Literature Review, Analysis and Discussion 7,500 words
This section presents a review of the recent relevant peer-reviewed and scholarly literature concerning environmental sustainability in general and how environmental sustainability initiatives can help multinational corporations of different sizes and types achieve a competitive advantage in particular.
Literature Review. According to Michalisin and Stinchfield (2010), "There is widespread consensus that human activity has had a significant impact on global climatic patterns which will have important consequences for much of society. Although there has been much research on the relationship between corporate environmental performance and corporate financial performance, empirical testing of the association between proactive corporate climate-change strategies and financial (or accounting) performance is still in its infancy" (p. 123). Despite this dearth of research, these authorities speculate that firms that successfully implement strategies to lessen their effect on climate change should outperform competitors who are less proactive in such efforts (Michalsin & Stinchfield, 2010). Richey Jr., Mert Tokman, Robert E. Wright, Michael G. Harvey
Multinational corporations (MNCs) must find ways to protect the environments of emerging markets if they hope to maintain sustainable economic development (Ojah & Han 1997). Dumping refuse and products that will generate or become solid waste in these developing countries may produce unintended consequences by causing damage to the environment, network image, and business-to-business relationships (Lipman 2002). The aftermath of this potential conflict will eventually motivate emerging markets not only to increase the level of environmentally-related laws and regulations but also to stimulate the enforcement of existing legislation (Rugman & Verbeke 1998). Given the long-term implications, the goal of MNCs should be to meet the current economic needs of the local environment without triggering potentially catastrophic environmental events (World Resources Institute 1996). Above all, emerging market initiatives should pursue economic, environmental, and social goals (Dover et al. 1997; Khanna, Palepu, & Sinha 2005) which are in line with developing sustainable emerging markets. These initiatives necessarily require structural transformation and effective governance (Gautam, Bansal, & Pandey 2005; Weaver, Rock, & Kusterer 1997), since sustainable development must "[meet] the needs of the present without compromising the ability of future generations to meet their own needs" (World Commission on Economic Development 1987: 45).
Researchers have investigated the effects of various strategies for preserving the environment that are contingent on the behavior of consumers and business partners. Top management teams, including supply chain managers, are encouraged to promote product stewardship throughout their product's lifecycle, develop clean technology, and create strategic plans for promoting sustainability in emerging markets (Richey, Tokman, Wright & Harvey, 2005).
Environmental sustainability has been increasingly embraced as an important agenda by government agencies worldwide, but the first challenge in measuring environmental sustainability is to define the scope in conceptual terms (Cui, Hens, Zhu & Zhao, 2004). This point is also made by Lo and Marcotullio (2001) who report, "Despite the current focus on sustainable development, there is yet no agreement upon its definition. Inherently, there is a problem with the concept since it will differ with community perception. Despite the lack of rigor concerning the term, the important point to consider is that it is closely related to "environmentally friendly" development" (pp. 157-158).
Likewise, York (2009) emphasizes that, "Environmental sustainability is a vital goal, and we cannot get there if we do not think carefully about what it entails" (p. 206). In reality, economic and environmental sustainability are two inextricably interrelated features of business systems. In this regard, Lo and Marcotullio (2001) report that, "Economic sustainability, in a normative sense, supports a level of environmental sustainability chosen by society. The condition of the human-made environment, such as urban infrastructure, requires massive capital investment financed by either domestic or foreign sources and makes up an important aspect of a sustainable economy. On the other hand, economic sustainability, to a large degree, is also determined by environmental sustainability. Clean water and air are the prerequisites for efficient industrial development. In addition, the anthropomorphic environment is an important determinant in attracting foreign capital inflows. As Lo and Marcotullio (2001) point out, "Environmental quality is a pull factor for foreign capital. Therefore, environmental sustainability is an important part of the foundation of economic sustainability, and vice versa" (p. 68).
