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Chapter 3:Theoretical review

3.1 Theory:

Database searches yield relatively few works addressing the exact term ―green management‖ and the majority of such works focus on environmental management and environmental management systems (EMS) as ways to improve environmental and business performance [e.g. (Florida & Davison, 2001; Darnall, Jolley, & Handfield, 2008)]. While both improved environmental and business performance are basic goals of green management, we believe that a more specific and extensive conceptualization is warranted. When definitions of the exact term ―green management‖ are found in the literature, they often appear either too vague or incomplete. One of the most recent studies on green management defined the term as ―practices that produce environmentally-friendly products and minimize the impact on the environment through green production, green research and development, and green marketing‖ (Peng & Lin, 2008). With no mention of factors such as strategic integration or sustainability, we feel that this definition falls short of what it means to embrace true green management, but recognize that developing a definition of the term was not the purpose of these authors. While researchers have made valiant attempts to develop conceptualizations and typologies, arriving at a widely-accepted definition of green management does not appear to have been a priority. In addition to green management being a rather new term, the lack of a comprehensive and specific definition, and the confusion surrounding the range of practices that actually constitute green management, another obstacle in determining a solid definition of the term is that green management is typically labelled with a different nomenclature such as corporate environmentalism, environmental management, or corporate sustainability. Not only are there different terms by which we label green management, but each of these terms are defined and interpreted in a variety of ways by a diverse group of researchers and practitioners. For example, some suggest that the concept of corporate environmentalism revolves around the objective of reducing waste, which in turn contributes to the organization ‘s ultimate goal of making money (Costello, 2008). However, others define corporate environmentalism as something much more broad and profound than financial returns derived from waste reduction. For instance, one working definition of the term identifies corporate environmentalism as ―the organization-wide recognition of the legitimacy and importance of the biophysical environment in the formulation of organization strategy, and the integration of environmental issues into the strategic planning process‖ (Banerjee, Corporate environmentalism: the construct and its measurement, 2002). While this definition stresses the importance of environmental issues and the need to integrate these issues into the strategy of the organization, some factors that we believe are critical to the practice of green management seem to be missing or need to be specified; factors such as continuous improvement, sustainability, and innovation. Environmental management and corporate sustainability are also terms that have been used in close conjunction with or as a substitute for green management. Both concepts seem to extend beyond simply reducing waste, and therefore more accurately embrace the ideal of green management than the description of corporate environmentalism offered by Costello (2008). Environmental management focuses on continuous improvement and environmental management systems have been looked upon with much favor by large organizations, policy makers, consultants, and researchers as an effective approach for proactively dealing with environmental issues (Kautto, 2006). However, we should note that some have defined environmental management simply in terms of economic profit (e.g. (Denton, 1994)). Corporate sustainability also stretches beyond waste reduction and requires continuous improvements to achieve its challenging objectives. In order for sustainability to be possible, according to Daly (1996), our

Chapter 3:Theoretical review

economy must radically shift from a focus on growth to a steady-state economy, which requires that rates of consumption do not exceed rates of regeneration, rates of non-renewable resources do not exceed the rate at which sustainable renewable substitutes are developed, and the rates of pollution emissions do not exceed the assimilative capacity of the environment (Daly, 1991). Hawke (1993) Applies an economic golden rule to define what it means to be sustainable when he advises everyone to ―leave the world better than you found it, take no more than you need, try not to harm life or the environment, [and] make amends if you do.‖ Borrowing from the basic premises of these terms, we feel the need to incorporate ideas such as continuous improvement and sustainable processes into the definition of green management. Following careful examination of the preceding review and the additional historically-based, practitioner-based, and theoretically-based literatures concerning green management, several recurring concepts were identified. The recurrence of similar concepts across three different perspectives solidified the importance of their inclusion in the following definition of green management (Haden, Oyler, & Humphreys, 2009): Green management is the organization-wide process of applying innovation to achieve sustainability, waste reduction, social responsibility, and a competitive advantage via Continuous learning and development and by embracing

environmental goals and strategies that are fully integrated with the goals and strategies of the organization.

3.2 Green Business

Green businesses adopt green management principles, policies, and practices that improve the quality of life for their customers, their employees, the communities in which they operate, and the environment. Many green businesses begin with a desire to resolve the impacts of climate change and other environmental problems. Green businesses must follow a green approach and green standards in their operational management and in the output of products. Green business can be derived from two perspectives related to the output in the form of green products (goods and services) as well as the process (or production) of an economic activity. Entrepreneurs can enter into an overtly ‗green ‘business sector, providing green and environmentally friendly products (e.g. waste management, renewable energy among others). Alternately, green business can provide their goods or services through an environmentally friendly process or with the help of clean technologies (e.g. ecotourism). Irrespective of the two perspectives upon which green businesses are operated, following definition embodies the true nature of green businesses: Green business is an organization that is committed to the principles of environmental sustainability in its operations, strives to use renewable resources, and tries to minimize the negative environmental impact of its activities. In this perception, ―greening‖ of business is part of a long-term strategy of becoming sustainable, i.e. being able to achieve business tasks in the way that does not develop any threat economic, social or environmental for both current and future generations.

