Environmental Performance : Content and Context

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Authors: Gitte Dreyer Jakobsen & Andreas Persson Directors of Research: Prof. Philippe Daudi and Dr. Mikael Lundgren Programme: Master’s Programme in Leadership and

Management in International Context

Date: June, 2009

Baltic Business School, University of Kalmar. Sweden

A study of three companies’ environmental performance

Environmental

Performance

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Acknowledgements

The work with this master thesis concerning environmental performance has provided us with a source of great professional and personal satisfaction. We would like to thank all persons that made this experience joyful and who contributed one way or another to this final result. We would especially like to thank the persons we have interviewed and Philippe Daudi for inspiring us to go beyond ordinary practice, go our own way, and who awoke our philosophic interest. We also would like to thank Nils Nilsson for his kindness, good advice and for the good feeling he gave us and Mikael Lundgren for reviewing our text and vocabulary. Last but not least a big thanks to all three for commenting our earlier drafts and for trying to guide us along the way. We would like to end with a quote that helped us writing, keeping to our beliefs and convictions, and fulfill the ideas about our master thesis when the winds were blowing at the hardest;”(…) it is important to remember to have fun, and to keep the faith that you are right in your actions when the world around you is trying to tell you that you are wrong” (O’Sullivan & Taylor, 2004, p. 134).

By reading this master thesis

you will gain an understanding

of the emerging complexity of environmentalism

and

its opportunities and limitations

in business life.

Baltic Business School, Kalmar, June 2009

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Abstract

We started out with a focus on how companies act when considering the environment in business, but the research took us further than that and led us to the root of our research focus. We are discussing aspects pertaining to the relation of society – and business life, and how human beings perceive the connection to nature. Our initial thought was to study business and how companies handle the environmental context, but the social context appeared to us as well with its strong connection to the environment. The master thesis is written with a respect for the environment and with an aspiration to give a sense of the larger context wherein nature and human itself exist.

The environment is a complex issue for companies to handle. The benefits of improving the environmental performance are not always clear, which induces companies with insecurity as to what strategic action should be taken. The development of environmental performance over the years has resulted in certain environmental deeds, which have become institutionalized in different industries. What is considered to be ethically acceptable is not easily established, but it is a term companies are facing more often, especially when companies take actions that give them higher influence on society. Every company can claim to be environmentally friendly, at the same time, consumers are skeptical towards these claims, which complicates sincere attempts of environmental improvements. A company’s reality is constructed by people, and the company has to adjust to the demands people have outside and inside the organization. It is people’s perception of the environment that will state the demands of a company.

We have studied three companies and how they handle their environmental performance that is determined by the business context, and the perception the interviewees have thereof. In the environmental area of sustainability, ISO-certification is an industry norm that is created, sustainable forestry is another, but we have realized that the environmental area is not balanced. The norms and expectations of society conflict with business and environmental considerations. That is why some companies are hesitant in initiating environmental action, because environmental initiatives cost, as any investment does, and might not give back tangible benefits.

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Preface

“Indeed, we are learning that the most effective method of addressing many of the worlds pressing problems is often to mobilize the corporate sector in ways that benefit both society and companies”

(Porter & Kramer, 2002, p. 5) We have our interest in business, and believe that it is possible to do well for society and the environment, while creating economic growth. The ever more increasing environmental awareness of society will enable socially - and morally responsible companies, which we want to be a part of in the future, to perform environmentally well. Our belief is that the growing environmental consciousness will transform society preference regarding the environment to a degree that no business leader can ignore it, and no company can be lead without it. Business and the correlation with the environment is appealing for us to deal with. We care about the environment and the problems we see on the news media. We would like to have a future for our families and take responsibility to not worsen the environmental situation.

In times like these, with economic constraints brought on by the financial crisis, we even more think that companies have to balance their economic interest with responsibility for society. It is time to stop focusing on the quarterly reports and earnings and start to drive business with a long-term view. We want to pursue careers, where we can make a difference environmentally, without forsaking economic growth, which is the engine of business – and society development.

Our dreams about performing environmentally well and at the same time create economic growth can for some seem idealistic, but we regard it to be possible, if it is done in a strategic way. By interviewing managers to get the real world know-how, we want to get a better understanding of the relationship between environmental performance and the context wherein companies exist.

In the near future when we are going to apply for jobs, the biggest determining factor will be if a company’s values are congruent with our own. Businesses must begin to solve problems in nontraditional ways and solutions to problems must include the environment and the moral obligations of the company. Our actions and behavior emerge from our mental capacity and if companies should behave differently, people in leading positions, within these companies, must alter their thinking patterns and take on new approaches to discover new business opportunities, which do not damage the environment.

The dominating perception of the environment in business life is seen as the improvement of the environmental performance of companies, and that it can only be done by sacrificing profit. Furthermore another common prejudice is that companies are just complying with norms and regulations within their industry, and nothing more.

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This master thesis will not revolve around the question as to how companies should behave, this master thesis will focus and discuss how three different companies handle the relationship between environmental performance and their particular business context. This leads to our own stand point, which is that companies should care for the environment and at the same time create economic growth. “(...) only 16 percent of [business] schools have incorporated business – environment subjects into their core curricula, (…) most students are not trained to consider environment as a key factor in business decision making” (Hoffman, 2000, p. xv). We are writing this master thesis because we would like to be a part of those 16 percent that in the future will consider the environment as a key factor in their business decisions.

Have This Been Discussed Before?

The environmental literature is written mainly by environmentalists that want to advocate “Green Businesses”. Most of the literature focuses on industrial improvements, which will improve the environmental performance of manufacturing companies. Extreme cases of pollution, emissions, and environmental accidents, which have damaged communities and the environment tremendously, are also described thoroughly in the literature. Companies which have benefited from improving their environmental performance are used as illustrations. It has come to our realization that the same case-studies are used in almost every book and examples that are illustrated are national or global accidents, which have gotten huge attention and enormous reactions. Most of the cases which are illustrated are also quite old. There exists no balanced or deeper debate in the literature; it is mostly worst – and best case scenarios that are presented, so the environmentalists can argue for their cause. Therefore we feel that there is a gap in the literature; something is missing in this debate. We believe that we found a particularly fruitful area for research, which thrilled our interest to write this master thesis. Therefore this master thesis is different, because we have critically analyzed the literature within the field. The research has taken us deep into the environmental business discussion and shed light on the contemporary behavior of Swedish businesses from a critical perspective.

