The social energy penalty

The primary new theoretical concept I introduce here is the social energy penalty – that is, the loss of social welfare for a constant resource output that is misdirected into symbolic activities. Developing this new concept was motivated by the need to distinguish between green solutions that are socially beneficial solutions to the problems of information asymmetry and socially costly attempts to control environmental rhetoric and resources. The social energy penalty arises when social costs outweigh social benefits over time (see Chapter 4, Figure 4.7). It is a theoretically powerful idea for three main reasons. First, it explicitly raises the level of analysis of the consequences of symbolic corporate environmentalism from the firm level to the social-system level. Conventional corporate environmentalism research, along with management theory in general, has been criticised for neglecting the social welfare effects of its recommendations. The social energy framework extends and applies ideas already used to explain firm-level environmental decisions, including learning effects, network externalities, and industry concentration, and uses them to predict social outcomes. I adapted conventional corporate environmentalism tools to account for welfare implications. Conventional corporate environmentalism researchers should no longer ignore the social energy penalty simply because it may be an unintended consequence of profit maximisation.

Second, the social energy penalty framework offers a powerful integration of critical and conventional views on the consequences of symbolic corporate environmentalism. As discussed in Chapter 4, critical views assume that high-status actors in a field have the power to manipulate symbolic meanings of everyday greening practices. Conventional views, in contrast, assume that mismatches between corporate green symbols and substantive actions are more benign reflections of imperfect implementation or a stage on the path towards realised corporate greening. These divergent assumptions have encouraged researchers from the two schools to talk past one another and have limited cross-fertilisation between the two largely unconnected research domains. The social energy framework turns these assumptions into an empirical difference across different contexts. Sometimes the critical view is correct, as in the CCS demonstration project example (see Chapter 6): powerful social actors are limiting the range of solutions to those that are acceptable to them, thereby imposing a social energy penalty on society. Sometimes we do not need to be as concerned about the social costs arising from corporate control because adoption helps firms to learn about their environmental impacts, and diffusion can lead to better information quality and authentic social benefit. Thinking in terms of the social energy penalty turns traditionally intractable assumptions into a matter of degree: To what extent might firms be able to exert symbolic control in different contexts? What might the social benefits of an industry-led scheme be over time? There is a social energy penalty only when the control costs are high and there are inadequate compensating social benefits.

The third theoretical contribution is to model the social energy penalty as the interaction of the social costs and benefits of green solutions over time (see Chapter 4, Figure 4.7). As I argue in Chapter 4, the social benefit curve crosses the y axis at the standalone technology value level and then rises with the cumulative adoption of green solutions in an S-curve as both existing and new adopters gain value from learning and network effects. The slope of the social benefit curve is a function of a number of factors. A technology management perspective emphasises the rate of performance improvement in the green solution, the importance of an installed base, and the availability of complementary assets. More institutional explanations for the shape of the social benefit curve focus on the power of stakeholders to force adoption and the extent to which firms share a common reputation. The social cost curve shows the increase in utility losses from the dominance of particular forms of green solutions as the new solution becomes established over time. It reflects social costs resulting from inertia, lock-out and misrecognition. The social cost curve is primarily a reflection of early adopters’ discretionary power. The framework provides a theoretically derived list of contextual contingencies for when the social energy penalty is likely to be higher. This opens up a theoretical space for others to extend and refine drivers of the social energy penalty as well as an empirical space to test them.

I labelled the social energy penalty based on a term from one of my empirical contexts: carbon capture and storage (CCS). However, I expect that the phenomenon of using social energy to provide symbolic support over and above that which is justified by material changes will extend far beyond environmental issues. The social energy penalty is likely to occur in any context in which there is uncertainty about how to meet social demands, flexibility in how firms might meet them – particularly through new language or symbols – and when the precise performance implications are difficult to observe. For example, Ahmed (Reference Ahmed2012) examined corporate equality policies and described them as ‘non-performatives that do not bring into effect that which they name’. Alvesson (Reference Alvesson2013) examined symbolic inflation in higher education, the professions, and working life and argued that organisations increasingly dedicate resources to rhetoric and image. These perspectives resonate with the early greenwashing literature of Greer and Bruno (Reference Greer and Bruno1996) and Tokar (Reference Tokar1997). Critical analyses that point out the social costs of symbolic corporate activity are not new. What I have added to these analyses is a new analytical layer to be able to identify when these social costs are highest and when they might outweigh potential social benefits. I encourage others to explore, test and expand the social energy penalty concept in other contexts.

Industry self-regulation

The ideas in this book also extend theory on industry self-regulation. Much of the conventional view focuses on when, how and why firms voluntarily control their collective actions on environmental issues. Research on voluntary corporate environmentalism has offered mainstream strategy theory new insights on the foundations of competitive advantage (Berchicci and King Reference Berchicci and King2008). But, as I discuss in Chapter 3, evidence from contexts such as the adoption of environmental management systems, disclosure programmes, industry agreements and the implementation of green solutions shows that firms that commit to proactive green solutions are no more likely – and, in some cases, are even less likely – to improve their substantive environmental performance (King et al. Reference King, Prado, Rivera, Hoffman and Bansal2012). The frameworks in this book contribute to answering Banerjee’s (Reference Banerjee, Bansal and Hoffman2012) call to explore the boundary conditions surrounding industry self-regulation, particularly by injecting ideas from the critical view on power, status and dominant discourse. My analysis has implications for industry self-regulation at both the firm and the design levels.

