Environmental Performance Constituted by Small and Medium-Sized Enterprises - Research Paper Example

Environmental Performance in SMEs Word Count: 1995 words Contents Contents Introduction 3 Discussion 3 Conclusion 9 Bibliography 10 Appendices 11 Appendix 1: Green markets and resource efficiency 11 Appendix 2: Problem ranking 11 Appendix 3: Barriers to environmental practices in SMEs 12 Appendix 4: Learning network framework 12 Introduction This study will reflect upon environmental performance constituted by small and medium-sized enterprises. In this respect, ISO 14001 precisely defines environmental strategies. Environmental management systems (EMS) are well integrated in large firms due to sufficient funds and time. SMEs are regarded as vendors to large firms, and they subsequently lack funds to implement EMS. Environmental performance is a major area of concern for organisational managers, as well as for the public who demand green products. SMEs are pressurised to implement environmental practices in order to gain competitive advantage in the marketplace. On the contrary, a good environmental image is already maintained by the majority of SMEs through technical efficiency. Hence this aspect would be critically analysed in this particular study. Market pressures are consistently demanding for achieving a balance between profitability and eco-efficiency. In an intensely competitive market segment, a business organisation can survive through increasing its market share and upgrading its environmental image. There are distinct differences between environmental management activities undertaken by larger organisations in comparison to small firms. It can be stated that third-party intervention would enhance benefits associated with ISO 14001 implementation in SMEs. Supply chain pressure is one of the major challenges faced by SMEs. Financial problems are still considered to be an obstacle in the context of implementing environmental practices in SMEs. Discussion Environmental management activity varies across organisations due to management structure and firm size. A small percentage of SMEs will adopt environmental standards if they are pressurised by customers. This is primarily because of the cost factor linked with EMS implementation. The technical ability and resources play a vital role while integrating environmental solutions. ISO 14001 is beneficial for all SMEs if it is exhibited appropriately, along with support obtained from a third party. However this statement can be contradicted by arguing that the absence of other potential drivers restricts a small-scale organisation from environmental improvements. These potential drivers can be categorised into absence of market pressure and low awareness. In the U.K., 51.8% of annual turnover is contributed by SMEs. These organisations play a pivotal role in the manufacturing and service sectors. There are SMEs which have successfully adopted EMS without any such problem of cost and time. For instance, a survey was conducted in Europe so as to evaluate compliance of SMEs with environmental legislation (Halila and Tell, 2013). A desirable percentage of SMEs have adopted environmental features in their operational procedures as highlighted in Appendix 1. Larger corporations extend required support to suppliers or other supply chain partners so as to ensure that they are well aligned with environmental practices. After the establishment of ISO 14001, there has been increased percentage of certifications, specifically in relation to SMEs. The implementation cost linked with EMS is negligible for SMEs. This is simply because of using available resources to implement an effective EMS rather than installing new devices or bringing forth a massive change in the system. Third-party support is basically beneficial for SMEs since it helps in reducing cost and provides required guidance. It has been assumed that SMEs fail to adopt EMS because they do not possess sufficient working capital. On the contrary, the implementation process is also closely knitted with motivational force and technical ability. There are also other problems which restrict SMEs from implementing EMS. This information has been obtained from a questionnaire survey conducted in U.K. on 59 SMEs (Halila and Tell, 2013). The list of such problems has been demonstrated in Appendix 2. Technical inefficiency in terms of paper work, allocation of resources, documentation time period, defining environmental standards, etc. can be stated as a barrier for SMEs while implementing environmental practices. Hence obtaining third party support should not only be the prime concern of SMEs, but they need to reflect upon training programmes. These programmes would spread awareness amongst team members and motivate them to design effective environmental policies (Aiyub, Arifin, Awang and Jahi, 2009). On the other hand, environmental initiatives can also be undertaken which might require support from third parties such as environmental NGOs, authorities and business clubs. In the last few years, training programs have been