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The Mechanisms Behind Environmental Strategies in Chemical Manufacturing
Firms
Keshminder Singh1, VGR Chandran*2, Santha Chenayah@Ramu3
1 Faculty of Business and Management
University Teknologi MARA
Puncak Alam Campus 42300
Selangor Darul Ehsan
Malaysia
Email: keshm967@salam.uitm.edu.my
And
Department of Economics
Faculty of Economics and Administration
University of Malaya
Malaysia
* Corresponding Author
2Department of Development Studies
Faculty of Economics and Administration
University of Malaya
50603 Kuala Lumpur
Malaysia
Email: vgrchan@gmail.com
3Department of Economics
Faculty of Economics and Administration
University of Malaya
50603 Kuala Lumpur
Malaysia
Email: santha@um.edu.my
Abstract
The evaluation of an effective environmental strategy goes beyond understanding its
antecedence and benefits. Identifying and understanding the various mechanisms
behind the formulation, design and implementation of environmental strategies is
important – yet past studies have not adequately addressed the issue. This paper
explores corporate environmentalism, and extends the framework by identifying the
internal mechanisms behind the environmental strategies in large Malaysian chemical
manufacturing firms. Given the exploratory nature of the study, a case study method
using semi-structured interviews was used to ascertain these mechanisms.
Interestingly, the results revealed seven important mechanisms of the environmental
strategies in large chemical firms. These are a central system, internal system,
quantifiable measurement, specific environmental management unit, strategy
alignment, collaboration, and collective involvement. The mechanisms are clustered
2
as systems and commitments based on the role that these mechanisms play in the
environmental strategy of the firms. Additionally, powerful and influential top
management commitments were found to contribute to the initiation of these
mechanisms.
Keywords: central system, chemical industry, environmental orientation,
mechanisms of environmental strategy, policy design.
Introduction
Environmental issues are rapidly increasing in number and complexity, challenging
firms to formulate superior environmental strategies in order to sustain competitive
advantages (Journeault, De Ronge, and Henri 2016; Chen, Ong, and Hsu 2016).
Environmental strategy is referred to as ‘a strategy that manages the interface between
its business and the natural environment’ (Aragón-Correa and Sharma 2003, 71).
Environmental strategies fall into a continuum between two different approaches,
which are environmental reactivity and environmental proactivity. Environmental
reactivity refers to firms implementing initiatives just to meet environmental
regulatory requirements. Meanwhile, environmental proactivity refers to firms
carrying out extensive voluntary events in order to protect the natural environment
(González-Benito and González-Benito 2006). For firms – especially those in
developing countries – this process becomes even more difficult, given that they need
to invigorate existing capabilities while integrating new activities to handle unfamiliar
and demanding actions.
Nevertheless, in the past literatures focused mainly on the drivers of environmental
strategies and their influence on firm performance – neglecting the issue of how those
strategies are formulated. It is equally important to explore the mechanisms behind
environmental strategies (MBES) formulation, in order for managers to improve their
understanding of the mechanisms and calibrate a formal structure in formulating
environmental strategies. This paper aims to contribute to filling in the research gaps
by exploring MBES, using Malaysian chemical firms as case study. This paper
mainly focuses on determining the internal mechanisms that influence the
formulation, design and implementation of environmental strategies. It aims to
provide a more holistic understanding of the environmental strategies for the firm’s
sustainability agenda (Lucas 2009). With better knowledge among top management
and managers, the challenges of implementing environmental strategies can be
minimized (Epstein and Roy 2007). This poses two important research questions:
What are the internal mechanisms that impact a firm’s formulation, design and
implementation of environmental strategies? And how do these mechanisms
holistically congregate to achieve a firm’s sustainability agenda? We define MBES as
the forces involved in the formulation, design and implementation of environmental
strategies1. A proper MBES is essential so that once these strategies are implemented,
the important essence of these strategies are not lost (Christmann 2000; Epstein and
Roy 2007; Maxwell et al. 1997). A firm’s performance, moreover, depends on a
carefully charted strategy (Edgeman and Eskildsen 2014).
1 In this paper, the concept of MBES was coined by reviewing the meager amounts of studies in this area (Epstein & Roy, 2007;
Mårtensson & Westerberg, 2014).