At the firm level, I developed two frameworks to demonstrate how managers decide on the quantity and portfolio of investments in green solutions. First, I extended Husted and Salazar’s (Reference Husted and Salazar2006) theory on the optimal quantity of investments in green solutions. I showed how altering assumptions on the functional equivalence of green solutions and how firms can alter the private costs and benefits of green solutions can open up symbolic gaps. Changing Husted and Salazar’s (Reference Husted and Salazar2006) assumptions reveals the overproduction of symbolic green solutions if a firm has the power to limit scrutiny, decouple symbol from substance, define metrics of social output in symbolic terms, or simply face a lower relative cost and higher relative benefit from symbolic rather than substantive green solutions. Previous theory has been slow to explicitly model symbolic gaps in the conventional coerced egoist case, despite empirical evidence of widespread symbolic investments. This analysis also serves as a reminder that managers’ decisions on the quantity of green solutions are not disconnected from whether they are primarily symbolic or substantive. Here, I contribute to an effort advocated by Lyon and Maxwell (Reference Lyon and Maxwell2011) to integrate the analysis of corporate environmental action and disclosure decisions.

Second, I adapted Brennan and Pettit’s (Reference Brennan and Pettit2004) Economy of Esteem to the firm level to develop theory on firms’ portfolio choices of green solutions. As far as I am aware, this is the first adaptation of Brennan and Pettit’s framework into the corporate strategy context. Corporate environmentalism research emphasises symbolic performance in the form of reputation, legitimacy and status as drivers of environmental decision making. I adapted Brennan and Pettit’s (Reference Brennan and Pettit2004) framework to describe how a firm invests in a portfolio of green solutions to maximise its symbolic performance (see the discussion about Figure 4.4). The crucial insight from this analysis is that firms maximise their ‘audience-seeking’ and ‘performance-enhancement’ activities in order to achieve the highest possible levels of symbolic performance given their budget for green solutions. The relative costs of audience-seeking and performance-enhancement activities will vary according to the context. I argue that large, visible firms have lower audience-seeking costs, and I show in Chapter 5 that this leads them to be more likely to state proactive environmental intentions but no more likely to improve their substantive environmental impacts. I also argue in Chapter 6 that firms that state competitiveness motivations for implementing a pollution control technology will face a flatter budget line than firms with legitimation motives. Therefore, they are more likely to invest in performance-enhancing rather than audience-seeking activities.

These findings are useful preliminary adaptations of a much broader theoretical framework offered in Brennan and Pettit’s (Reference Brennan and Pettit2004) work. We can significantly strengthen industry self-regulation theory by further unpacking this framework. First, it seems likely that the slope of the budget line would differ depending on the characteristics of firms (e.g., visible or high environmental impact), green solutions (e.g., product compared to process), and audiences (e.g., government, investor or NGO), which explains when self-regulation is more likely to be merely symbolic. Some researchers are beginning to seriously examine how firms decide between different self-regulatory schemes (see, e.g., Delmas, Nairn-Birch, and Balzarova Reference Delmas2013 and Prado Reference Prado2011). The relative costs of audience-seeking and performance-enhancing activities may be an important driver of this decision that has not yet been examined sufficiently.

Second, the framework might provide an explanation for positive symbolic gaps, or what Delmas and Burbano (Reference Delmas and Burbano2011) termed ‘silent green firms’ (see Chapter 4, Figure 4.3). These firms often are portrayed as unusual in that they do not seem to capitalise fully on their environmental performance by communicating about it. Perhaps these firms simply face flatter budget lines or esteem curves that place their equilibrium investment portfolios towards the bottom right in Figure 4.4.

Third, future research may ask more fundamental questions about this framework. For example, is the budget line always straight? It may be possible that there is positive feedback between symbolic and substantive investments in self-regulation. As firms begin audience seeking, they may get on a course that leads to substantive improvements later (see, e.g., Christensen et al. Reference Christensen, Morsing and Thyssen2013 and Haack et al. Reference Haack, Schoeneborn and Wickert2012). Future research might investigate whether particular combinations of audience-seeking and performance-enhancement activities over time lead to more utility, resulting in a nonlinear budget line. Furthermore, when applied at the corporate level, the curves are an accumulation of managers’ preferences rather than preferences at the individual level, as in Brennan and Pettit’s (Reference Brennan and Pettit2004) original version. How sensitive are firms’ investments to where environmental decisions are taken within the firm? Do communications or marketing departments lean towards valuing audience-seeking activities relatively more than operations? Can this explain differences in firms’ voluntary self-regulation commitments?

The industry self-regulation literature has explored the importance of reputation and legitimacy in driving corporate green decisions. I build on recent research from broader organisational theory to more clearly delineate how reputation, legitimacy and status differ from one another (see Chapter 3, Table 3.2). I then extended the conventional self-regulation literature by modelling status as a virtual controller (see Chapter 4, Figure 4.5). I assumed that managers’ environmental decisions are typically driven by reputation and legitimacy seeking until a firm’s control over greening comes under threat. If a firm detects that its discretion on environmental issues is being questioned, it might exert its status as a powerful social actor to control the green solutions available. This phenomenon is most obviously observed in the context of CCS in Chapter 6, although it also was evident in a firm’s attempt to dominate the design of voluntary carbon measurement and disclosure schemes in Chapter 7. Thinking of status as a virtual controller provides a useful boundary condition for industry self-regulation. Self-regulation may be socially benign as long as firms do not perceive a serious threat to their core business. Status as a virtual controller allows us to integrate the emphasis of the conventional view on reputation and legitimacy and of the critical view on status. Developing this approach would allow us to understand when self-regulation schemes are more likely to be dominated by the high-status firms and would result in symbolic outcomes designed to maintain and protect symbolic capital rather than improve the natural environment. An important future research question in this line of thinking would be to understand when the virtual controller overrides normal reputation and legitimacy seeking. Conventional researchers must focus more attention on the role of status and symbolic power in legitimacy seeking.

