Environmental Consciousness on Environmental Management: History
View Latest Version
Please note this is an old version of this entry, which may differ significantly from the current revision.
Contributor:
Cheng-Li Huang
,
Fan-Hua Kung
,
Chia-Ling Cheng

As society’s view of the public good expands to include responsible corporate citizenship, profit performance alone no longer suffices as the sole measure of a company’s performance. Issues of environmental protection and contributions to society are also included in evaluating overall corporate strategy, thus broadening the evaluation beyond the income statement. As companies adopt the mantle of environmental, social, and governance (ESG) theories, their potential liabilities are no longer limited to operational costs. Investments in environmental protection and environmental management systems influence a company’s competitiveness and strategic considerations. When performed right, these investments not only reduce litigation and administrative costs, but also enhance long-term profitability and continuing development 

  • environmental consciousness
  • environmental management
  • environmental performance
  • ESG
  • sustainability

1. Introduction

Environmental management can be defined as managing the impact of a company’s products, processes, and organization on the environment, ecosystem, and culture during its business operations [1][2]. Hervani, Helms, and Sarkis (2005) [3] assessed the green supply chain and indicated that being environmentally conscious requires one to incorporate environmentally friendly designs, implement green procurement (using certified suppliers and purchasing raw materials that do not harm the environment), employ total quality environmental management (gauging internal performance and preventing pollution), use environmentally friendly packaging materials and transportation, and facilitate the reuse and recycling of expended products. It has been argued that the green economy resolves the struggles between society and the environment while creating new opportunities and challenges for companies of all scopes and in all industries. Lundgrena and Zhou (2017) [4] stated that environmental management is an investment to reduce environmental impact, which may also affect a company’s competitiveness, i.e., changes in productivity, and stimulate more efficient use of energy. Thus, when a company demonstrates better ESG performance, it will benefit from having a competitive and strategic advantage.
The natural resource-based view of the firm holds that a company’s competitive advantages are grounded in a series of interconnected strategies regarding pollution prevention, product management, and sustainable development [5]. Arda, Bayraktar, and Tatoglu (2019) [6] found that environmental proactivity can fully mediate the relationship between integrated quality and environmental management and firm performance. Put simply, corporate environmental management integrates environmentally friendly concepts into corporate business activities, such as using green production methods to reduce the consumption of resources and energy, creating green products that limit environmental pollution, and facilitating sustainable development for individuals and the community.
Today, many companies strive to devise marketing strategies that involve corporate giving (philanthropy) and green images. However, some studies have stated that a corporation promoting its charity and environmental protection activities for public relations, advertising, and image marketing does not strengthen its corporate image; in contrast, such a campaign arouses public suspicion of a company’s underlying motives [7]. Only when a company fulfills its social responsibilities will stakeholders be satisfied and its reputation improve [8]. Companies in good standing can attract customers, investors, and potential employees more easily [9]. In effect, environmental management confers a double advantage to companies, offering commercial and environmental benefits.
Margolis and Walsh (2003) [10] observed that the majority of previous studies used instrumental considerations to investigate corporate social responsibility, such as the relationship between corporate social responsibility and corporate performance. Later, Garriga and Melé (2004) [11] reviewed existing corporate social responsibility theories and categorized them by their focus on moral values, profits, social needs, and social performance. This led them to form four categories: instrumental theory, political theory, integrative theory, and ethical theory. They then advised that future research focus on these four theoretical bases and examine the association of these theoretical bases with performance. Existing literature on ESG clearly shows that the concept of ESG encompasses adherence to moral behavior, assurances of an increase in profitability, integration of a society’s needs into a company’s operations, and the exertion of a positive influence on society. However, the majority of these past studies involved normative and argumentative research; empirical research has focused solely on a single method or theory or questioned the effectiveness of other approaches.
Despite the sharp increase in research on environmental issues, few studies have taken multiple theories into consideration [12]. This research therefore attempts to explore issues of environmental consciousness and environmental management through the fundamental theories. The objective is to construct a clearer and more integrated theoretical system describing environmental management and to fill the gaps in existing literature. It is hoped that the results can assist companies in scrutinizing the effectiveness of their environmental management measures while also assisting investors in identifying companies with genuine environmental consciousness. This will do more to encourage companies to fulfill their environmental and social responsibilities and provide governing agencies with a reference when formulating environmental regulations.

