How Environmental Movements Shape an Industry

How Environmental Movements Shape an Industry

Lauren Rakowski July 16, 2010
This research examines the pressures that shaped the U.S. chemical industry's environmental beliefs and practices from the 1960s to the 1990s. Environmental issues were treated as technical issues in the 1960s, but grew in importance to become issues of strategic concern in the 1990s, when firms addressed product stewardship through life-cycle analysis, reducing pollution, and environmental management systems. This evolution was driven by evolving stakeholder pressures, disruptive events and legal cases, which all led to a reshaping of the industry's environmental management practices.

Background This paper maps changes in the U.S. chemical industry over three decades. Important events were instrumental in creating uncertainty for firms. Such events may include: milestones (like formation of the EPA), accidents (like an oil spill, nuclear accident, or toxic fire), or legal events (like parliamentary hearings or trials). The paper illustrates how stakeholders, such as government, trade associations, interest groups and the public shaped the industry's response.

Findings

Four distinct stages marked the environmental practices of the U.S chemical industry:
 
Stage 1: 1962-1970. Environmental issues emerged through Rachel Carson's book Silent Spring; massive fish deaths on the Mississippi intensified concerns. However, firms denied environmental problems as merely technical issues to be overcome. 

Stage 2: 1971- 1982. The first Earth Day involved 20 million Americans and catalyzed public support. In response, the Environmental Protection Agency (EPA) was created to regulate firms. Firms treated environmental issues as problems of regulatory compliance.
 
Stage 3: 1983-1988. After a rollback of Reagan era attempts to deregulate environmental issues, the EPA increased civil actions and introduced criminal ones. NGOs directed lawsuits towards government and industry. Firms began to treat environmental issues as avenues for social responsibility.
 
Stage 4: 1989-1993. Insurance companies and investor groups began to pressure companies on environmental issues, leading the industry to see environmental protection as strategic in nature.

Implications for Managers

Pay attention not only to regulations, but also to the norms and expectations of others that influence your market environment: your industry peers, investors, voters, etc. View disruptive events as transitory moments when these constituents can alter the norms and rules by which your business is run. By engaging in this process of event framing, you can deflect some of the harsh criticism that can come from those outside of your sector.

Implications for Researchers

This research helps define and measure organizational fields (groups involved in the issue) and legal, social and cultural aspects of institutions. Future research can explore the role of events in driving institutional change in more detail. 

Methods

This study used longitudinal data from 1960-1993 to capture the evolution of organizational fields, competing institutions and disruptive events relating to changes adopted by the U.S chemical industry. The study measured which stakeholders interacted using a statistical analysis of 3,572 federal legal cases. A content analysis from 2,358 articles from the Chemical Week trade journal characterized shifts in the industry's concept of environmental issues and exposed disruptive events that may have driven those shifts. 
Hoffman, Andrew. (1999). Institutional evolution and change: Environmentalism and the U.S. chemical industry. Academy of Management Journal, 42(4): 351-371. 

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