Benefits of Environmental Stewardship

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Benefits of EnvironmentalStewardshipTor Guimaraes a & Osam Sato ba Tennessee Technological University , Post OfficeBox 5022, Cookeville, TN, 38505, USAb Tokyo Keisai University , Tokyo, JapanPublished online: 20 Oct 2008.

To cite this article: Tor Guimaraes & Osam Sato (1997) Benefits of EnvironmentalStewardship, Journal of Transnational Management Development, 2:3, 59-80

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Benefits of Environmental Stewardship: Comparing U.S.

and Pacific Rim Companies Tor Guimaraes

Osam Sato

ABSTRACT. Environmental sensitivity has gained much attention in business organizations; however, there is little empirical evidence on the business benefits from environment oriented measures. Some of the many promised benefits from environmental sensitivity are categorized and rated. Thc framework proposed by the Management Institute for Environment and Business (MEB) is used to assess company environment stcwardship. A pretested questionnaire was uscd to collect data from 66 business organizations in the United States and from 3 1 organizations in Pacific Rim nations. These organizations were known to have undertaken at least some "green business" activities. Thc results suggest that companies showing higher degrecs of cnvironrnent stewardship will derive greater business benefits than organizations which aim at minimum compliance with government regulations in this area. While, compared with Ameri- can organizations, on the average the Pacific Rim companies show significantly less environmental stewardship and derive significantly less benefits from it, 'their efforts in the area have also been re- warded. [Arlicle copies available for a fee fmm The Haworlh Documeni Delivery Setvice: 1-800-342-9678. E-mail adduess: [email protected]]

KEYWORDS. Environmental Stewardship, Green Business, Busi- ness Benefits, Pacific Rim Versus USA.

Tor Guimaraes is J. E. Owen Chair of Excellence. Post Ofice Box 5022. Tcnnessec Technological University, Cookeville, TN 38505. E-Mail: ~ ~ 5 5 9 6 6 TNTECH.EDU

Osam Sato is affiliated with Tokyo Keisai University, Tokyo, Japan. Address correspondence to Tor Guimaraes.

Journal of Transnational Management Development, Vol. 2(3) I996 O 1996 by The Haworth Prcss, Inc. All rights rcscrved. 59

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INTRODUCTION

Following the Exxon Valdez oil spill, six oil and chemical companies were called on by public employee pension funds holding 13.5 million of their shares to place environmentalists on their corporate boards (White, 1990). In 1991, President Bush called for the private sector to undertake initiatives for environmental improvement. As a result, a Presidential Commission on Environmental Quality com- posed of twenty-five business, environment, foundation, and aca- demic leaders demonstrated how the Total Quality Management (TQM) concept could be used as a method for achieving pollution prevention. Thus, environmentalism became linked to one of the most widely accepted managerial concepts of today, and eleven corporations volunteered to participate by implementing twelve projects. These companies included AT&T, Chevron, Dow, DuPont, Ford, GE, International Paper, Merck, 3M, Proctor & Gamble, and US Generating Company. One of the key findings is that Total Quality Management and pollution prevention are complementary concepts. In the aggregate, the twelve projects accomplished the following: eliminated millions of pounds of pollutants from manufacturing processes; saved substantial sums of money; increased efficiency or effectiveness of the production process; improved the quality of products and services; enhanced public perception of the company or its products; and improved employee morale (Presi- dent's Commission on Environmental Quality, 1993).

While getting their companies more involved, top executives are increasingly also personally concerned with environmental issues. CEOs are asking their boards to take greater oversight of company environmental management'practices because of the competitive advantage associated with environmental stewardship (Baker, 1993). Jane Hutterly of S.C. Johnson Products suggests that it is difficult to distinguish between environmental stewardship and competitive advantage (Baker, 1993). A large majority acknowl- edges the importance of moving aggressively to ensure a clean and safe environment. In Sheridan's (1992) survey of 318 U.S. executives, most (91.2 percent) recognize the importance of "being green" and see a strong connection between good environmental stewardship and creating the right corporate image in the market-

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place. Of the 135 company presidents and CEOs in the sample, 45 (33 percent) reported they now spend a great deal more time on environmental issues.

