Business response to environmental concerns - Business Environment

Corporately responsible actions and/or expenditures have a trade-off cost: the alternatives that the money, resources, time and effort could have been used for if they had not been devoted to more socially oriented goals. As indicated previously, this is generally known as the ‘opportunity cost’, the notion that in a world of finite resources, whatever a business chooses to do, it does at the expense of something else, the opportunity forgone. As a result, the timing of returns is a critical factor in the decision-making process. The returns to investment in greater environmental responsibility are, however, likely to be of a long-term nature, a situation which may offer little comfort to firms, particularly small businesses that are fighting for survival and need short-term returns. Thus while businesses, in general, may want to provide a more environmentally responsible policy particularly if their stakeholders are forcing them to look to the wider concerns of business practice and process the implementation of such a policy may only occur if it is deemed to be in the best interests of the business: that is, where the resources are used in an optimum way to provide sufficient reward for the hierarchy of stakeholders. Business culture at present is still largely driven by short-term profit and the stakeholders that generally hold the most influence are the providers of financial capital, the shareholders or owners of the business. In order to develop greater environmental awareness in business it is necessary to review the way objectives are prioritized to take account of the view points of indirect stakeholders, thus ensuring that the issue of sustainable development is brought on to the corporate agenda.The willingness and/or ability of a firm to be corporately responsible for its own sake has little, if any, precedent in current business practice; organisational policy is far more dependent upon the business environment in which the organization works. All business activity, by definition, involves some environmental damage and the best a business can achieve is to clear up its own mess while searching hard for ways to reduce its impact on the environment.It is, therefore, impossible to expect the type of business environment not to influence the level of corporate responsibility, and the degree of change, the intensity of competition and the scale of complexity will all be factors in the creation of policy, whether this be to increase market share or to reduce the levels of air emissions.If firms are to provide a greater level of corporate responsibility, does society have to resort to the use of laws and government regulation, or will business perceive the change in societal expectations and decide voluntarily to act more responsibly towards the general environment? The answer probably lies somewhere between the two, but there is obviously a close association between the level of legislative impact upon a firm and the degree of perceived impact the organization would expect to have upon the environment that may lead to the implementation of environmental management systems. Set hi puts forward a threefold typology:Social obligation. A situation where the organisation uses legal and economic criteria to control corporate behaviour. The strategy is, therefore, reactive and dependent upon change instigated by the market or through legislation. The organisation exhibits an exploitative strategy, giving in to environmental concerns only when it can obtain direct benefit. The principal stakeholder in this type of organisation is the shareholder and the pursuit of profit the primary objective.Social responsibility. This type of organisation tries to go beyond the requirements prescribed by law and instead seeks to conform to the current values and norms of society. The organisation will, therefore, accept responsibility for solving current environmental problems and will attempt to maintain current standards of both the social and physical environment. In order to achieve this the organization must be accountable to a range of stakeholders and this assumes that profit, although the dominant motive, is not the only one.
Social responsiveness. This organisation exhibits a proactive strategy, actively seeking future social change. The policies of the organisation are followed with a fervent zeal, the business seeks to lead the field in terms of promoting a corporatelyresponsible attitude. It accepts public evaluation of its policies and procedures and is prepared to impinge upon profit to maintain the high profile it has established through its corporately responsible actions.The concept that business will be purely socially responsible must come from an ethical position, a standpoint which is difficult to envisage within the British economy but one to which the Body Shop arguably offers a close approximation.Businesses, however, may actually follow a socially responsible approach as a result of the possible advantages it might afford the organisation. In general the hypothesis can be supported that a better society produces a better environment for business. Further, it often makes sound investment sense, leading to increases in market share, a lowering of costs through energy and material savings and finally an improvement in the ‘corporate image’. Provision for responsible behaviour is therefore financially good for the business. A further possible impetus for implementing environmental management systems could come from political rather than economic sources. In simple terms, organisations that instigate their own environmental policies and/or regulations tend to face a reduced threat from external regulatory bodies and this improves company image while reducing possible checks upon corporate practices and processes.

In essence, the conclusions reached highlight the fact that organisations will not normally pursue a proactive role in the development of environmentally responsible policies. The initial short-run costs are prohibitive when the payback is generally assumed to be over the long term. What might be required is a re-education of those involved in the decision-making process so that they understand the benefit of a longer-term view and can identify policies that offer a sustainable competitive advantage over time. This is true for all strategy and is therefore applicable to the implementation of environmental policies.


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