3.3 Characteristics of Green Businesses Hirsch identifies nine categories of green business behavior. Hirsch explains claiming that: when firms go green, they exceed legal requirements by:

1. Directly reducing their own regulatedor unregulatedenvironmental impacts in ways that will reduce regulatory risk, improve company brand, and allow firms to get out in front of anticipated regulations;

Chapter 3:Theoretical review

2. Reducing their customers ‘environmental impacts and decreasing their customers ‘exposure to

unhealthy substances;

3. increasing their reuse and recycling of materials used in the production process;

4. improving their energy efficiency or that of their customers;

5. improving their resource productivity or that of their customers;

6. implementing systems to identify waste reduction, pollution prevention, energy efficiency, or

resource productivity opportunities throughout the company or facility;

7. collecting and disseminating more information about the firm ‘s environmental impacts and

performance than the law requires;

8. providing more opportunities for stakeholder input into corporate environmental decision making

than the law requires; and

9. Financing and investing in green products and business models, such as those described above.

3.4 Scope of Green Management The scope of the meaning of green is considerable. It can relate to issues such as ecological concerns, conservation (planet and animal), corporate social responsibility (CSR), humanitarian concerns, fair trade, clean water, animal welfare, equality, and sustainability. Each of these issues alone is broad and complex. The term ―green‖ may also imply different things to professionals in various fields. In health and medicine, for example, greening may mean minimizing damage to human health; in business, the term may imply harmonizing corporate environmental performance with stakeholders ‘expectations. However, even in business, the word green differs greatly. This is particularly the case when describing products as green. Even products that are the same may be green in different ways. Furthermore, the use of green in products has led to controversy. For example, for products that may be environmentally friendly in some respects but are at the same time unsafe in the long term, it could be argued that labelling them as green is incorrect, and it would even be socially irresponsible to have these products in the marketplace.

Since green management is a new term, researchers and practitioners interpret green management in a variety of ways. Some may view compliance with regulatory standards or a simple initiative to reduce paper consumption (i.e. requiring that all photocopying be double-sided) as green management. Others may feel that green management entails new corporate strategies, organizational restructuring, or a complete overhaul of manufacturing processes. The range separating these two viewpoints is vast, suggesting that there is a broad continuum or spectrum along which a variety of ―green‖ business practices can fall, from the simple and easy to the complex and challenging.

Banerjee (2001) suggests that the range of a National Conference on Marketing and Sustainable.

Development organization ‘s environmentally-based strategies progresses from reactive to proactive; that organizations can resist or merely comply with environmental standards, or they can view environmental concerns as an opportunity to be innovative and gain a competitive advantage. Other researchers have also identified similar continuums of environmental strategies, models, typologies, and classifications (e.g. (Hass, 1996; Freeman, Pierce, & Dodd, 2000)).

Chapter 3:Theoretical review

3.5 Types of Green Management Various researchers in the field of green management have categorized the concept from different stand points which can be considered from the point of view of strategic approaches adopted or the classification of organizations based on the strategic approaches. Meima's (1994) categorization of the various environmental management paradigms that have emerged over the past few years into four groups, gives us an overall theoretical framework. His approach suggests that while there are some who perceive the environment as an anthropocentric moral/ethical issue, there are others who regard it as a means to gaining financial benefits. It is here that the concept of competitive strategies and competitive advantage comes in. The third paradigm perceives environmental management as a function of quality (e.g. TQEM, BS7750). The fourth approach to environmental management is determining ways in which industrial action can be made compatible with nature; for instance, by minimizing emissions, by reducing wastes at source etc. Simpson (1991) suggests that corporate responses to environmental pressures can be categorized into three main groups; the `Why Mes', the `Smart Movers' and the `Enthusiasts'. The `Why Mes' are the companies that have been forced to improve their environmental performance as a result of some well-publicized event. Some outstanding environmental accident acts as a catalyst and induces the company to take some action in the field. `Smart Movers' are the ones that have been able to exploit the opportunity created by the arrival of the green consumer to gain competitive advantage. The `Enthusiasts' include companies that have moved beyond compliance, and have incorporated their environmental strategy into their overall business strategy. National Conference on Marketing and

Sustainable Development

In Roome's Strategic Options Model (1992), there are five environmental strategies for companies, namely; non-compliance, compliance, compliance-plus, commercial and environmental excellence, and leading edge. These are referred to as; stable, reactive, anticipatory, entrepreneurial and creative in Ansoff‘s Strategic Posture Analysis (Ketola, 1993). The first three strategies are related to compliance with the environmental standards, as the name suggests. Compliance-plus implies looking beyond the existing standards and norms. It involves integration of the environmental management techniques with the entire management system of the company. Excellence and leading- edge approaches view environmental management as good management, recognize the opportunities that have arisen as a result of the environmental revolution and strive towards state-of-the-art environmental management. Hence, it is through the adoption of excellence and leading-edge strategies that a company can gain competitive advantage. The difference between Steger's and Roome's models is that while Steger perceives corporate response to the environment as based on environmental risks and market-based opportunities, Roome argues that environmental pressures like legislation, constraints within the firm, and the ability of managers to bring about an organizational change in order to incorporate environmental issues, are equally important. James’ framework (1992) is similar to that of Roome‘s. He believes that there are four categories into which companies can be divided, in accordance with the environmental strategy adopted by them. The first category is similar to Steger‘s indifference and Roome‘s non-compliance, where all environmental issues are simply ignored. Companies that do the minimum that is required

by law fall in the second National Conference on Marketing and Sustainable Development Similarly,