My emphasis on status is part of a broader attempt to bridge the two perspectives by injecting power into conventional analyses of corporate environmentalism. Industry self-regulation often is promoted within the conventional view as a way to enhance a firm’s competitive positions and to act as an entry barrier, particularly if a firm can persuade regulators to adopt its version of a green solution. Yet, the material, discursive and positional power of those who write the rules too often is neglected in the current industry self-regulation literature. As with the most obvious greenwashing exposed during the 1990s and 2000s, visible attempts by powerful firms to lobby or advocate for particular green solutions may well be exposed by NGOs and journalists. However, most corporate environmentalism is implemented in a more nuanced context, wherein the powerful exhibit high cultural literacy, social prestige, mutual forbearance and limited rivalry. The leaders of prestigious firms, regulatory agencies and NGOs interact with peers within and across the same high-status group, making them more likely to reinforce one another’s strategic positions. This limits the environmental problems that are discussed in the public domain and the range of acceptable solutions. Industry self-regulation research needs to take more seriously the power and relational position of key firms as they advance standards, symbols and solutions to suit themselves. One promising line of research for the conventional view could be to investigate whether symbolic gaps can act intrinsically as an entry barrier, particularly when the solution is proposed and supported by powerful incumbents. In contrast, critical scholars might investigate the power of high-status firms to eliminate or hide their presence as powerful social actors.

At the design level, this book serves as a reminder to ensure tight coupling between the organisational means and environmental ends of self-regulatory schemes. Traditionally, conventional researchers recognise the need to design auditing, monitoring and sanctioning into the membership rules and criteria of self-regulation schemes to ensure more than merely symbolic compliance (see, e.g., Christmann and Taylor Reference Christmann and Taylor2006, Darnall and Sides Reference Darnall, Henriques and Sadorsky2008, Delmas and Terlaak Reference Delmas and Terlaak2001, and Short and Toffel Reference Short and Toffel2010). My contribution here is to use the drivers of the social energy penalty to develop contingencies related to when net social benefit is maximised in industry self-regulation design. For example, net social benefits will be higher when there is mandatory sharing among participants to enhance the benefits of learning; aggressive promotion of the symbol so as to raise awareness and network externalities for all adopters; and a broad range of actors invited to participate in scheme design to mitigate the discretionary power of core members and the appearance of conflict of interest. Optimal design may even include funding or otherwise encouraging monitoring by others to further drive social benefits: the more actively a green solution is monitored, the higher quality is the information available for all agents to make more efficient decisions. More work is needed in developing and evaluating criteria to design standards with the lowest possible social cost – an issue to which I return in the discussion on practical implications.

Finally, this work pushes forward theory on the welfare effects of self-regulation. Conventional researchers make the case that industry self-regulation can lead to more efficient resource allocation, thereby improving overall social welfare (see, e.g., Husted and Salazar Reference Husted and Salazar2006 and Maxwell et al. 2000). However, these analyses neglect the importance of firms exerting control over the range of solutions available. When firms voluntarily adopt corporate environmentalism, they can choose which types of initiatives to support or practices to implement. I used Waldfolgel’s (1993) approach to model voluntary green solutions as a gift. When firms decide on the form of the green solution, there is less utility gain than if receivers had chosen the form of the gift themselves. This is the case for all non-cash gifts except for the unlikely situation in which the preferences of givers and receivers are identical. Conventional researchers have encouraged managers to invest ‘strategically’ in corporate environmentalism by adopting green solutions that meet their corporate objectives. Voluntary initiatives as gifts can be used to credibly communicate information about a donor’s type. However, they also meet a firm’s needs more closely than their consumers or stakeholders, leading to a utility loss.

Much work remains to be done to better understand the welfare effects of corporate environmentalism. These welfare effects are less positive than previous models generally assume. Resolving this debate will rely on more direct empirical tests of the welfare implications of industry self-regulation schemes. In Chapter 8, I suggest some promising directions, building on Waldfogel’s utility analysis and the latest experimental research in behavioural economics. For example, future research could adapt DellaVigna et al.’s (Reference DellaVigna, List and Malmendier2012) experimental setup to the corporate level to estimate the extent to which different green solutions lead to welfare losses for the giver. Experiments could manipulate the characteristics of the self-regulation schemes and the extent to which they offer competitiveness or legitimation benefits. We now have access to long lists of different voluntary standards and eco-labels. Even ranking these according to their distance from the flexibility of cash gifts – as Waldfogel did by comparing gifts with different characteristics – would be a significant step forward in understanding the welfare implications of industry self-regulation.

Conventional industry self-regulation research has contributed much to bring environmental concerns into high-impact management journals, prestigious academic associations, business school curricula and corporate boardrooms. Unfortunately, the evidence in this book reveals that all too often, industry-led solutions do not lead to positive environmental impacts or fix the problems that they are designed to solve. Despite the efforts of managers and academics to promote corporate engagement with environmental issues through apparently less-threatening industry self-regulation schemes, too many symbols have developed shared meanings that are more proactive than their substantive impact. As with Chevron’s People Do campaign in the early greenwashing era, much industry self-regulation provides social reassurance that companies are fulfilling their proper social function. However, much of this is false reassurance because consumers, voters, investors and managers turn a blind eye to the worsening environmental impacts of industrial activity. Social expectations around environmental issues influence companies in waves of attention over time. Environmental issues have ebbed in social attention during the recent financial downturn; however, as the economy recovers, we can expect attention to turn again to noneconomic factors such as environmental and social sustainability. It may take only one crisis or accident to expose the weaknesses of self-regulation schemes for protecting society from environmental harm. Industry self-regulation proponents must be prepared for the eventual higher monitoring of the various forms of symbolic corporate environmentalism. Otherwise, the self-regulation field risks losing credibility as corporate environmentalism is exposed as merely symbolic, just like The Yes Men’s We Agree campaign.

In this book, I develop ways to distinguish useful symbolic corporate environmentalism from socially wasteful symbolic manoeuvres. We can use these frameworks to ensure that the baby is not thrown out with the bathwater in criticising corporate environmentalism. Industry self-regulation research should more seriously examine the outcomes and boundary conditions so that it can withstand the stricter scrutiny that may come in time. To help in this effort, I introduce three new ideas to the self-regulation field: (1) explicitly modelling audience-seeking and performance-enhancement investment portfolios, (2) using status as a virtual controller, and (3) exploring the utility implications of controlling the form of voluntary green solutions. Developing each of these ideas would refine industry self-regulation theory and potentially defend the most socially beneficial solutions in the future.