Some of the ways executives.can stay proactive in the field are through increased vigilance, eliminating polluting activities, developing environmental service capability, and forging links with environmental lobby groups (Clark, 1990). International Chamber of Commerce President Hugh Faulkner said recently that the single most important factor in corporate environmentalism is whether the chairman is convinced that it works (Kleiner, 1990). McKilben (1990) suggests that CEOs should listen to the more radical environmentalists as a means to develop antibodies that point out environmental problems (infections) in the firm's system, and "that the infamous business criminals of the next decade will not be from Wall Street, but they will be corporate executives who didn't listen to the environmentalists' warnings." At the macro level, several industry-wide initiatives in environmental management have recently begun. The International Chamber of Commerce's Business Charter for Sustainable Development set forth 16 principles to guide companies in building forward-thinking environmental management programs. More than 1,000 companies have signed onto the charter since it started in 1991 (Anonymous, 1992). The U.S. chemical industty has a responsible care program which calls upon manufacturers to increase communication with the general public and to make continuous improvements in their dealings with the environment (Kiesche, 1992). In a similar fashion, many public utilities are involved in environmental stewardship. Leading the charge, as Indiana's largest utility, PSI Energy recently created the Department of Environmental Stewardship, which is charged with the company's broader responsibility as an environmental citizen (Rogers, 1992). Similarly, the utility giant Tennessee Valley Au- thority (TVA) is showing heightened concern with the environment. In July 1993, as Johnny Hayes took the oath of ofiice as TVA's twenty-third director, he defined one of his greater challenges to be the balancing of efficient economic develovment with environmental programs-(~he Knoxville News sentinel: 1993).

While the need for environmental care is undeniable for the wide variety of reasons discussed above, and the reaction to this need by

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the corporate world seems rather impressive, many authors find that much of what is really going on is rather obtuse and misleading to the public. Scarlett (1992) points out that all too often the advice provided by various groups and government agencies, while well- intentioned, is rather simple minded and often wrong. A sharp article by Garfield (1991) points out that "there are any number of ways to be crassly opportunistic about the green revolution, and marketers have wasted no time finding them." Exacerbating this credibility problem is the lack of empirical evidence which is being overwhelmed by personal opinions and limited case studies showing what individual business organizations are doing. There is need for research addressing the aggregate impact of such action, and whether or not the business organizations involved are benefiting from their environment oriented measures. Evidence for the latter is particularly important if the business community is to wholeheart- edly embrace the green movement, rather than be dragged into it by public pressure and government regulations.

This study was designed with three main objectives: first, to identify and rate the business benefits companies are deriving from different degrees of environmental stewardship; second, to test the main hypothesis that companies showing higher degrees of environment stewardship will derive greater business benefits than organizations which aim at minimum compliance with government regulations in this area; third, to compare American companies and their Pacific Rim counterparts along these benefits and also in terms of their environmental stewardship.

CONCEPTUAL FRAME WORK

After an extensive search of the business management and environment oriented literature areas, no previously established theory or measures were available to support our study objectives, except for the MEB framework for environmental stewardship discussed below. Therefore, this study attempted to develop and perform some preliminary validation of the measures for two constructs: business benefits from environment sensitivity and environmental stewardship. The study is not designed to thoroughly validate these

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measures but to explore relationships between them and among their components.

E~ivironmental Stewardship

The Management Institute for Environment and Business (MEB) has proposed that environmental strategies vary along a spectrum of pro-activism, and can be grouped in three broad categories: (1) the environmentally responsible citizen, (2) the economically rational environmentalist, and (3) the environmental steward (MEB, 1991). Some of the items in these categories are not mutually exclusive. Monsanto's Nicholas L. Reding presented a practitioner's view de- scribing three similar stages: (I) the compliance phase, (2) environmental stewardship, and (3) sustainable stewardship (Reding, 1992). Monsanto's experience provides illustrative examples for the MEB framework.

The first MEB category, the "environmentally responsible citizen," includes firms who commit to compliance with existing regulations, are reactive, and view "green" as being politically smart. In this group, the product (and its corresponding impact on the environment) does not change; the marketer's job is to more effectively sell the positive environmental attributes that the product possesses. Further defining this period, Reding points out that the "compliance period" started in the 1970s and contributed much needed balance and direction. However, it had many disadvantages, including: a focus on an end-of-pipe treatment, a passion for the present, discouraging spending on the future, and a com- mand and control philosophy-where the goal was defined and steps spelled out-stifling creativity and innovation. In summary, this period (still the norm for some companies) created distrust and suspicion among environmentalists, companies, and government (Reding, 1992).

