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Business Strategy and the Environment Bus. Strat. Env.

18, 542556 (2009) Published online 22 September 2008 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/bse.625

How to Dene an Environmental Policy to Improve Corporate Sustainability in Developing Countries


Mnica Cavalcanti S de Abreu*
Federal University of Cear, Brazil University of Cambridge, Institute for Manufacturing, Cambridge, UK

ABSTRACT Continual efforts to work with government and society are crucial to persuade businesses to become even better engaged in sustainability practices in developing countries. This study rebuilds the SCP (structureconductperformance) paradigm to incorporate environmental variables and to address the environmental strategy choices. Grounded theory was adopted in a systematic collection of data in petrochemical, textile and beverage companies established in different Brazilian states. In-depth personal interview, site visit and documentary evidence were coded and analysed. The empirical results demonstrate that environmental regulation and enforcement, environmental risk and demands from stakeholders play a central role in increasing the corporate commitment to the natural environment. The study denes four strategic generic types of organization, termed variously as sleeper, reactor, defender and innovator, owing to their solutions to environmental issues. This typology contributes as a roadmap for business decision makers to choose the appropriate environmental strategy in a global economy. Copyright 2008 John Wiley & Sons, Ltd and ERP Environment.
Received 1 October 2007; revised 4 April 2008; accepted 8 April 2008 Keywords: environmental strategy; environmental management; environmental policy; stakeholder engagement; sustainability; Brazilian industry

Introduction

INCE THE MID-1980S, COUNTRIES IN LATIN AMERICAN HAVE OPENED THEIR MARKETS TO INTERNATIONAL TRADE and investment. They also have taken steps to stabilize their economies through curbing ination substantially, controlling budget decits, privatizing many state enterprises and revaluing their currencies (Dominguez and Brenes, 1997). Following the external debt crisis of 1982, the Brazilian economy entered a period of profound macroeconomic instability, in spite of successive economic plans and policies aimed at stabilization. Brazilian industry lagged behind the international trajectory towards technological and managerial changes. As pointed out by Ferraz et al. (1999), in the period 198094, governments promoted nine major stabilization plans,

* Correspondence to: Dr. Monica Abreu, Av. da Universidade, 2470, Benca, 60.020-180, Fortaleza, Ceara, Brazil. E-mail: mabreu@ufc.br
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15 different wage indexation policies, 19 changes in the rules governing changes of the exchange rate, 22 different proposals to deal with the external debt and 20 proposals for the scal adjustment of the state. From the 1990s, a new development strategy, named competitive integration, started to emerge. Changes can be seen as composed of three main blocks: market focus, industrial structure and a regime of incentives and regulations (Ferraz et al., 1999). Trade liberalization, aiming at increasing both import and exports and exposing the local industry to international competition, has changed the market focus. The industrial structure, in turn, was set to be modied by means of privatization of state companies and attraction of direct foreign investment. Decreasing government intervention in the economy (deregulation) has been the main feature of the regime of incentives and regulations. The renewal of environmental consciousness in Brazilian society from the 1990s, together with the corresponding growth in the extent and stringency of related regulations, has brought about a change in the nature of environmental pressures on the industry because these issues began to affect the market place directly. By becoming market-related factors, such pressures have promoted an associated change in the nature, source, means and geographical scope of rms environmental response. The purpose of the current research was to evaluate the environmental strategies adopted by Brazilian companies. The framework used is a traditional structureconductperformance (SCP) approach, common in industrial economics, and adds the assumption that the environmental performance of a company is the result of its environmental competitive practices or conduct standards, depending on the industrial structure in which it is inserted. The paper is organized as follows, and the next section discusses issues that a company must address in developing an appropriate environmental strategy. Steps to develop the environmental SCP model are presented. Then, the empirical research methodology is introduced. The primary method of investigating was grounded theory (Strauss and Corbin, 1998; Creswell, 2007), a qualitative research method designed to aid in the systematic collection and analysis of data. Subsequently, the main results were discussed. The study postulated that there are four general types of organization. The environmental strategy adopted is a function of the importance attached to pressure on the industry structure, and the consequent environmental behaviour adopted. The nal section draws conclusions as to where these efforts have brought us to in respect of environmental strategies in developing countries.