Organisational decoupling

This book also presents implications for understanding decoupling in the broader organisational theory literature. Bromley and Powell’s (Reference Bromley and Powell2012) recent review highlighted a shift in contemporary organisations from ‘policy-practice’ decoupling to ‘means-ends’ decoupling. We might view the shift from greenwashing to broader symbolic corporate environmentalism as a specific application of this broader shift. Traditionally, decoupling has been thought of as a gap between policy and practice. As with greenwashing, however, this policy-practice decoupling is becoming less prevalent in time due to social trends including transparency, monitoring and auditing. Bromley and Powell (Reference Bromley and Powell2012: 489) argued that policy-practice decoupling is being replaced by means-ends decoupling, when ‘policies are implemented but the link between the formal policies and the intended outcome is opaque’.

Symbolic corporate environmentalism is an excellent illustrative context to examine this shift to means-ends decoupling. Firms increasingly must implement the environmental policies and commitments they make, but the connection between green solutions and their eventual outcomes remains tenuous. Indeed, the environmental context is particularly useful here because of the potential to evaluate organisational actions against a basic social outcome – that is, whether green solutions eventually lead to substantive improvements in environmental impacts. Corporate environmentalism exhibits several trends that Bromley and Powell (Reference Bromley and Powell2012) suggested are typical of means-ends decoupling: (1) there is widespread diffusion of environmental practices and symbols that are of dubious substantive value; (2) firms not only adopt green solutions symbolically but also implement them symbolically (see Chapter 5); (3) firms face increasing pressures of rationalisation and measurement, but the modes of measurement are socially contested (see Chapter 7); and (4) a firm’s environmental commitments and programmes are subject to endemic reform as they are constantly adapted and changed in response to increased monitoring.

Analysing symbolic corporate environmentalism offers at least three insights concerning the emerging literature on means-ends decoupling within organisational theory. First, my application of Brennan and Pettit’s (Reference Brennan and Pettit2004) Economy of Esteem framework offers the potential to explain the links between the means and ends of green solutions (see Chapter 4, Figure 4.4). The means-ends decoupling approach positions investments in shared meanings around corporate environmentalism as adaptive symbols rather than the more traditional ceremonial adoption. Within this view, the weak link between corporate environmentalism and improving environmental impacts does not result because managers are avoiding or failing to implement stated corporate environmentalism policies. Rather, symbolic gaps arise because managers are caught up in larger structural pressures that require them to implement, measure, monitor and report on green solutions regardless of whether these activities have positive outcomes. Restated in Brennan and Pettit’s (Reference Brennan and Pettit2004) language, managers’ decisions are not necessarily driven by technical cost-benefit considerations but instead by investing in a portfolio of activities to gain social esteem. The means-ends decoupling approach so far does not consider a firm’s portfolio of activities in response to institutional pressures – in particular, the balance between audience-seeking and performance-enhancing activities. Neither does contemporary decoupling research typically differentiate between ends: whether the outcomes are improvements in economic, symbolic or environmental performance. I encourage others to use Figure 4.4 to clarify this nuance and potentially identify and analyse different types of means-ends decoupling.

Second, the corporate environmentalism context is fertile ground to further examine the rise of ratings, measuring and auditing as rationalising processes. Bromley and Powell’s (Reference Bromley and Powell2012: 496) means-ends decoupling approach emphasises how ‘organisational activities are integrated not through a direct connection to production but rather through operational systems such as accounting, personnel management, evaluation, or monitoring’. As discussed in Chapter 6, environmental credentials, emblems and kin are important carriers in the process of institutionalising CCS as a green solution. These cultural symbols are produced and maintained as institutionalised conceptions of how firms can meet environmental demands. Chapter 7 describes how corporate translation of stakeholder demands for carbon accounting led to practice that prioritises comparability and consistency in reporting rather than accuracy in improving carbon performance. Both studies served as a reminder that measurement, ranking, rating and accounting systems are institutionalised in parallel with the corporate environmental activities they are designed to evaluate. They are perceived as legitimate or not, and they can create distinctions among organisations even when there is no meaningful difference between them. Organisations may implement green solutions not because there is a clear environmental or economic benefit from doing so but rather because they have been caught in symbolic environmental ratings or rankings system (Chatterji and Toffel Reference Chatterji and Toffel2010; Doshi, Dowell, and Toffel Reference Doshi, Dowell and Toffel2013). My analysis is a reminder that when valuing environmental performance, we must consider not only economic but also cultural value. The means-ends decoupling approach is alert to the roles of signals and symbols but focuses too little attention on symbolic capital. I argue in Chapter 6 that organisations can gain symbolic capital by possessing cultural symbols that are associated with high prestige, whether or not the prestige is warranted. Future research could investigate the extent to which possessing symbolic capital makes means-ends decoupling more likely.

Third, Bromley and Powell (Reference Bromley and Powell2012) identified the diversion of resources as a key consequence of means-ends decoupling. They pointed out that in early institutional theory, decoupling was seen as positive, enabling organisations to function effectively in conflicting and contested institutional environments. Over time, this has been replaced by a more cynical view in policy-practice decoupling research, which tends to emphasise the negative consequences of decoupling as managers consciously decide not to implement socially desirable policies in order to manipulate institutional pressures. We saw that in the corporate environmental context, resources are diverted into producing emblems, credentials and kin to provide cultural support for a firm’s activities. These may be general categories that are useful in the broader decoupling literature. I also delved underneath the surface of whether decoupling is positive or negative: When might there be net social benefits to means-ends decoupling? The social energy penalty framework should be valuable to research in the means-ends decoupling tradition because it addresses the normative implications of symbolic implementation that might be applied in a variety of empirical contexts. In this way, my analysis can be seen as a response to calls to investigate the society-wide consequences of the rising phenomenon of means-ends decoupling.