The second MEB category, the "economically rational environmentalist," is characterized by firms who take environmental action beyond regulations, but only when it pays to do so. This middle of the road approach is conducive to a more proactive strategy to reformulate, repackage or otherwise change products or processes. Examples given by MEB include: development of an organization- wide recycling program, product design changes to achieve waste

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minimization, community-oriented programs like environmental education or support for local environmental action (MEB, 1991). The underlying theme is that environmental action is implemented, often beyond regulation, only when it pays to do so, and then the public is informed of these changes in either product-based or corporate-based literature.

The third MEB category, "the environmental steward," is characterized by firms who take environmental action based on a set of values, and consistently go beyond regulations (MEB, 1991). The firms in this group make environmental responsibility a priority at least equivalent to financial profitability, often constraining short term profitability for long-term benefits. In general, the "steward" extends its environmental actions beyond economic rationality. For Monsanto this period was labeled phase 2 but was still called "environmental stewardship." Beginning in 1986, with SARA Title 111, the environmental law requiring annual reporting of data, environmental protection went into higher gear. Advantages of this period include its focus on quantitative goals to reduce pollution. For ex- ample, in 1988 Monsanto publicly committed to reducing pollution 90 percent by 1992. According to independent sources, Monsanto was pronounced "on target" in early 1992 (Stead, 1992). While this process was called a "breakthrough in approach and commitment," several disadvantages were also identified, including high cost and possible competitive weakness resulting from competing with firms who do not incur the "voluntary costs" associated with pollution prevention (Reding, 1992).

Reding (1992) defines phase 3 slightly different from the MEB category, calling it "sustainable stewardship" characterized by adding value by virtue of the firm's environment expenditures to help sustain environmentalism. This fits nicely into MEB's "stewardship period" because it helps define what environmental values a firm considers important. By "added value," Reding means being so sensitive to customers' environmental needs and con- cerns that the firm finds innovative ways to help those customers, hopefblly gaining a competitive advantage in the process. While progressing in the right direction, the process is creating considerable added value, including the results from 170 Monsanto em-

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ployee suggestions to the Awards Program for Environmental Achievement.

The literature contains a large number of reasons for business organizations to seek environmental improvements, including survival and profits. Due to public pressure and litigation, governmen- tal regulations and compliance monitoring are getting tougher every day. Further, many companies have discovered that reducing waste means money saved, and that, in many cases, trying to be environmentally sensitive created profitable commercial opportunities. The old fashioned business approach to environmental decisions always weighted costs and tangible, immediate benefits. On the other hand, according to Buchholz, Marcus, and Post (1992), "Environmental- ists point out that nearly every economic benefit has an environmental cost and that the sum total of costs in an affluent society often exceeds the benefits." Perhaps a more constructive approach is to focus on identifying, measuring and disseminating information on the business benefits of environmental programs. This may be most beneficial to the environment and to the companies involved. Further, this approach can be particularly fruitfd because corporations have special knowledge, expertise and resources which can be invaluable in dealing with the environmental crisis (Hoffman, 199 1).

The Relationship Between Environmental Stewardship and Business Betrefis

Organizations operating under the "minimum compliance with government regulations" approach tend to spend little time and attention exploring the business possibilities under environmental stewardship. This "fire fighting" mode to environment responsibility leads to environmental disasters such as the Exxon Valdez case mentioned earlier (White, 1990). On the other hand, organizations whose managers have committed to a more systematic exploration of the business possibilities behind their environmental programs tend to derive more substantial benefits from such programs (Presi- dent's Commission on Environmental Quality, 1993; Sheridan, 1992; Baker, 1993). Therefore, the following hypothesis is tested:

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Companies showing higher environmental stewardship will derive greater business benefits from their environmental programs than organizations reporting lower environmental stewardship.

Comparittg Atnerican arid Pacific Ritn Compatties

This comparison serves two useful purposes. First, it tests the widespread belief that company environmental programs are more advanced among American companies than their Pacific Rim counterparts. This would be primarily due to the more advanced code of law and government regulations addressing environment protection in the United States. Second, assuming that the hypothesis proposed above holds true for both company groups, the results enable a broader generalization to companies in developing countries, as many of the Pacific Rim countries are, as well as to organizations in mature industrialized nations such as Japan and the United States.