3
Literature Review and Theoretical Consideration on Corporate
Environmentalism
In the past, literatures gave considerable attention to environmental strategies, namely
environmental reactivity and proactivity that form the critical aspects of
environmental strategies. In this regard, the most frequently researched aspects of
environmental strategies are the antecedences and the benefits. Studies on the
antecedences highlighted environmental regulation and competitive forces (Aragón-
Correa 1998; Banerjee et al. 2003; Bansal and Roth 2000; Christmann 2000; Hart
1995; Paulraj 2009; Sharma and Vredenburg, 1998), top management commitment
(Banerjee et al. 2003; Del Brío et al. 2001), stakeholder pressure (Abreu 2009; Betts,
Wiengarten, and Tadisina 2015; Henriques & Sadorsky 1999; Liu, Tang, Lo, and
Zhan 2016), and firm characteristics (Fernández, Junquera, and Ordiz 2006; Sangle
2010; Arora and Cason 1996; Levy 1995) such as managerial attitude, motivation,
firm size and location as the important drivers of environmental strategies. Extending
further on the knowledge, Banerjee (2001) incorporated industry differences to give a
clustered understanding of environmental drivers and strategies. On the other hand,
studies on the benefits of environmental strategies for firms primarily emphasized the
benefits gained by firms, specifically market performance in terms of improved sales
and advancement in competitive advantage (Dangelico and Pontrandolfo 2013; Porter
and Van Der Linde 1995; Shrivastava 1995), financial performance (Ezzi and Jarboui
2016; Iwata and Okada 2011; Russo and Fouts 1997; Teng, Wu, and Chou 2014), and
environmental performance (Levy 1995; Epstein and Roy 2007; Tilley 1999).
More importantly, an element which has been ignored in past studies – but which is of
importance – is the mechanisms behind the environmental strategies (MBES). We
found through our interviews that these mechanisms are important in order to
translate environmental concerns and issues into environmental strategies. We
discovered that it mainly involves seven important mechanisms. To date, Mårtensson
and Westerberg (2014) and Epstein and Roy (2007) have explored some of the
requirements of effective environmental strategies. Mårtensson and Westerberg
(2014) explored five vital requirements to design an effective environmental strategy.
This includes building employee skills and experience, strengthening the relationships
between internal and external stakeholders, enhancing communication channels,
promoting cooperation and control, and finally, restructuring the firm’s material flow.
On the other hand, Epstein and Roy (2007) investigated the coordination and control
within multinational companies on the facet of environmental strategies. Their
findings indicate that in order to ensure consistency, greater control is exerted by the
headquarters (as opposed to business units) over issues pertaining to setting
environmental standards, initiatives and strategies evaluation. Both studies
successfully brought forward the aspects of MBES, but what was ignored were the
systems and processes involved in using these aspects to craft these strategies. In
particular: the flow of communications within the organization; the process involved
in transforming an environmental objective into initiatives; and the system used to
monitor the implementation and progress of these strategies. These building blocks of
MBES therefore need to be strengthened so that firms can effectively respond to
rapidly growing environmental issues. Additionally, Edgeman and Eskildsen (2014)
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in their study pointed out that sustainable enterprise excellence depends on integrated
organizational design and function. Nevertheless, despite some evidences from past
studies, the mechanisms of environmental strategies were not well explored. There is
also limited evidence on how firms in developing countries established these
mechanisms to sustain their competitive advantage, given their limited capabilities
and resources.
Figure 1. Environmental strategies research area categories
As mentioned, MBES is a concept that is less explored. Given this, our starting point
in exploring the MBES is to use the concept of corporate environmentalism by
Banerjee and advancing the concept further (Banerjee 2001; Banerjee 2002; Banerjee,
Iyer, and Kashyap 2003). Corporate environmentalism refers to the amalgamation of
environmental issues in the decision-making of a firm’s business. According to
Banerjee, corporate environmentalism encapsulates environmental orientation (EO)
and environmental strategy as depicted in Figure 2. Environmental orientation (EO) is
the identification of environmental threats that firms pose towards the environment
due to their business operations, and the solutions to these problems. EO is a
convergence of two sub-clusters. First, internal EO focuses on the firm’s internal
culture, which is their values and ethics involved in shaping their commitment
towards the environment. Second, external EO emphasizes on the managers’ take on
external stakeholders and the responses to their interest. The firm’s EO is translated
into the firm’s mission and vision statement, transpiring into the working philosophy
of the entire organization (Chamorro and Bañegil 2006) which coordinates the
relevant capabilities for strategy formulation. Additionally, their internal economy in
Environmental
Strategy
Strategy
Performance
MBES
- Formulation
- Design
- Implementation
Drivers of Corporate
Environmentalism
Category 1
Category 3
Category 2
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terms of the organizational system, formalization and centralization also triggers the
adoption of these strategies (Fraj-andrés et al. 2009). Therefore, there is a complex
integration between the changing philosophy, capabilities and systems behind an
environmental strategy. Since the inception of the environmental management
systems (EMS), firms have been adopting them as they provide the structure and base
required for the implementation of environmental actions (González-Benito and
González-Benito 2006). EMS helps to integrate the complex systems involved in
strategy formulation, however the working mechanisms that bring the entire system
together need to be thoroughly investigated. Therefore, in order to move from
environmental concern to active environmental action, these matters need to be
decoded into effective environmental strategies. That is the gap that this paper tries to
close, especially the decoding process that involves the formulation, design and
implementation processes.