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Table of Figures

Figure 1 – Thesis Outline (Own Creation) 3

Figure 2 – Qualitative Research Outline (Inspired by Bryman & Bell, 2005) 6 Figure 3 – Pollution Prevention Hierarchy, (Esty & Winston, 2006) 21

Figure 4 – Strategy Framework, (Esty & Winston, 2006) 24

Figure 5 – Convergence of Perspectives (Inspired by Hoffman, 2000 ; Porter & Kramer, 2002 ; Söderbaum,

1993) 29

Figure 6 – Determinants of Environmental Response, (Winsemius & Guntram, 2002) 30 Figure 7 – Development Stages in Environmental Policy Planning, (Winsemius & Guntram, 2002) 32 Figure 8 – Actors in the Environmental Arena, (Esty & Winston, 2006) 36

Figure 9 – Stakeholder Relations, (Abe et al, 1998) 39

Figure 10 – Financial Viability, (Abe et al, 1998) 40

Figure 11 – Viability of Life Sustaining Flows, (Abe et al, 1998) 41

Figure 12 – Environmental Responsibility Development, (Peattie, 1995) 47 Figure 13 – The Corporate Pyramid of Needs, (Winsemius & Guntram, 2002) 49 Figure 14 – The Organization within a Broader Institutional Context, (Hoffman, 2000) 54 Figure 15 – Mind Map of Interview Findings, Södra Cell (Own Creation) 64 Figure 16 – Mind Map of Interview Findings, IT-Company (Own Creation) 70 Figure 17 – Mind Map of Interview Findings, Elanders (Own Creation) 75 Figure 18 – Factors of Environmental Strategy Framework (Own Creation with inspiration of Winsemius &

Guntram, 2002) 83

Figure 19 - Factors of the Corporate Pyramid of Needs (Own Creation with inspiration of Winsemius &

Guntram, 2002) 85

Figure 20 - McKinsey Factors (Own Creation with inspiration from Winsemius & Guntram, 2002) 86 Figure 21 - Factors of Company Perspectives (Own Creation with inspiration from Winsemius & Guntram,

2002) 87

Figure 22 - Industry and Company Profile (Own Creation with Inspiration from Hoffman, 2000 ; Porter &

Kramer, 2002 ; Söderbaum, 1993) 91

Figure 23 - Factors for Environmental Performance (Own Creation with inspiration from Winsemius &

Guntram, 2002) 96

Figure 24 – The New Perspective on Environmental Performance (Own Creation) 97 Figure 25 – Environmental Performance on a National Level (Own Creation) 98 Figure 26 – Environmental Performance on a Corporate Level (Own Creation) 99

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1 Introduction

n this part we will discuss the importance of addressing the environmental challenge. We will present our topic and describe the purpose of the master thesis, which leads to a broad research question. Furthermore an outline of the thesis is given to provide the reader with an overview of the content of each part of the thesis.

1.1 Background

Not many years ago the environment was not considered at all in the business world, and pollution and waste had not been defined as something of negative impact. Nowadays companies are forced to handle the misdeeds of these inconsiderate businesses, which at that time claimed to not know better, or at least there was no pressure, externally or internally, for the companies to improve their environmental performance. Moreover companies struggle to keep up with increasingly strict regulations, customer and employee demands, society pressure, and at the same time delivering return on investments to their shareholders. Within this business context the tension of caring for the environment and at the same time being profitable is present, which is what triggers our interest in the topic. Our aim is to understand how companies are pursuing profit and taking responsibility at the same time with the environment as focus point.

The environmental state of the Earth has become an unavoidable topic that will influence us all one way or the other in the future. The damage to the environment is irreparable but action can be taken to not make the situation even worse, and from a business point of view it is quite a challenge. That is why our interest has been awoken on this matter, because we see the necessity of considering the environment in the strategic endeavors of a company, both for the sake of the environment but also for the sake of companies’ survival.

1.2 Research Problem and Purpose

Our backgrounds in economy and business development influence our view on the environmental performance of companies. For companies to gain competitive advantage from implementing environmental aspects into their strategy it has to create some form of return of investment, whether it is in the form of intangible – or tangible assets. In order for a business to survive it must be competitive, and the environment is one way for a company to improve its competitive abilities. That is why we will keep a constant link between environmental performance and profitability and not focus on purely philanthropic actions that are only connected to preserving the natural world and its resources. The business world must also be considered in this because the resources to make

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changes are there to be found. No other organ has the same power and this realization has set changes in motion. If the environmental aspect is not considered in the business world it will lead to a diminishing natural world and the resources will become even scarcer. The link between the business world and natural world is strong and the relation must be handled wisely. That is why we want to get a better understanding of how environmental success can be linked with business success.

An important factor is companies’ profitability; companies with a very good profitability can improve their performance by carrying out thoughtful environmental efforts which are adjusted to the company’s specific situation. This meaning that we believe that it is good business to perform environmentally well, if it is done in a good way, and what is good differs a lot depended on industry and stakeholder pressure. The motivation lies within the increased profit, increased legitimacy, increased brand value, self-value and the improved environmental impact. It has to do with the betterment of corporate conscience. This viewpoint provokes the question as to whether companies should bother with environmental strategies if no profit or competitive advantage is gained from performing environmentally friendly. Companies now have to perform environmentally well even if it does not yield any direct increased profit because an emerging environmental awareness demand more and more that companies should take responsibility. The demand from stakeholders forces companies to improve its environmental impact, while companies are trying to gain benefits by doing it and when the pressure is none existing the question remains, how much resources should companies allocate to improve their environmental performance. History has proven that it is the pressure from external stakeholders is the determining factor of the degree to which companies commit to environmental initiatives. Companies are restricted by their search for profit and by their resources while companies are facing pressures the way companies are handling this situation will determine how fast companies environmental performance will be improved. It is all interlinked and there is no real beginning or end, just the constant process of the business world interfering with the natural world and the people’s expectations and demands within this context, that forms a complex situation which companies now have learn how to handle. How much responsibility should a company take? And how much responsibility can companies take? And perhaps the most troubling question for managers nowadays, what can we gain by improving our environmental performance? Or is it an act of social responsibility?