METHODOLOGY

This section describes how the major constructs addressed in this study were measured, the sampling process used, the content validity of the measures, the sample demographics, and the data analysis procedures used.

Cotistruct Measurett~ent

Business Benefits: The many claimed and/or promised benefits from environmental programs identified from the literature are presented in Tables I, 11, and 111. Respectively, these benefits can be grouped intuitively into three broad categories: management and personnel, operational efficiency, and external benefits. The refer- ence (literature source) for each item is shown in the first column of the tables. Respondents were asked to specify the extent to which their companies had derived each benefit from their environmental programs using the scale 1 = not at all, 2 = little extent, 3 = some extent, 4 = considerable extent, 5 = great extent. The average for the benefits under each broad category was its overall measure. The measure for total benefits was the average for the 29 items.

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TABLE I. Comparing US. and Pacific Rim Companies: Management and Personnel Benefits

Frankel (1 992) ) a. Improved Employee Morale 1 2.94 (1.07) 1 2.27 (.96) ( .001

Dumaine (1 983) ( b. Fostered a more positive organizationai culture 1 2.97 (1.08) 1 2.13 1.96) 1 .OD1

Source

)I Canon and Moulden; Mega;l c. Promoted employee involvement 13.11 (1.17) 1 2.42 (.92) 1 .001

II Ca~mcross (1991 ) I I I I Frankel (1992) ( d. Resulted in fewer disgruntled employees 1 2.47 (1.04) 1 1.90 (1.01) 1 .01 II

Benefits

U.S. Ratings

(n = 66)

Avg. (S.D.)

NWF (1 992)

Schlossberg (1993)

Gilges (1 991)

Mega (1 992)

McManus and Carter (1991)

Asher (1991)

Lustig; Cross (1992) ,

Asher (1991)

Asher (1991)

I

PacRim Ratings

(n = 31)

Avg. (S.D.)

Rating scale: 1 = not at all. 2 = little extent. 3 = some extent. 4 = considerable ewtent, 5 =great extent

e. Stimulated re-engineering

1. Stimulated innovation

g. Created management development opportunities

h. Created employee training opportunities i. Erimuraged employee/employer mmmunication

j. Strengthened the informal organization

k. Contributed to problem solving skills

I. Lower employee absenteeism

m. Lower employee turnover

T Tests

2 Tail

p value

2.42 (1.28)

2.91 (1.21)

2.52 (1.21)

2.83 (1.26)

2.96 (1.23)

2.70 (1.14)

2.71 (1.20)

1.79 (1.12)

1.80 (1.10)

-

1.77 (1.02)

1.90 (1.01)

1.94 (.96)

2.19 (1.20)

2.19 (.98)

1.90 (.98)

2.07 (1.09)

1.36 (XI)

1.39 (57)

- -

.02

.001

.02

.02

,001

.001

.01

.02

.02

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TABLE II. Comparing U.S. and Pacific Rim Companies: Operational Efficiency Benefits

Rating scale: 1 = not at all, 2 = little extent, 3 = some extent. 4 = considerable extent, 5 = great extent

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TABLE Ill. Comparing U.S. and Pacific Rim Companies: External Benefits Derived

3

r

Source

Fierman (1991)

Frankel (1992); Freeman (1 990); Dunlap and Scarce (1991)

Chase; Asher (1991)

McManus and Carter (1991)

Asher (1991); Miles and Munilla (1993)

Asher (1991)

Smyth (1991); Porter (1 986)

Asher (1 991); Winters (1990); Engleberg (1992)

Frankel (1 992)

Cornish (1991); O'Leary (1991); Penifer (1990)

Rating scale: 1 = not at all. 2 = l i e extent. 3 = same extent, 4 =considerable extent, 5 = great extent

Benefits

a. Increased sales

b. Improved customer feedback

c. Results in a perceived closeness to customer

d. Easier new product implementation

e. Enhanced local competitiveness

f. Enhanced regional competitiveness

g. Enhanced global competitiveness

h. Strengthened company's image

i. Improved customer loyalty

j. Increased spinoffs from working with 3rd P ~ W grows

U.S. Ratings

(n = 66)

Avg. (S.D.)