Figure 2. Corporate environmentalism
The decoding process is less explored in detail in the corporate environmentalism
framework, mainly in terms of formulation, design and implementation. As such, this
paper expands further the framework and includes MBES as part of it. Figure 3
illustrates the additional feature of MBES to Banerjee’s concept, which this study
explores further. Prior studies have indicated that there are certain mechanisms behind
the transformation of EO into environmental strategies, which can be considered as
MBES (i.e. However, MBES is still in its infancy stage). Once the EO is established
within an organization, MBES needs to be put into place to operationalize and form a
structure that allows the incorporation of environmental strategies into a strategic
business plan. In other words, activities such as formulation, design and
implementation should take place before the incorporation of environmental issues
into a strategic business plan. The incorporation of environmental issues into a firm’s
strategic planning results in activities (Banerjee 2001) that reduce environmental
harm. Understanding the mechanisms that execute and manage the incorporation of
environmental strategy into strategic planning is essential, since it will allow for better
strategy actions.
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Figure 3. Integration of MBES into corporate environmentalism
As mentioned, once MBES is established, the formulated and designed strategies will
be incorporated into the organization’s strategic business plan at four different stages,
namely the enterprise, corporate, business and functional levels (Banerjee, Iyer, and
Kashyap 2003; Schendel and Hofer 1979) (see Table 1).
Table 1. Four different levels of strategies (Banerjee, Lyer, and Kashyap 2003;
Schendel and Hofer 1979)
Level
Strategy
Details
1
Enterprise
Deals with a firm’s fundamental mission and its contribution
towards society.
2
Corporate
Looks into the types of business that a firm should envelope to
materialize the strategy targets of its enterprise.
3
Business
Working on a firm’s competitive advantage through efficient
resource allocation, product differentiation and/or focusing on
niche market.
4
Functional
Engage in establishing operating procedures for different
business/organizational functions such as advertising, sales,
research and development and others.
Furthermore, this concept of proposed incorporation of MBES into the corporate
environmentalism is in line with the resource-based view (RBV) of the firm (Barney
1991; Wernerfelt 1984; Penrose 1959). In this regard, MBES itself can be considered
as one of the dynamic capabilities of the firms – whereby the accomplishment of
enterprises is through the convergence of heterogeneous resources endowed to them,
as well as through their unique capabilities which can serve as the foundation for the
mechanisms behind the environmental strategies. Additionally, the concept of
complementary assets (Teece 1986) serves as an important object in this study.
Complementary assets refers to the capabilities and infrastructure that support an
innovation to be successful. From the environmental strategies viewpoint, the notion
of complementary assets refers to assets that are needed in order to gain competitive
advantages with the implementation of environmental strategies (Christmann 2000).
Therefore, a successful MBES that crafts an award-winning strategy is definitely a
valuable asset to raise the competitive advantage of a firm.
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Research Methodology
A case study approach strategy was deployed, as this form of investigation is suitable
for the exploratory nature of this study (Anderson 2010). Moreover, scholars in the
past – specifically in the area of environmental management – have successfully used
qualitative designs to gauge prominent and valuable information (Tilley 1999;
Strannega 2000). Data collection focused on determining the underlying mechanisms
that are involved in environmental strategies formulation, design and implementation.
The study was executed using a qualitative approach to data collection, through semi-
structured interviews.