Environmental Strategic Options


Since the late 1980s, academics and practitioners have developed classications to describe trends in environmental management, using a diversity of labels to designate processes and outcomes, such as strategies, responses or performance (Kolk and Mauser, 2002). Although environmental management models show a wide variety of characteristics, many are stage or phase models that describe a development in time consisting of an increasing integration of environmental concerns with business policy and strategy. Hunt and Auster (1990) suggest that there are ve distinct stages in developing an environmental programme. The continuum extends from the beginner, which provides only minimal protection from environmental problems, to the proactivist, which is more aggressive in reducing risk. Each stage represents a generic characterization. Hass (1996) utilizes the continuum model proposed by Hunt and Auster (1990) as a research framework for a study of eight Norwegian rms. Difculties in classifying the companies lead to the development of a new typology with four orientations towards environmental management and its implementation. Otherwise, Vastag et al. (1996) proposed a framework to evaluate corporate environmental strategies. The external and internal physical characteristics of companies determine their exogenous and endogenous environmental risks, which in turn have an impact on a companys environmental management characteristics. Rodriguez and Ricart (1998) developed a matrix combining internal variables (the environmental management system implemented) with external variables (clients and other stakeholders demands). Winn and Angell (2000) found that policy commitment to environmental issues, and approach to implementing environmental activities, are two orthogonal independent dimensions of environmental management strategies of rms. The principal difference between these models derives from variables used in their analysis; therefore, companies are positioned in a scale according to their attitudes or response to specic environmental issues.
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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M. Abreu

Classication proposals differ basically in two respects: the evaluation criteria used, and the number of stages resulting from the scale of progression (Gago and Antolin, 2004). Multiple typologies and taxonomies have proposed different levels of proactivity of environmental strategy, ranging from slightly exceeding legal requirements to environmental excellence or leadership (Aragn-Correa and Rubi-Lopez, 2007; Paulraj, 2008). Although extant research has tried to categorize environmental strategy, it has focused predominantly on explaining motivations and practices within rms established in developed countries (e.g. Sharma and Henriques, 2005; Buysee and Verbeke, 2003; Winn and Angell, 2000; Henriques and Sadorsky, 1996; Bansal and Roth, 2000). Meanwhile, it is important to consider a different perspective on environmental strategy implemented in companies that operate in developing countries (Christmann and Taylor, 2001, 2002). A new classication scheme helps to address the fact that stakeholders demands and the dynamic capability for a proactive environmental management vary amongst industries, peculiar to each country. Development of the Environmental Strategic Model The SCP (structureconductperformance) paradigm is used as a framework around which to build an environmental strategy model to evaluate the environmental dimension of business strategies. The SCP paradigm (Bain, 1956) implies that structure is of overriding importance to competitive advantages. Therefore, research may focus on structural characteristics and pay relatively little attention to other variables such as rm resources, core competencies and the decision-making process (McWilliams and Smart, 1993). Such changes imposed by the efciency paradigm were incorporated into the environmental SCP model. The PSR (pressurestateresponse) model (OECD, 1998) has also been utilized to develop the concepts of pressures of the industry structure, conduct and performance. This model states that pressures mean the integration of environmental concerns into stakeholders demands, response indicators represent the integration of environmental concerns into actions by the rms, and the indicators of state evaluate the environmental performance. The environmental SCP model adds to the assumption that the environmental performance of a company is the result of its environmental competitive practices or conduct standards, depending on the structure of the market in which it is inserted, as seen in Figure 1. Companies are inuenced by external forces, termed shocks. These forces give dynamism to the model, and originate from changes in government policy/regulations, technological breakthrough and changes in taste/lifestyles. It is also important to consider the existence of internal feedback. According to Scherer and Ross (1990), not all inuences ow from industry structure towards performance. A causal relationship running from market structure to environmental conduct and from environmental conduct to environmental performance is assumed. Market and business factors play the most important roles in a decision-making process, but a wide array of forces such as regulatory demands, stakeholder forces, cost factors and competitive requirements drive corporations to adopt proactive environmental management (Berry and Rondinelli, 1998). Gonzlez-Benito and GonzlezBenito (2006) also include external factors such as industrial sector (environmental risk, concentration and

