The Greening of Management Essay
The Greening of Management
Advancements in technology over the last 100 years have provided mankind with an unappalled material wealth. According to the WorldWatch Institute Report, the world economy has expanded from $4 trillion in 1950 to more than $20 trillion in 1995, and in this same time period world population has more than doubled (WorldWatch Institute, as cited in Valasquez, 1998). But this technological and material prosperity does not come without its costs; there have been terrible consequences on our natural environment. Much of the burden can be placed onto the shoulders of unscrupulous business’s operating in the latter half of the 20th century under the ‘Classical view’ of social responsibility (Shaw, 1998). That is, that their only social responsibility is to maximise profits. Luckily, in the late 1980’s and throughout the 1990’s the attitudes of businesses towards looking after the environment began to change for the better. The widely used term for this is now know as, ‘The Greening of Management”.
2.0 Define and Discuss ‘The Greening of Management’
In the rapidly changing business world of the 21st century it is now widely accepted that “A primary concern of many businesses now is how to manage their environmental impacts effectively and efficiently” (Berry & Rondinelli, p38). The name for this fairly new style of management is called “Green Management”. The Greening of Management is concerned with companies embracing environmental protection as part of their competitive strategies, as well as “the recognition of the close link between an organisation’s decisions and activities and its impact on the natural environment” (Robbins, Bergman, Stagg, Coulter, p145). Greening of management has helped business’s understand that proper environmental protection requires the prevention or pollution rather than just the control of wastes at the end of the pipeline. (Berry & Rondinelli, 1998).
3.0 Development of “Greening of Management”
For centuries business institutions, under the orders of management, were able to treat natural resources such as air, water and land as free, limitless resources. Because no one entity owned them, these companies used and polluted as they pleased without considering their impact on our environment (Valasquez, 1998). In the 1960’s and 1970’s, there was a large amount of pressure being put on both the government and corporate sector to become more environmentally friendly. Yet most companies attempted to avoid government environmental regulations at all costs. In the mid 1970’s a few multinational corporations began to re-structure their style of management to take a more pro-active approach to environmental management and ease pressure from activist groups (Berry & Rondinelli, 1998).
During the 1980’s business’s started to bow to pressure by environmental activist groups and government agencies to increase pollution control and further comply with regulations. Instead of waiting for environmental problems to happen and then deal with them, the companies began to actively seek improvements and solutions as a preventative measure. It wasn’t until the early 1990’s greening of management as a mainstream business practice really became popular. Not only were companies now totally complying with government regulations, they were setting their own stringent environmental standards. For example, in a time period of five years General Electric decreased toxic emissions by 90 percent and Xerox reduced their hazardous waste output by 50 percent (Berry & Rondinelli, 1998). Overall the development of green management has lead to a significant reduction on pollution output across the corporate sector.
4.0 Types of ‘Greening’
There are 4 main categories that each corporation will fall into regarding their attitudes towards managerial greening. These are Legal, Market, Stakeholder and Activist (Robbins, et al, 2003). These attitudes range from doing very little towards greening right through to coming up with new greening approaches.
Legal attitudes typically include short-term thinking, old fashioned management practices and a distinct disbelief in environmental problems. This is the traditional way in which most companies acted during the mid-20th century, only doing the very minimal required.
As an organisation becomes more sensitive and aware of the environment they are likely to use the market approach towards greening. Here the company is more willing to work together with authorities to identify possible environmental improvements and also will respond to the environmental demands of its customers. A noticeable improvement over the legal approach but the motives used here are still vastly profit, and not environmentally driven.
A stakeholder approach is driven by a real sense of environmental care and responsibility. Here the organisation will practise good environmental performance and compliance and anticipate new standards of legislation. Both stakeholder and market approaches can be seen as good examples of social responsiveness.
At the highest end of the greening of management scale is the activist approach. Here the business undergoes a total concept rethink and it may see a full redesign of products, materials and processes. The point that stands out is the company will see environmental protection as an opportunity rather than a threat.
A company going green in today’s corporate environment finds a lot of support. The level of tolerance for environmentally insensitive corporations is much lower than it has been in the past. For these companies unwilling to go green, there is no where in the world to hide. Fortunately, for those that are willing to make their business environmentally responsible there are numerous benefits other than the direct positive impact to the environment (Harrison, 1993).
One of the biggest reasons for a business to go green is the huge marketing tool which it provides. Customers are demanding cleaner products and services like never before and companies that can provide these are certainly letting the public know about it. Strong environmental polices can provide the edge that a business needs to claim more of its potential market share (Roy, & Vẻzina, 2001).
Another major benefit for clean companies is that they can be remunerated for taking preventative measures against environmental pollution. This can come in the form of relief from green taxes and charges and by the ability to resell unused pollution permits. Not only does it give the green companies a business edge, but puts pressure on non-compliant companies to adhere to environmental obligations. It has also been noted that banks are quicker to loan to companies that prevent pollution and insurance companies are more willing to indemnify them (Harrison, 1993).
6.0 Environmental Accounting
Environmental performance is one of the many important measures of business success. There are two main ways in which business’s can show environmental cost in their accounting records. In conventional cost accounting the combination of environmental and non-environmental costs in overhead accounts results in their being ‘hidden’ from management.
