«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
Most importantly, perception differences not only reside in the heads of individuals, but amount to different paradigms in economic and business theory as well. A paradigm is an established epistemological framework that guides the thinking around a specific topic (Kuhn, 1962). The result of the attention to environmental issues with probably the most far reaching consequences is an ontological questioning of “business” itself, and especially how business relates to the natural environment. Over the last decades, researchers have argued for a reconsideration of the role of the environment in economic thinking, because the way we define the human or business–natural environment relationship legitimizes, and reinforces our subsequent behaviors.
“By disassociating human organization from the biosphere and the full human community, it is possible that our theories have tacitly encouraged organizations to behave in ways that ultimately destroy their natural and social-life support systems” (Gladwin et al., 1995: 896).
The paradigmatic debate is thus concerned with the question whether the natural environment is an entity external to the firm with instrumental value, or whether organizations are intertwined and interdependent on a natural environment that has a moral value to economic life (Gladwin et al., 1995; Purser et al., 1995; Shrivastava, 1995b). We stress the difference between these perspectives, since they shed light on the unit of analysis employed in the context of environmental strategies. In the former approach, the unit of analysis is the firm or the organization, with the natural environment something that may be external to the firm (it can also be internal to the firm, to the extent property rights are owned for the natural resources), whereas this is impossible in the latter approach. It is evident that the perspective that is taken may have implications for the role and object of strategy, as is shown also in the theoretical thinking on the natural environment in both economics and strategy.
In the history of economic thought, the natural environment has been investigated from two general streams: environmental economics and ecological economics. Whereas the
former perceives the natural environment and the economy as two distinct spheres that are linked with each other along transactions and exchanges, the latter defines the economy as an interlinked subsystem of the entire biosphere (Perman et al., 2003; Vatn, 2005; Common & Stagl, 2005). In environmental economics, the natural environment simply represents a source for production (e.g. land for tillage or building, minerals for ore, air to breath, drinking water, …), a sink able to accept pollution or waste (e.g. landfill, air or water for CO2 absorption or dilution, …), an amenity to enjoy (e.g. beaches, natural reserves, food …), an object of worship (animistic religions) or something to get rid off (e.g. diseases, floods, drought, …). In contrast, the ecological economics perspective equates “the environment” with both the individual building blocks, as well as all the bio-geochemical processes that keep this system functioning (Common & Stagl, 2005). The approach is holistic and embedded in ecological principles. Rather than considering the economy and the natural environment as independent systems that are connected trough exchanges and transactions, the economy is embedded in the natural environment.
A similar distinction has emerged in management theory, which was catalogued by Purser and colleagues (1995) as the anthropocentric vs. the ecocentric organization paradigm and by Gladwin and colleagues (1995) as the technocentric vs. ecocentric paradigm. Put in simpler terms, the difference between the two perspectives is in seeing “nature-as-object” (anthropocentrism) versus “nature-as-self” (ecocentrism). In the ecocentric paradigm, strategy is concerned with the natural environment from a moral point of view (Purser et al., 1995) and strives – above anything else – for the sustainability of natural and cultural values.
Conversely, in the anthropocentric paradigm, the natural environment is perceived though its instrumental function to the human being or the organization. The main vehicle is “environmental management”, concerned with “searching for better means to engineer and control nature for instrumental purposes” (Purser et al., 1995: 1078). It is in line with libertarian views of corporations, that state that “the social responsibility of business is to increase its profits” (Friedman, 1970: 32) and that the voluntary endeavor for the social good is fundamentally subversive and wrong (Smith, 1776; Friedman, 1970).
Gladwin and colleagues have argued that neither ecocentrism nor anthropocentrism provide the practical basis to achieve sustainable development, and that only a pragmatic “sustaincentric paradigm” is able to harness the theoretical underpinnings for this immensely complex social objective (Gladwin et al., 1995). In the sustaincentric paradigm, humans are “neither totally disengaged from, nor totally immersed in the rest of nature” (Gladwin et al., 1995: 890), and the relationship between humans and nature is guided by both moral and
instrumental principles. The basic premise is that a prosperous economy depends on a healthy environment and vice versa, and that as a result, the role of humans towards nature is one of stewardship: we are responsible ourselves to uphold a state of nature that is able to support us.
Recently, Michael Porter and Mark Kramer expressed the core of this view in their paper on “Strategy & Society” (Porter & Kramer, 2006):
“Successful corporations need a healthy society. Education, health care, and equal opportunity are essential to a productive workforce. Safe products and working conditions not only attract customers but lower the internal costs of accidents.
