Managers in many industries are coming to the realisation that in order to remain competitive in the rapidly changing world economy they must learn to think globally. In order to become more competitive through striving to achieve international standards of management performance, managers must factor in explicitly to their management processes the environmental and social impacts of their operations. The upsurge of concern for environmental and social risk management is global and now plays a major role in corporate strategic decision making in leading international firms in many industries.
In order to succeed in the global arena, certainly in North America and western Europe and increasingly in the 'developing' world, companies must increasingly turn the public's concern for the environment to their corporate advantage (Cairncross 1992, Hart 1992, 1997, Klassen and McLaughlin 1996, Reinhardt 1999, Russo and Fouts 1997, Shrivastava and Hart 1992, Sharma and Vredenburg 1998, Vredenburg and Westley 1997, Sharma, Pablo and Vredenburg 1999). The public's concern for the environment presents firms with market opportunities (Cairncross 1992, Reinhardt 1999, Westley and Vredenburg 1991), cost-saving opportunities (Porter and van der Linde 1995), or with actual or potential environmental legislation in the various jurisdictions in which the firm operates (Cairncross 1992, Porter 1991).
Porter argues that environmental protection and its proper corporate response can benefit a country's competitiveness. Countries with strong national public concern for environmental protection, or strict environmental regulations, often lead in export of affected products and services (Porter 1990, 1991). Companies whose home markets are relatively lax with respect to the protection of the natural environment have difficulty competing in the world's richest and most attractive markets where environmental concerns are highest. When in the late 1980's, for example, Germany set limits on residues of chlorinated organics in papers, its own producers could generally meet the standards but Canadian firms could not. Canadian firms expected similar limits in their domestic market and quickly switched to low chlorine techniques (Cairncross 1992). When a British publishing firm learned that their Canadian paper supplier was using virgin old growth forest, they cancelled their supply contract (CBC News, October 1992). British Columbia's environmentally-inspired Forest Practices Code, in effect for almost a decade, has motivated the B.C. forestry industry to achieve higher environmental standards. Two B.C.-based forestry firms, Canfor Corp. and Interfor Corp, both have environmental certification from the Geneva-based International Standard's Organization (ISO) (Gibbon 2000). This certification has resulted in increased market access to major markets and major retail chains in those markets, such as Home Depot, who demand that producers log in environmentally friendly ways (Gibbon, 2000).
Globally competitive companies will increasingly find themselves facing different environmental and social standards in different countries. World standards will, however, tend to be driven by the standards set in the larger, richer markets, which also tend to have the highest environmental and social standards. California's strict standards on car emissions have, after a lapse of time, become those of the U.S.; Germany's packaging laws increasingly have become Europe's (Cairncross, 1992). Multinational firms from the 'developed world' are finding, in a world of instant electronic communications and an increasingly active community of international non-governmental organisations (NGO's) (Economist, 2000) that they are expected to comply with the 'developed world's' highest standards regardless of where their operations are found. Nike, Shell, Enron, Monsanto, and McDonald's each were heavily criticised by critics abroad and in their home markets over the past few years for poor management decisions regarding environmental and social issues in their global operations (Economist, 2000). …