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1.2.1 Research Question

We are interested in wherefrom companies feel the pressure to consider the environment in their actions, moreover, we want to get an understanding of how companies environmental business context is defined and how companies are handling the environment as a strategic way and how they take on a responsibility for the environment. This leads us to the research question as follows:

How can companies’ environmental context and – performance be described?

1.3 Thesis Outline

The thesis will have the progression as visualized by the model below. A short summary of each chapter, from the second chapter, is also presented in the following.

Chapter 2 - Methodology and Method

The second chapter introduces our thoughts on the scientific approach and the methods we have used in the research design and - strategy. Furthermore the method for data collection is discussed as well as the analysis thereof. Lastly we reflect on, and consider our choices, and what it has meant for the quality of our research.

Chapter 3 - Theoretical Framework - Part I

This chapter, which is the first part of the theoretical framework, begins with the introduction to the business context companies are facing nowadays, where different perspectives on the environment and business are presented. This chapter gives the reader an understanding of the basic theories existing in the environmental discourse.

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Chapter 4 - Theoretical Framework – Part II

The second part of the theoretical takes the reader further into a discussion of human and corporate responsibility when it comes to environmental action.

Chapter 5 - Empirical Data

The fifth chapter is the presentation of the empirical data, which has been collected by interviews with environmental managers at Södra Cell, Elanders and an IT-company. At the IT-company additional interviews where gathered and that information is also part of the empirical framework, along with the use of additional material provided by the company representatives.

Chapter 6 – Analysis

The analysis chapter gives a picture of the environmental business context for three different Swedish companies, in three different industries. Also this chapter connects the theory with the empirical data, and the three companies’ environmental performance is discussed and analyzed. Here patterns in the environmental performances of the companies are discovered and examined, but also comparative aspects are assessed.

Chapter 7 – Conclusion

Here we assess whether the broad research question has been answered. A discussion of the analysis result will also appear. Moreover the introduction of a new perspective of the environmental discourse will be discussed.

Chapter 8 – Suggestions for Further Research

As we have come across much literature on the environment and business we have also come across much information that is not included in the thesis. This we still find very interesting and therefore we give the reader the opportunity to look into these additional areas of environment and business.

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2 Methodology and Method

he methodology chapter explains our research approach and the methods we have used throughout the research for the master thesis. We will describe and argue for the choices we have made in terms of scientific approach, design of research, collection and analysis of data and the quality of our findings.

2.1 Scientific Approach

Our view of knowledge, research and the world can be described by the following quote; we see “(…) reality as constructed rather than given, and reason as the result of the ongoing resolution of contradictions rather than simply the application of fixed rules of logic” (O’Sullivan & Taylor, 2004, p. 38).

Our scientific approach is inspired by the hermeneutic and interpretive paradigm, which means that we as researchers are active and interpretative during the research. We are not interested in testing assumptions, we want to investigate and discuss the complex issue and relationship between environmental performance, profitability and competiveness and aspects pertaining to this. We as hermeneutic researchers are open, committed, engaged, and subjective when we seek to understand and interpret data. Our focus is on words, the spoken - and written language, which is important, because we aim to interpret language and texts with our mental capacity (Patel & Davidson, 2003; Andersen, 1998).

We are well aware of the fact that we as hermeneutic researchers will take with us our pre-knowledge which consists of impressions, thoughts and feelings into our research (Corbin & Strauss, 2008), and we acknowledge Patel & Davidson’s (2003) view point, claiming that the researcher’s pre-knowledge is not a hindrance. On the contrary it is an asset, which helps the researcher to understand the reality that is under investigation

According to O’Sullivan and Taylor (2004) we can never achieve answers that will provide us with the picture of the absolute truth, which implies that reality is constructed by ourselves, because as we are incomplete the reality will be as well (Alvesson & Sköldberg, 2008). “Life is infinitely more wondrous, complex, and incomprehensible than we can imagine for the simple reason that we are limited by our own capacities to make meaning, and hence, ever to construe a mental model fully adequate to the possibilities inherent in the universe” (O’Sullivan & Taylor, 2004, p. 41). What appears to be our finest task is to “(…) honor our givens while holding them up for scrutiny, to grasp our truths with what Goethe called “delicate empiricism” reliable enough to hang from, but always subject to revision” (O’Sullivan & Taylor, 2004, p. 41). Therefore we have been critical

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throughout the research, constantly questioning the data, the actions of our surroundings, and our own assumptions and interpretations of the reality we are a part of. We have therefore recognized that our own and others’ subjectivity is a big part of interpretation and analysis.

2.2 Research Design and Strategy

2.2.1 Stages of Research

Below the different stages in our research are visualized to give an overview to the reader. The stages are all explained in further detail in the following parts.

“(…) we begin where we are and in a way which we are moved and able to begin” (O’Sullivan & Taylor, 2004, p. 3). The citation describes very well the spirit we started our research with. We started out the research for the master thesis without knowing anything about the topic of corporate environmental performance. All we had was a genuine interest to know more, and from that starting point our research journey took off. We started with the gathering theory to get a comprehensible knowledge base, because environmental performance is a complex topic, which includes knowledge about chemistry, technology, industrial manufacturing, natural science, social ecology, deep ecology, green politics and – leadership, ecological economics, eco-psychology and – spirituality, industrial ecology, environmental science, the processes of life cycle assessment and design for the environment, cradle-to-cradle – and cradle-to-grave considerations, green washing, environmental change management, corporate culture and organizational behavior, environmental values and – ethics, environmentalism, stakeholder management, and much more.

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We went back and forth between the empirical data collection and the theoretical data collection, and our ambition was to learn as much as possible within the topic, and because of that we found the abductive approach to be the best suited method, where we could shift between empirical – and theoretic interpretations. The abductive approach, which can be explained as a mix of the deductive- and inductive method, lets the researcher act more freely, which we appreciated (Andersen, 1998 ; Patel & Davidson, 2003). The reasons for choosing the abductive approach is due to the possibility for us as researchers to go back and forth between the empiric data and the theoretical data, while at the same time performing analysis and interpretation. We saw that as a great benefit because we felt that adopting either an inductive- or deductive strategy would restrict us, rather than benefiting us. The use of the abductive approach enabled us to think “(…) at the edges, (…) value and incorporate complexity, diversity of views, open and expand the mind, promote creativity, and embrace diverse ways of knowing that include direct knowing through intuition and feelings“ (O’Sullivan & Taylor, 2004, p. 61).