Figure 1. Environmental strategic evaluation model


Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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cohesion) and geographical location. Greater weight should be given to the power of the pressure group, the potential for accidents and the safety record of industries in high environmental risk rather than industries in low risk segments (Jose, 1996). However, one determinant factor stands out as central to all the others: the pressure exerted by the companys different stakeholders. It involves recognition of stakeholders environmental concerns, which are translated into strategic actions designed to improve a rms environmental performance (Buysee and Verbeke, 2003; Banerjee, 2002; Delmas and Toffel, 2004). The environmental conduct denotes three practices: planning and organization; operation and communication (Gonzlez-Benito and Gonzlez-Benito, 2006). The rst means the extent to which company has dened an environmental policy and developed procedures to establishing environmental objectives, the second represents the selection and implementation of operational procedures and assessing the outcomes of the respective processes and the third has allocated responsibilities and communicates the action taken in favour of the natural environment. Management aspects such as environmental strategies, policies, communication and commitment are frequently considered as part of environmental performance, and are therefore incorporated as dening criteria in environmental management models. Whilst environmental management and performance are closely linked, there is both practical and theoretical justication for considering them as different sets of (related) indicators (Kolk and Mauser, 2002). Environmental performance refers to indexes expressed in physical terms. According to Azzone and Noci (1996), physical indexes are measures that can be expressed on a quantitative scale, but do not refer to any economic based parameter. Air emissions, solid waste, energy and materials consumptions and wastewater generation can be considered within this category. The concepts of environmental pressures on the industry structure, conduct and performance reect three aspects of the greening of the industry. Environmental conduct is driven by pressures, and refers to activity that aims to protect the environment, and therefore the environmental performance represents the results achieved.

Methodology
Qualitative research methods are particularly suited to understanding the dynamics present within single settings (Eisenhardt, 1989). In this eld, grounded theory aims to develop a theory derived from data systematically gathered and analysed through the research process (Strauss and Corbin, 1998; Creswell, 2007). This method provided for the generation of an environmental strategy matrix through interrelating categories of information based on data collected from petrochemical, textile and beverage companies established in different Brazilian states. The matrix was derived putting together a series of concepts based on experience, and the idea that the SCP paradigm could be rebuilt, adding the environmental variable.

Interview Protocol Development The interview protocol was focused on understanding how companies dene their environmental strategy and identify the steps into the process. The rst version was tested in a large textile rm established in Cear state. The revised version introduced multiple possibilities and generates a list of 50 questions divided into three sections: industry structure, environmental conduct and performance. The industry structure section asked question about production, prots, number of employees and main products. There were questions to identify companies market share, who their customers, competitors and suppliers are and where their customers, competitors and suppliers are located. The environmental conduct questions reect the environmental management of a company within its business system, including management and administration, research and development, operations and production, and marketing. Thus, the ISO 14001 requirements were utilized as an environmental management system reference. In practice, examples of environmental conduct questions are environmental expenditure, number of nes and
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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citations, emergency response activities, number of audits conducted, contractor compliance programmes required and pollution abatement controls. Furthermore, issues related to the achievement of planned objectives and targets, environmental policies, environmental law enforcement, training programmes implemented, environmental demands from stakeholders and communication procedures were discussed. The OECD (1998) core set of environmental indicators was considered as a starting point to develop the performance questions. The list proposed by OECD is as follows: climate changes; ozone layer depletion; eutrophication; acidication; toxic contamination; urban environmental quality; biodiversity; landscape; water, forest and sh resources and soil degradation. These issues were considered during the interview in order to identify the environmental risk, how they measure and control discharges, and the environmental performance achieved. This nal version was tested in a large petrochemical company, established in Cear state, in order to check whether the interview protocol was exible enough to be applied within different industries and able to establish the answers accuracy. Data Collection Activities Industries were chosen based on their industry structure and environmental risks (high or low), hence they could be compared among themselves. Brazilian petrochemical, textile and beverage industries were distinguished according to the structural change, and have relevant implications for the strategy adopted. An overview of each sector is further presented. In 1994, the Brazilian Government established the Plano Real. The main idea underlying this development strategy was that, in order to stabilize the economy, Brazil had to accelerate the denationalization of state-owned industries and intensify its inclusion in the world economy with the framework of neo-liberal policies (Green, 2003). In this way, Brazil has begun a major process of restructuring the oil, gas and petrochemical industry in order to reduce the involvement of the state in the economy. The entire petrochemical industry of the country consisted of only few rms. This structural change was aimed at stimulating competition and the participation of international companies in the Brazilian market. The impact of the commercial opening on the textile sector during the 1990s was more intense than in other sectors while leading to an intense concentration of movement. According to Kon and Coan (2005), in the 1980s, this industry was technologically obsolete as the investments had been interrupted. Many companies had moved to North Eastern Brazil, expecting government support in order to resist Asias competitive pressure. In 1999, two leading Brazilian beverage companies merged and gained in productivity, economies of scale and distribution logistics. Nonetheless, traditional beverage companies are facing competitive challenges by rms introducing a low cost soft drink into the market. Concerning the environmental risk, it is assumed that the petrochemical industry has higher environmental risks than the textile and beverage industries. Petrochemical plants are highly polluting and operate in a social or physical context in which risks are further increased by external conditions or public attitudes toward environmental hazards. On the other hand, textile and beverage (soft drink) companies use well developed technologies and nonexhaustible resources such as raw materials, and their activities do not involve the transportation of massive volumes of hazardous materials (Vastag et al., 1996). The analysis had begun with the rst interview and observation, which leads to the next interview or observation, followed by analysis, more interviews or eldwork. The comparative study of rms within different industries was designed to identify the inuences, such as the degree of environmental regulation and enforcement, demands from stakeholders and environmental risk on the environmental strategy adopted. The criteria of technology similarity and size of plant were used to select rms for in-depth personal interviews and site visits. Initially, data from seven textile and four beverage companies were collected in Cear state. One important beverage company, established in Pernambuco state, and four petrochemical rms, installed in Bahia state (Camacari Petrochemical Complex), were also interviewed. All these companies were established in North Eastern Brazil.
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