A multiple case studies approach was used, as it was suggested to be a better choice
compared to single case study (Yin, Bateman, and Moore 1985). Yin (2003)
postulated that if the findings of the multiple cases follow a replicative pattern, then
the results are considered robust. Additionally, Yin (2003) stated that by adding the
number of cases, the degree of information certainty is increased. Therefore, this
study employed a multiple case study approach, taking into consideration the benefits
of such an approach on the final results. For the purpose of this study, the interview
process was halted after the sixth interview, as by then a replicative pattern was
identified and information certainty was established. Six large-sized chemical
manufacturing firms in Malaysia with environmental commitments were selected
using a purposive sampling technique for the following reasons:
• Large firms were chosen as they have a higher tendency to get involved in
environmental activities, due to sound financial and managerial capabilities
(Przychodzen and Przychodzen 2015; Aragón-Correa 1998; Levy 1995) .
• Chemical manufacturing firms were selected due to their highly polluting
track record – they are commonly referred to as a ‘dirty’ industry (Anastas and
Warner, 1998; Epicoco et al. 2014; Hoffman 1999). The industry also faces
stringent environmental regulations (Klassen and McLaughlin 1996);
therefore, it has a greater tendency to adopt environmental initiatives.
• The firms’ environmental commitment has a selection criteria, so that
adequate resources and information can be obtained during the interview
(Jabbour and Jabbour 2009). Evidence for environmental commitment was
determined through ISO 14001 certification, Responsible Care Management
System (RCMS) initiatives, environmental awards and others. The
information was obtained through the firms’ websites and annual reports.
Personal face-to-face interviews using open-ended questions (Appendix 1) were
carried out with one key personnel from each respective firm, which lasted between
45 minutes to an hour. The key personnel were either a head or senior officer from the
environmental division, as they have substantial knowledge regarding the firm’s
environmental activities (Bansal and Roth 2000). A total of 6 chemical firms were
selected and they are named A1, A2, A3, A4, A5 and A6 in order to protect their
identities. Content analysis technique and robust categorization were used to analyze
the data generated from the interview (Elo and Kyngäs 2008). The robust
categorization was formulated through the execution of a series of open axial and
selective coding procedures. In assessing the qualitative responses, the categorization
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that emerged from the interview data provided further clarity (Strauss and Corbin
2008). In addition, in order to strengthen the analysis and findings, the categorization
was corroborated with the existing literature on environmental strategy.
Findings and Discussion
The consolidation of the information and evidence from the interviews suggested that
in principle, the firms adopt seven important mechanisms. These mechanisms seem to
help the firms to systematically promote and design their environmental strategy and
achieve competitive advantages. The next section discusses in greater detail each of
the mechanisms behind the environmental strategy.
Central System
All the respondents stated that there is a central system at the headquarters that
formulates the primary environmental strategies of the entire organization. This
system consists of a selective group/team from the headquarters, which is purposely
assigned to manage the primary strategy formulation process by taking into
consideration the organization’s environmental vision and mission. Additionally, the
headquarters determined a specific set of guidelines/framework to administer the
entire formulation process strategy. This standard guideline/framework provides a
detailed set of instructions and procedures, which is mandatory for every department,
unit or employee to follow during the course of the environmental strategy
formulation. These guidelines/frameworks encapsulate several important aspects such
as budgeting, resource usage, chain of command, safety standards, performance
standards and others. Finally, the actions of the business units are based on these
primary environmental strategies. This is clearly stated by a few of the respondents:
“Global team formulates the strategies. We have a ‘control framework’,
which are guidelines for us to follow. Everything is specified in the guidelines,
so this makes the process much easier and structured.” (Respondent A2)
“Environment team formulates the strategies. For every environmental issue,
there is a group in charge of it.” (Respondent A1)
Given the fact that the chemical industry is a highly risky and polluting industry, the
headquarters seems to obtain certain control in the formulation of the environmental
strategies. These centralized mechanisms safeguard the firm’s corporate image as
claimed by scholars (Walley and Whitehead 1994), and control the complexity that
these firms have to deal with as they operate at multiple locations (Baligh, Burton,
and Obel 1996).
Internal System
Besides the central system, the interview results revealed that there is an internal
system within the firms. The purpose of the internal system is to localize the primary
environmental strategies in response to local regulatory needs and firm capabilities. In
addition, under the internal system the top management identifies firm level
environmental issues through the feedback from every department. These issues are
later addressed through more firm-specific environmental strategies, which are
9
formulated using similar guidelines/framework set by the headquarters. These
strategies tend to be short term in nature compared to the primary strategies.
