3 Key Stakeholder Groups Shape Environmental Performance
Community stakeholders have substantial control over corporate resources and decisions companies make about the environment. Three groups often drive improvements in firm environmental performance: those who are wealthy, those who care about the environment, and those who live in densely populated areas. Applying these findings can help companies understand how stakeholders influence environmental policies.
Companies in certain industries incur large costs related to pollution. These companies can improve financial performance and competitiveness by improving their environmental performance. This study analyzes how large stakeholder groups pressure firms for better environmental performance.
This study finds companies respond to environmental pressures from key stakeholders by reducing toxic emissions. These include: the wealthy, politically active groups that care about the environment, and groups in densely populated areas.
- Wealthy groups use power to demand better environmental performance from companies who depend on them for resources.
- Small actions by politically active groups that care about the environment reduce toxic emissions. For example, 16 people out of every 1000 state residents being part of an environmental organization significantly reduced plant toxic emissions.
- Groups in densely populated areas exert stronger pressures because they are more at risk from the negative effects of pollution.
This study helps build a richer understanding of the relationship between stakeholders and environmental performance by analyzing stakeholder pressures and the relation to resource dependencies in three of the most polluting U.S industries. Future research could explore the relationship between emissions and regulatory stakeholders. It could also examine the financial costs and benefits related to stakeholder pressures, such as cost efficiency through technologies that reduce environmental impacts.
Hierarchical linear modeling (HLM) is used to test the relationship between toxic releases and stakeholder pressure. Environmental performance, measured by toxin levels released by 5,033 plants, is the dependent variable and is based on the EPA's Toxics Release Inventory (TRI) database. The independent variable, stakeholder pressure, is collected from sources including: U.S. Census, the League of Conservation Voters, the U.S. Department of the Interior, and the COMPUSTAT financial database.