2. Environmental Consciousness on Environmental Management

Carroll (2016) [13] advocated that a company’s social responsibilities include economic, legal, ethical, and philanthropic responsibilities. Although the fourth category presented by each researcher differs in name, their connotations are similar. Each of the four components of responsibility is specific to different stakeholders, in terms of the different priorities that the stakeholder may be affected by.
Garriga and Melé (2004) [10] proposed instrumental theory to describe a company that perceives corporate social responsibility solely as a financial tool and values-related investments only in the context of improving its financial performance. This point of view originates from the agency theory, which upholds that companies take into account only the managers and shareholders within their organizations and consider profit creation to be the primary duty of their managers. Freeman (2010) [14] presented a more inclusive stakeholder theory, which emphasizes that stakeholders provide vital resources, or contributions, to a firm, which satisfy stakeholder demands. The salient argument behind stakeholder theory is that companies need to ensure their survival and continued success by satisfying stakeholder demands or else face severe criticism from their stakeholders [15].
Under instrumental theory, a company is responsible for satisfying shareholder needs; thus, it considers social responsibilities as operational goals and bases its operations on the expectations of its shareholders. Performing ESG activities to earn profits is a common method employed by companies [16]. Many past studies have shown that effective ESG practices can lead to strong financial performance [6][9] and high market value [4]. It has been proposed that ESG can have the following economic strategic objectives: maximizing shareholder value, which mostly centers on short-term performance gauged against market returns; achieving competitive advantages, in which long-term performance is measured by long-term profits; and cause-related marketing, in which companies promote good deeds and positive feedback to gain competitive advantage [10]. ESG can assist companies in creating substantial benefits, a view receiving more attention as competition grows more intense. Among many companies, the management of ESG activities has taken priority over other considerations [17]. Instrumental theory is the most widely applied theoretical basis in ESG research, perhaps because it emphasizes that the purpose of fulfilling ESG is to enhance a company’s competitive advantage and value-creating capacity with the ultimate goal of optimizing the interests of shareholders [18]; therefore, this research adopts shareholder interest maximization strategies as its theoretical basis.
Political theory emphasizes the social power of a company as a for-profit organization whose operations rely on more than just the principles of capitalism. In addition to having economic power, companies are able to demand that governments alter market regulations, which means they can influence politics. As a result, the general public forms expectations of these social entities. On account of this double power effect, interdependence exists between such companies and society [19], in which the latter has precise expectations regarding the proper behavior of the former. Furthermore, political theory holds that these companies exercise power responsibly and participate in social collaboration, which means that their operational strategies should promote environmental and social development of local communities.
Political theory can be further divided into corporate constitutionalism, integrative social contract theory, and corporate citizenship [20][21][22]. Stressing the relationship between social responsibility and social power, Lee (2011) [23] combines institutional and stakeholder theories to explain how companies choose their corporate social responsibility strategy. Companies that cannot bear their environmental and social responsibilities will inevitably lose their social power. Furthermore, companies can use their social power to protect their stakeholders from unreasonable organizational powers. This is referred to as corporate constitutionalism. Donaldson and Dunfee (1994) [24] observed that companies have social contracts, in which they offer customers, employees, and other members of society certain benefits in exchange for power. Donaldson and Dunfee (1999) [25] extended this viewpoint and developed the integrative social contracts theory, which holds that microsocial contracts established between companies and various economic communities contain consensual agreements that do not violate the universal rights defined by macrosocial contracts. Corporate citizenship originates from the fact that the survival and growth of companies rely on the social costs incurred by the general public. Thus, in addition to making a profit, companies are also obligated to play the part of good corporate citizen. As they offer value to society through their core operations, they must also pledge to uphold their obligations to society and act as a public role model in the practice of social ethics. Corporate citizenship involves a common voluntary operational strategy that operates within a specific scope [26].