Interestingly, in most cases the firm level strategies are executed through
environmental projects, which are collaboratively planned by the top management and
the respective divisions. These projects take into consideration the current
organizational and regulatory needs as well, while staying within the firm’s
environmental vision and mission. In this aspect, proximity is also important given
that some of the environmental issues are location-based. Therefore, the projects are
designed to address the current environmental issues faced by the firms and fulfill the
regulatory requirements.
“We have both long-term and short-term strategies. The managing director
formulates the short-term strategies and looks into the practical side of the
strategies. These strategies take into account the local organizational and
regulatory needs.” (Respondent A4)
“At the local level, the environment department with the consultation of top
management formulates the strategies that are in accordance to the
organization’s vision and mission.” (Respondent A5)
“Based on the ‘Control Framework’ provided by the headquarters, we set our
projects and these projects involve other divisions as well. These projects are
planned to achieve the group’s main objectives.” (Respondent A2)
Formalization was seen within the internal system, where the formulation of firm
level strategies was based upon a set of guidelines/framework provided by the
group/headquarters. It was evident that the final decisions on environmental initiatives
were decided by top management decisions and guidelines by the group/headquarters.
Our findings also validate past evidence that the formalization process is an important
aspect within the internal system. In order for corporate greening to advance,
formalization is necessary (Takahashi and Nakamura 2005). It reduces headquarters’
involvement (Roth, Schweiger, and Morrison 1991) and gives a little autonomy to the
firms to incorporate their ideas into the strategies (Hales 1999), thus allowing firms to
leverage on it to earn their competitive advantage.
Specific Environmental Management Unit
Decision-making regarding environmental strategies involves various divisions and
personnel within the organization (De la Torre-Ruiz et al. 2013). Thus, coordination
is of paramount importance. Indeed, communication is crucial (Mårtensson and
Westerberg 2014) in streamlining the entire system. Addressing solutions to
coordination and communication issues, every informant acknowledged that there is a
requirement for a specific environmental management unit to oversee all
environment-related issues. This unit is responsible for synchronizing feedback
between top management and the departments, and also various divisions. In addition,
they initiate and facilitate as well as monitor the approved environmental projects.
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Lastly, these units were also deemed to be a one-stop resource center for everyone to
obtain environment-related information.
“Global Environment (GE) team takes charge of all environmental issues.
There are many units under GE and each unit is designated to manage a
specific environmental issue.” (Respondent A1)
“HSED monitors all the green strategies and projects. They will coordinate
the top management and the departments.” (Respondent A4)
“HSED initiates and facilitates environmental projects. HSED is basically the
one stop center to get all the information.” (Respondent A3)
From the responses, it was evident that this unit is multifunctional. We believe that a
proper organizational structure and environmental resources within this unit may
speed up the implementation process of the strategies. The setting of a specific
environmental management unit therefore reflects the high level of importance that
top management gives towards environmental issues (Del Brío et al. 2001).
Quantifiable Measurement
The interviews, on the other hand, also disclosed that the majority of the firms use
quantifiable measurements to gauge the success of the environmental strategies.
This quantifiable measure itself seems to be a detailed and planned document to
ensure consistency. For example, electricity cost reduction, energy intensity index,
carbon reporting and percentage of waste reduction are deemed to be some of the
main targets in their environmental key performance indicators that are frequently
assessed. However, some respondents acknowledged that the least they can do is to
meet environmental requirements set by the Department of Environment, Malaysia
(DOE), as a measure of their strategy’s success. Firms seemed to raise the bar higher
once their current targets had been achieved in order to further reduce their carbon
footprints. In other words, continuing improvement was undertaken by all the firms.
“There are key performance indicators (KPIs) for every environmental
initiative. The KPIs itself is a huge document; we call it the ‘A1 Technical
Standard’…goals that we set are frequently measured. For example, operation
level goals are measured quarterly.” (Respondent A1)
“Annually, reviewing our environmental projects, setting energy intensity
index and at the least, meeting the requirements set by DOE. In our
organization, we are always raising the bar to be better.” (Respondent A2)
“There are targets, which are time bound…reduce the electricity bill by 1%
every year. SMART system is also used…there is tough competition out
there...everyone is going green.” (Respondent A3)
The firms’ initiative to frequently review their environmental actions and targets
provided an avenue for improvement. The assessment of their strategies enabled them
to raise the bar higher once their targets were achieved, especially in the race to be
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recognized as the most environmentally-friendly enterprise among their competitors.