2.2.2 Collection of Qualitative Data

The abductive approach is connected to collection of qualitative data, which supports our choice of doing an interpretive investigation. When a research is directed towards understanding the beliefs, discovering the feelings, or identifying a person’s perspectives, the researchers can never in advance know the answers (Kvale, 1997). This implies that those kinds of questions are most suitable for the abductive – and inductive approach, carried out by a research that is aimed at gathering qualitative information. We were focused on qualitative interviews where we wanted to interpret what our interview subjects expressed verbally, but also analyzing texts or materials we got during the interviews. What determined if we were going to have a qualitative or quantitative method depended on how the broad questions were formulated. With the qualitative method, just as we have argued as hermeneutics, we emphasize being interpretive (Bryman & Bell, 2005). The qualitative method was appealing because we want to interpret words, we want to come close to the respondent, we want thorough answers and we want to understand the context which can be hard to pose questions to. Our research design has been colored by a hermeneutic approach, by an abductive approach and by collecting qualitative data.

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2.3 Approach to Empirical Reality

We have divided the data collection process in two categories. One concerning the primary data, which is the core of the master thesis, this being the empirical data, gathered through semi-structured interviews (Bryman & Bell, 2005 ; Andersen, 1998). The qualitative information is the essential part of the research and therefore the source of this information must be considered well before a choice is made (Holme & Solvang, 1997). In our search for interview participants the criteria encompassed: People working with environmental- management and strategy, and companies with environmental impact, but also companies with less environmental impact was in our interest. Therefore we have chosen both service – and manufacturing companies, because we believe that the environmental challenge is present in all industries. The selection of companies is influenced by our broad research questions and by some convenience considering their locations, but for the most part the accessibility to good interviewees determined who we interviewed (Bryman & Bell, 2005). All of the companies are situated in Sweden, this due to our wish to perform face-to-face interviews. This was not possible with the interview with the environmental manager at Elanders, which therefore was performed over the phone.

The idea of distinguishing between primary- and secondary data is to clarify for ourselves the connection and relation between the data and the relevance it has to the research (Holme & Solvang, 1997).

2.3.1 Empirical Data – Primary Data

The empirical data has been obtained through semi-structured interviews. We have had a few but deep interviews to get the best understanding of reality as possible. The interviews are of great importance for the thesis argumentation, and the interview participants are chosen due to their positions, experience and the companies they work for. The respondents are all responsible for the environmental strategy of their company and therefore highly relevant for the master thesis. The ethical aspect in performing interviews is important; we cannot make judgment of others’ actions and opinions, because we are there to get their view of reality. If we would judge the interviewee we would influence our perception of the data (Corbin & Strauss, 2008). Interviews are complex social processes where we cannot be sure that the interview participant is giving us the true picture of his or her reality. There are aspects such as the interviewee’s interest in polishing his or her own image, the company’s image or simply giving the researchers the wrong impression of reality. Also to keep in mind is the political arena of organizations, where incentives and statements can have a certain purpose related to another context (Alvesson, 1999).

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2.3.2 Semi-structured Interviews

To learn of environmental strategy formulation and implementation, and how persons are thinking and their experiences in this respect, we believe that interviews are the best approach. The questions frame the interview but there is no particular order that must be followed throughout the interviews. This because each interview is unique in its own way, and surrounding factors such as atmosphere, personality of interviewee, and our own participation determines the outcome of the dialogue (Andersen, 1998 ; Alvesson, 1999). The interviews consisted of conversations controlled by a framework ensuring that we as researchers covered all questions but still allowed for additional and improvised questions to emerge. Alvesson (1999) emphasizes that the researcher may obtain information, ideas or perspectives the he or she has not reflected on earlier, by having a looser structure in the interview process. If space is given to allow for the negotiation of reality a common understanding can be accomplished, and in this way enriching the data. The emerging questions and ideas deepened the investigation of the interview respondent’s knowledge on the subject, which has a validating effect on the study (Holme & Solvang, 1997). With interviews as these we have to consider our roles. We realize that we are part of the data and that we will co-construct it with the interviewee (Finlay, 2002). Therefore we cannot separate ourselves from the data and the analysis thereof, and self-reflectiveness on the processes of data collection, the interviews, ourselves as researchers and the information given is necessary (Lincoln & Guba, 2000). According to Steedman (1991) nothing has in itself any meaning, the meaning or reality is constructed, which means that the act of interpretation constructs reality. All of this has been taken into consideration, while keeping in mind that our backgrounds and cognitive thinking patterns determine the direction of the research and also the interpretation of the data (Corbin & Strauss, 2008).

It is important to prepare the interviews well and consider the knowledge that has been built in order to be able to ask the questions revealing the deeper aspects of the study (Kvale, 1997). Alvesson (1999) addresses issues pertaining to the interview situation. He is concerned with the view on interviews that some people have as being simple tools to gather data, when they in his opinion are socially complex situations where many aspects should be considered while performing the interview, but especially in the following processing of the data. We agree to some extent, meaning that we are aware of the complexity of the interview situation. His view of careful analysis and reflection afterwards as being the main task for the researcher is also an interesting aspect. The preparation for the interviews was carried out with the particular interview participant in mind. The work with environmental strategy and environmental performance is what the interviewees have in common, but they work in different industries and have different job positions. We have then taken into account the perspective the interview respondent would have, based on the job position.

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Furthermore we will investigate the companies the interviewees work for to fully comprehend the information given at the interview.

We recorded the interviews on tape so that our minds would not be preoccupied with taking notes. We, due to our hermeneutic approach, realize that we are a part of the data construction, so we ourselves have to be sharp and present at each interview to allow for ideas to flourish and have a deep discussion of environmental strategy and environmental performance (Corbin & Strauss, 2008).

2.3.3 Conducted Interviews

The table below displays the interviews we have conducted.