Efficient utilization of land, water, energy, and other natural resources makes business more productive. Good government, the rule of law, and property rights are essential for efficiency and innovation. Strong regulatory standards protect both consumers and competitive companies from exploitation. Ultimately, a healthy society creates expanding demand for business, as more human needs are met and aspirations grow. Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.” (Porter & Kramer, 2006: 83) The general implication of this paradigmatic debate for strategy is twofold. First, a person’s paradigm reflects whether the natural environment is a parameter that is taken into account only in the production function (as a cost or a constraint) or becomes so important that it is included in the objective function of the firm (part of the mission and the evaluation criteria). The natural environment currently asks the strategist to make a choice and to reflect on where he or she will position the natural environment in his or her strategy. Second, paradigm shifts generally experience institutional inertia and resistance to move away from the business-as-usual. Such periods increase the complexity and uncertainty, as the paradigm shift opens new questions, requires new solutions and often new knowledge (Kuhn, 1962;
Gladwin et al., 1995). The natural environment is now generally part of the production function as environmental departments and managers, compliance departments and officers, taxes, permits, quota and the like. The legal structures, expectations from shareholders, takenfor-granted assumptions on the environment vs. economy reflect how deeply engrained and intertwined this paradigm is within the veins and fibers of our society (Hoffman & Ventresca, 1999). A wave of new paradigmatic assumptions questions many of these fundamentals, strategies and practices and may thus require new capabilities, structures in response. One such a development is a shift from the dyadic relationship between business and government, with government controlling business, to a triadic relationship where both governments and civil society organizations are watchdogs over and facilitators of business activities that are in line with societal expectations (Hoffman, 1999). Furthermore, although a paradigm shift
imposes difficult questions from a macro-social point of view, it has clear implications for strategy. One of the problems of paradigms is that they cannot be compared: each paradigm has its own logic and conceptual frameworks that make it impossible to understand the logics of another. As a result, “choice” of a paradigm is impossible without accepting all the conceptual consequences that derive from its basic assumptions. For example, accepting the sole role of a corporation to make profits requires accepting a strong state to legally enforce property rights and to provide common services. Furthermore, the fact that paradigms exist may also enable strategists to recognize arguments that derive from alternative paradigmatic backgrounds. Finding solutions for the fierce debates that may derive from inter-paradigmatic differences first requires understanding that organizations or individuals ground their thinking on different assumptions. Unless a common ground is found where joint understandings between different paradigmatic viewpoints are created, such inter-paradigm debates will endup in a “dialogue of the deaf”(Hoffman & Ventresca, 1999; Lepoutre, Dentchev, & Heene, 2007).
2.3.4. Summary With the analysis as presented above, my goal was to summarize the arguments why the natural environment presents a particular domain of interest in the field of strategy. As I have demonstrated, the natural environment imposes challenges of free-rider problems, social and stakeholder interests and more paradigmatic, more philosophical reflections on the nature and role of the firm in relation to society. These challenges are important for strategy, since they will influence a firm’s performance, and will therefore require appropriate responses in terms of objectives and practices. The variety in responses that a firm can develop in this perspective are the object of the following section.
2.4. “Proactive” The final semantic building block of “proactive environmental strategies” relates to the way how businesses can develop strategies in response to the natural environment as a contextual variable. “To prepare a[n environmental] strategy, managers must decide where they want to be on the spectrum from strict compliance to environmental leadership.” (Walley & Whitehead, 1994: 52).
The term “proactive” derives from the general business and strategy literature, where a number of descriptions have been developed to characterize reaction typologies of firms with regards to their circumstances. Miles and Snow (1978), for example, identify firms as
“prospectors” when they continually look for opportunities and lead in responses towards changing contexts, “analyzers” when they critically follow up on their competitors and respond accordingly, “reactors” when they are unable to react upon changing environments, and “defenders” when they do not assess the environment outside their limited competency domain and aim to protect their current positions. Covin and Slevin (1989) and Lumpkin and Dess (1996) draw on Miles and Snow to define proactivity as part of the concept of entrepreneurship, highlighting the need to take initiatives or introduce new practices or products ahead of competitors. In their view, proactiveness is opposed to passiveness, rather than reactiveness: whereas passiveness is an indifference or inability to seize opportunities or lead in the market, reactiveness suggests an active response to resist competitors. As such, they position their view in line with Chen and Hambrick, who stated that “proactiveness involves taking the initiative in an effort to shape the environment to one’s own advantage;
responsiveness involves being adaptive to competitors’ challenges.” (1995: 457).