Integrative theory indicates that companies are dependent on society, and for this reason, management practices should include identifying environmental issues with an emphasis on understanding and responding to different public interests [27], combining social value with corporate operation activities, and devising integrative management strategies. When corporate value systems are consistent with the surrounding social value system, the participating companies can gain legitimacy or prestige. In contrast, inconsistency between the two systems can pose substantial threats to a company’s legitimacy [10]. Thus, ESG is determined by the demands of the social value system at the time, and the perspective taken by a company’s environmental and social responsibilities should be converted into a perspective of public responsibility [28]. Integrative theory corresponds to the purpose of the normative stakeholder theory. Based on this theory, in addition to paying attention to shareholders, companies must also show concern for their employees, customers, communities, and the stakeholders. All stakeholders affected by the company should have the right to participate in corporate decisions, and the management should be responsible for serving the affected stakeholders [29]. Therefore, a company’s goal should be to protect the interests of all its stakeholders rather than just its shareholders. Their core concepts of integrative theory include the corporate social performance model presented by Wartick and Cochran (1985) [30], which integrates the principles and directive behavior of ESG and responds to social demands as well as to policy development involving social issues. Later, Wood (1991) [31] transformed the concepts of the corporate social performance model into three interrelated aspects: driving principles, behavioral processes, and significant efficacy. Wood’s study raises several issues worthy of reflection, such as how stakeholders might be identified, how the social demands of different stakeholders might be comprehended, how to manage the conflicts or potential conflicts that might occur among stakeholders, and finally, how society can determine whether a company’s performance meets social demands. In view of these reflections, integrative theory focuses on issues management, public responsibilities, stakeholders, and corporate social performance. For instance, Buysse and Verbeke (2003) [32] used the stakeholder perspective to explain that the green demands of stakeholders influence a company’s environmental strategies. Theories based on stakeholders are the most common, as it is commonly agreed that taking into account the interests of corporate stakeholders can benefit a company’s governance and promote its interests.
Ethical theory examines the relationship between companies and society from the perspective of moral values. Companies must be aware that all their actions to fulfill their ESG principles must comply with a code of ethics. Freeman (2010) [13] stated that due to moral principles, companies are not only responsible for the demands of society, but also for those of their legitimate stakeholders; they must satisfy the demands of certain groups in society (their stakeholders) rather than merely their shareholders. The normative stakeholder theory assumes that stakeholders have valid, normative claims on companies and that individuals or groups possess legitimate interests in the procedural and/or substantial aspects of corporate activities [18]. The stewardship theory has been proposed, emphasizing that managers should have a sense of mission with regard to morality and endeavor to do what is right. They should respond to their stakeholders according to ethical standards regardless of whether the results of the decision have adverse effects on a company’s financial performance [33]. The absolute demands on corporate behavior also include universal rights and sustainable development, concepts that are widely advocated on the international level. The social responsibility of universal rights is centered around human and labor rights. Although standards in this respect remain inconsistent, the Universal Declaration of Human Rights and the International Labour Organization Convention serve as the primary foundation. The Bruntland Report of 1987 is perhaps most representative of sustainable development in that it discusses the social responsibility of protecting the natural environment. Later, Elkington (2006) [34] again stressed the triple bottom line: while the single bottom line focuses on the management strategies involved in the financial aspects or economic benefits of a business, the triple bottom line encompasses the social aspects of maintaining and developing social and human capital and environmental factors, which involve complying with environmental laws and regulations and seeking means to utilize resources and process waste. Henriques and Sadorsky (1996) [35] measured the environmental ethics of companies, contending that they must implement the vision, policies, and projects designed by environmental protection agencies in order for companies to realize their environmental responsibilities.
There is some overlap among the four theories. They all indicate that when a company is aware of its environmental and social responsibilities, whether it is facing stakeholder demands or moral obligations, it is impelled to engage in related activities, one of which is environmental management. Menguc, Auh, and Ozanne (2010) [36] stated that even if environmental and social standards are not widely accepted as legal standards that regulate corporate behavior, corporate managers regard ESG practice as a crucial consideration when striving to achieve strong financial performance as it pertains to resource planning; therefore, this research applies these theoretical bases regarding ESG to the issue of environmental management in Taiwan as a means of exploring how environmental consciousness forms in companies and how such consciousness influences environmental management.

