Corporate environmental management strategy: beyond "the pofit-making machine" metaphor

The general view is that it is increasingly desirable for companies to adopt a more environmentally responsible strategy. The benefits of doing so are summarized by Curcio and Wolf (1996), as captured in the following diagram:

In examining corporate environmental management strategy, we inevitably study 5 main areas:
1. Environmental impact drivers, e.g. population growth, increase in fuel consumption, etc.
2.Environmental impacts, e.g. global warming, reduction in biodiversity, etc
3. Business responses, e.g. adoption of ISO 14000, product stewardship, ethical investment, etc.
4. The ethical thinking underlying the business responses
5. The strategic thinking underlying the business responses.

These 5 areas are inter-related and are topics of much debates in the literature on corporate environmental management. It is clear that there are alternative strategic postures that a company can adopt in corporate environmental management, e.g. the (a) legitimacy), (b) competitive advantage, and (c) enlightened management postures discussed in Dillard, Brown and Marshall (2005). Similarly, Curcio and Wolf (1996) discuss 3 main corporate environmental strategies: (a) environmentally proactive strategy, (b) environmentally ambiguous strategy, and (c) environmentally irresponsible strategy.

From my reading of the literature, I think it is very important to study M. Friedman's arguments about what businesses' ethical stance should be because how companies  respond to the environmental impacts depend on how companies perceive Frideman's view on business. First of all, let me summarize Friedman's main ideas: (i) managers should as as agents of shareholders (not as stakeholder managers); (ii) managers have to run their business as a profit-making machine, otherwise, their businesses spare efforts not related to strengthening their businesses' competitive advantage. As a result, their businesses may not be able to compete well or even to survive in the face of intense competition in the marketplace.

Friedman's arguments have generated much debates in the academic/ business world. Adoption of Friedman's view of business greatly influences a company's response to contemporary environmental impacts. To be specific, if we adopt Friedman's view, then a company's environemental response needs to be justified in terms of profit-maximization as well as creation of sustainable competitive advantages. It is totally acceptable for a company to launch more environmental protection initiatives if this helps it to achieve profit and competitive goals. For example, by adopting more pro-environmental protection practices, a company can improve its corporate branding, reduce business risk and offer more valuable products to consumers (e.g. for consumers who favour more environmentally friendly products). In this case, there is no need to move beyond the profit-making machine metaphor in guiding a company's environmental protection effort. Due to issues as related to tragedy of the commons, public goods and the messiness of environmental management at the society and globe levels (e.g. arising from the multi-party nature of the problem), Friedman's view of business and the market mechanism have much more theoretical limitations in addressing environmental management beyond the corporate management level.

I do see that, a stakeholder perspective (especially a 'strong' stakeholder perspective) offers a fundamenally different set of guidelines on business responses to environmental impacts. Such a perspective is highly relevant to our contemporary social ethos. Such social ethos has been fostered in the globalized social media ecosystem. This is the main reason why Friedman's view of business is becoming less relevant to guide business practices. Thus, there is a greater need to adopt a stakeholder view of business, and I will think that the notion of social system from Ackoff is becoming more relevant for guiding business thinking and practice. Such thinking has its favoured languages, e.g. social business, social marketing, and social media.



Further readings:

1. Ackoff, R.L. (1981) Creating the corporate future, Wiley.
2. Curcio, R.J. and Wolf, F.M. (1996) "Corporate Environmental Strategy: impact upon firm value", Journal of Financial and Strategic Decisions Vol. 9(2), Summer, pp. 21-31.
3. Dillard, J., Brown, D. and Marshall, R.S. (2005) "An environmentally enlightened accounting", Accounting Forum 29, pp. 77-101.
4. Staib, R. (editor) (2009) Business Management and Environmental Stewardship, Plagrave, Mcmillan.