Environmental Issues Can Be Handled Without Compromising on Profits - Research Paper Example

 Environmental issues can be handled without compromising on profits Organizations today strive to be sustainable and sustainable business does not mean only to satisfy the customers with products and services (Anonymous, 2008). This customer satisfaction has to be brought about without adversely impacting the environment while operating in a socially responsible manner. Organizations have a commitment to the ethical expectations that the society has and meet the statutory requirements. Sustainable development is maintaining a balance between economic growth and environmental protection (Quazi, 1999). Environmental issues have been of concern because of several disasters and events that have been taking place due to the negligence of the corporations. The strategic avoidance or minimal compliance with the regulations pertaining to environmental management has led the corporations to environmental pollution or degradation of the environment. The managers are usually faced with difficult situations when they have to trade-off between economic profitability and concern for the environment. However, firms can address the environmental concerns while remaining sustainable although different firms may follow a different path to achieve the objectives. Managers’ commitment to sustainable development can be a source of competitive advantage but they view strategic environmental issues as threats (López-Gamero, Claver-Cortés & Molina-Azorín, 2007). It has also been found that the amount of resources available to the organization as well as the size of the firm determine the firm’s orientation towards appropriate environmental initiatives. This is evident from the case of the Body Shop and its take over by L’Oreal. Body Shop is known for its ethical stand on animal testing, human rights, community trade and the environment (Glasgow, 2006). The Body Shop had been positioned as an ethical and green-conscious business, believing in fair-trade practices (Alarcon, 2008). Body Shop had been seeking financial support and when the takeover was decided, it was also agreed that Body Shop would continue to operate as an independent unit. L’Oreal is 25% owned by Nestle and is a brand in itself. While Body Shop was dead against testing its cosmetics on animals, L’Oreal has always been doing this. L’Oreal’ has refused to sign the Compact for Safe Cosmetics – a Code of practice – that requires the removal of potential carcinogens and other toxins from beauty products (Russell, 2007). Body Shop still maintains cordial relations with its major NGO stakeholders such as Peta, WWF and Friends of the Earth. Being a small company and with a firm commitment towards the environment, Body Shop maintains the traditional approach to the core sustainability concerns. They strictly refuse ingredients tested on animals; they phase out chemicals which are still allowed by law, and they promote products with a purpose and not simply to attain beauty. The focus of Nestle or L’Oreal has been in retaining huge profits whereas Body Shop focused on customer satisfaction through its commitment to the environment. Body Shop knew that customers were willing to pay a premium for environment friendly products. The size of the firm hence makes a difference to the environmental initiatives and sustainable development. Firms try to maintain external relationship towards sustainable development but they need to adopt internal proactive environmental management practices (Rondinelli & Berry, 1999). In the past environmental protection was viewed as a philanthropic activity and a means to keep in touch with the stakeholders of the company. Merely contributing to environmental infrastructure development or improvement, sponsoring education and training programs for teachers on environmental issues, funding community-initiated environmental initiatives, and creating formal stakeholder relationships with environmental interest groups and nonprofit organizations is not sufficient. Exxon Mobil is a case in example for engaging in such activities but they have a poor reputation on environmental issues, which can be damaging, contend Watson and Mackay (2003). In the 2005 Corporate Citizenship Report, Exxon claims to promote sustainable development by “providing support for scientific research on important environmental issues, encouraging public discussion on environmental policy, and implementing biodiversity conservation through the preservation of endangered species, their habitats, and other biologically diverse ecosystem” (CCR. 2005). They even claim to have granted $5.3 million for worldwide environmental contributions in 2005. In the developing countries they have designed health reporting system and they are also providing and improving educational and training opportunities for women and girls in the developing countries where they work. Simultaneously, Exxon is taking advantage of deregulation in Argentina where there are allegations that the company is bringing up megaprojects like El Cerrejon coal mine to blocking measures to cut greenhouse gas emissions (FOE, n.d.). While Exxon claims to protect wild life and invest in preserving wetland habitats through its association with various environmental organizations, they have also been charged as the largest producer of combustible fuels that generates greenhouse gases which in turn leads to global warming (Alsop, 2004). The company is even challenging the existence of global warming and maintains that their business cannot be liked to global warming. Economic development is the main cause of the environment issues that the society faces today - global warming, ozone decline, nuclear radiation, industrial toxins, and widespread air and water pollution (York, 2009). Managers have to make a trade-off between profits and the environment. While some firms contend that customers will not buy green products because they are expensive, others are of the opinion that green must be profitable for them to even think of it. However, today deep ecological concerns of several environmental societies are enforcing that