2.08 (1.10)

2.46 (1.13)

2.33 (1.06)

1.97 (1.12)

2.23 (1.23)

2.11 (1.22)

1.92 (1.11)

2.94 (1.21)

2.54 (1.13)

1.96 (1.07)

PacRirn

Ratings (n = 31)

Avg. (S.D.)

1.65 (28) 1.97 (1.08)

1.90 (1.08)

1.52 (35)

1.61 (.96)

1.58 (.96) 1.65 (1.20)

2.42 (1.29)

1.90 (.98)

1.48 (.72)

T Tests

2 Tail

p Value

.06

.05

.07

.03

.02

.04

.27

.06

.01

.01

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Environmental Stewardship: Environmental stewardship was measured with the 21 items shown in Table IV, adapted from the MEB document (1991). Respondents were asked to rate each item with a Likert-type scale ranging from (1) completely disagree to (5) completely agree. Items were presented in the form of state- ments such as "Your organization is committed to compliance with existing environmental regulations," or "Your organization has clearly defined environmental values."

Items were subjectively recoded as specified in Table 1V before being added to compute the company degree of environmental stewardship. The following rationale was used for recoding: items 3 and 5 were recoded to zero because they contribute nothing toward environmental stewardship. The same can be said for ratings of 1,2, and 3 (completely disagree, etc.) for any item in Table IV. For items 1, 2, 4, 6, and 14 the rating "somewhat agree" was assigned 1 point toward environmental stewardship, and "completely agree" was assigned 2 points. Items 1 through 6 characterize the MEB's responsible citizens group. For items 7 thru 15, which characterize MEB's rational environmentalists, "somewhat agree" and "completely agree" were coded 3 and 4, respectively; except for items 14 and 15 which the researchers felt contributed less toward environmental stewardship. For items 16 through 21, characterizing MEB's environmental stewards, the recoding was to 9 or 12 points for "somewhat" or "completely agree," respectively. Table V shows the average, standard deviations, and per- centage of respondents rating (before recoding) for each stewardship item greater or equal to 3 (neither agree nor disagree). The average for the recoded 21 items was used as the measure for environmental stewardship.

Saniplitig Process

A questionnaire was developed and pretested for readability purposes. After modifications, data was gathered over a seven month period during the fall of 1993 and winter of 1994. Specifically, questionnaires were mailed to 197 companies in the Southeast- ern United States and 163 in Pacific Rim nations of Japan ( 7 9 , PRC (56), Singapore (28), Korea (26), Thailand (12), and Malaysia (2). The mailing lists represent convenience samples developed from

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Tor Guimaraes and Osam Salo

TABLE IV. Recoding Degree of Environmental Stewardship

Rating Scale: 1 = completely disagree, 2 =somewhat 1 1 1 2 1 3 1 4 disagree, 3 - neither, 4 = somewhat agree, 5 =completely agree

YOUR COMPANY: 1. is commilted to compliance with existing

environmental rewlations -

2. has a reactive environmental policy 1 0 1 0 3. considers environmental reaulation an exoense 1 0 I 0 - I I

4. perceives "green" as being politically smart 0 0

5. uses labels that stress "green," without changing 0 0 the product

6, has a public relations office that stresses. 0 0 "our products aren't that b a d

7. has a pro-active environmental policy 0 0

8. willingly reformulates products or processes 0 0 to be oreen -

9. willingly repackages products to be green 0 0

10. has developed an organization-wide recycling 0 0 oronram . -

11. implements product designs that achieve waste 0 0 minimization

?coded Valu

12. sponsors environmental education 1 0 1 0 1 0 1 3 I I I I

13. supports local environmental action 1 0 1 0 1 0 1 3 14. Informs the oublic after imolementina "areen" 1 I I 1 " -

changes 0 0 0 1

15. acts "green" beyond regulation when it pays to do so 0 0 0 2

16. has clearly defined environmental values 1 0 1 0 1 0 1 9

17. takes environmental action based on a set of values

18. consistently goes beyond what regulations require

19, constrains short term profitability for long term benefits

20. makes environmental responsibility a priority at least equivalent to financial profitability

21. extends its environmental actions beyond 0 0 0 9 economic rationality

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TABLE V. Sample Demographics

(A) Company Gross Revenue PacRlm ("10) ("a

0-50 Million

51-100 Million 15 (22) 2 (6)

I I 101 -300 Million 1 21132) 1 6119) 11

II 301-600 Million 12 (18)

601-1 Billion I 6 (91 9 (29)

(C) Industry Phase I Growing 1 32 (48) 1 17 (55)

11 Mature 1 19(29) 1 8(26) 11

I I Declining 15 (22)

1 66 31

several sources including the authors' personal contacts within the organizations.

