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Reduce Risk through Environmental Practices

This study examines how the environmental practices of proactive firms differ from other firms. Answering this question can help managers understand the environmental strategies that will build competitive advantage.

Two strategies help proactive firms anticipate and deal with risk: voluntary, preventative measures such as total quality management systems, and corrective approaches such as pollution insurance.

Background

Firms are considered proactive when they respond to challenges by changing policies rather than reacting to isolated events. Proactive environmental responses include: reducing the environmental impact of products, improving the efficiency and costs of processes, involving employees in decisions, and using R&D and marketing to expand sustainable markets. This study builds on past research by looking specifically at how companies use voluntary and preventative practices, or corrective practices that respond to regulation.

Findings

  • Firms with proactive environmental strategies use both preventative and corrective practices.

    • Preventative practices include voluntary measures such as programs that train workers about the environment, total quality management and product life-cycle analysis.

    • Corrective practices are normally subject to public regulations such as pollution insurance and emission filters.

  • Environmental training itself does not result in better environmental performance.

Implications for managers

Adopt a proactive environmental strategy to anticipate problems and create solutions.

  • Use Total Quality Management systems to address the environment and overall management.

  • Reduce product impacts and use flexible technologies that can respond to change quickly.

  • Improve the efficiency of products and processes, which will also cut costs.

  • Use R&D and marketing to expand markets for sustainable new products.

  • Involve employees in decision-making.

Implement corrective practices that help your company comply with regulation.

  • These may include pollution damage insurance, discharge controls and filters and residue recycling.

Implications for researchers

Future research could look at the specific role employee and executive environmental training serves. We suggest research could also examine whether the results are consistent for small companies and across countries.

Methods

This paper tests the relationship between how proactive companies are and their environmental approach. Data are obtained from 2 questionnaires given to 105 firms in Spain. One questionnaire measures business strategy, while the other measures company environmental practices. The firms with the most responses used are from the automotive industry, banks, retail trade and food, beverages and tobacco.

Aragon-Correa, Juan Alberto. (1998). Strategic Proactivity and Firm Approach to the Natural Environment. Academy of Management Journal, 41(5): 556-567.

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