Practical implications

Corporate environmentalism poses significant challenges for public and private policy. In public policy, regulators appreciate the need for corporate involvement in achieving environmental aims, but they also know that firms can be self-interested and control access to resources. In private policy, managers face conflicting environmental demands that vary in unpredictable ways across locations and time. They need to somehow meet these demands in a society that values rationalisation and reassurance but is not willing to dramatically change consumption patterns to mitigate environmental impacts. All corporate environmentalism has a symbolic component; the challenge for public and private policy is to separate when symbolic corporate environmentalism is socially harmful from when it might be an inevitable part of an overall positive industry influence on the natural environment. Dismissing all corporate green solutions as merely symbolic risks a stifling of innovation and raising the overall cost of meeting environmental challenges. At the same time, accepting corporate environmentalism at face value can lead to false reassurance that green aims are being achieved and, ultimately, to worse environmental damage. In this book, I propose a contingent view on symbolic corporate environmentalism to help practitioners identify when it is most damaging and to focus their efforts accordingly.

The social costs of symbolic corporate environmentalism are likely to be higher when firms have the discretionary power to design a specific green solution. Firms may not always exercise this power. If the environmental demand is not particularly expensive or disruptive to a firm’s core activities, managers may go along with another firm or stakeholder’s green solution to gain positive reputation or to maintain legitimacy. But if the firm’s core business is threatened, we can expect managers to find ways to use their firm’s social status to design a compromise green solution and build cultural support around it. This is most evident in the case of CCS, wherein carbon-intensive firms sensed that they needed a plausible solution to climate change and provided political, economic and discursive support for the new technology. The problem with CCS is not so much that the technology does not work: the scientific consensus is that it does and it could be a vital way to substantially reduce global carbon emissions in a few decades (IPCC 2005). The problem is more that companies that are supposed to fund the development of this technology have no intention of doing so on the required scale or timeline. For CCS, R&D is not so much ‘research and development’ but rather ‘research and delay’. The significant gap between stated project timelines and actual project commissioning is mirrored in the gap between enthusiastic rhetoric and investment realities. Far more investment has been discussed and committed on paper than has actually been spent on CCS projects. Firms are skilled at generating and protecting cultural symbols surrounding these potential projects – such as awards, patents, papers at scientific conventions and endorsement from politicians – making it difficult to see the gap between the social recognition that firms obtain for participating and the negligible concrete progress. CCS is an extreme example of firms having the power to sell a symbolic green solution to society that they have little intention of fully supporting: social costs are potentially high.

In situations in which social costs may be high, it is worth examining further whether there are social benefits. To estimate these properly, we need three key pieces of information: (1) the standalone technology value of the green solution, (2) the likely limits of the social benefit, and (3) the initial rate at which these benefits might be generated. In Chapter 8, I provide ideas on how to estimate each of these. However, it is important to remember that there may be scope for both regulators and managers to influence each parameter. For example: Are there any complementary changes to regulation or company practices that might improve the standalone environmental cost-benefit of the green solution? Are there ways to drive the green solution up the social benefit curve, such as mandatory information sharing from early adopters to encourage learning; supporting others in society such as NGOs or think tanks to act as monitors; publishing official information to make firms’ reputations more transparent; and providing regulatory sanctions for noncompliance to underpin the selected green solution?

Balancing social costs against social benefits will determine whether there is an overall social energy penalty. The frameworks and analysis in this book suggest that the social energy penalty from symbolic corporate environmentalism is likely to be higher when:

1. the industry is concentrated and dominated by a few powerful firms

2. leading firms sense a threat to their core business

3. firms can control the definitions and symbols around a green solution

4. the stakeholder environment is less monitored (e.g., weak NGOs, direct regulations or investor interest)

5. the most powerful actors around the green solution have complementary rather than conflicting logics (e.g., when industry and regulators perceive the problem in the same way)

6. the industry is characterised by collaboration and consortia, including with government partners

7. one green initiative is seen as a solution to several different social, policy, economic or environmental problems

8. there is little potential for newly adopting firms to learn from earlier firms’ experience

9. firms adopt the green solution primarily for legitimacy rather than competitiveness reasons

10. environmental performance standards are based on having measurement and reporting systems rather than changing underlying environmental impacts

In Chapter 1, I began by describing green solutions implemented by HSBC in recent years. The bank invested in a portfolio of environmental activities, including planting virtual trees as part of a new green bank account, commissioning greener corporate buildings, making and then withdrawing a commitment to the ‘carbon neutral’ label, and signing up to financial industry initiatives such as the Equator Principles. All are examples of corporate environmentalism and all have material and symbolic components: buildings, certificates, logos, charters, a system of counting trees, or new internal job titles, programmes, and departments to manage them. We want to know which of these supposed green solutions have the highest net benefit to society. Are there any that policy makers should discourage, that NGOs should expose as merely symbolic or, alternatively, that other firms should adopt as well? The frameworks in this book help to answer these questions.