A useful framework for understanding the interrelationships between these issues is provided by Bhan (2010) who reports that the content dimension of the framework refers to the economic, social and environmental impacts (both positive and negative) of current multinational corporation practices and operations. The process dimension refers to how change within an multinational corporations is achieved over time. The adoption of environmental management changes can also be understood in terms of the interrelated dimensions of context, content, and process as illustrated in Figure __ below.
Figure __. The Environmental Management Nexus of Multinational Corporations
Source: Bhan, 2010
At the most basic level, it is suggested that environmental sustainability can be presented as a function of the following five phenomena:
1. State of environmental systems, such as air, soil, ecosystems and water;
2. Stresses on such systems in the form of pollution and exploitation levels;
3. Human vulnerability to environmental changes in the form of loss of food resources or exposure to environmental diseases;
4. Social and institutional capacity to cope with environmental challenges; and,
5. Ability to respond to the demands of global stewardship by cooperating in collective efforts to conserve international environment resources such as the atmosphere (Cui et al., 2004, p. 229).
For multinational corporations faced with dwindling revenues and a shrinking customer base, environmental sustainability may not be considered important enough to warrant attention from organizational leaders because of a lack of resources. Nevertheless, a growing body of research suggests that to the extent that multinational corporations achieve success in each of the foregoing functions will be the extent to which it also achieves a competitive advantage. For instance, Michalisin and Stinchfield report that the strategic capabilities underlying a sustainable development strategy strengthens a firm's strategic competitiveness in four fundamental ways as follows:
1. As the firm becomes recognized as a leader in working to solve the planet's climate change problems, its reputation may help the firm attract and retain highly talented employees that share similar values and convictions about corporate environmental responsibility
2. The leading-edge competencies and insights on business and environmental sustainability gained from working collaboratively with multiple constituencies is a socially-complex and partly tacit in nature, making it difficult for competitors to easily replicate.
3. The relationships developed in these collaborative efforts may give the firm exclusive access to critical suppliers of finite natural resources, provide access to countries that allow few if any foreign competitors, help the firm increase its market share of "green" customers, and allow the firm to gain the political acumen needed to be at the forefront in crafting new environmental legislation
Sustainable development strategic capabilities constitute the highest level of environmental responsibility, where the firm's overall strategy is driven by a strong sense of social-environmental purpose, calling for other firms (even competitors), governments (international, national, state, and local levels), environmentalists, academics, and others to work toward solving our global climate change problems. Because such firms recognize the magnitude of the problems in the biosphere and their own internal limitations, they proactively organize research and technology consortiums to draw on the collective resources, skills, knowledge, and insights among multiple participants in deriving broad-based climate change solutions (Michalisin & Stinchfield, 2011). Moreover, there are even signs that minimal environmental sustainability practices are going to be demanded of multinational corporations by consumer groups as evinced by the Consumer Charter for Global Business that stipulates, in relevant part that:
Consumers have the right to expect that all goods produced, distributed and marketed by the corporation are:
1. Produced in such a manner that causes as little damage as possible to the environment, both directly and indirectly;
2. Distributed in such a manner as to minimise damage to the environment, both directly and indirectly;
3. Transported in such a manner that minimises damage to the environment, both directly and indirectly;
4. Corporations will, insofar as it is reasonable, ensure that their products are disposed of in a manner that is consistent with the principle of environmental sustainability (Consumer charter for global business, 1999).
Companies that achieve a high degree of return on investment in these areas are typically characterized by:
1. Assisting countries where they operate in addressing environmental problems associated with greenhouse gas emissions,
2. Working with government officials toward stricter policies on air standards; and,
3. Providing support to regions impacted by natural disasters (Michalisin & Stinchfield, 2011).
In sum, these multinational organizational leaders assume a long-term view about the future state of the planet in which they operate and the role they play in promoting societal well-being (Michalisin & Stinchfield, 2011).
Environmental sustainability is defined as the ability to produce high levels of performance in each of the foregoing five dimensions in a lasting manner and…