Working with Stakeholders Drives Environmental Performance

Cooperation with stakeholders is essential for developing capabilities to improve environmental performance. Companies can create effective routines by allowing stakeholders with the most influence over decisions to help identify problems.

They can also use constant feedback from internal and external stakeholders to come up with solutions to improve environmental performance, and gain insight into the effectiveness of changes.

Background

Companies are constantly learning by developing new capabilities. These capabilities may affect existing operations, such as fine-tuning an existing technology to reduce emissions. Or, they may lead to new operations, such as in the conception of a new plant design to reduce pollution. Previous research has not considered the power that important stakeholders have to affect these types of learning. This paper looks at two major companies’ routines to address how and why stakeholders affect company learning.

Findings

• Routines for adapting existing operations are effective when stakeholders agree on solutions. A multi-national chemical company advances its environmental performance by engaging stakeholders so they agree on solutions. External stakeholders identify problems in consultation with the parent company and department committees agree on how to allocate resources and adapt operations. Working groups from trade associations exchange best practices. These routines lead to cooperation for improved environmental performance.

• A lack of routine for gaining stakeholder agreement inhibits implementing new strategies. A family-owned food company seeks new ways to be sustainable. Yet, its ambition is not shared at lower levels, like production units. It lacks routines to share information and has no committees to put strategy into practice. This lack of a routine to communicate inhibits agreement to implement change.

Implications for Managers

• Recognize and use important stakeholders to identify where your company can improve. Identify important stakeholders based on who has the most power to influence decisions.

• Use input from internal and external stakeholders to come up with solutions. Internal stakeholders from different departments can allocate resources and contribute knowledge. External stakeholders, such as working groups, can provide ideas.

• Create a feedback loop so stakeholders can report on the effectiveness of changes. This will help maintain stakeholder cooperation, which is essential to implement changes for environmental improvement.

Implications for Researchers

Future studies can emphasize the potential impact of stakeholder power. These studies can take into account variables that mediate the relationship between stakeholder power and organizational learning, like company ambitions, routines, institutional contexts, and personal attributes like leadership and skills.

Methods

This study compared the environmental management practices of two large Netherlands companies in 1999 (one in food and one in chemicals) with strong environmental performance. Data were collected from 19 interviews with managers and influential stakeholders, as well as field observations. Secondary sources included financial and environmental reports, government policies, periodicals and brochures.

Roome, Nigel J., & Wijen, Frank. (2006). Stakeholder Power and Organizational Learning in Corporate Environmental Management. Organization Studies, 27(2): 235-263.