Environmental Strategies Amongst Brazilian Industries

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During these interviews, there was a growing need for more environmentally proactive companies. Therefore, one textile company that had implemented an environmental management system and an eco-label was interviewed in Santa Catarina state. Additionally, three petrochemical companies, established in Rio Grande do Sul state (Triunfo Petrochemical Complex), were interviewed. One of them represents an important reference in relation to the environmental quality in the industry. All these companies have been set up in South Brazil. The data were collected from ve different Brazilian states, which allows identication of diverse environmental conducts and performance, and also stakeholders demands. It is important to mention that the effectiveness of environmental enforcement varies among Brazilian states. Visits were also conducted with ofcials of the regulatory body of the states of Cear, Bahia and Rio Grande do Sul in order to meet the agencies infrastructure. Following Sharma and Vredenburg (1998), data collection was stopped after 20 companies had been studied, and theoretical saturation seemed to have been reached; that is, new information on the phenomena being examined was no longer gained. To examine the environmental strategy, mainly medium or large sized companies were interviewed. The phase of data collection occurred in 2001 and interviews totalled approximately 60 hours. The executive interviews in each company included the CEO or a member of top management and line/operations manager. Data Analysis During all interviews and site visits, notes were taken and these are analysed, together with the observations made whilst waiting for interviews, on the website, environmental reports, news clippings and other reports in the mass media. Documentary evidence completed the data set. The data comprised industry structure reports, companies environmental reports, educational and promotional materials and copies of operational procedures. Closer examination was prepared after each interview to highlight issues concerning industry structure, environmental conduct and performance. The analytic process was based on immersion in the data and repeated sorting, coding and comparisons that characterize the grounded theory approach. Analysis began with open coding. Strauss and Corbin (1998, p. 101) described this coding as that in which concepts are identied and their properties and dimensions are discovered in data. After open coding, axial coding puts data back together in new ways by making connections between concepts and the category. From this process, the conditional matrix, which species the relationship between environmental pressure and conduct, addresses the companys strategy choices.

Results
Environmental Pressures on the Industry Structure In 2000, a disastrous oil leak occurred at Petrobras renery near Curitiba in the southern state of Parana. It came only six months after an oil spill of more than one million litres, which polluted Rio de Janeiros picture-postcard Guanabara Bay (BBC News, 2001). All petrochemical companies visited reported these accidents. Interviewees argued that environmental pressure from stakeholders increased greatly. Brazilian society was very worried about the chemical risk posed by industry. On the other hand, textile and beverage companies treated them with indifference. The environmental risks of petrochemical rms are huge and associated with all environmental performance indicators (as seen in Table 1). The petrochemical companies establish and maintain procedures to identify environmental aspects of their activities, products and services, and also develop strong operational control and technological investments. Interestingly, all of them were concerned about wastewater treatment and solid waste management. Textile companies were concerned mainly with wastewater quality, energy consumption and noise. Beverage companies were worried only about water depletion, wastewater quality and noise. Nonetheless, these concerns are more related to economic issues and community disturbance than environmental aspects. These companies merely comply with local environmental regulations without taking extraordinary precautions to prevent environmental damage.
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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Environmental pressures

Indicators

Answers

Companies Petrochemical N=7 Textile N=8 7 1 5 7 1 2 2 2 0 0 3 5 7 3 3 4 1 1 1 0 0 4 4 Beverage N=5 3 1 3 2 0 4 2 0 0 1 2 2 4 2 0 0 0 0 0 0 0 0 5