By identifying, assessing and allocating environmental costs, environmental accounting allows management to recognise opportunities for cost savings. These cast savings can be reduced or eliminated by a range of methods, including investment in ‘greener’ process technology, the redesign of processes/products and cutting out costs altogether that provide no added value to the finished product. Many companies are now finding that environmental costs can be offset by generating revenue through sale of waste by-products and transferable pollution permits (Spitzer, 1995). Waste and emissions are therefore a sign of inefficient production. Overall we can conclude that a relatively simple application of environmental accounting may yield large cost savings to a business.
7.0 Driving forces
Organisations now in the 21st century are holding environmental performance in a very different view to that of a decade ago are and developing a new green mentality. They are considering green costs as investments that can potentially present a profitable return and market view. But what is really driving corporate environmentalism: Opportunity or Threat?
A very strong force which has always threatened businesses is regulatory action over non environmental compliance. Berry & Rondinelli (1998, p2) report that, “not complying with government regulations is no longer an option for corporations that seek to be competitive in international markets”. Each year government’s collect hundreds of millions of dollars from companies in violation of regulations. Jail time for managers and executive staff in serious cases is also becoming increasingly common (Harrison, 1993).
Corporate greening of management today is being driven by a force much larger than just the threats of regulatory action. Companies now must work hard to ensure they protect or enhance their ethical images. The media is quick to pounce on environmental slip ups and bad publicity is rampant and damaging to a business. Yet if companies are able to use their environmentalism to draw good publicity, it can certainly become a clever marketing tool (Khanna & Anton, 2002). A company run under green management is also better able to satisfy the safety concerns of employees and to develop new business opportunities in order to remain competitive in the world market (Berry & Rondinelli, 1998).
8.0 Greening of Management in the future
Corporations that do not implement proactive environmental management strategies will simply not stay competitive in the 21st century on the global market. As this need becomes clear, innovative approaches towards pollution prevention and waste control are being developed all over the world. Individual firms are working together in strategic alliances to share research and strategies.
What one company considers waste can be another company’s raw material. The trading of these resources will enable to businesses to be more efficient as well as be of major benefit to the environment. In the future this concept will be. Berry & Rondinelli (1998) predict plants from different industries will be located in close proximity to each other allowing for the trade of inputs and outputs.
Research and development institutions will have an importing role to play in coming years. Scientific research will produce greater pollution control and prevention techniques and new green methods for business will become available. For example, biodegradable packaging will significantly reduce the amount of everyday waste that has to be disposed of each year. Progress in other scientific areas such as genetics is advancing at a rapid rate. This allows primary producers to directly engineer their crops or animals for better output and quality. This wipes out a lot of the needs for pesticides and treatments which are quite harmful to the environment (Valasquez, 1998).
The greening of management has certainly changed the way businesses operate over the last 30 years. The most significant changes occurred in the 1990’s but there is still further improvement on techniques available. It has made companies all over the globe realise the close link between their decisions and activities and its impact on the natural environment. The attitudes that companies typically show towards managerial greening usually fall into 1 of 4 groups. These attitudes range from doing only what is legally required right through to researching and developing new greening techniques.
The benefits from corporate greening can be quite significant to both a companies profits and also to the natural environment. Green management provides a company with a marketing tool that can be used to reach new customers. It can also give companies a business edge by giving relief from green taxes and the ability to resell pollution permits. Environmental accounting can also be used by a green business to better measure their success. By identifying, assessing and allocating environmental costs, it allows management to recognise opportunities for cost savings.
The driving forces of corporate environmentalism can come in the form of threat or opportunity. The threat of regulatory action is very real and can spell disaster for a firm if bad publicity is spread by the media. With opportunities however, businesses can use their environmentalism to draw good publicity. In the future the business world will continue with its adoption of green management. New green management methods will emerge as will new scientific systems.
Berry, M.A, & Rondinelli, D. A. (1998). Proactive corporate environmental management: A new industrial revolution. Academy of Management Executive, 12, 2, 38-50
Harrison, E.B. (1993). Going Green: How to communicate your company’s environmental commitment (1st Ed). IL, USA: Business One Irwin
Khanna, M., & Anton, W.R.Q. (2002). What is Driving Corporate Environmentalism: Opportunity or Threat? Corporate Environmental Strategy, 9, 4, 409-417.
Roy, M.-J., & Vẻzina. (2001). Environmental Performance as a Basis for Competitive Strategy: Opportunities and Threats. Corporate Environmental Strategy, 8, 4, 339-347.
Robbins, S. P., Bergman, R., Stagg, I., Coulter, M. (2003). Foundations of Management, (1st Ed). NSW: Pearson Education Australia
Shaw, W.H. (1998). Moral issues in business (7th Ed). Melbourne, VIC: Thomas Nelson Australia
United States Environmental Protection Agency (1995). An introduction to environmental accounting as a business management tool: Key concepts and
terms. Washington, USA, Spitzer, M.
Valasquez, M.G (1998). Business ethics: concepts and cases (4th Ed). Sydney, NSW: Prentice-Hall
Williams, H. E. (1996). Environmental risks and rewards for business, (1st Ed). New York, USA: Wiley