The influence of environmental issues in strategic analysis and choice: a review of environmental strategy among top UK corporations.

Do UK corporations understand the need for environmental strategies, and if so why?

Introduction

Over the last decade, environmental issues have become increasingly significant to policy makers in both the political and the business world[1,2]. Globally, governments are increasingly seen to be adopting environmentally aware measures, to regulate the activity of corporations and consumers alike.

For the business community, the issue has been how seriously to regard the need for environmentally aware strategies. The environment is increasingly perceived to be affecting bottom line performance, and this presents a fundamental conundrum for the business strategist. A decision is required as to the position a company adopts in relation to the environment. This position may be located anywhere across a continuum ranging from adopting a policy of compliance with existing or future regulations, to attempting to adopt a management strategy.

A compliance strategy can be defined as the pursuit of a set of policies which are reactive, and driven by existing legislation. Such a strategy could also be driven by perceptions of the likely requirements of future legislation. A management strategy involves a more proactive attitude, and would usually be linked to a belief that some form of competitive advantage, or leadership position beneficial to a corporation, is available. These ideas are summarized in Roome[3]. The continuum contains an intermediary stage, "compliance plus", representing a strategic decision to place a company beyond mere compliance, but as yet some way from environmental management. A model developing similar ideas is presented by Sadgrove[4] when developing the concept of the "Green Grid".

The decision as to which strategy to pursue will depend on a number of factors. Two key factors have been identified by Steger[5]; first, the extent of the environmental risk inherent in a corporation's operations; second, the opportunity to achieve some degree of advantage from environment strategies. Steger argues that a correlation exists between these factors, and the seriousness of a corporation's attitude in this area.

The importance of the environment as a competitive factor has been heightened by the growing trend towards the globalization of markets. Arguably, business is fast approaching a situation where the strictest environmental regulation in place anywhere in the world will become the effective minimum price of entry into that market.

However, and despite this apparent new reality, there continues to be a degree of scepticism as to the extent of commitment that UK companies are exhibiting in this area. Concern has been expressed that UK firms are fundamentally short-term in their outlook[6], and are not prepared to invest in longer-term environmental strategies[7]. Many companies appear not to have given adequate consideration to the question of compliance or leadership, which must drive environmental strategy. There is therefore a need to address this question, and to determine where UK corporations stand in terms of the environment. This article seeks to contribute to this debate.

Past examinations of the impact of environmental issues on the strategic analysis and strategic choice process within UK corporations, have tended to concentrate on a specific industry. Predominantly, these studies have occurred in industries that are widely held to have real environmental problems[8,9]. While such studies are valuable, especially to practitioners within a particular industry, it was felt that an overview of current environmental thinking within the very largest UK corporations would be a valuable exercise.

The article addresses a range of key managerial concerns across a number of indicators and functional activities, derived from a recent survey of the corporate environmental perspectives of top UK corporations. The areas covered include a consideration of where the environment fits into the corporate strategy process; the impact the environment is having on operational activity and investment decisions; and the nature of the environment as opportunity and threat. More generally, it seeks to provide an understanding of how significantly companies view environmental issues.

Methodology and objectives

Over the summer and autumn of 1994, 164 of the top 200 UK grossing companies[10] were approached, and asked to participate in a wide-ranging survey of corporate environmental attitude, expectations and policy development. Seventy-eight corporations completed the questionnaire. This represents a response rate of 47.5 per cent. Table I depicts the composition of the sample.

 
Table I. Survey sample sectorial breakdown 

 
FT grouping             Number       Survey grouping       Number 

 
Electricity               13         Electricity             13 
Breweries                  2         Manufacturing           26 
Electrical                 3 
Engineering                5 
Industrials               11 
Paper, packaging 
and printing               3 
Tobacco                    2 
Chemicals                  7         Petrochemical           15 
Oil and gas                7 
Textiles                   1 
Building and 
construction               5         Service                 24 
Finance and 
miscellaneous              3 
Food producers             8 
Shipping                   2 
Retailers                  1 
Transport                  3 
Water                      1 
Other                      1 

The respondents replied by answering a series of questions relating to key environmental issues. The initial design of the questionnaire was influenced by two sources. The first influence was a comprehensive literature survey, the key findings of which will be discussed during the analysis. The second influence was an ongoing longitudinal study of the environmental activities of Australia's top 1,000 organizations conducted by Coopers and Lybrand[11], from which a number of common concerns were highlighted. Areas of commonality between the two instruments are deliberate, to allow for future comparisons between the environmental activity in the two countries. The UK survey benefits from the prior experiences of the Australian research, and was tested internally and externally, prior to general circulation.

It was decided to direct the questionnaire not towards a CEO as is customary, but to attempt to identify the person with day-to-day responsibility for the supervision of corporate environmental strategy. As will be seen from the findings, the person with responsibility for the environment was placed in a myriad functional departments throughout the corporation, which in itself is of significance in considerations of corporate commitment. Initially the corporation was contacted in order to obtain the name of the executive with responsibility in the field of the environment. In most cases, a copy of the survey was sent to the respondent. In some cases, at the respondent's request, the survey was conducted over the telephone, or in a face-to-face interview. All companies not responding in a set period of time were sent two postal reminders.

The respondents were required to complete a panel of 40 questions, the majority of which were of the multivariate tick box variety. Opportunity to provide alternative responses was provided in most instances, and the respondents were encouraged at all times to comment on the issues under investigation.

Key objectives

The survey was conducted to achieve two key objectives. First, to identify how far the environment is an issue in the corporate strategic analysis and choice process of UK corporations, and to assess its importance compared with other business issues. Second, to discover the motivations leading to the environment becoming an issue for UK corporations. This second objective included an attempt to determine to what extent the environmental issue is seen to offer future business opportunities.

Objective 1: is the environment an …