Date Interview time span Interviewee

2009.04.15 14.00 – 16.15 Roine Morin, Environmental Manager, Södra Cell, Växjö

2009.04.16 10.00 – 11.00 Quality – and Environmental Manager, IT-company, Stockholm

2009.04.16 11.00 – 11.30 Director of Legal Function, IT-company, Stockholm

2009.04.16 13.00 – 13.30 Marketing Manager, IT-company, Stockholm

2009.04.16 13.30 – 14.00 Director of Personnel, IT-company, Stockholm

2009.04.16 14.00 – 14.30 Director of Sales, IT-company, Stockholm

2009.05.06 09.00 – 10.30 Lena Manners, Environmental Manager, Elanders, Malmö

Roine Morin is working as the environmental manager of Södra Cell, a subsidiary to Södra. He speaks on behalf of the whole corporation and its environmental initiatives. Lena Manner is representing the subsidiary of Elanders in Malmö, but she also includes the whole corporation and the environmental actions thereof in the interview. The employees at the IT-company referred only to the environmental initiatives of the subsidiary in Stockholm, where they are working, and only a few references were made to the subsidiary in UK and the mother company in Japan. The interviews with Roine Morin and the environmental manager at the IT-company were conducted at their offices. Due to the busy schedule of Lena Manners the interview with her was performed over the phone.

Our interest was in the interviewees’ perception of their companies’ environmental performance and how they interpret the companies’ environmental awareness and also the relationship between profitability and environmental performance. In order to do this we had to understand the interviewed persons’ perspectives, interpretations and values. This is important, because peoples’ behavior and actions are often determined by their perception of reality. Another aspect that is important in the qualitative data collection is the closeness to the interviewees. At the IT-company

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we conducted five interviews that gave us a good understanding of the employees’ shared perception of reality.

2.3.4 Theoretical Data – Secondary Data

The theoretical data is mainly derived from books and articles, from which we have collected the information constituting the theoretical framework for the master thesis. This is the already developed information on the topic and the theoretical framework is a result of our extensive research on corporate environmental strategy and other topics closely related to. We found it necessary to look into these topics as well, due to their connection and co-dependencies, but we have remained at the core, that is corporate environmental strategy. The surrounding topics have increased our knowledge base and given us a good understanding of the complexity businesses have to deal with today. The theoretical knowledge has also been of importance in the creation of questions for the interviews. We wanted to make sure that we would ask the “right” questions, but also be able to understand, interpret and analyze the information (Kvale, 1997).

2.4 Approach to Analysis

During the whole master thesis we will analyze our information from different perspectives, from our perspective as researchers and from the interview person’s perspective. We will as well analyze the information in detail (micro perspective) but also from a helicopter perspective (macro perspective), which means that we get detailed knowledge about the different themes and an understanding of the big picture of our research question. Being detailed, aware, and knowledgeable about the different parts and the whole of our thesis, makes us seeing more of the whole picture and recognizing the diversity of options and the important factors that plays a significant role within our investigation, and that is what has been appealing for us as researchers. The shifting perspectives will give us a multilayered conclusion in the end of the thesis. Kvale (1997) argues that shifting perspectives help to get as good an understanding as possible of the information, by getting detailed knowledge about the different parts and good knowledge about the data as a whole. When we read the transcripts from the interviews we constantly shifted perspective which gave us a better understanding of the interviewed person’s answers and viewpoints. The results depended a lot on our critical minds and at the same time our ability to understand the interviewed person. The hermeneutic approach has a similar pattern as abduction. This due to the shifting perspectives, the view on research as a process, the processes of going back and forth between empirical data collection and theory sampling, which includes an ongoing interpretation of data and collection of more information, which is referred to as the hermeneutic circle or – spiral (Alvesson & Sköldberg, 2008 ; Kvale, 1997). In Alvesson’s (1999) paper, eight conceptualizations are proposed that we as researchers should keep in mind when analyzing our empirical data. These we will consider when

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conducting our analysis. The hermeneutic researcher regards the diversity of different interpretations highly, which is enriching and colors an investigation in a certain way. We have not been searching for a formula giving the recipe to the absolute truth; we regarded the interpretation of a phenomena or situation. Depended on the depth of the research of each company we got detailed knowledge in each case and depended on that we interviewed different persons and companies we got a broad based understanding of the topic. We analyzed similarities and differences between the interviewed companies to understand the big picture. This been said, the hermeneutic approach fitted us very well, we wanted special knowledge about certain circumstances and phenomena and companies, and we also had the opportunity to come back and ask more questions, which is important for the hermeneutic spiral and the abductive approach. It is important because the hermeneutic approach argues for an ongoing process until saturation is accomplished within the topic (Kvale, 1997 ; Patel & Davidson, 2003).

2.5 Quality of Research

The quality of our research is determined by, not only, the empirical data we have collected, but also our interpretation thereof. What our minds and actions have contributed with to this research is intangible and yet comprehensible. The extensive theory collection has given us the knowledge to be on the same level as the interview participants. That can be considered both good and bad, because we are then locked in what we know (Weick, 1995). In this case however we would have been lost if we had not been so thorough in our theory collection and the processing thereof. The interview questions would have been naive and not deep enough.

It could be argued that we have been lacking focus, since we have changed research question, and thereby perspective more than once. As we have come to understand this process retrospectively, we have never had the need for a fixed research question. All along we have delved into the topic taking on different perspectives, which we came to understand, was filled with important aspects that could not be ignored in the overall context of the topic of environmental performance, strategy and competitiveness. We have not tried to direct our research towards a specific goal or towards a result we wanted to validate. We have followed the device; that we get what we inspect and not what we expect. I can also be explained as, we did not let presumed knowledge lead us through our research process, but we let the actual findings do (Smallwood, 2007).

At the interviews we brought a tape recorder to enable us to return to the conversation we had with the interviewees. Furthermore we gave the interviewees the possibility to read the transcripts of the interviews to verify that, what we have taken with us was in fact, their perception of reality. At the IT-company we interviewed five persons from different departments, which gave us a good picture of the organization. Furthermore Roine Morin, the environmental manager, working at Södra Cell

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has been working in the environmental field since 1986. More than 20 years of knowledge and experience gives a certain validity to his words and contributed to the quality of the interview.