A total of 99 responses were received in time for data analysis. The response rate of 25 percent is deemed acceptable for exploratory studies of this kind. The sample includes companies from the

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US. (66), Japan (1 I), PRC (6), Singapore ( 9 , Korea ( 9 , Thailand (3), and Malaysia (1).

The Content Validity of the Measures

The content validity of,the stewardship measure is .fairly well established by the level of expertise developed by the MEB in environmental matters. It is not likely that experts at the institute left out important items from the environmental stewardship construct. Company environmental affairs coordinators who re- viewed the questionnaire for this study confirmed that through the pilot test. The content validity of the business benefits measure was ensured by the thorough survey of the literature to develop a com- prehensive list of items. Again, the pilot test for the questionnaire confirmed .the content validity for this measure.

Sample Description

As shown in Table V, the companies in the American and Pacific Rim samples include a wide variety of organizations in terms of gross revenue and whether the industry is growing, mature or declining. The industry sectors represented in both samples include: manufacturing, retailers, financial services, wholesale, utilities, and health care. The Pacific Rim organizations, on the average, tend to have larger gross revenues, otherwise no sample bias is apparent.

Data Analysis

Given the exploratory nature of this study, and. the relatively simple theoretical model being tested, the statistical data analysis procedures used were straightforward. Averages and standard deviations for the component items and the major constructs were calcu- lated. Cronbach's Alpha coefficients of internal reliability were computed for the environmental stewardship scale, for the overall business benefits scale, and for the latter's three sub-components. To compare American and Pacific Rim organizations, t-tests along each promised benefit and environmental stewardship item were

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computed. Last, to test the relationship between stewardship and business benefits, a separate intercorrelation coefficients matrix for the major variables was produced for American and Pacific Rim companies.

RESULTS AND DISCUSSION

Tables I through 111 show the averages, standard deviations, and percentages of "considerable extent" plus "great extent" for the various business benefits derived from environmental stewardship. The relatively low averages for American and Pacific Rim companies are rather disappoi&ng but the relatively high standard d&- ations and the percentages in the tables indicate that some companies are deriving considerab?e business benefits from their environmental activities.

Results and Discussion Regarding American Orgarrizarions

The highest average rating in Table I is associated with the promotion of employee involvement as a benefit from environmental sensitivity. Addressing environmental issues may provide organizations with an opportunity to develop employee involvement for other activities such as Total Quality Management where such involvement is deemed crucial to successful implementation. Other significant benefits from environmental programs are a more positive organizational culture, encouragement of employerlemployee communication, and improved employee morale. As business competitiveness increases and employee motivation becomes an essen- tial requirement for company survival, these should be viewed as important benefits indeed. In Table 11, the highest average rating is associated with lowering material wastes. That reflects the visibility of the waste disposal problem and the escalating costs of disposal. Similarly, the next highest average deals with energy saving. The benefits of legal nature, such as avoidance of lawsuits and fines, show the largest standard deviations, perhaps indicating major differences in the existence of government regulations or legal risk associated with business activities in different industry sectors or business areas.

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Table 111 shows strengthened company image as the greatest derived benefit from environmental sensitivity. This benefit is con- sidered increasingly important because of its impact on customers' attitude toward the company and company competitive positioning in the industry. Along the same lines, other significant benefits are improved customer loyalty, customer feedback, and closeness to customers.

Table VI shows the average ratings, standard deviations, and the percentages of "somewhat agree" plus "completely disagree" responses for each environmental stewardship item. As expected, on the average respondents reported their organizations behave as much as environmental stewards (items 16 thru 21) as responsible citizens (items 1 through 6 ) or rational environmentalists (items 7 through 15). On the other hand, as discussed below, Table VII shows that business benefits are not evenly distributed among the three groups. The very large standard deviations for most of the items allayed the authors' suspicion that respondents would uni- formly report high degrees of environment stewardship because it is a desirable company trait.