Environmental risks

Environmental impacts

Waste water quality Solid waste generation Noise Energy consumption Air emissions Water depletion Nature resource depletion Climate change Ozone layer depletion Fines Warning No nes Regulatory agencies Community Domestic customer International customer Financial agents Employees Nongovernmental organization (NGO) Green label ISO 14001 Own EMS No environmental demands

6 4 4 2 3 2 2 2 2 5 0 2 5 5 5 4 2 2 1 0 2 1 4

Environmental legal systems Stakeholders demands

Number of environmental penalties Demanding stakeholders

Customers environmental demands

Table 1. Environmental pressures on the industry structure

The research revealed that the environmental regulation agencies installed in Bahia and Rio Grande do Sul states are very well equipped, and the monitoring is strict, through monthly mandatory reports and plant visits. Brasil Energia Journal (2001) reported that Rio Grande do Sul state is exemplary in terms of enforcement. Petrochemical companies have a complete knowledge of environmental law, but, despite this, ve companies have been ned because of environmental accidents. On the other hand, the environmental regulation agencies installed in Cear and Pernambuco states are not well equipped. These states are located in North Eastern Brazil which is one of the most underdeveloped regions of the country. These agencies do not have enough resources to monitor companies thoroughly. Consequently, ve textile and two beverage rms have never been ned. All companies appear to attach substantial importance to complying with regulations. Petrochemical companies attach more importance to maintaining a good relationship with people living in the surrounding areas and with clients. On the other hand, textile companies attach substantial importance to international customers. The pressure increments appear to be associated with the largest set of stakeholders perceived as important to inuence their environmental strategic decisions. Petrochemical customers demand ISO 14001 and specify environmental patterns to produce and distribute, and some of them also audit the petrochemical plants. In contrast, customers of beverage companies do not have any environmental demands.
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Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

Environmental Strategies Amongst Brazilian Industries


Environmental Conduct Adopted and Performance Achieved

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There are signicant differences in environmental conduct in the three industrial sectors. To measure the managerial characteristics of the companies, respondents were asked about the following topics: the environmental policy component that is currently installed at their companies, the importance of environmental issues in corporate strategy, knowledge of environmental law, resource allocation to environmental projects and the pollution prevention technologies implemented (as seen in Table 2). All petrochemical companies and only three textile rms had dened the organizations environmental policy. The policy forms the basis upon which the organization sets its objectives, targets and programmes. Achieving sustainable development, enhancing a positive image and reducing waste are the key environmental concerns for petrochemical companies. The textile companies are concerned with complying with regulations and realizing new market opportunities. On the other hand, most beverage and textile companies had not implemented any environmental policy. Managers were asked about their knowledge of environmental laws. Six petrochemical and only one textile rm had a complete knowledge. Most textile and beverage companies do not have a thorough understanding of Brazilian environmental laws. There are signicant differences in environmental investments by the companies. The percentage of environmental investments out of total company investments was signicantly higher in petrochemical companies than in the other rms. Overall, petrochemical rms, three textile and one beverage company had appointed a manager responsible for environmental management. The petrochemical rms had to prove reasonable care in their operations to offset criticism from a relatively well organized social movement favoured by the media. The employees are also committed to protect the environment because of the training programme. The petrochemical rms mainly develop technology to optimize the process; the textile ones use technology to reduce consumption of energy and materials. On the other hand, beverage companies do not invest in technology to reduce environmental risks. ISO 14001 had been implemented in ve petrochemical rms and one textile rm. Only one beverage company had implemented its own environmental management system, following its international holding company. In order to implement their environmental management systems, companies must identify environmental aspects and impacts, run environmental audits and establish procedures to monitor and measure environmental performance indicators, as shown in Table 3. The petrochemical rms are highly polluting and have more aggressive safeguards to prevent or reduce environmental damage, establishing restricted operational controls. Only a few petrochemical rms had published their environmental reports. Five petrochemical companies and only one textile rm had procedures and channels to receive and treat the stakeholder demands. The rest did not register stakeholders demands or complaints. Indicators used by the petrochemical, textile and beverage companies to assess their environmental performance were identied and also conrmed the environmental conduct adopted (as seen in Table 4). The research intended to obtain quantitative dates about environmental performance in order to compare companies. Most petrochemical companies gave their internal or published environmental reports. Otherwise, one textile company and two petrochemical rms presented the environmental performance monitoring programme but did not permit carrying it out. The other rms (textile and beverage) have even had this environmental performance followed up. It is not important for these companies to measure environmental performance; they have other priorities, and the regulatory agency has never demanded this information from them. All petrochemical companies and two textile rms dened their indicators in accordance with the legal requirements. However, the monitoring and measurement system is fully implemented in ve petrochemical rms and one textile rm. These companies administer a quantitative environmental performance assessment and have teams responsible for developing a work plan to treat environmental issues by corrective and preventive action.

