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Essential Matter: Corporate Environmentalism: From Rhetoric to Results

1 Sep 1997

  • Authors: Margaret Flaherty, Ann Rappaport


Globalization is here to stay and, as a result, the speed with which ideas, products and services travel around the world is changing the way companies do business. How will the environment fare under globalization, and how will firms use environmental management strategies to maintain or improve their competitiveness?

Various trends and processes associated with globalization are generating conditions and pressures conducive to corporate environmental responsibility. As trade continues to liberalize, flows of goods, services and capital render traditional geopolitical borders increasingly irrelevant and traditional approaches to managing the environment obsolete. Corporate environmentalism has taken on new meaning both in operational and philosophical terms. The factors promoting it are more diverse, the scope broader, the rigor greater. Doing a good job on the environment and crafting strategies to address sustainable development no longer represent unproductive costs but, increasingly, opportunities whose benefits may be vital and necessary for the survival of companies.

Six trends seem particularly important in terms of promoting or facilitating corporate environmental management and business responsibility for sustainable development. First, as companies seek greater uniformity in process, production and product standards, geographic location is becoming less important. On the other hand, socio-economic and environmental distinctions are becoming more important in shaping corporate image and consumer decisions. Second, the movement from product-based manufacturing into service-based commerce in some sectors has significant implications for environment and development in both developed and developing countries. Third, as investment in developing country research and development increases, and as corporate authority within transnational firms is increasingly decentralized, southern-based firms and institutions are playing a more important role in the development and production of goods and services. Fourth, international attention to corporate activities is increasing as multilateral organizations establish global rules and standards concerning evironmental management, and as communications technology and civil society networks facilitate surveillance. Fifth, globalization means that the range of any particular company's stakeholders is broad. Many companies are recognizing that their ability to operate effectively depends on their accountability and standing among stakeholders. At the same time, they also recognize that doing a good job on the environment cannot be separated from social and community responsibility issues. Finally, legal systems and frameworks, at both national and international levels, continue to expand and, as business and government recognize the limits of command and control approaches to environmental protection, more collaborative approaches to resolving environmental problems are emerging.

Considerable progress has been made by firms over the past few years in coming to grips with their environmental responsibilities. Companies are being pushed to consider environmental concerns in the full range of their decisions, and they are challenging themselves constantly to respond to new market opportunities and reconceptualize their core businesses. It is also apparent that as leading companies strive to make sustainable development operational, the issues of environment, economics and social responsibility are increasingly indistinguishable.

While companies are undergoing transformations, governments are simultaneously seeking ways to increase the effectiveness of their policies. Approaches that reflect corporate self-interest may result in significant improvements to the environment at relatively modest societal costs. As part of this approach, however, policy makers will have to develop a more complete understanding than they now have of the forces driving corporate environmental responsibility.

Company response to environment issues is a topic that has received insufficient attention from policy makers, academicians and non-governmental organizations. Understanding the forces driving corporate responsibility in the environmental field creates the possibility of crafting policies that are more effective and less contentious than those currently in place. While it would be naive and inaccurate to suggest that all companies are taking seriously their responsibility toward the environment, there are an increasing number of ways through which company practice is revealed to the public and subjected to scrutiny. This increasing transparency represents an enormous opportunity for developing countries to shape company decisions in directions that favour sustainable development.

Margaret Flaherty manages the World Business Council for Sustainable Development (WBCSD) programme on trade law & policy, education & training, corporate social responsibility and sustainability in the market.

Ann Rappaport is Assistant Professor in the department of Urban and Environmental Policy at Tufts University, Boston, USA.