Standardize Environmental Policies to Lessen Shareholder Pressure
September 27, 2017
Multinational corporations are standardizing their environmental policies worldwide based on pressures from government, industry and consumers. Managers can respond to these pressures in 3 ways: 1) Set minimum global performance standards; 2) Use codes of conduct of successful competitors, and 3) Give consumers the same message about environmental actions. Doing so will also help managers comply with regulation, keep up with competition and improve reputation.
International environmental regulation is increasing, industries are setting norms for environmental conduct and consumers are considering the environment when making purchasing decisions. This study explores the questions: Do companies adapt environmental policies to local regulations to exploit lower standards in some countries? Or do they standardize their policies worldwide?
Government pressures contribute to companies setting minimum performance standards worldwide. MNCs do not take advantage of cross-country differences in regulation because of increased international regulation.
Industry contributes to companies standardizing their codes of conduct. Industry pressures other firms in the same industry to adopt similar codes of conduct to protect the industry's reputation.
Customers push companies to standardize what they tell consumers about their environmental strategy. Customers consider environmental conduct when making purchasing decisions, but can only make decisions on available information. Giving consumers the same message creates similar perceptions worldwide.
Implications for Managers
Set minimum environmental performance standards for your operations in all countries. This will help meet global regulations, while giving you flexibility to adjust local policies. Adopt standards which give broad guidelines and increase transparency, such as the ISO 14001 Environmental Management System.
Follow broad codes of conduct used by successful competitors in your industry. For example, the Responsible Care Program, adopted in 39 countries by 1996, gives 10 guiding principles, six management codes and guides companies in managing facilities and interacting with their communities, suppliers and customers.
Give the public the same information about your environmental actions in all countries. This will improve public perception of your company's responsibility and reputation.
Implications for Researchers
Further research could explore how stakeholder demands affect conduct beyond chemical companies in the U.S. It could also look at whether improved company performance is due to global business strategies or a standardized environmental policy.
Multiple regression analysis was conducted on data collected from 87 mail questionnaire surveys, administered to headquarters of 72 MNCs in the chemical industry in the United States. Each had operations with sales of at least $100 million in 1995.