Environmental Strategy Matrix Two types of causal relationship emerged from the data, which ultimately led to certain typologies related to environmental strategy. These were (a) environmental pressures that affect the structure of the industry and (b) environmental conduct. Environmental risks, demands from stakeholders, and all-pervasive environmental regulations
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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Environmental conduct

Indicators

Answers

Companies Petrochemical N=7 Textile N=8 3 5 3 1 4 1 2 5 6 2 5 2 1 5 3 3 5 3 1 4 1 1 5 2 Beverage N=5 1 4 1 4 1 4 4 1 3 1 1 5 1 4 1 1 3 1 4

Management and administration

Environmental policy Importance of environmental issues

Knowledge of environmental law Financial resource allocation per year

Percentages of environmental investments

Reasons for environmental investments Human resource allocation

Environmental training and development programme

Research and development

Pollution prevention technologies

Yes No Sustainable development commitment Image improvement Pursuing new markets Improve waste management Complying with regulations Yes Partial No <US$50 000 US$50 000250 000 US$250 000500 000 US$500 0001 000 000 >US$ 1 000 000 01% 12% 25% 510% >10% To attempt the environmental law Environmental objectives and targets Environmental manager No specic environmental manager representative Yes In process of implementation process No Clean technologies Green label Process optimize Reduce the consumption of energy and/or materials No investments

7 4 2 1 6 1 5 3 2 1 3 2 1 1 1 6 7 5 2 2 4 1

Table 2. Environmental conduct of the companies within management and administration, and research and development, business systems

and the consequent potential for liabilities are environmental pressures on the industry structure that can affect businesses and their choice of strategy. Petrochemical companies are subjected to strong pressure when the environmental risk is high, the environmental legal system is structured and the environmental enforcement is effective, and also the stakeholders have many requirements. On the other hand, companies such as textile and beverage are affected by weak environmental pressures whenever their environmental impact is low, the environmental legal system and the enforcement are fragile, and, additionally, the stakeholders demands are only potential.
Copyright 2008 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

Environmental Strategies Amongst Brazilian Industries

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Environmental conduct

Indicators

Answers

Companies Petrochemical N=7 Textile N=8 1 2 5 1 2 5 4 4 8 3 7 2 5 1 7 3 5 1 2 5 8 1 2 Beverage N=5 1 4 1 4 4 3 4 1 1 4 1 1 4 1 4 1 4 5 2

Operation and production

Environmental management system

Environmental aspects

Operational control

Purchasing and contract requirements Environmental audit Measuring and monitoring system Marketing Environmental reports

Communications channels

ISO 14001 Implemented Responsible Care Programme In process of implementation (ISO 14001) Own EMS Not implemented Identied In process of identication Not identied Wastewater treatment Solid waste management Water conservation Air pollution controls of stationary sources Air pollution controls of mobile sources Air pollution controls of fugitive sources Electric energy conservation Steam, oil, natural gas, GLP conservation Noise control Dened In process of denition Not dened Done Not done Done In process of implementation Not done Published environmental reports Not published environmental reports Not done Procedure to receive stakeholder demands Procedure to receive stakeholder demands in process of implementation No communication channels

5 2 5 2 7 7 6 5 2 5 5 4 4 2 1 5 2 5 2 2 5 5 2

Table 3. Environmental conduct of the companies within operation and production, and marketing, business systems

According to the axial coding process, environmental conduct is laid out in two categories: developed and not developed. Five petrochemical companies and one textile were clearly categorized as having a developed environmental conduct. The environmental management system (EMS) is in place and their top management has a key role to play in building awareness and motivating employees by explaining the organizations environmental values and communicating its commitment to sustainable development. They identied all signicant environmental aspects and also take into account the degree of practical operational controls and environmental requirements to suppliers and contractors. These companies have set up a procedure to continually review legal requirements. Roles, responsibility and authorities are well dened and documented. Environmental audits were conducted on a periodic basis. Firms
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Indicators