Table VIIa presents the Cronbach's Alpha coefficient of internal reliability and the Pearson's intercorrelation coefficients for the major variables in the study. In all cases, alpha coefficients for the multi-item scales were well above .70, the commonly accepted level of .70 for studies in social sciences. The intercorrelation coefficients provide support for the major sh~dy hypothesis that company environmental stewardship will produce business benefits. High- er degrees of stewardship are directly related to total business benefits, as well as to each of its components: managerial/personnel benefits, operational efficiency benefits, and external benefits.

Results and Discussion Comparing American arid Pacific Rim Orgartiza~iorrs

Results for the t-tests shown in Table VIII indicate that American companies have reported significantly higher levels of environrnen- tal stewardship. Further, except for operational efficiency benefits, Pacific Rim nations have reported significantly lower benefits in the other areas and in total. Nevertheless, some Pacific Rim companies are forging ahead with environmental programs and have derived

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TABLE VI. Comparing US. and Pacific Rim Companies: Degree of Environmental Stewardship

Rating Scale: t = completely disagree, 2 = somewhat disagree, 3 = neither. 4 = somewhat agree, 5 =completely agree (n = 66) (n = 31) 2 Tail

p Value . - . .

11 YOUR COMPANY: 1. is committed to compliance with existing environmental regulation I I I 2. has a reactwe environmental policy 1 2.74 (2.12) 1 2.60 (2.19) 1 .76 11

II 3. considers e6ironmental regulation an expense 1 1.71 (2.16) 1 2.10 (2.23) 1 4. perceives "qreen" as beins politically smart 1 2.88 (2.13) j 1.97 12.23) 1 .06

(1 20. makes environmental responsibility a prionty at least equivalent to 1 2.35 (2.19) 1 1.55 (2.14) 1 .09 (1 financial profitability I I I

21. extends its environmental actions beyond economic rationality 1 1.47 (2.11) 1 .97 (1.84) 1 .26

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TABLE VII

(a) Matrix of Intercorrelations Among Major Study Variables (US. Companies, n - 66)

I' I I I I

Within parentheses are the Cronbach's Alpha internal reliability coeflicients for each variable, combined sample. "Significance Levels for Correlation Coefficients (rounded to nearest digit) is .O1 or better.

(b) Matrix of Intercorrelations Among Major Study Variables (Pacific Rim Companies, n = 31)

Significance Levels for Correlation Coefficients (rounded to nearest digit): = .05 or better.

" = .O1 or better.

- 3. Operational Efficiency Benefits

4. External Benefits

5. Total Benefits

TABLE VIII. Comparing U.S. and PacifIc Rim Companies: Benefit Areas and Environment Stewardship

Varlables

1. Degree of Stewardship

2. ManaaemenUPersonnel Benefits

4

.29

.68"

.62"

Rating scale: 1 =not at all, 2 =little extent. 3 =some extent, 4 = considerable extent. 5 = great extent

2

.45'

5

35'

.84"

.77"

.82"

Major Variables

Management and Personnel Benefits Operational Efliciency Benefits

External Benefits Derived

Total Benefits

Degree of Environmental Stewardship

3 .24

.63"

U.S. Ratings (n = 66)

Avg. (S.D.)

2.62 (.92)

2.55 (1.03)

2.25 (S7)

2.47 (.84)

2.35 (1.42)

PacRlm Ratlngs (n = 31)

Avg. (S.D.)

1.95 (.75)

2.24 (.87)

1.77 (.85)

1.99 (.75)

1.57 (1.40)

T Tests 2 Tail

p Value

.OO

.16

.O1

.01

.01

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78 JOURNAL OF TRANSNATIONAL MANAGEMENTDEVELOPMENT

substantial benefits. As mentioned earlier, many standard deviations in Table VI are relatively large, indicating considerable inter- - - company differences along the stewardship items. The same can be said about Tables I through 111, regarding business benefits from environmental stewardship.

Table VIJb also confirms that level of stewardship for Pacific Rim companies is directly related to the level of management and personnel benefits, as well as to total benefits derived from environmental programs, at the 0.05 significance level or better. In the case of management and personnel benefits, the relationship is as strong as among American companies. The smaller sample size is the likely culprit for the lower significance level for the relationship.