Therefore, firms have understood that a proper evaluation system warrants the success
of their environmental strategies (Ilinitch et al. 1999; Lober 1996).
Strategy Alignment
Strategy alignment is the final mechanism behind the environmental strategy. Firms
are often seen desiring cutting-edge and innovative solutions to their environmental
problems. In addition, they want to obtain advanced green knowledge, so that they
can stay ahead of their competitors who are vigorously involved in the green
transformation. Therefore, firms revise and review their strategies within a time
period of three to five years so that they can align their strategies with globally
emerging environmental issues.
“There are absolute goals and relative goals, which are revised
periodically…always looking for new innovative solutions to solve
environmental problems. Even currently, we are not satisfied with what we are
doing.” (Respondent A1)
“We have a 5-year environmental improvement plan. This plan is constantly
viewed so that we keep abreast with the changes that are taking place…it’s a
competitive world out there.” (Respondent A2)
“Our targets are revised every three years…market study is conducted to
introduce new plans.” (Respondent A6)
Collaboration
Collaboration between top management, departments and employees is the backbone
of environmental strategy formulation and design, based on indicators provided by
respondents. To understand this collaboration, it is important to observe the path that
firms use to structure their internal strategies.
A common practice among firms is to first request their staff to list down
environment-related problems in their departments, followed by proposing solutions
to those problems. Their environmental management unit then uses this information
to structure environmental projects and propose them to the top management. The
selection of the ideas and solutions is based on the cost-benefit analysis. Usually, the
chosen solutions to solve environmental problems should justify the investments and
the benefits the firms will get. Once approved, the ownership of these projects is
handed over to the departments, and the success of these projects is the responsibility
of the departments. These projects are therefore the firm’s environmental activities
under their internal strategies.
“HSED will go around asking every department on the problems that they
face…list down the problems and the proposed solutions. These proposed
solutions are then converted into projects…HSED writes a proposal to the top
management to approve the projects.” (Respondent A3)
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“Every year, we have a project turnaround…to identify projects…involves
other divisions as well. Then we propose to the management for approval and
budget. Once approved, the departments will take charge of the projects.”
(Respondent A2)
“Everyone is involved in the strategy making…over here, every individual is
responsible in protecting the environment…eco-together.”(Respondent A4)
After examining the responses from all the firms, we inferred that every individual in
the firm plays a significant role in planning the environmental strategies. The intensity
of the collaboration as seen by these firms has the possibility to increase the success
rate of their environmental initiatives, since encouraging the participation of
organizational members in strategy development automatically places them in a
learning and creative process (Cacciolatti and Lee 2016). As a result, these processes
can help them to achieve organizational and environmental goals, technical skills, and
the knowledge required to mitigate pollution (Mårtensson and Westerberg 2014).
Figure 4 exhibits the six key departments identified during the interviews that firms
consider during their strategy formulation process. Among the six departments, more
than 50% of the firms acknowledged that the production and operation departments
are highly engaged. Whereas for the maintenance, technology and emissions
reduction departments, on average 33% of the firms considered them during their
strategy formulation. Lastly, the finance department is the least considered among the
top six key departments where strategy formulation is concerned. According to the
response from the firms, the first reason for the finance department being the least
considered is that large firms are not financially constrained. The second reason is
that the increasing demand for environmentally friendly products and stringent
environmental regulations globally has pressured the firms to prioritize their
environmental performance (Fujii and Managi 2016), especially to sustain their
exports. For these reasons, the R&D allocations are strategically planned and
communicated across departments. Respondents also indicated that top management
encourages each department to propose the feasible solutions and budget to solve
environmental issues within their respective departments. These proposals often
receive complete support from the top management. From the interviews, it was
evident that the finance department channels the funding information to all the major
departments before the environmental strategies are formulated. Therefore, apart from
facilitating and monitoring the funding process, this department does not play an
active role during the formulation of the strategies.
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Figure 4. Departments that are primarily involved in environmental strategy
formulation
Collective Involvement
While collaborative effort is involved during the formulation and designing of
environmental strategies, collective involvement among employees is found during
the implementation of these policies. For most of the firms, the involvement was
voluntary because caring for the environment has become a part of their corporate
culture. However, a few firms also used guidelines, directives and campaigns to
encourage their employees’ participation.