First, consider HSBC’s virtual trees. HSBC promised to plant one virtual tree in its virtual forest for every account that was switched to a paperless Green HSBC Plus account in 2007. It committed to planting one real tree for every twenty virtual trees, and the bank was criticised for a backlog of tree planting even at this conversion rate. This is an iconic example of symbolic corporate environmentalism in action. Driven by the need to be perceived as doing something on environmental issues, HSBC invented a new product and an accounting system for virtual trees that was decoupled from the bank’s underlying impacts. The firm controlled the rules of the scheme, including the conversion rate and the measurement and reporting system that accounted for the virtual trees. There is likely to be a utility loss associated with this solution because HSBC controlled the form of the voluntary initiative. It would have been more efficient for the bank to give a discount or cash back to customers who switched to its paperless account (which it subsequently implemented). Alternatively, there would have been better environmental impact if the bank had more directly limited carbon emissions by limiting staff travel or altering its lending criteria to fund only less carbon-intensive projects (which it has since promised). Furthermore, there is little potential for social benefit from virtual trees because there is little for other adopting firms to learn about environmental impacts through such a simple green solution. Perhaps recognising these difficulties, HSBC quietly dropped its virtual tree-planting programme and green bank accounts, replacing them with paperless options on all accounts. HSBC is not the only company that has had problems with symbolic virtual trees. In a 2008 online marketing initiative, Timberland promised to plant a virtual tree for each ‘like’ it received on its Facebook page. Overwhelmed by responses, it subsequently altered the ratio of virtual to actual trees and eventually placed a limit on the number of real trees the firm would pay to plant. There is great potential for a social energy penalty when companies control commensurability (e.g., how new bank accounts or Facebook likes are converted into precise numbers of trees) and when virtual symbols outpace a company’s ability to deliver non-core activities such as tree planting in the real world. HSBC’s relatively small virtual-trees initiative is fairly easy to dismiss as having little or no net social benefit.

Second, HSBC has committed to achieving LEED Gold certification for the firm’s top fifty energy-consuming buildings.¹ The bank commissioned the first buildings to be LEED Gold certified in Latin America and in China and continues a global rollout of certifying its data centres, regional headquarters and larger offices. The buildings are cultural manifestations of corporate environmentalism and have a symbolic component that promises that the bank is taking seriously its social responsibility. The buildings may even be seen as forms of symbolic capital if the bank successfully attaches high-status credentials (e.g., LEED Gold certification) or prestigious kin (e.g., famous architects) to the social understanding of the buildings. However, the value of these credentials and kin are somewhat arbitrary: stakeholders use them as shortcuts to decode the bank’s symbolic performance without examining actual environmental performance. To evaluate net social benefit, we must look inside the details of the green building certification schemes. HSBC actively chooses between green building standards, opting for LEED Gold in most countries but for the more stringent BREEAM ‘excellent’ standard for its headquarters and data centre in the United Kingdom. Which, if any, has a higher social energy penalty?

In Chapter 8, I am critical of LEED compared with the more rigorous BREEAM green building standard but, applying the previous list of criteria, it is evident that both schemes have the potential for a social energy penalty. Both schemes were introduced to symbolise a way for land developers, architects and builders to respond to a threat to their core business – that is, the ability to develop new buildings. Governments and industry players had a shared interest in encouraging new symbols to show local communities that buildings were being built in an environmentally responsible way, protecting construction jobs and local economic development. Firms commission green buildings primarily to maintain social legitimacy rather than to gain direct competitiveness benefits, making firms more likely to choose credentials based on symbolic capital value rather than environmental or economic benefits.

However, there also are significant differences between the symbols (see Chapter 8). Whereas both certifications add cost to a building, the costs are lower for the less-stringent LEED scheme, making it more attractive for legitimacy seekers. The certification criteria for LEED are controlled by the USGBC, an industry-led, membership-based trade association, whereas BREEAM is managed by a former government executive agency that is now an independent approvals organisation operating at arm’s length from both industry and government. LEED criteria are based on voluntary standards, whereas BREEAM criteria are based on technical best practice and legislation. Energy efficiencies are translated through dollar amounts under LEED but linked to direct CO₂ emissions reductions under BREEAM. The institutional environment surrounding building regulations and industry self-regulation is more decentralised in LEED’s US regulatory system than it is in Europe. All of these factors point to a higher social energy penalty associated with LEED certification than with BREEAM.²

Although there may be a social energy penalty associated with LEED certification, at least LEED certification is tied to the building’s environmental performance. The third of HSBC’s green investments – the carbon neutrality label – lost symbolic value for HSBC because it became decoupled from material changes in internal firm practices. HSBC was the first large bank to declare itself carbon neutral in 2005; however, by 2011, it announced that it was withdrawing from the symbol. HSBC was not the only large firm to withdraw from carbon neutrality around that time. Companies such as Dell, Nike, PepsiCo and Yahoo all backed away from carbon neutrality language in 2010–2011. Why? When carbon neutrality was first introduced as a label, it included a wide variety of behaviours directed at a goal of net-zero emissions. Precise definitions varied in terms of the scope of companies’ emissions included and, in particular, whether firms were required to reduce direct emissions from their own internal activities or whether they could pay others to do so. For example, the UK DECC issued guidance on carbon neutrality, stating that it should not be achieved only by offsetting but also should include internal reductions (DECC 2009). In contrast, the Carbon Neutral Company, which assisted 350 companies in 35 countries to become Certified CarbonNeutral®, does not require internal emissions reductions (Carbon Neutral Company 2013). The symbolic flexibility of many meanings of carbon neutrality weakens the signalling value of the label. It imposes a higher social energy penalty because the benefits of the symbol are less clear, and firms can control the particular form of carbon neutrality credentials that they offer to their stakeholders.

Leading companies have backed away from carbon neutral certification because the weaker label advocated by agencies such as the Carbon Neutral Company has gained prominence. They have replaced the label with more precise commitments about improving the energy efficiency of their internal operations (HSBC 2013), reporting their use of the entire suite of GHGs (Nike 2013), and going ‘beyond carbon neutrality’ by investing in renewable energy projects and offering products that help supply chain partners reduce emissions (Google 2013). Despite the social energy penalty, however, carbon neutrality certification has not vanished. Several major companies, including UPS, Microsoft, and Bain & Company, sought and achieved CarbonNeutral® certification in 2012 and 2013. In the case of Microsoft, the company introduced carbon neutrality as a new commitment because it found that it could not meet its previous 2009 commitment to reduce relative carbon emissions by 30 percent by 2012. Its new cloud-computing business model was driving up gross carbon emissions, so the only option was to opt for carbon neutrality, which allows the use of offsets (Microsoft 2012). Microsoft replaced a commitment based on improving internal material changes with one based on changing measurement and reporting systems, leading to a higher social energy penalty.