Steger's conceptual model (Roome, Business Strategy, R & D Management and Environmental Imperatives, 1994) categorizes corporate strategies into four categories; indifference, offensive, defensive and innovative. Indifferent companies are those that have low environmental risk and even less environmentally-based opportunities for growth. Offensive companies are those that have considerable potential for exploiting environmentally-related market opportunities, and include companies that manufacture pollution control equipment etc.

Chapter 3:Theoretical review

Those adopting a defensive strategy are companies like the chemical companies, which have high environmental risk and cannot afford to ignore environmental issues, or their very survival could be at stake. The innovators are those that have high environmental risk and also a lot of environmentally-based opportunities for growth.

Topfer (Bostrum & Poysti, 1992) also divides companies into four categories, namely; resistant, passive, reactive and innovative. Companies that fall in the first category are the ones that view concern for the environment as a hindrance to their growth and do their level best to hinder the passing of environmental laws. Passive companies are like Steger's indifferent companies, who ignore the issue altogether. Roome argues that action taken by reactive companies has been triggered off by legislation, whereas Topfer sees it as a defensive move to catch up with the competitors. The last category, the innovators, are the same as Steger‘s innovators and Simpson‘s enthusiasts. Beaumont, Pedersen and Whitaker (1993) perceive corporations at six different levels, in accordance to their response to the environment. The first two levels are similar to Roome‘s non- compliance and compliance. The third level is referred to as ‗corporate action ‘, where management begins to regard environmental matters as important and takes a broader and a more long-term perspective of the environment. At the fourth level changes take place in the organization in response to environmental issues. The fifth level is ‗supply chain action ‘, where environmental matters become an integral part of the entire industry's supply chain. At the final level of ‗business scope action ‘, an organization expands its activities, using environmental issues to get ahead in business.

Welford’s (1994) categorization of the SME (small- and medium-sized enterprises) sector into four main groups is slightly different. The first group is referred to as the ‗ostriches‘. Companies that fall in this category not only assume that concern for the environment is a passing phase and that their impact on the environment is negligible, but also assume that their competitors feel the same and hence do nothing to conserve the environment. Then there are the ‗laggards‘, companies that are aware of the environmental challenges facing them, but are unable to combat those challenges because of cost constraints, lack of trained manpower, lack of knowledge etc. The third group consists of the ‗thinkers ‘, companies that know that something should be done, but are still waiting for others to show the way forward. The ‗doers ‘are the ones that have proceeded to put their thoughts into action.

Dodge and Welford have developed an environmental performance scale which has become known as the ROAST scale (Welford, 1995) and is now being used by others to identify aspects of corporate environmental performance. In order to measure improving environmental performance, Dodge and

Welford argue that we need to define an ultimate National Conference on Marketing and Sustainable

Development category. In the third category are companies that move beyond legislation and the last group consist of companies that use the environment as a tool for gaining competitive

Chapter 3:Theoretical review

Environmental Performance Scale Extremes:

Resistant Organization

Performance Scale Extremes: Resistant Organization Resists any green behavior Disregards green aspects in

Resists any green behavior

Disregards green aspects in decisions Willing to damage environment if beneficial to the organization Negative environment values Sees resources and nature for human profit and pleasureExtremes: Resistant Organization Resists any green behavior Resists any green intellectual or philosophical argument as

Sees resources and nature for human profit and pleasure Resists any green intellectual or philosophical argument

Resists any green intellectual or philosophical argument as trite views of extremists

Transcendent Organization

as trite views of extremists Transcendent Organization Internalizes sustainable development Green criteria become

Internalizes sustainable development

Green criteria become paramount in decision makingOrganization Internalizes sustainable development No decision will upset the ecological relations

Green criteria become paramount in decision making No decision will upset the ecological relations

No decision will upset the ecological relations

making No decision will upset the ecological relations Environmental values take on an ideology associated with

Environmental values take on an ideology associated with sustainable development Human being are not above nature and but with nature, all decisions must reflect the intrinsic values and interrelationships of other members of the biosphere

Greening of the economy not only seeks to produce goods in a more resource efficient way but also to produce goods and services that support greener outcomes such as recycled paper and solar water heaters. The greener production methods are, the greater the availability of green goods and services. Therefore, the easier it is to practice greening principles until it becomes a standard practice and not an add-on or unique feature. This requires a strategic transformation of management practices to next level of green management practices as discussed above. However, since the environment is a complex, variable and extensive system, protecting the environment is a hard and enduring task. It is impossible that all the existing pollution problems in the environmental can completely be resolved in the next decade. A wonderful and quality environment must be achieved by continuous planning, governmental policies, efforts of the enterprises and public participation.