentally proactive companies, at least as regards the implementation of an EMS, differ from reactive companies in the implementation of TQM and JIT, employee involvement and supplier auditing. Although empirical evidence is still reduced, these results lead us to think that environmental proactivity is one more feature of world class manufacturers, a concept introduced by Hayes and Wheelwright (1984) and Schonberger (1986) to describe those industrial companies able to succeed and stand out in any market in the world. External Factors Industrial Sector The industrial sector constitutes an essential variable for the study of environmental management since each industry has a different polluting potential and is subject to different controls and scrutiny from institutions, social groups and consumers. The oil, chemical and paper industries are, for example, among the sectors associated with the poorest environmental performance and the greatest environmental risk. In fact, statistics reveal that these sectors devote the highest volume of their resources to pollution abatement, at least in the USA (US Department of Commerce, 1996). Furthermore, many of the main ecological disasters in recent years have been set off by companies related to these sectors. At the other extreme, service industries usually represent a reduced environmental impact and the lowest environmental risk. This led to think that in each sector there will be different motivations and postures as regards environmental management. These industrial differences are empirically confirmed by Barnerjee (2002), who observed significant divergences in the way each sector perceives the importance of environmental issues as well as in how they incorporate such issues in strategy. Vastag and Melnyk (2002) also registered differences as regards the expected and perceived effects of ISO14001 certification. In the study of Arora and Cason (1996), the intensity of polluting emissions, a variable that, as mentioned above, discriminates industries, positively influenced voluntary participation in pollution prevention programmes. Although they do not obtain empirical evidence in any sense, Arora and Cason (1996) also point out the importance of industry concentration. On one hand, the most concentrated sectors are more able to pass on a price increase to their customers and are therefore less reluctant to incur environmental investments. In addition, they usually have higher benefits and hence more resources for environmental initiatives. On the other hand, in sectors with low concentration environmental proactivity might be seen as an opportunity to become differentiated and obtain a competitive advantage. From another but related point of view, Bansal and Roth (2000, p. 730) consider field cohesion, understood as the intensity and density of formal and informal network ties between constituents in an organizational field, as a key contextual variable conditioning the emergence of certain environmental motivations. The greater the field cohesion, the stronger the search for legitimation through environmental practices. However, the implementation of environmental practices with competitive objectives will be less probable since replication is frequent and differentiation becomes difficult. In the same way, environmental practices in response to social responsiveness principles will be less probable since companies try not to show up the environmental backwardness of other companies. Although the definition of organizational field, which comes from the institutional theory (DiMaggio and Powell, 1983), does not correspond to the definition of industrial sector, it makes sense to talk about industrial cohesion as a relevant variable in environmental management. Geographical Location The location of production facilities seems to be an important factor insofar as it relates to two other variables: (1) environmental regulation and (2) social pressure. The relationship with the former affects

10 96 J. González-Benito and Ó. González-Benito location at the national and regional level. Most of the literature has focused on analysing whether more restrictive environmental regulations dissuade companies from setting up production plants. Although there is no conclusive empirical evidence (Jaffe et al., 1995), a series of recent papers (e.g. Henderson, 1996; Becker and Henderson, 2000; List and McHone, 2000; Keller and Levinson, 2002) provides support for a negative effect of restrictive regulations on industrial location decisions. These papers have some methodological peculiarities that might explain why their results diverge from those of previous papers (Jeppesen et al., 2002). Thus, recent research suggests that companies that cause more pollution and are less environmentally committed locate production facilities in regions with more permissive regulations. In other words, the less proactive companies are concentrated in regions with low levels of regulation. A different question is what happens with already settled companies when regulation becomes more demanding. Although according to the above literature some companies might choose to relocate their operational activities, if we take into account the work of Porter and Van der Linde (1995a, 1995b), some others might change their environmental behaviour towards proactivity. These authors suggest that regulation acts as a trigger for environmental innovation and can lead to a greater environmental proactivity from which certain competitive advantages can be achieved. Thus, consistent with the conclusions in the previous paragraph, this reasoning leads us to think that the most regulated regions concentrate the most proactive companies. National and regional location therefore seems to be a variable influencing the environmental proactivity of a company since it usually determines the regulatory frame that the company is subject to. With respect to the relationship between location and social pressure, it fundamentally affects the selection of a specific location within a region. As pointed out by Vastag et al. (1996), the environmental strategy of a company responds not only to the endogenous environmental risks (polluting potential) but also to the exogenous environmental risks, which depend on the likelihood of reactions from the socioeconomic environment and, in particular, on the location of its production facilities. In this sense, exogenous risk is lower when production activities are located far away from large cities and natural reserves or within industrial estates or when plants represent an important source of employment for nearby towns. These authors observed that the higher the exogenous environmental risk of companies, the greater their commitment to environmental preservation. That is, in these locations, social pressure is lower and companies find fewer motives to develop proactive strategies. Although we have not found additional evidence on this question, this paper leads us to think that the specific location of a production facility also affects its level of environmental proactivity. Stakeholder Pressure Stakeholders are individuals and groups who can affect the company s performance or who are affected by a company s actions (Freeman, 1984). Clarkson (1995) distinguishes between primary stakeholders, those without whose participation and support the organization cannot survive (e.g. customers, suppliers, regulators), and secondary stakeholders, which affect and are affected by the organization but are not engaged in transactions with it and are not essential for its survival (e.g. media, non-governmental organizations). In line with the proposals of Freeman and Liedtka (1991), this author considers that an organization is a system of primary stakeholder groups and its survival and success depends on the capacity to create value for these stakeholders by satisfying their demands and expectations. The organization can adopt more reactive or more proactive postures when responding to these demands. As regards corporate social responsibility and, in particular, environmental responsibility, stakeholders demand integrity, respect, standards, transparency and accountability (Waddock et al., 2003). In fact, the environmental consciousness of a company implies harmonizing environmental performance with