incorporated in SMEs, in the form of team discussion, seminars, conferences, etc. ISO 9000 series experience is used by SMEs while implementing ISO 14001. However SMEs were also involved in offering incentives to employees so that they work in accordance with environmental standards. SMEs commitment towards environmental sustainability has always been questioned by many researchers. The differences prevalent in environmental strategy are due to certain aspects such as financial resources, production capabilities, management style and organisational structure. Organisational culture plays a critical role in regulating alignment of employees with environmental practices. However a negative culture is witnessed in SMEs when it comes to EMS implementation, due to lack of knowledge on associated benefits. There are wide array of factors which differentiate environmental sustainability approach in larger firms from smaller organisations. Market orientation is often observed to influence firm’s commitment towards environmental sustainability. On the basis of this concept, it can be stated that, customers are a key driver behind establishing good environmental image. Market oriented firm can be defined as one which is customer-focused and externally focused. When a company is customer-focused it signifies that its major aim is to build a wide base of satisfied customers. Being external-focused enables a firm to exhibit market-oriented behaviours in the industry. Environmental concern amongst consumer market segment pressurise SMEs to adopt sustainable measures. A firm can gain competitive advantage through developing a large base of loyal customers. SMEs which lack market oriented phenomenon are less inclined towards commitment to sustainability. Entrepreneurial orientation can be stated as another influential force which drives environmental sustainability. There are three components associated with entrepreneurial orientation such as risk-taking, innovativeness and proactiveness. Sustainable entrepreneurship facilitates innovation in operational procedure. The societal and customer demands are inter-linked with commitment towards environmental sustainability. In overall context, sustainable approach can be implemented through effective co-ordination amongst organisational functions or activities (González-Benito and González-Benito, 2008). Cost and time is not the only important aspect rather EMS implementation requires strong communication channels amongst team members. SMEs encompass fewer people who do not coordinate well in terms of implementing environmental practices. To be more precise suitability of ISO 14001 is greatly dependent on firm size and motivation towards adopting environmental practices. These problems are often ignored which plays a significant role in degrading commitment level of SMEs towards environmental sustainability. The basic EMS standard is based on a known model which is Plan-do-check-act model. A proper learning network motivates organisational members to develop environmental practices. EMS standard can be beneficial for a SME only when employees have desirable knowledge on environmental sustainability. Learning networks can be considered as a medium through which SMEs can eradicate challenges faced during EMS implementation. SMEs are not an individual entity but should be regarded as an interconnected entity. There is multiple research studies conducted on importance of social networks. Learning networks should comprise of individuals who can share their knowledge and experience with others. Lack of managerial support is one of the key factors which restrict SMEs from implementing EMS. Environmental practices are an innovation in modern scenario. SME managers should possess psychodynamic competence in order to be aligned with innovative change. This is a completely new dimension which indicates that in all circumstances third-party support is not the essential aspect. The psychodynamic competence relates to motivation or courage in an individual to opt for innovative ideas. SME managers fail to implement EMS because they eventually lack such competence. Learning network is flexible to anticipate environmental changes and enable SMEs to acquire key strategies adopted by competitors. On the basis of this network, managers can reflect upon primary environmental issues. Apart from knowledge creation, there is also collaboration of three tasks in such network. These tasks can be defined as education, co-operation and research. The importance of third-party is centred towards designing joint environmental project with SMEs. There are SME managers who are knowledgeable in context of environmental sustainability but are unable to implement best practices due to lack of resource (Brammer, Hoejmose and Marchant, 2012). Government authorities over the years have extended support to SMEs who primarily lack funds to implement EMS. An Armenian SME survey was exhibited to determine major barriers associated with green practices. Appendix 3 highlights information obtained through the survey. The survey had been