Answers

Companies Petrochemical N=7 Textile N=8 2 1 5 1 2 5 4 1 Beverage N=5 1 4 5 1 3

Process to identify the environmental performance indicator

Continuous improvement process

Reasons for nonestablishment of environmental performance indicators

Following the legal requirements Benchmarking Do not have environmental performance indicator Monthly monitoring and denition of corrective and preventive plan action Establish environmental objective and targets Corrective action plan to solve the no conformances Do not have a continuous improvement process Not important Other priorities Never asked by regulators agency

7 2 3 2

Table 4. Environmental performance evaluation

seek to reduce environmental impacts of operations beyond regulatory requirements and invest resources in human and technology development. On the other hand, ve textile and four beverage companies were positively categorized as not having developed environmental conduct. Their top management has not dened the organizations environmental policy. These companies do not have a specic management representative to handle environmental issues. Therefore, employees and contractors do not have the requisite knowledge and skills to perform the work in an environmentally responsible manner. Communication is limited to dealing with the concerns of the external stakeholders legal complaints. These companies merely established internal operational controls for nature resource consumption and few controls for wastewater and noise. The importance of the environmental issues is limited to fullling legal requirements. Two petrochemical companies, two textile companies and one beverage company can be categorized as not having a developed environmental conduct. These companies are in the process of implementing an environmental management system. Top management has approved the policy, although they do not have it in place yet. The process to establish objectives and targets is at an early stage. Hence the main focus is on reducing waste and the depletion of resources. These companies are reviewing legislative and regulatory requirement; environmental aspects, operational procedures and monitoring systems. Training to integrate environmental awareness into daily business process is just beginning. The appropriate human, physical and nancial resources are not well dened because they do not have procedures to track the benets as well the cost of their environmental or related activities. From the empirical results there emerged an environmental matrix that categorizes companies with four labels: sleeper, reactor, defender and innovator (as shown in Figure 2). For each level of environmental pressure (weak or strong) it is possible to have two different degrees of environmental conduct, not developed to developed. Once the position of each rm is determined, it is easier for management to lay out strategic plans for countering competition. There are two main categories: defender and sleeper. Most petrochemical companies are defenders, which represents a mature response to the pressures they face. This is the most sustainable and strategically advantageous position for a business subjected to strong pressure. Environmental demands are imposed mainly by regulatory agencies, customers and community. These companies are large with multinational characteristics and equally
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Environmental conduct

Developed

INNOVATOR

DEFENDER

(1 textile company)

(5 petrochemical companies)

Not developed

SLEEPER

REACTOR

(7 textile and 5 beverage companies)

(2 petrochemical companies)

Weak

Strong

Environmental pressure

Figure 2. Environmental strategy matrix

exposed to international competition. They represent one of the most important industrial activities for the local economy; however, they need a social licence to operate. These companies incorporate this matter into their strategic planning and top managers adopt environmental decisions. Ample environmental information is generated and many corrective and preventive measures are adopted. Their strategies include an environmental management system, such as ISO 14001 or EMAS, and ecoefcient and pollution prevention practices that require investment in changes in processes, products and operations to reduce energy and material use at source. On the other hand, seven textile and all beverage companies are sleepers, signifying that environmental issues do not inuence the rms strategy. The situation typically occurs when environmental issues mean cost without any competitive advantages. These companies operate domestically and their resource commitment and management involvement in this matter is minimal, with a limited range of organizational compatibilities. However, these companies have located their production facilities in industrial states and represent an important source of employment for nearby towns. Social pressure is lower and there are fewer motives to develop environmental strategies. Just one textile company is an innovator. This company is concerned about Asias inuence on the market, and it is looking to establish its strategy by differentiation and by increasing its participation in the international market. This rm is a market leader and innovator, enjoying rst-mover advantages, and invests in environmental technologies and green labels. Efforts were made to maintain and augment its core strength. In short, the importance of the environmental issues in relation to stakeholders is to capture premium prots from environmental process improvements and increase competitive advantage. Petrochemical companies subjected to high pressure that maintain a nondeveloped environmental conduct are reactors. Businesses in this risk category should attempt to improve their environmental conduct. This area has no signicant competitive advantage in terms of either market or environmental attractiveness. The market share is in danger of being captured by competitors who adopt a strong environmental conduct. They merely aim to meet legal requirements, involve end-of-pipe investments in already developed technologies and do not require the rm to develop expertise or skills in managing new environmental technologies or process. Reactor organizations should consider a more comprehensive response to stakeholder demands by changing their conduct. The current position of these rms may be untenable. Environmental accidents, for example,
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Bus. Strat. Env. 18, 542556 (2009) DOI: 10.1002/bse