This entry is adapted from the peer-reviewed paper 10.3390/su142114587

References

  1. Winn, S.F.; Roome, N.J. R&D management response to the environment: Current theory and implications to practice and research. RD Manag. 1993, 23, 147–160.
  2. Testa, F.; Gusmerottia, N.M.; Corsini, F.; Passetti, E.; Iraldo, F. Factors affecting environmental management by small and micro firms: The importance of entrepreneurs’ attitudes and environmental investment. Corp. Soc. Responsib. Environ. Manag. 2016, 23, 373–385.
  3. Hervani, A.A.; Helms, M.M.; Sarkis, J. Performance measurement for green supply chain management. Benchmarking 2005, 12, 330–353.
  4. Lundgrena, T.; Zhou, W. Firm performance and the role of environmental management. J. Environ. Manag. 2017, 203, 330–341.
  5. Hart, S.L.; Dowell, G. A natural-resource-based view of the firm: Fifteen years after. J. Manag. 2011, 37, 1464–1479.
  6. Arda, O.A.; Bayraktar, E.; Tatoglu, E. How do integrated quality and environmental management practices affect firm performance? Mediating roles of quality performance and environmental proactivity. Bus. Strategy Environ. 2019, 28, 64–78.
  7. Moir, L.; Taffler, R. Does corporate philanthropy exist? Business giving to the arts in the U.K. J. Bus. Ethics 2004, 54, 149–161.
  8. Javed, M.; Rashid, M.A.; Hussain, G.; Ali, H.Y. The effects of corporate social responsibility on corporate reputation and firm financial performance: Moderating role of responsible leadership. Corp. Soc. Responsib. Environ. Manag. 2020, 27, 1395–1409.
  9. Deephouse, D.; Suchman, M. Legitimacy in organizational institutionalism. In The Sage Handbook of Organizational Institutionalism; Greenwood, R., Oliver, C., Sahlin, K., Suddaby, R., Eds.; Sage: Oxford, UK, 2008; pp. 49–77.
  10. Margolis, J.D.; Walsh, J.P. Misery loves companies: Rethinking social initiatives by business. Adm. Sci. Q. 2003, 48, 268–283.
  11. Garriga, E.; Melé, D. Corporate social responsibility theories: Mapping the territory. J. Bus. Ethics 2004, 53, 51–71.
  12. Gillan, S.L.; Koch, A.; Starks, L.T. Firms and social responsibility: A review of ESG and CSR research in corporate finance. J. Corp. Financ. 2021, 66, 1–16.
  13. Carroll, A.B. Carroll’s pyramid of CSR: Taking another look. Int. J. Corp. Soc. Responsib. 2016, 1, 1–8.
  14. Freeman, R.E. Strategic Management: A Stakeholder Approach; Pitman: Boston, MA, USA, 2010.
  15. Ferrell, A.; Liang, H.; Renneboog, L. Socially responsible firms. J. Financ. Econ. 2016, 122, 585–606.
  16. McWilliams, A.; Siegel, D. Corporate social responsibility and financial performance: Correlation or misspecification? Strateg. Manag. J. 2000, 21, 603–609.
  17. Windsor, D. The future of corporate social responsibility. Int. J. Organ. Anal. 2001, 9, 225–256.
  18. Brown, J.A.; Forster, W.R. CSR and stakeholder theory: A tale of Adam Smith. J. Bus. Ethics 2013, 112, 301–312.
  19. Clarkson, B.E. A stakeholder framework for analyzing and evaluating corporate social performance. Acad. Manag. Rev. 1995, 20, 92–117.