companies have to proactively address the ecological footprint. The conflict between economic growth and environmental issues is perpetual and the problem appears to be insurmountable. The stakeholder theory suggests that “holders’ who have “stakes” interact with the firm and make the operation possible (Onkila, 2009). The theory further suggests that stakeholders are identified by their interest in the firm and the legitimate interest of all the stakeholders are of intrinsic value. Responsible management involves taking into account all who have interest in the firm but according to York businesses claim that they are adopting a value-based model where they take into consideration the interest of all the stakeholders but the reality is that they focus on the shareholders’ interest. The managers understand and sympathize with the environmental movement, they even understand the importance of preserving the wilderness but when it comes to taking decisions, such arguments and sympathy are ineffective. Despite this, there are some larger corporations that have demonstrated their concerns for the environment and have been able to create competitive advantage evident in cost savings and increased revenue. 3M, a publicly traded company produces a wide variety of consumer and industrial products. The company employed 67,071 people in 60 countries in 2004 (York, 2009). Having a long-term commitment to sustainability, the company had started a Pollution Prevention Pays (3P) program in 1975. Over thirty years, the company’s total savings have been over $1bn and they put their pollution prevention at 2.2bn pounds. Their commitment towards sustainability did not inhibit their competitiveness. In fact they focused on top line growth combined with continued improvement in operational efficiency. However, their commitment was powered primarily by economic drivers and not ethical drivers. They ensured that every 3P project demonstrated significant cost savings and they achieved the operational efficiency through their Six-Sigma program. Hence their focus was on economic development but they managed to achieve their objectives while being sustainable and preventing pollution. Ecological consideration can be a part of the business strategy and not the primary driver but it does enable companies to address the environment concerns and remain profitable as well. Proctor & Gamble (P&G) unlike 3M did not focus on cost savings but they still realized profits while being environmentally conscious (York, 2009). P&G responded promptly to customers’ desires for more environmentally safe packaging and products. This led to the development of Total Quality Environmental Management (TQEM) through out the company. Thus their sustainable packaging was driven by consumer demand while 3M focused on innovation. Each company responds to the concerns in different ways but they are able to achieve the objectives. Thus, a study of different firms and their strategies reveals that it is possible to remain sustainable while addressing the environmental issues. Corporations have been forced to address the environmental concerns due to external pressure from societies and organizations primarily focusing on preserving the ecological balance of the planet. Whatever may be the driver, corporations have demonstrated that it is possible to attain profits while being environmentally conscious. It is not just the smaller organizations such as Body Shop that can be environmentally ethical. Large corporations such as P&G have proved that keeping a customer-focused strategy it is possible to be ethical as far as the environment is concerned. There are others such as Exxon Mobil that externally demonstrates concern for the society and other stakeholders but their primary focus is the shareholders’ interest. There are many that find as easy way out when they claim that it is not possible to be profitable and be green. Efforts are necessary but this is not insurmountable. Investments can be directed towards a greener environment while being socially responsible and taking into consideration the interest of all the stakeholders. Reference: Alarcon, C. (2008). THE BODY SHOP: L'Oreal's other Body beautiful. Marketing Week, London: Mar 27, 19 Alsop, R. J. (2004). Corporate Reputation: Anything but superficial - the deep but fragile nature of corporate reputation, Journal of Business Strategy, 25 (6), 21-29 Anonymous. (2008). What Is Social Responsibility? Why Is It Important? The Journal for Quality and Participation, 31 (3), p11 CCR. (2005). Exxon Mobil. Retrieved July 18, 2009, from http://www.exxonmobil.com/Corporate/Files/Corporate/ccr05_fullreport.pdf FOE. (n.d.). The Exxon files, Friends of The Earth, Retrieved July 18, 2009, from http://www.foe.co.uk/resource/briefings/exxon_files.html Glasgow, F. (2006). Have they sold their souls? Retrieved July 18, 2009, from http://www.acca.org.uk/members/publications/accounting_business/archive/2006 june/2671895 López-Gamero, M. L., Claver-Cortés, E., & Molina-Azorín, J. F. (2008). Complementary Resources and Capabilities for an Ethical and Environmental Management: A Qual/Quan Study. Journal of Business Ethics, 82, 701-732 Onkila, T. J. (2009). Corporate Argumentation for Acceptability: Reflections of Environmental Values and Stakeholder Relations in Corporate Environmental Statements. Journal of Business Ethics, 87, 285-298 Quazi, H. A. (1999). Implementation of an environmental management system: the experience of companies operating in Singapore, Industrial Management & Data Systems, 99 (7), 302-311 Rondinelli, D. A., & Berry, M. A. (1999). Environmental Citizenship in Multinational Corporations: Social Responsibility and sustainable development, Greening of Industry Network Conference Russell, J. (2007). Strategy & Management: Body Shop takeover – Ethical business as usual. Retrieved July 18, 2009, from http://www.ethicalcorp.com/content.asp?ContentID=4936 Watson, M. & MacKay, J. (2003). Auditing the environment. Managerial Auditing Journal, 18 (8), 625-630 York, J. G. (2009). Pragmatic Sustainability: Translating Environmental Ethics into Competitive Advantage. Journal of Business Ethics, 85, p97-10 Read More