We as researchers have discussed at length our different point of views on the interpretations of the data. We have gone back and forth between the tape recorded interviews, the transcripts and the theory to make sense of the information given. Alvesson (1999) has made us sentient of the implications there can be with interviews and the perception researchers can have of the interview process. He speaks of neo-positivists and romantics, where he believes none of these are good approaches. We have come to understand that we shared the perspective of the romantics, where the development of trust and active listening at interviews is highly valued by the researchers. By gaining awareness of other perspectives and approaches our own perception got influenced. We believe that this revelation has had a positive effect on the analysis and interpretation of the empirical data.

During our interviews and while analyzing the empirical data we considered the interviewees and the possibility of impression management wherein the interviewee (Alvesson, 1999). There is a risk in discussing the environment, because most people want to be perceived as ethically - and politically correct. This means that people might phrase their answers so they as persons and the company they work for come off as being better than they really are. To avoid getting the “wrong” picture we compared the empirical data with annual reports and marketing material from the companies. We have thereby gained a more truthful picture of the companies’ actual performance. This became especially apparent when inconsistencies between the interviewees’ words and the annual reports and marketing material occurred. Because of the interviewees’ critical view on the environmental performance of their respective companies, we consider the risk of impression management to be low.

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3 Theoretical Framework – Part I

he theoretical framework is divided in two parts. The first part will give a basic understanding of the environmental business context, and the second part will go deeper into a discussion of the overall context connected to environmental performance. The following chapter will work as the foundation for understanding companies’ environmental performance. We will first present the environmental business context.

“We stand at a critical moment in Earth's history, a time when humanity must choose its future…”

(O’Sullivan et al, 2004, p. 29)

3.1 Introduction to the Environmental Business Context

It has become customary that companies must explain and justify how they treat the environment. The environmental concerns vary a lot from company to company and the ten most discussed environmental issues are; climate change, air pollution, energy use, waste management, water emissions – and use, ozone layer depletion, biodiversity and land use, oceans and fisheries, deforestation, and chemicals, toxins and heavy metals (Esty & Winston, 2006). These are the most precious problems that society and business are discussing and are concerned about.

We live by nature’s resources and that is why we have to live inside its boundaries, unfortunately these boundaries have not been respected for many years. What is happening these days bears evidence of a change in the mindsets of the inhabitants of the Earth, which now changes the way companies are doing business.“Today, we have reached a point in our social development at which quality of life is being redefined in terms that challenge two general assumptions of industrial and economic growth: that the environment is (1) an endless source of resources and (2) a limitless sink for wastes” (Hoffman, 2000, p. 27). Some companies are taking more responsibility for the environment and the difference these companies make goes beyond what any government of any country could accomplish. They are more or less free of political struggles and are not restrained to a specific area, - they are global and their resources can benefit a larger area than their own surrounding community. “The simple fact is that environmental protection and economic strategy are now inextricably intertwined” (Hoffman, 2000, p. xvi), which emphasizes that the business economy and the natural environment are interlinked because “the environment provides critical support to our economic system – not financial capital, but natural capital” (Esty & Winston, 2006, p. 3). Some industries are highly dependent on natural resources and these industries contribute to the feared demise of the natural resources. “If you try to pull out any part of

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nature, you find it’s hitched to everything else in the Universe” (O’Sullivan & Taylor, 2004, p. 32), which means that every impact on nature starts with a reaction to an impulse, which sets in motion a chain of processes, or even negative spirals.

Where companies earlier just took the existence and abundance of natural resources for granted a shift has forced them to consider their role in both business world and natural world. Climate change “(…) is global, largely invisible, resulting from millions of sources over a century or so. Its magnitude and persistence make it debatable whether it can be controlled, let alone solved” (Makower, 2009, p. 14). Companies must change depended on the increasing environmental awareness and they should stop worsening the quality of the environment. Moreover, the challenge must be considered to be a part of a larger process that ultimately will reverse the negative spiral that is causing the climate change. What is needed are new thoughts and concepts that will make it possible to fully integrate business, ethics and the environment, so that one does not go without the others (Freeman et al, 2000).

Environmental problems are complex, dependent on their existence, whether it is local, regional, national and global. This makes the creation of corporate environmental strategies difficult since the marketplace is confused with conflicting beliefs and statements. Makower (2009) explains that“(…) distrustful consumers, proactive but humble companies, aggressive but often misguided activists, the media`s mixed messages, and the lack of norms and standards of what is “good enough” (…)” (Makower, 2009, p. 17) are the reasons for the complexity ruling the global marketplace. Furthermore the dangers of today encompass: “(…) exploding population growth, rapid depletion of resources, and ever more industrialization and urbanization (…)” (Hart, 1997, p. 99). The problems emerge from the massive population growth and the extreme economic development in emerging countries, which are political and social issues. Companies are the only organizations with the capabilities, resources, technological knowledge, global reach, and in the end the motivation to achieve a sustainable business world (Hart, 1997). Companies must therefore take account of how to“(…) devote resources to environmental initiatives in a way that satisfies their economic objectives” (Hoffman, 2000, p. 10).

The traditional view on the marketplace as Michael Porter’s generic strategy model suggests, there are two ways of gaining competitive advantage, this by product differentiation or by lowering costs (De Witt & Meyer, 2004). These conditions have changed dramatically, and the numerous possibilities that used to exist for companies to differentiate are disappearing due to the globalization. Gaining competitive advantage by outsourcing, and thriving on low labor cost, or having access to monetary resources and low-cost raw materials is not considered a competitive advantage any longer, since every company has the possibility to exploit that. “(…) Competitive advantage is becoming even more difficult to establish and maintain. This restructured landscape requires refined business strategy (…)” (Esty & Winston, 2006, p. 283-284). The environmental aspect of corporate

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strategy is therefore the variable that can decide the competitive advantage and differentiate the company. The businesses are bound to consider this disruptive marketplace, both to reduce risk and to seize upon emerging possibilities, and in doing so they must go “(…) beyond simple slogans or random acts of greenness (…)” (Makower, 2009, p. 14), the environmental strategy must be heart-felt by its executors, and the corporate values are in this sense the guiding lights shaping corporate behavior. By “going green” companies have found a new way to gain competitive advantage. Companies interested in obtaining competitive advantage must be better than their competitors. “And that means beating them in both areas: reducing exposure to climate-related risks and finding business opportunities within those risks.” (Lash & Wellington, 2007, p. 142). That is why the mindsets of leaders in companies today entail the environment and with the incentive to gain more than profit from the efforts, the benefit reveal itself as being competitively advantageous. This mindset has to be adjusted in terms of short-term and long-short-term expectations towards return on investments. Benefits of environmental investments are often realized over long periods, and the competitive advantage might not appear before a company right away and the short-term result may be more tempting to pursue (Reinhardt, 1999). That is why improved environmental efforts is considered to be at the expense of improved business performance by some companies (Winsemius & Guntram, 2002).