11 Review of Determinant Factors of Environmental Proactivity 97 stakeholders expectations (Gupta, 1994). Thus, the company acts conditioned by the pressure that it receives and perceives from its stakeholders. Several authors point out the importance of this pressure for the development of proactive environmental strategies (Winsemius and Guntram, 1992; Jennings and Zandbergen, 1995; Fineman and Clarke, 1996; Maxwell et al., 1997; Berry and Rondinelli, 1998). There is certain empirical evidence in this respect. Although with some nuances, the results of Henriques and Sadorsky (1999) support the idea that environmental proactivity is associated with higher pressure from those they call organizational stakeholders (customers, suppliers, employees and shareholders) and community stakeholders (e.g. non-governmental organizations, social groups). At the other extreme, environmental reactivity is associated with higher pressure from regulatory stakeholders (e.g. governments, trade associations) and the media. Buysse and Verbeke (2003) introduced the distinction between internal primary stakeholders (employees, shareholders and financial institutions) and external primary stakeholders (customers and suppliers) and observed that only the former group motivates environmental proactivity. This result was explained by arguing that the sample studied consisted of producers of intermediate products and had scarce consumer contact. Álvarez et al. (2001) also observed that the implementation of environmental practices in the hotel industry responds to a higher stakeholder pressure. The study of Klassen and Whybark (1999a) included external stakeholder influence as a contextual variable that was measured by two constructs: public interaction, which assessed to what extent managers gather opinions from and provide environmental information to the public, and awareness of environmental regulation, which assessed to what extent plant personnel are informed regarding environmental regulation and evaluated on regulatory compliance. Both constructs showed positive effects on the degree of environmental proactivity. As an additional argument to support the importance of stakeholders as motivators of proactive environmental strategies, it is worth mentioning that one of the benefits attributed to environmental proactivity is precisely the improvement of relationships with the stakeholders and even the possibility of influencing some of them (Shrivastava, 1995a; Russo and Fouts, 1997; Sharma and Vredenburg, 1998). It must also be taken into account that the environmental consciousness of final customers is growing and the number of them who prioritize environmental preservation over economic growth is rising (Mainieri and Barnett, 1997). This leads us to think that the importance of this group of stakeholders for environmental issues is growing. Relationship with the Other Determinant Factors Although direct relationships between each of the revised factors and environmental proactivity can be argued, all these factors can potentially affect the level of pressure received from stakeholders as well as the degree and way in which such pressure is perceived. That is, to a greater or lesser extent they can also be understood as factors that moderate the relationship between stakeholder pressure and a company s environmental proactivity. Because of this, stakeholder pressure can be viewed as a central determinant factor whose influence and importance is affected by the other variables (See Figure 3). The state of some of the variables mainly affects the intensity of stakeholder pressure. This is the case of company size, internationalization, position in the value chain, industrial sector and geographical location. The large companies and the multinationals (parents and subsidiaries) are usually the most popular companies and are hence more closely watched by those stakeholders worried about the natural environment. They are the target of green consumers, non-governmental organizations, environmental regulators and the media since they are understood as the leaders that must set an example to other companies and since any change they accomplish has great social repercussions. Furthermore, in these companies, the workforce tends to be more organized and demanding, thus exerting more pressure on different issues and, in particular, on environmental questions. In addition, these companies are usually