conducted in 2014, and 38.3% of respondents (SME managers) stated that finance is a major barrier to EMS implementation. Government support is essential for those SMEs who are unable to provide financial incentives. ISO 14001 has proved to be beneficial for SMEs since it ensures high quality products for customers. Large corporations influence SMEs to adopt such environmental friendly practices because it is a part of business policy of large firms. Financial resources can be regarded as an obstacle in implementation of green practices in SMEs. Learning network provides an opportunity by which SME managers can gain desirable knowledge on environmental practices and its associated benefits. Appendix 4 outlines a learning network which helps in initiating innovative change within SMEs. In overall context, knowledge and resources are two important entities which support SMEs to maintain their commitment towards environmental sustainability. There are certain financial mechanisms which can be explored by SMEs who plan to invest in green technologies. These mechanisms mainly comprise of tax privileges, grants and low-interest loans. The favourable loan conditions can be explored by those SMEs which are able to elaborate on their environmental practices. Banks can also make their credit decisions based on environmental criteria in later time period. Environmental investments, particularly for SMEs, can also be accompanied with tax incentives. These governmental measures can be in the form of reduced taxes or accelerated amortisation for energy efficient and renewable equipment, or even corporate tax credit for EMS investment (Halila and Tell, 2013). There are financial benefits associated with EMS implementation which could later be shared by SMEs with third-parties like governmental authorities, banks, etc. Financial savings are closely knitted with incorporation of ISO 14001. These savings have motivated several SMEs to focus on utility consumption, legal compliance and increased waste reuse. Apart from financial benefits, there are other non-monetary benefits which drive small-scale firms towards environmental sustainability. Brand reputation amongst customers can be considered as one such benefit of ISO 14001. EMS implementation provides a platform whereby SMEs employees can gain knowledge about environmental issues. This kind of awareness helps in preventing pollution and reduces workplace risks or accidents. Managerial support would enable SMEs to adopt green practices. The percentage of savings in large firms is comparatively higher than small scale firms. This aspect reduces managerial support and deprives SMEs from exploring financial gains linked with EMS. In such scenario, intervention of third-party make managers realise financial benefits in long run. Environmental performance in SMEs is a wider perspective and it is not only inclined towards time or cost factor. There are multiple entities which regulate the entire mechanism. However majority SME managers consider financial resource to be a major area of concern. Conclusion ISO 14001 is a simple environmental standard which has been implemented in many SMEs. It cannot be considered as a costly process or time-consuming method. Environmental NGOs, business clubs, etc., can be denoted as a mentoring body which guide SMEs in context of implementing EMS. Third parties outline a relationship between financial investment and financial gains related with green practices. In short term, financial gains cannot be explored by such small-scale firms but it shall prove to be advantageous in long run. Governmental authorities also support such green initiatives undertaken by SMEs. They mainly extend their support by offering financial rebate or low interest bank loans. ISO 14001 implementation cost is within expected range and cannot be stated as a burden for SMEs. There are other barriers such as technical inefficiency, lack of managerial support, lack of market oriented approach, etc., which prevent SMEs from EMS adoption. Third parties have always been supportive toward SMEs but these firms need to reflect upon other issues, apart from cost and time. Bibliography Aiyub, K., Arifin, K., Awang, A. and Jahi, J. M., 2009. Environmental performance in small and medium sized enterprises (SMEs) certified to ISO 14001 in the United Kingdom. International Business Management, 3 (1), pp. 7-14. Brammer, S., Hoejmose, S. and Marchant, K., 2012. Environmental Management in SMEs in the UK: Practices, Pressures and Perceived Benefits. Bus. Strat. Env., 21, pp. 423–434. González-Benito, Ó. and González-Benito, J., 2008. Implications of market orientation on the environmental transformation of industrial firms. Ecological Economics, 64, pp. 752–762. Halila, F. and Tell, J., 2013. Creating synergies between SMEs and universities for ISO 14001 certification. Journal of Cleaner Production, 48, pp. 85-92. Appendices Appendix 1: Green markets and resource efficiency Appendix 2: Problem ranking Appendix 3: Barriers to environmental practices in SMEs Appendix 4: Learning network framework Read More