  20. Carroll, A.B. Corporate Social Responsibility. Bus. Soc. 1999, 38, 268–295.
  21. Waddock, S. Parallel universes: Companies, academics, and the progress of corporate citizenship. Bus. Soc. Rev. 2004, 109, 5–42.
  22. Matten, D.; Crane, A. Corporate citizenship: Toward an extended theoretical conceptualization. Acad. Manage. Rev. 2005, 30, 166–179.
  23. Lee, M.P. Configuration of external influences: The combined effects of institutions and stakeholders on corporate social responsibility strategies. J. Bus. Ethics 2011, 102, 281–298.
  24. Donaldson, T.; Dunfee, T. Toward a unified conception of business ethics: Integrative social contracts theory. Acad. Manage. Rev. 1994, 19, 252–284.
  25. Donaldson, T.; Dunfee, T. Ties That Bind: A Social Contract Approach to Business Ethics; Harvard Business School Press: Cambridge, MA, USA, 1999.
  26. Wood, D.J.; Logsdon, J.M. Theorising business citizenship. In Perspectives on Corporate Citizenship; Andriof, J., McIntosh, M., Eds.; Greenleaf: Sheffield, UK, 2001; pp. 83–103.
  27. Cheong, C.W.; Sinnakkannu, J.; Ramasamy, S. Reactive or proactive? Investor sentiment as a driver of corporate social responsibility. Res. Int. Bus. Financ. 2017, 42, 572–582.
  28. Alhouti, S.; Johnson, C.M.; Holloway, B.B. Corporate social responsibility authenticity: Investigating its antecedents and outcomes. J. Bus. Res. 2016, 24, 305–319.
  29. Campbell, J.L. Why would corporations behave in socially responsible ways? an institutional theory of corporate social responsibility. Acad. Manag. Rev. 2007, 32, 946–967.
  30. Wartick, S.L.; Cochran, P.L. The evolution of the corporate social performance model. Acad. Manag. Rev. 1985, 10, 758–769.
  31. Wood, D.J. Corporate social performance revisited. Acad. Manage. Rev. 1991, 16, 691–718.
  32. Buysse, K.; Verbeke, A. Proactive environmental strategies: A stakeholder management perspective. Strateg. Manag. J. 2003, 24, 453–470.
  33. Donaldson, T.; Preston, L.E. The Stakeholder theory of the corporation-Concepts, evidence, and implications. Acad. Manag. Rev. 1995, 20, 5–91.
  34. Elkington, J. The triple bottom line. In The Accountable Corporation; Epstein, M.J., Hanson, K.O., Eds.; Praeger: Westport, CT, USA, 2006; pp. 97–109.
  35. Henriques, I.; Sadorsky, P. The determinants of an environmentally responsive firm: An empirical approach. J. Environ. Econ. Manag. 1996, 30, 381–395.
  36. Menguc, B.; Auh, S.; Ozanne, L. The interactive effect of internal and external factors on a proactive environmental strategy and its influence on a firm’s performance. J. Bus. Ethics 2010, 94, 279–298.
More
© Text is available under the terms and conditions of the Creative Commons Attribution (CC BY) license; additional terms may apply. By using this site, you agree to the Terms and Conditions and Privacy Policy.
This entry is offline, you can click here to edit this entry!
ScholarVision Creations
Feedback