12 98 J. González-Benito and Ó. González-Benito Operations Planning and organisation ENVIRONMENTAL PROACTIVITY COMPANY SIZE INTENSITY OF PRESSURE PERCEPTION OF PRESSURE STAKEHOLDER PRESSURE Communication MANAGERIAL ATTITUDE STRATEGIC ATTITUDE INTERNATIONALISATION POSITION IN THE V.C. INDUSTRIAL SECTOR LOCATION Figure 3. Stakeholder pressure as a core determinant factor of environmental proactivity quoted on the stock exchange and their value is therefore more directly dependent on the interest and recognition they arouse in the wide range of investors, including those applying ecological criteria when making up their portfolios. Companies manufacturing finished products receive more pressure from external stakeholders since these stakeholders tend to blame the ecological impact of products on the companies that put them into the distribution channels and final markets and that own the trademark. In the same way, companies in those industrial sectors that present more environmental risk and that generate larger amounts of residues are usually subject to greater control and higher pressure, as well as companies located in the proximity of cities and natural reserves. The other revised variables affect the company perceptions of stakeholder pressure. This is the case of the managerial attitude and motivations and the company strategic attitude. The greater the managerial commitment to the natural environment, the more sensitive to environmental problems they are, and hence the more perceptive of the pressures and requirements of other stakeholders. This is because managers act as intermediaries in the relationship between the company and its stakeholders and their interpretations play an essential role (Fineman and Clarke, 1996). On the other hand, the interest and capacity of strategically proactive companies to anticipate and adapt themselves to market changes and to adopt the most innovative practices make them more sensitive and responsive to early pressure from their stakeholders. Conclusions In this paper, the literature has been reviewed in order to identify determinant factors of company environmental proactivity. According to the existing empirical studies, five company features, i.e. internal factors, stand out because of the relevant role they play: company size, degree of internationalization, position in the value chain, managerial attitude and motivations, and company strategic attitude. Two

13 Review of Determinant Factors of Environmental Proactivity 99 external factors have also been identified as relevant: industrial sector and geographical locations of production facilities. Finally, stakeholder pressure has been highlighted as a central and essential determinant factor. Although the other factors can exert direct effects on the degree of environmental proactivity developed by a company, they also affect both the intensity of stakeholder pressure and the company capacity and predisposition to perceive it. This study allows us to outline the typical profile of environmentally proactive manufacturers. Generally, they are usually large manufacturers of finished products with international presence, with managers aware of the importance of environmental management and convinced of the competitive opportunities it represents, used to developing innovative strategies and the latest production approaches, with activities in industrial sectors with high ecological impact and risk, and with production facilities in countries with restrictive environmental regulations and in the proximity of natural reserves and cities where they are not an important source of employment. Apart from characterizing the proactive manufacturers, this paper provides a list of variables that should be taken into account in those studies aiming at explaining and setting in a context environmental strategies. In addition, it allows us to identify other ways, that are less coercive than environmental regulation, to foster environmental commitment in companies. These would basically consist of generating and promoting some determinant factors (e.g. campaigns promoting top managers awareness of environmental challenges) or eliminating the barriers raised by others (e.g. grouping small companies to jointly face up to some environmental transformations). Although this paper focuses on the factors to which most attention has been paid in the academic literature, future research should aim at searching for new factors and analysing other variables that have already been mentioned as possible determinants although with scarce empirical support as yet. In this sense, it is worth mentioning the flexibility of the production system (Klassen and Angell, 1998), I+D effort (Arora and Cason, 1996), the imitation of competitors (Del Brio et al., 2001), financial performance (Levy, 1995) or organizational slack (Bowen, 2002). It is also important to study the interrelationships between the different factors proposed here in order to identify the most important ones. This requires empirical studies including all the variables in order to control for the effects of collinearity between them. References Álvarez Gil MJ, Burgos Jiménez J, Céspedes Lorente JJ An analysis of environmental management, organizational context and performance of Spanish hotels. Omega 29: Angell LC, Klassen RD Integrating environmental issues into the mainstream: an agenda for research in operations management. Journal of Operations Management 17(5): Aragón-Correa JA Strategic proactivity and firm approach to the natural environment. Academy of Management Journal 41(5): Arora S, Cason TN Why do firms volunteer to exceed environmental regulations? Understanding participation in EPA s 33/50 Program. Land Economics 74(4): Azzone G, Bianchi R, Mauri R, Noci G Defining operating environmental strategies: programmes and plans within Italian industries. Environmental Management and Health 8(1): Azzone G, Noci G Identifying effective PMSs for the deployment of green manufacturing strategies. International Journal of Operations and Production Management 18(4): Banerjee SB Managerial perceptions of corporate environmentalism: interpretations form industry and strategic implications for organizations. Journal of Management Studies 38(4): Banerjee SB Corporate environmentalism: the construct and its measurement. Journal of Business Research 55(3): Bansal P, Roth K Why companies go green: a model of ecological responsiveness. Academy of Management Journal 43(4):

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