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strengthen stakeholders concerns and the business environment could change too quickly for them to attempt to answer it. The approach complements strategy management theory, as it suggests that both environmental pressures and organizational characteristics inuence rms to adopt environmental management practices. The movement across the matrix may be constrained by factors that are outside management control. This will limit the strategy alternatives that the business may choose. For example, when attempting to move horizontally, factors such as overall market size, annual market growth and barriers to entry and exit can be inuenced. Whilst moving vertically, rms can manipulate factors such as environmental awareness and motivation, resource allocation, environmental technologies, energy usage, operational efciency, safety precautions and emission levels. The empirical work carried out allows us to understand how Brazilian manufacturing industry is dealing with environmental issues. In addition, the environmental matrix can be used by companies to evaluate their environmental positions and compare them with those of their closest competitors. Companies should understand stakeholders demands and pay special attention to market contexts and their internal organizational capabilities before making individual decisions about environmental approach.

Conclusion
This paper provides a model to develop and evaluate the environmental components of business strategies. The environmental SCP model is expanded from the structureconductperformance paradigm to add the assumption that the environmental performance of a company is the result of its environmental competitive practices or conduct standards, depending on the industrial structure into which it is inserted. From the empirical results emerges a framework to develop and evaluate the environmental components of business strategies, which relates the environmental conduct to the forces exerted on the industrial structure. Most petrochemical companies are multinational and operate under the pressure of the international market and shareholders in order to present a good environmental image and, hence, performance. Environmental management is part of their core business. On the other hand, textile companies dene their strategy by low cost to compete against Asias products. Similarly, beverage companies just attempt to comply with the stakeholders demands, which mean products with quality and low price. These companies argued that they cannot afford to invest a large amount of money for a number of years to improve environmental performance of their products and process. Also, they faced limited interest from customers in green products or environmental management. Assessing the environmental strategy, innovator and reactor companies have been identied. The textile company is an innovator, as it voluntarily adopts stringent environmental standards and controls in anticipation of its rivals. In 1997, this company became ISO 14001 certied to provide credibility and trust among the many stakeholders who interact with the rm. On the other hand, reactor petrochemicals rms have no longer recognized the need to address the pressure with their existing environmental conduct. In addition, the studies demonstrate that industrial sectors, such as petrochemicals, that present more environmental risk and that generate larger amounts of residues are usually subject to greater control and higher pressure. The location of production facilities seems to be an important factor insofar as it relates to two other variables: environmental regulations and social pressure. Textile and beverage companies, for instance, are located in Brazilian states (Cear and Pernambuco), where society and the government have more economic than environmental concerns. As pointed out by Jenkins (2001), there is no doubt that the environmental issue has moved up the policy agenda in Brazil. It is also clear that environmental regulation has been one of the key factors driving rms to improve their performance. However, besides the enforcement on rms to deal with environmental problems, the pressure increments appear to be associated with the largest set of stakeholders perceived as important to inuence their environmental strategic decisions. Market characteristics and industry structure in emerging economies like Brazils could change in the future if a number of trends observed in developed countries also materialized here. For example, international agreements
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and foreign stockholder and client demands could become more inuential in targeting stronger environmental behaviour. This study is not without limitations. First, it relies on self-reported measures provided by company managers, but it also attempts to conrm their environmental conduct, asking for evidence, analysing documents and observing the environmental performance by site visit. Other limitations, it should be noted, include the investigation of only three different Brazilian industry sectors. In spite of these limitations, the paper sheds light on the multifaceted aspects of environmental strategy in Brazil, which has an extraordinary social, cultural and ecological diversity. The survey implications to get business even better engaged in sustainability practices require ongoing efforts in conjunction with government and society. Government should strengthen the enforcement of regulations but also provide adequate infrastructure, training and incentives that support the joint environmental goals. Stakeholder engagement and partnerships with civil society are still limited. Collaborative efforts including increasing public awareness and facilitating activities that enable information and knowledge sharing can encourage advances in the sustainability agenda. As long as these actions become real, companies will lead the process of change.

Acknowledgements
I owe Dr. J. Ignacio Canales-Manns (University of St. Andrews School of Management) and the two anonymous reviewers who strongly contributed with their time and ideas to this study. I would like to thank the CNPq (National Counsel of Technological and Scientic Development) for funding part of this research.

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