“Every staff is involved…top to bottom and left to right, we even involve our
contractors. Over here, we manage their entire supply chain. It is ‘eco-
together’.” (Respondent A4)
“Everyone in the organization is involved in the implementation. Taking care
of the environment is basically a culture here.” (Respondent A2)
“There is a detailed policy guideline, which requires everyone in the
organization to be involved.” (Respondent A1)
Two informants reported that directive measures were mainly used to force the
participation of employees at the bottom level. Their lower level of education seems
to hinder them from grasping any environmental awareness provided to them, which
later transpires into a poor level of involvement.
“The bottom level follows procedures and instructions set by the safety
committee. It is difficult to get full commitment from the bottom level, maybe
due to their educational level.” (Respondent A6)
“Employees at the operation level have a lower level of education and they
always show lack of interest and awareness.” (Respondents A3)
Department Number,of,Firms %/6 Department Percentage,
Production 4 67 Production 67
Operation 3 50 Operation 50
Maintenance 2 33 Maintenance 33
Technology 233 Technology 33
Emission>Reduction 2 33 Emission>Reduction 33
Finance 1 17 Finance 17
Figure-4
67%>
50%>
33%> 33%> 33%>
17%>
0>
10>
20>
30>
40>
50>
60>
70>
ProducCon> OperaCon> Maintenance> Technology> Emission>
ReducCon>
Finance>
Percentage,
Key,Departments,Involved,in,Strategy,FormulaAon,
14
The use of voluntarism and directives mainly involves a different level of
employment status. The most important seems to be creating environmental
awareness, and incorporating that awareness as part of the corporate culture.
Categorizing the Mechanisms and Top Management Commitment
Our observation provided us some basis to divide the mechanisms into two
categories: system and commitment. System is what we considered as a well-
structured and guided system that governs the transformation of environmental
objectives into initiatives that the firms follow. Effective environmental strategies,
moreover, depend on a robust system and structure (Epstein and Roy 2007;
Christmann 2000). Five mechanisms that qualified in the system category are central
system, internal system, specific environmental management unit, quantifiable
measurement and strategy alignment. From the findings, we also found that over the
years firms have been investing in relationship-building among the members of the
organization (Mårtensson and Westerberg 2014) to increase their commitment. Given
this, the second category is known as commitment, which consists of collaboration
and collective involvement. Systems and commitment are the two most important
mechanisms behind the environmental strategy.
One significant finding from the interview which needs utmost attention is that the
governing of the MBES requires the commitment of top management. If the
environmental management unit is unable to get the top management to commit, its
entire environmental strategy implementation will be impossible. It is commitment by
top management that serves as the key driving force of MBES. Because of pressure
from the group/headquarters (Boiral et al. 2012), strong and influential top
management commitment (Banerjee, Iyer, and Kashyap 2003) were seen to be present
in the organization that was interviewed. The top management has put in a lot of
effort and commitment in organizing MBES into a formal structure.
Top management has invested important strength in promoting active interaction
within the organization, which potentially builds trust and enhances commitment
(Ring and Van de Ven 1994) among organizational members. The returns on this
investment have been rewarding, such as the development of a collaborative
mechanism in planning the environmental strategies, and provision of a dynamic on-
the-job learning experience for employees on environmental issues.
The motivation and attitude projected by managers, on the other hand, were seen to
slowly alter firms’ environmental behavior – from being reactive to proactive
(Carballo-Penela and Castromán-Diz 2014). The interview results disclosed that firms
are now not only looking into local environmental issues, but also globally emerging
issues. There has been a change of mindset; their take on environmental issues is at a
greater level. Therefore, the success of MBES has proven to be superlatively
dependent on top management commitment. Figure 5 presents the improved
framework incorporating the MBES based on the empirical findings of the study.
15
Figure 5. Mechanisms behind environmental strategies
Conclusion
In the past two decades, a colossal amount of studies on environmental strategies had
paid attention to the exploration of their antecedence or environmental performance,
which undoubtedly provided critical information to businesses and economic
managers. Nevertheless, there is still one core force that has not been given much
attention, and without which the transformation of environmental issues into active
strategies is impossible. This force is known as the mechanisms behind the
environmental strategies (MBES) which govern the formulation, design and
implementation of the strategies.
