Social and environmental accounting, organizational change and management accounting

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Essay

Theme: “Social and environmental accounting, organizational change and management accounting”

Moscow 2016

Introduction

The recent years have been characterized by the industrial globalization, which is having significant effects on the natural environment (Gonzales, Sarkis & Adenso-Diaz, 2008). It is an increasingly demand that businesses work towards minimizing negative impacts on the natural environment (Klassen & Whybark, 1999). As the concern for the environment is rising companies are incorporating more environmental friendly practices in to their strategy (Gonzales et al. 2008). These environmental issues in turn, affect companies in different ways and no company can afford to ignore them.

There are some factors acting as more important determinants influencing companies' to adopt a specific environmental strategy and these factors are not consistent through industries, although similarities can be found it depends on factors such as stakeholders' interest and involvement. Depending on the stakeholders' influence, companies will undertake a more or less proactive or reactive environmental strategy. Proactive firms are those who are willing to take actions and go beyond the law and reactive firms are characterized by just keeping up with the regulations. Although existing research have identified factors influencing a company's environmental strategy there is lack of research empirically analysing how different stakeholders affect the environmental strategy of the firm (Fraj-Andreмs, Martinez-Salinas & Matute-Vallejo, 2009). Moreover, the majority of existing research is focus on influencing factors in the paper mill- and chemical industry. The authors of this paper choose to focus on firms in the energy intensive industries in general and firms in the glass industry in particular to see how stakeholders influence the environmental strategy of the firm. This industry suffers from high CO2 (carbon dioxide) emissions, and Pilkington, a glass manufacturer in Halland stands for the highest CO2 emissions in the region (Sveriges Radio, 2009), which will justify and motivate the relevance of this study. Moreover, this research will be limited to review one company and only examine the stakeholders' influence upon the firm, hence only the impact on the environmental strategy is of interest.

Overview of stakeholders

Stakeholders can influence companies in a number of ways and to various extents. The literature distinguishes between primary and secondary stakeholder groups. Primary stakeholders are those that the company cannot survive without, such as shareholders, employees, customers and suppliers together. Secondary stakeholders include those that affect or are affected by the company, but are not “engaged in transactions with the corporation and are not essential for its survival”, such as media and other interest groups. Secondary stakeholders have the ability to influence the public opinion and in turn influence the company in a positive or negative way, but the company do not depend on them as in the case for the primary stakeholders. Effective environmental management requires the identification of important stakeholders. Moreover, the variety of salient stakeholders is important in order to pursue green strategies as they have the ability of allocating substantial resources in multiple domains such as manufacturing technologies, management systems etc. Therefore it lies a great challenge for companies in addressing the concerns from the key stakeholders in an effective manner as they have different interests and demands that needs to be satisfied. Demand from primary stakeholders can be satisfied in different ways and to different extent, which will influence organizations to adopt a more reactive or proactive environmental strategy. Сorporate social responsibility and environmental consciousness are important, as they need to be in line with the expectations from the stakeholders. Henriques and Sadorsky (1999) on the one hand argue that a firm's level of environmental proactiveness is related to high pressure from what they call organizational and community stakeholders, i.e. customers, suppliers, employees, shareholders and for example NGO's and other social groups. On the other hand it is suggested that environmental reactivity is related with high pressure from governments and media (ibid). There are other theories about this as well, for example Buysse and Verbeke (2003) present that one can distinguish between internal primary stakeholder and external primary stakeholders. Internal primary stakeholders are employees, shareholders and financial institutions while customers and suppliers belong to external primary stakeholders (ibid). They argue in their study that the internal primary stakeholders are the only stakeholders that motivate the environmental proactiveness within the firm. However, their study was made on producers of intermediate products with little customer contact.

Measuring Stakeholder Influence

Since the second research question is more explorative, the authors will build the answer from the empirical findings. However, to provide some indications in how to look at the influence from stakeholders, the authors will explain how the perceived importance of stakeholders affect the influence on the environmental strategy and how it can pressure the firm to adapt to a more or less reactive or proactive environmental strategy.

Stakeholders' importance depends on the firm's managerial perceptions of the stakeholders, which in turn influences the firm's strategy.

It is important to understand the importance of different stakeholders as they act as motivation for the firm to adopt a proactive or reactive environmental strategy. Moreover, a proactive environmental approach can improve the relationship with the stakeholder and in turn influence the stakeholder.

It is found by Hart (1995) that firms can be categorized in three generalized groups: pollution prevention, product stewardship and sustainable development, depending on the environmental approach they undertake. These categories are ranging from a reactive (pollution preventive) to a proactive (sustainable development) approach.

Pollution prevention. Firms following this strategy are focusing on minimizing emissions and waste through continuous improvements on internal activities (ibid).

Product stewardship. Firms following this strategy are involving external activities and consider the whole product life cycle to minimize the environmental impact (ibid). These actions require a closer approach towards suppliers and involvements from external stakeholders in product development and process planning.

Sustainable development. Firms following a sustainable development strategy have the purpose of minimizing the environmental burden of the firm's growth and development by deploying low impact technologies and collaborate with stakeholders (ibid).

Conclusion

environment industrial environmental strategy

The relevance of stakeholders' positive action for environmental proactivity was verified. It seems that, the more articulated the stakeholders' actions, the more efficient the strength of the pressure they exert on the companies will be. Non-market stakeholders, which do not participate directly in the companies' supply chain, seem to demonstrate a more mature relationship environment. Thus, it was identified that stakeholders and companies gradually advance towards the incorporation and integration of their responsibility actions with a view to achieving sustainable development. Environmental management ideas and practices are increasingly present on the social actors' agendas, which start to acknowledge their interconnections.

References

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