Learning Objectives
• Understand the challenges businesses face in addressing the environmental impact of their activities.
• Appreciate how business environmental strategy may align and/or clash with international, regional and national regulation.
• Understand the potential and limitations of self-regulation and multi-stakeholder voluntary initiatives on environmental governance.
• Identify the push and pull factors that may facilitate the transmission of environmental performance demands up and down the value chain.
Introduction
Increased consumer awareness of the environmental impact of production and transportation of goods, numerous campaigns and direct action by non-governmental organisations (NGOs) and other civil society groups, and emerging national and international regulation are leading business to assess and address the environmental impact of activities linked to its products, also beyond those carried in-house (Dauvergne and Lister, 2012).
Business can do much in reducing the environmental footprint of its own operations. But the fact that production is increasingly fragmented in geographical and organisational terms poses specific challenges in transmitting environmental demands to other supply chain actors. The many scandals that have touched branded companies in particular have led them to devise environmental strategies for their own operations and for those of their suppliers to avoid reputational risk, and to increasingly participate in multi-stakeholder initiatives addressing sustainability issues in supply chains (Nadvi, 2008; Vurro et al., 2010; Wahl and Bull, 2014).
Environmental improvements that business can implement on its own include those affecting production, processing, distribution, consumption and disposal or recycling. Sometimes, these processes lead to net cost reductions for operators due to, for example, increased efficiency or reduced energy consumption. Other times, they lead to net value addition, for example through the creation and certification of new environmental qualities that become embedded in products selling at a premium price. But they can also impose net costs. If net costs of environmental improvements in the short term are recouped in the long term, there is still a business case to carry them out. If net additional costs are permanent, firms will carry out environmental improvement only if all competitors do so, either through regulation or through industry-wide voluntary standards (Orsato, 2011).
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