To fill the gap, we investigated the mechanisms behind the environmental strategies
within a firm. Our main findings suggest two pertinent components of MBES: system
and commitment. System encompasses five important mechanisms that provide the
working flow in transforming environmental issues into strategies, namely: central
system, internal system, specific environmental management unit, measurement, and
strategy alignment. Central system governed by headquarters or group transforms the
organizational vision and mission into primary strategies. This system facilitates the
firms in dealing with environmental issues using a guided framework developed
under the central system. Likewise, there is an internal system at the firm level. Using
the guided framework provided by the central system, detecting and transforming the
environmental issues into actions through active interaction within the organization
are the main purposes of this system. Next, there is a specific environmental
management unit in the system, a one-stop center to get environment-related
16
information, provide feedback, plan environmental initiatives and manage these
initiatives. Moreover, firms set targets that are measurable and time-bound so that the
success of the strategies can be assessed and improved. Lastly, to retain their
competitive advantage, frequent strategy alignments are carried out to incorporate
globally emerging environmental issues into their strategies.
On the other hand, collaboration and collective involvement fall under the second
category. Collaboration between top management, departments and employees has
been the backbone of environmental strategy formulation and design. There is a
strategy formulation procedure that top management has implanted within the
organization that automatically involves every organizational member in the process.
Additionally, this mechanism provides on-the-job learning platforms for the
employees, especially environment-related. Next, collective involvement among
employees was found in the implementation of these strategies. However, the upper
layer of management portrayed a higher level of commitment compared to the bottom
layer. Feedback suggests that this difference might be due to the low level of
education background in the latter group. Another important point is that MBES’
initiation and binding depend on the strength and influences of the top management
commitment.
This study extends past research in the field of strategic management and
environmental management by filling in the existing gaps. Moreover, this study offers
qualitative input to confirm past empirical findings that there is centralized decision-
making on prime environmental objectives and targets by the headquarters; however,
autonomy is still given to the business units regarding these issues (Epstein and Roy
2007). Indeed, this study concurs with the concepts explored by Mårtensson and
Westerberg (2014) that the effectiveness of the environmental strategies can be
improved by building cooperation and relationships within the organization. This
insight provides strong grounding that centralizing decision-making, granting relevant
autonomy to firms and building organizational cooperation and relationships has the
potential to enhance MBES. More importantly, this study strengthens the corporate
environmentalism concept brought forward by Banerjee by incorporating MBES.
At a practical level, our findings have an important managerial implication. In an era
where green chemistry is advancing (Epicoco, Oltra, and Saint Jean 2014), business
managers – especially in chemical firms in developing countries – can emulate these
mechanisms to improve the pace of their environmental strategy formulation, design
and implementation. Understanding MBES furthermore may provide an avenue for
managers to increase the success rate of their environmental strategy, by studying the
uncertainty related to it – since limited resources calls for an effective strategy
prioritization (Dangelico and Pontrandolfo 2013). Lastly, in handling environmental
issues, managers should promote strong cooperation among members of their
organization to promote sustainable business performances.
On the other hand, policy makers should implement a mechanism to enhance firm
capabilities related to MBES, rather than emphasizing on direct environmental
measures – as it can automatically transpire into effective environmental performance.
Furthermore, the provision of training to managers on building organizational
relationships and cooperation can advance corporate greening within the organization.
17
Finally, developing a comprehensive structure of MBES for firms to foster learning
will be helpful, especially for small and medium enterprises.
This study is not without its limitations – it is based on a single industry, therefore,
generalization to a large population is not suitable. Indeed, for generalization
purposes, a follow-up study is required, with a quantitative study in a similar industry
setting to validate the interview data. Future work in this area requires paying close
attention to explore each mechanism in further detail. This can strengthen the current
findings and also provide important insights to businesses and managers on MBES.
Nevertheless, this study contributes mainly in identifying the critical elements of
mechanisms behind environmental strategies, as well as validating some of the past
evidences in the context of environmental management in the chemical industry of a
developing country.
Appendix 1
1. What are the plans/actions/strategies taken by your organization to improve
the organization’s environmental performance?
2. How are people in your organization prepared to face the increasing
environmental challenges both domestically and globally?
3. How is the flow of communication between every managerial level within
your organization to solve environmental problems?
4. How are environmental initiatives assessed in your organization?
5. How does your organization respond to the environmental
regulations/standards set by the countries that your organization exports to?
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