Finally, HSBC committed to a variety of financial sector initiatives including the United Nations Environment Programme Finance Initiative (at the Rio Conference in 1993), the UN’s Global Compact (in 2001) and the Equator Principles (in 2003). The Equator Principles illustrate a particularly good example of how a green solution might turn out to have a net social benefit. Ten large financial institutions voluntarily adopted the principles in June 2003 to improve their environmental and social risk management practices in infrastructure project financing.³ In the early years (i.e., 2003–2006), the principles were widely criticised as a symbolic attempt to gain legitimacy and repair reputational damage from earlier NGO campaigns (O’Sullivan and O’Dwyer Reference O’Sullivan and O’Dwyer2009). The original principles had many of the hallmarks of high potential social cost: adopting banks tended to be larger than non-adopters; projects often were financed by consortia of financial institutions, leading to interdependence among major industry players; environmental and social concerns could attract considerable public scrutiny in large infrastructure projects, possibly threatening the viability of the projects; the banks narrowed the scope of the principles to project only finance activities; and firms avoided building in accountability and sanctioning mechanisms to monitor compliance (Haack et al. Reference Haack, Schoeneborn and Wickert2012; O’Sullivan and O’Dwyer Reference O’Sullivan and O’Dwyer2009; Scholtens and Dam 2007).

Given the high potential social cost, we should assess the potential for social benefits. Here, the picture is more positive. The Equator Principles diffused rapidly, with an average of seven new institutions adopting them per year, and now cover more than 70 per cent of international project-finance debt in emerging companies.⁴ Banks reported learning about social and environmental risks surrounding infrastructure projects (Macve and Chen Reference Macve and Chen2010), and they responded to the complementary asset of shared reputation to gradually revise the principles under NGO pressure to become broader and more stringent over time (Balch 2012). As Haack et al. (Reference Haack, Schoeneborn and Wickert2012: 835) stated it, after being criticised for greenwashing in the early years, the ‘banks ultimately talk[ed] themselves into a new reality of doing project finance’. The third version of the principles published in May 2013 extend their scope and reach far beyond what the originators of the charter imagined ten years earlier (Equator Principles 2013). The principles provide a good example of a green solution with apparent potential for social cost ultimately yielding social benefit. In time, the low cost of signing up to an industry-dominated scheme has drawn almost the entire international project-finance industry into normalising a much higher engagement with environmental and social issues. As Haack et al. (Reference Haack, Schoeneborn and Wickert2012: 837) concluded from their careful analysis of the Equator Principles: ‘[I]nstead of unconditionally sanctioning organizations for decoupling, it might pay off to tolerate their gradual transformation and encourage experimentation informed by mutual learning and dialogue’.

Thus, the frameworks presented in this book should assist practitioners in at least ranking green solutions according to their potential for a social energy penalty. Of the green solutions in HSBC’s portfolio, we can expect the highest social energy penalty to be associated with planting virtual trees and the biggest social premium from the Equator Principles. The three intermediate cases are certification schemes with different designs and criteria. Of these, the BREEAM green building standards are likely to have the lowest social energy penalty, followed by USGBC’s LEED and then The Carbon Neutral Company’s CarbonNeutral® certification. The lesson here is that whereas it may be difficult to determine an exact quantification of a social energy penalty for a given symbol, the frameworks in this book and the previous checklist should be useful in ranking alternative industry-led green solutions. They should also be useful in assessing whether a particular symbol is generating a smaller or larger social penalty over time.

A broader reminder from this work for regulators is that policy makers also have a role in generating and perpetuating symbolic greening (Matten Reference Matten2003; Newig Reference Newig2007). Symbolic corporate environmentalism is not strictly a corporate phenomenon in the sense that others in society – regulators, politicians, consumers, voters and researchers – must be complicit in not calling firms to account for the social energy penalty to persist. There is a natural political temptation to focus attention on specific lobbying groups in response to deliberate corporate political strategies. In this book, however, I emphasise the parallel cultural temptation in adopting the business language of voluntariness, controllability and green solutions. When designing policy instruments, regulators should (as far as possible) question deference and arbitrary distinctions generated by ratings and rankings. Naïve enthusiasm for business-led solutions should be examined carefully, particularly if the regulatory instrument supports an industry-led green solution that meets some of the checklist conditions stated previously. One promising direction is ‘co-regulation’, in which self-regulatory solutions are backed up by some regulatory oversight or ratification (Gunningham and Rees Reference Gunningham and Rees1997).

Managers can now access an increasing range of contemporary advice on how to choose an eco-label (see, e.g., Delmas et al. Reference Delmas2013), how to communicate environmental credentials to a cynical public (see, e.g., Illia et al. Reference Illia, Zyglidopoulos, Romenti, Rodriguez-Canovas and Del Valle Brena2013), and how to reduce greenwashing (see, e.g., Delmas and Burbano Reference Delmas and Burbano2011). What my analysis adds is how to be aware of the social costs and benefits of corporate environmentalism. All corporate environmentalism has a symbolic dimension, whether or not it is merely symbolic. My goal has been to increase our sensitivity to when symbolic corporate environmentalism is socially harmful. Managers might use the frameworks to evaluate the social energy penalty associated with particular green solutions to avoid cases in which green solutions are of dubious social or environmental value. Doing so in advance might avoid problems later when the green solution is eventually criticised by others. They might also use these ideas to prioritise solutions that offer the most social benefit for a similar firm-level cost, such as those that are based on substantive performance standards or that encourage learning and sharing.