“In today’s world, no company, big or small, operating locally or globally, in manufacturing or services, can afford to ignore environmental issues” (Esty & Winston, 2006, p. 18). This statement is very strong, it could be said that the environmental challenge affects more and more companies. Even though, we can see an increasing responsibility among companies there are still a lot of companies which are not taking any larger responsibility for the environment. Companies’ consideration for the environment is of course dependent on core business and industry, and also how much risk and opportunity a company will come across in the pursuit of environmental performance. To keep in mind, there “(…) is one simple truth: our economy rests on the asset base of the natural world, not the other way around” (Esty & Winston, 2006, p. 288). This truth may be the only fully determined assumption about the environmental crisis, which companies can take action from.

Today’s stakeholders care more about the actions of companies than they have done in the past and are not merciful in their demands and critique thereof, which pressures companies to act. This leads us to another question of importance; how much responsibility should companies take for the environment? Companies have for many years seen the benefits from reducing “(…) costs, risks, and liabilities by cleaning up their acts well beyond what is required by law” (Makower, 2009, p. xii), and thereby extend their responsibility to proportions of no definition. As stated by Hart ;“(…) yesterday’s businesses were often oblivious to their negative impact on the environment and today’s responsible businesses strive for zero impact, tomorrow’s businesses must learn to make a positive impact” (Hart, 1997, p. 102).

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The global market where most companies these days exist is controlled by several forces and in recent years the environment has become an ever more present and influential business challenge. The complexity induces great uncertainty and restricts maneuverability of organizations that have to either adapt or create their specific playing field. Enhancing the complexity are the different opinions and interpretations of the environmental state of the Earth, where no common understanding has been established. “There is widespread disagreement about the scientific answers (…)” (Freeman et al, 2000, p. 9), but even in the communities where science is agreed upon the“(…) appropriate public policy” (Freeman et al, 2000, p. 7) is of great debate. The discussion may be dividing people, but what should be kept in mind is that the environmental impact of today is widespread and for the most part irrevocable. Earlier the general assumption has been that the environment would recover if efforts were put into it, but a lot of scientists nowadays believe that it is no longer possible. The scientists believe that we have crossed the border and there is no turning back.”Our activities increasingly have the potential to exceed the carrying capacity of specific ecosystems and perhaps even upset the global equilibrium, and thus ultimately threaten our very existence” (Winsemius & Guntram, 2002, p. xiii). Furthermore the fundamental values connected to the way we, as inhabitants of this planet, choose to live our lives is discussed, as are the incentives for corporate environmental strategies. Three questions addressing the issue of how we should live are posed: “By exploiting the Earth’s resources? By conserving the Earth’s resources? By living with nature?” (Freeman et al, 2000, p. 9). Three levels of leading lives and businesses with the environment are suggested and it is a free choice. If the business world can arrive at the conclusion that strategy and the activities connected to can be performed in an environmentally sensible manner, it will then enable reactions against the environmental crisis that has a more long-term perspective. What is crucial in this respect is the understanding of our role in the ecosystem. We are not superior entities above the laws of nature; we are equal to the natural world.

Environmental concern is now present in most decision-making processes. This goes for the whole range of people involved in any given business context. They are bound to consider the environment in their actions, and so a trend is detected in society as well. The human population is increasingly taking the environment into consideration in their behavior (Winsemius & Guntram, 2002). A corporate environmental strategy is the result of a company’s efforts put into performing environmentally well and the understanding of a company’s role in the business world and the natural world. Considering the environment in the further progress of a company gives benefits in the form of tangible and intangible assets. These assets are valuable for a company even though the level of measurability is diverse and at times non-existent. Environmental issues influence the businesses and therefore “companies normally frame greening in terms of risk reduction, reengineering, or cost cutting. But (…) when greening becomes part of strategy, opportunities of potential staggering proportions open up”

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(Hart, 1997, p. 100). The corporate environmental strategy must be derived from a risk assessment that fits a company’s particular situation but there is more to it than avoiding or preventing risk, and it is not good business to believe that the environmental problems will disappear, or that “(…) environmental problems [will] automatically create opportunities to make money.” (Reinhardt, 1999, p. 43). By approaching the environmental issues from the perspective of seizing opportunities, the end result will ultimately change into one of a more proactive kind. Environmental strategies might “(…) entail significant market, regulatory and scientific risks; they are not for every company – or even industry. The companies that appear to be succeeding are leaders in industries that face intensifying environmental pressure” (Reinhardt, 1999, p. 57). These companies are often larger ones with the resources and capabilities to do what it takes (Reinhardt, 1999). According to Esty and Winston (2006), companies that are taking the lead in environmental issues are generally more innovative and entrepreneurial than other firms. They anticipate issues before others and are also better prepared when something unpredictable occurs. They are better at finding new possibilities, lowering costs and decreasing the environmental impact. According to Esty and Winston (2006) benefits that leading environmentally aware companies gain are higher revenues, lower operational costs, lower lending rates, a more innovative corporate culture, and higher brand value such as credibility and trust from the customer. These leading environmentally aware companies are concerned with “doing the right things” as a way of managing environmental risk but also as a way of seizing opportunities brought on by the environmental issues. The management of the environment has changed from being merely an operational cost issue, which aims to meet the laws and regulations, to be an essential part of strategic management (Winsemius & Guntram, 2002 ; Esty & Winston, 2006).

