Academic journal article
By Cunningham, James
Irish Journal of Management , Vol. 25, No. 1
INTRODUCTION - ENVIRONMENTAL DRIVING FORCES
There is an immediate pressure on all firms, particularly MNCs to meet stringent legal and regulatory controls, with individual executives being held responsible under criminal laws ior firms' environmental damage (Simmons and Cowell, 1993; Vari, 1993). Consequently, as Rondinelli and Vastag note:
. . . the threat of criminal prosecution is not the only force driving companies to develop environmental management systems. Increasingly, customers are reacting negatively to corporate environmental mismanagement, shareholders are abandoning companies caught in environmental crises, and financial institutions are including environmental risks in their assessments of loan requests. (1996: 107)
By correctly measuring and managing its environmental costs, a firm can increase product profitability (Fitzgibbon, 1998).
There are several green driving forces that firms face, including specific disasters, public opinion, credibility pressures, regulatory pressures, consumers, shareholders' internal pressure, legislation, competitive pressures, ethical investments, media interest, supplier pressures, the rising costs of mishaps, government regulators, NGOs, scientific evidence, market pressures and new opportunities (Clark et al., 1094; Fitzgibbon, 1998; Jose, 1996; Hitchens et al., 2000; Maxwell et al., 1997; Peattie and Ratnayaka, 1992; Preston, 2001; Rugman andVerbeke, 1998; Schot and Fischer, 1993).
The leading forces for environmental change come from green consumers, pressure groups, insurance groups and green investors (Azzone and Oertele, 1994). Green consumers have significantly influenced new product introductions, product design, product packaging and advertising approaches (Coddington, 1993; Meffert and Kirchgeorg, 1994; Ottman, 1992). This view is further supported by Preston (2001) who states: "it is becoming increasingly apparent that environmental factors are becoming a purchasing decision differentiator." In addition, growing pressure exerted by regulators and public opinion in shaping firms' responses to environmental issues. Fitzgibbon (1998) refers to these factors as the major "sticks" in getting firms to address environmental issues. The main interest groups in firms' environmental issues include government, employees, suppliers, customers, investors and local communities. In essence, these groups mediate in the process of environmental management and influence the nature of pressures and the response (Williams et al., 1993). The response from policy makers and practitioners to the nature of environmental pressure has been to broaden out the choice of policy instruments for the protection of the environment. This is reflected in the adoption of more innovative policy instruments by national governments. The broadening out of policy instruments from command and control includes market incentive mechanisms and flexible regulations. This is in response to the failure of the market in relation to the environmental protection (Clinch, 2000). One of these innovative policy responses has been voluntary approaches.
VOLUNTARY APPROACHES -THE PRACTITIONER'S RESPONSE
Environmental voluntary approaches as an instrument for environmental management are preferred by industry but greeted with some degree of scepticism hy the environmentalists and other stakeholders (EEA. 1907: 50; Jenkins, 1995). Arguments are made that voluntary approaches are preferred by industry as it buys them time and delays the implementation of rigorous environmental regulations (Bizer, 1999; Bizer et al., 1999). Environmentalists are concerned that voluntary approaches lead to a lessening of environmental protection standards. From a game theoretic analysis perspective, Segerson et al. (1908) and Schmelzer (1990) show that the environmental standards achieved under a voluntary approach may be less than under command-and-control regulations in certain circumstances. …