Limitations

Throughout the book, I build the case that symbolic corporate environmentalism has social costs and benefits, depending on a variety of field-, firm- and solution-level characteristics. However, as I point out in Chapter 8, I did not directly test the overall framework. This important task is left to future researchers, and I hope that Chapter 8 provides guidance on how to do so. As well as testing the frameworks more directly, I encourage further work resulting from two key limitations of my approach: (1) exploring different types of symbolic corporate environmentalism, and (2) expanding the framework to different empirical contexts.

The conceptual frameworks in this book expand our theories from deliberate, disclosure-based greenwashing to include the entire range of symbolic aspects of everyday firm practices. I present empirical studies based on environmental strategies and policies (see Chapter 5), an environmental technology (see Chapter 6) and a carbon measurement system (see Chapter 7). In passing, I discuss examples based on symbols in the built environment and discourses surrounding collaboration with stakeholders. Taken together, these examples cover five of the eight cultural manifestations of corporate environmentalism listed by Forbes and Jermier (Reference Forbes, Jermier, Bansal and Hoffman2012). I leave it to other researchers to assess whether these ideas can be appropriately applied to the other symbolic domains Forbes and Jermier (Reference Forbes, Jermier, Bansal and Hoffman2012) identified: organisational structure, human resources processes and incentives, and stories and rituals. There are parallel literatures in organisational behaviour that might evaluate the social implications of green job titles, specialised environmental departments, and environmental training and incentives more thoroughly than I do here. Future research might also link my frameworks with emerging findings on the narrative dimensions of diffusing corporate environmentalism through stories (see, e.g., Haack et al. Reference Haack, Schoeneborn and Wickert2012 and Christensen et al. Reference Christensen, Morsing and Thyssen2013).

Building on this, there may be potential to develop more nuanced arguments based on different types of symbolic corporate environmentalism. For example, symbolic corporate environmentalism may vary according to its embeddedness in the organisation, its visibility to outsiders, by net cost to the adopter, or whether it is attached to the core organisation rather than a particular event or activity. Furthermore, I focus on increases in symbolic corporate environmentalism by adopting or implementing new green solutions. Future research could gain deeper insights from other changes in symbolic corporate environmentalism, such as corporate withdrawal from symbols they helped design, controversies around changes in criteria, and stopping a particular green solution altogether. Recent examples of companies withdrawing from a standard that they helped to design include Apple’s withdrawal from the Electronic Product Environmental Assessment Tool green electronics registry and the UK retailer Tesco dropping its plan to include a carbon footprint label on all of its own brand products. For a controversy about changes in criteria, interested readers should see the negotiation surrounding the USGBC’s decision to exclude SFI-certified wood in its rating system. An illustration of the withdrawal of a symbolic green solution is the EPA’s phase-out of the voluntary Climate Leaders Program that operated in the United States from 2002 to 2011.

Finally, I focus on the symbolic components of environmental activities in companies. This is a compelling example of firms adopting new organizational practices in response to institutional demands. I encourage other researchers to test the robustness of the findings in other empirical contexts. Any context in which there is scope for gaps between stated intent, the implementation of new practices and actual impact might be profitably explored in this way. Researchers explored the drivers of symbolic gaps in contexts as diverse as corporate governance (Westphal and Zajac Reference Westphal and Zajac2001), management control systems (Kennedy and Fiss Reference Kennedy and Fiss2009; Oakes et al. Reference Oakes, Townley and Cooper1998), equal opportunity policies (Kelly and Dobbin Reference Kelly and Dobbin1998), ethics codes (Stevens et al. Reference Stevens, Steensma, Harrison and Cochran2005), and public policy (Weber et al. Reference Weber, Davids and Lounsbury2009). Although I am unable to generalize beyond symbolic gaps in corporate environmental strategy, future research could investigate to what extent the findings may apply elsewhere.

After greenwashing

Greenwashing seems to be on the decline, at least in the narrow sense of deliberate disclosure by companies of their artificially favourable environmental performance. Activists in a social media era have become better at exposing it, and academics have built models based on twenty years of corporate environmentalism research to understand it. This does not mean that we no longer need to be concerned about the social implications of widespread symbolic corporate greening. The naïve marketing of the 1980s and 1990s – exemplified by Chevron’s People Do campaign and unrefined online engagement campaigns such as Timberland’s Facebook virtual trees programme – is no longer successful in our contemporary social media age. Companies and NGOs are inventing increasingly media-savvy deliberate green communication strategies, such as tweetjacking, astroturfing, astrotweeting and even reverse greenwashing.⁵ It remains to be seen which of these deliberate post-greenwash strategies will thrive in the coming years. Some may succeed but it is more likely that these deliberate communications will be caught up in exposure and cynicism over time, just like greenwashing has in recent years.

I focus instead on a more socially embedded and often neglected phenomenon: the shared meanings related to everyday corporate environmentalism. This much broader phenomenon is an inevitable consequence of firm engagement with green issues because all firm activities have a symbolic component. Unlike transitory greenwashing and its new-age successors, symbolic corporate environmentalism is here to stay. My goal was to work out when symbolic corporate environmentalism is more or less socially wasteful. Based on evidence from the frameworks, cases and stories in this book, it is difficult to think of a positive example in which there is an unequivocal social energy premium. The Equator Principles comprise possibly the best example of an industry-led green solution that results in a net social benefit over time. Even in this case, it was necessary to take the long view, looking back over ten years: the symbol was widely criticised in the early stages and had the potential for a high social cost.

This state of affairs might leave advocates of corporate environmentalism pessimistic because so many green solutions have an absolute social energy penalty. Critical theorists may be correct to suspect that organisations within society are defining and constructing solutions for the natural environment in order to control it. But realists accept that corporate involvement in addressing environmental issues is inevitable in the current socioeconomic system. Conventional corporate environmentalism researchers have the tools and a duty to help unpack when the same self-regulation they so often advocate imposes a social energy penalty. Social inefficiency arising from the symbolic component of corporate environmentalism may be an absolute problem, but conventional researchers can design green solutions that are relatively better. This book is a first modest effort in this direction.