CONCLUSIONS AND SUGGESTIONS FOR FURTHER RESEARCH

The importance of the market system for economic and business firm vitality has been demonstrated in many nations throughout the world. However, it should be intuitively obvious to all business managers justifiably pursuing the profit motive that such drive can- not be sustained for long in a depleted and polluted world. On the other hand, environmentalists in general have failed to identify and promote the many potential benefits from business environmental stewardship. While misinformed skeptics may refuse to accept the many success stories reported in the literature, many companies are deriving major business benefits from their "green" efforts.

This study was designed to accomplish three main objectives. First, to identify and rate the business benefits companies are deriving from different degrees of environmental stewardship. Second, to test the main hypothesis that companies showing higher degrees of environmental stewardship will derive greater business benefits than organizations which aim at minimum compliance with government regulations in this area. Third, to compare American companies and their Pacific Rim counterparts along these benefits and also in terms of their environmental stewardship.

The results show that the benefits from environment stewardship are many and that many American and Pacific Rim companies are

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Tor Guirnaraes and Osam Sato 79

benefiting from their programs. On the other hand, success is not guaranteed. Further research should be undertaken to identify the obstacles being encountered in practice, and the success factors for environment oriented business activities. Overall. the results stronelv -, corroborated the main hypothesis that companies showing higher degrees of environmental stewardship will derive greater business benefits than organizations which aim at minimum compliance with government regulations in this area. This is true for American companies as well as for their Pacific Rim counterparts.

Many organizations in the US. and in Pacific Rim nations have embarked in "green business" programs for external reasons such as improving company image with customers, government, and environmental groups. The long list of management and personnel benefits being derived also provides ample support for the notion that environmental activities deserve special managerial attention throughout the world, including managers of companies operating in developing countries (i.e., PRC, Korea, Thailand, and Malaysia).

The results from this study directed our attention to several areas which need further exploration. While the MEB framework provided a useful tool, other frameworks need to be studied. Perhaps future research should focus on the business benefits derived from the implementation of specific programs such as recycling, waste reduction, company sponsoring of environmental education, etc., rather than on stages of environmental stewardship. Studies ex- amining the impact of "green business" programs in promoting employee involvement, creating employee training opportunities, stimulating innovation, encouraging employeelemployer comrnu- nication, improved employee morale, and fostering a more positive organizational culture also represent a worthwhile research agenda.

REFERENCES

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Buchholz, R.A., Marcus, A.A., & Post, J.E. (1992). Managing E~~vironmental Issues: A Casebook. Englewood Cliffs, NJ: Prentice-Hall, Inc.

Clark, S.E. (1990). "How to Survive in the Environmental Jungle." Inslilutional Inveslor: (December), 89-91.

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Hoffman, M.W. (1991). "Business and Environmental Ethics." Business Ethics Quarferly, Vol. 1, lssue 2.

Kiesche, E.S. (1992). "Responsible Care: Getting the Message Across to Em- ployees." Chemical Week, 151 (December 9), 24-26.

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McKilben, B. (1990). "Environment: 'Radical' Protestors May Seem Like Your Enemies, But They're The Best Friends You Have." Business Month. (Octo- ber), 54-55.

President's Commission on Environmental Quality. (1993). Total Quality Man- agement: Framework for Pollution Prevention. Washington, D.C.

Reding, N.L. (1992). "From Compliance to Added Value: The Environment and Competitive Advantage." Market Enforcement ofEnvironmenla1 Ethics, Pro- ceedings of the 1992 Emerson Electric Center for Business Ethics Conference, Saint Louis University, April 9-10.

Rogers, J.E., Jr. (1992). "Adopting and Implementing a Corporate Environmental Charter." Business Horizons, 35 (MarchIApril), 29-33.

Scarlett, L. (1992). "A Guide to Environmental Myths and Realities." Consumer Research Mazazine, (January), 11-16.

Sheridan, J.H. (1992). "Environmental Issues by Executives Time." fndustry Week, 241 (March 16), 44,48.

Stead, W.E., & Stead, J.G. (1992). Management for a Small Planet: Strategic Decision Making and the Environment, Sage Publications, Newburg Park, CA, 181.

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The Management Institute for Environment and Business (MEB). (1991). Market- ing and Ecology: Readings and Discussion. Matthew B. Arnold, Frederick J. Long, and Patricia Choi, Editors, Arlington, VA, 26-27.

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Documents

Benefits of Environmental Stewardship