Rules are changing and they are derived from society, which gives companies license to operate. Companies have to follow the demands from society otherwise they expose themselves to considerable risk. Society’s expectations are changing from being less “green” to taking action and position in the environmental debate. If a company shares the values of the surrounding community it is then easier to grow, which is visible in the statement; companies’“(…) environmental strategies provide added degrees of freedom to operate, profit, and grow” (Esty & Winston, 2006, p. 13) in the society they are situated. Today it is considered to be good business sense to build a company around values that are connected to the public opinion. A company having the “right” values attracts the best employees, strengthens the brand value and creates trust with customers and stakeholders (Esty & Winston, 2006).

“Companies, especially major corporations, have been gradually integrating environmental thinking into their operations, often because being greener means being more efficient and more profitable” (Makower, 2009, p. 16). Pollution is a sign of inefficiency. Waste and toxic emanations are byproducts of processes that are not properly carried out, and a company has bought the materials without considering the

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production process or the disposal of the remnants. This means lost profit. Therefore, it is not astonishing that the globalization results in companies competing to be hyper efficient, low-cost suppliers of goods and services, and that one byproduct could be a reduction in their emissions and waste, and may be of use as an input for another company’s processes (Makower, 2009). Leaders of companies must therefore consider their environmental performance as more than assessing risks. There are also the internal processes, which need to be adjusted. The emerging environmental challenges can turn out to become unexpectedly costly, this could for instance be costs linked to handling a sudden pollution outbreak. By working with environmental issues companies lower both financial and operational risk, which is defined by Esty and Winston (2006) as eco-efficiency, and explained as cutting waste and reducing resources, which in the end saves companies money. As stated by Reinhardt (1999, p. 58); “(…) environmental problems are best analyzed as business problems”, and this realization adds to the needed alteration of the common mindset towards the environment. Will compliance with the laws and regulations and simple risk avoidance be enough? Or should companies move further than that? Leaders of companies must make a choice as to whether or not they want to lead the market, and the environmental aspect has great influence in this respect (Makower, 2009).

Environmental responsibility has previously been taken less seriously by both companies and society. Those days are over, and the demands of society have increased, which results in a need for liability and transparency. The aspiration for businesses and consumers to deal with environmentally friendly companies accentuates that it is a necessity to disclose any success in environmental performance (Makower, 2009; Winsemius & Guntram, 2002). There is a dilemma in this aspect, when considering the level of environmental performance of a company. If a certain successful environmental action is promoted, what is to keep society from moving focus to what a company does not do in terms of their environmental performance? Although the paradox exists, companies must, in order to survive, reveal whatever action they have taken with the environment in mind. The only way to do it right, is to embody the actions and statements fully, so that the efforts are real and cannot be taken apart by scratching the surface of the corporate image. It could be beneficial for leaders to reflect on the readiness of consumers to buy, invest or apply for jobs at environmentally aware companies. And also pose the question of whether or not the consumers are adequately knowledgeable about the environment in order to comprehend the “green” marketing and communication delivered by companies. If the customers are not, companies have an entirely different task ahead than the reporting of green deeds; they must also make the consumers care and be informed (Makower, 2009).

The brand of a company has to appeal to the costumers’ emotional and physical needs. The environ-ment being a topic well discussed these days has the opportunity to connect to the customers in this

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way. There is already a significant part of consumers that would never buy a product if the product damages the environment, this portion of consumers are increasing and their importance for companies will grow and become even stronger in the future (Winsemius & Guntram, 2002).

“Environmental reputations are often defined for a whole industry” (Esty & Winston, 2006, p. 82). Companies should consider the reputation of the industry because it reflects back on the reputation of the firm. A better reputation for the industry will create an advantage over other industries. In some cases it can be more important to rebuild the industry’s reputation than to focus on that of a company. Industries set guidelines and minimum standards for social and environmental issues. There is a growing tendency that environmentally aware companies in the same industry starts to collaborate and create environmental - and social norms and guidelines.

Questions like, what is our environmental impact? Who is exerting environmental pressure on us? What are the competitors doing within the environmental sphere? What do the customers think about our environmental responsibility? How can we stay ahead of competition or avoid lacking behind with our environmental performance? These are questions companies are asking themselves to try to get an understanding of how companies should act in the business context they are part of (Hoffman, 2000).

3.2 Environmental Profile

Companies need to know which kind of environmental issues they are facing in order to take appropriate action, and by estimating opportunities and risks efficiently, they can create a company-profile that enables them to invest wisely and ensure companies’ survival (Packard & Reinhardt, 2000). Companies should know the severity of the environmental impact they have, which will help the companies to create a corporate environmental strategy. Moreover companies should consider themselves and the whole value chain, from the first sub-supplier to the end-consumer, and determine the different environmental aspects and challenges lying within these relations (Esty & Winston, 2006). Winsemius & Guntram (2002) suggest that companies should do a Triple Focus Scanning. The first step to take is to investigate which environmental problems that are the largest. The second step to take is to investigate, which environmental problems are existing in the region, where a company is settled and operating. The third step is to investigate, which environmental problems that occur in the industry and see if another company has the same problems. By using the Triple Focus Scanning processes and by forecasting upcoming problems, companies have a good map over the most important environmental issues that affect companies (Winsemius & Guntram, 2002).

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3.3 Pollution Prevention

Companies must alter their pollution activities from pollution control to pollution prevention. The purpose of pollution prevention is to minimize or eliminate waste before it is created. Strategies for pollution prevention consist of unremitting endeavors to decrease levels of waste and energy consumption (Hart, 1997). Traditionally thinking companies are working with reducing, reusing, and recycling throughout their manufacturing processes. Companies that are built around an environmental vision work with reimagining and redesigning their products and processes. Often a company performing in that manner is built, as a starting point, to have an extremely low impact on the environment (Esty & Winston, 2006).

3.4 Life Cycle Assessment (LCA)

If a company assesses the life cycles of the products produced, the progress can be measured and the environmental impact can be diminished. “Life Cycle Assessment tracks the environmental impacts of a product from its raw materials through disposal at the end of its useful life” (Esty & Winston, 2006, p. 169). By measuring the whole value chain a company can see where the largest improvements for the environment can be made. The benefit with LCA is that companies can concentrate on the most hazardous environmental issues. By understanding companies’ full impact on the environment the scene is set for creating a strategy (Esty & Winston, 2006).