Current section is comprised of detailed review of the literature about the environmental management practices and its association with the performance of the firms. The chapter encompasses six sections, incorporating the detailed discussion on the environment management practices. In the first section details about the origin and adoption of environmental management practices have been given by focusing on main drivers of implementing EMP and the benefits of the implementation. The second section of the literature review is highlighting the association between environmental performance and financial performance of the firm by depicting that higher environmental performance assist the organizations in gaining competitive advantage. The next section pertains to the view of researchers about levels of implementation for EMP. Along with this, the proactivity of environmental management practices has been detailed along with its benefits in terms of competitive advantage. Three different levels have been highlighted that include operational level, tactical level and strategic level and the themes of EMP has been discussed in terms of these three levels. Along with this, the discussion is followed by the regulation in UK to incorporate EMP into the business operations of the UK plastic industry. Lastly, the summary of whole review of literature about the environmental management practices is mentioned.
The debate on the notion of environmental management system and its association with the performance of the firms was not a mainstream in the literature two decades ago. It was the era of conventional wisdom when it was widely been believed by the practitioners that the environmental management efforts contribute to increase the cost and time for the operations of company and they are the tribute of penalties for firms (Tsai, Guo, Chen and Shieh, 2000; Khanna and Anton, 2002; Sotorrío and Sánchez, 2008). However, the shift into attitudes of the practitioners was made by sparking debate initiated by the Jackson and Lombard, (1993) with an aim of highlighting that protection of environment could be profitable for the firm. According to them the reduction of waste from the environment and contributing to reduction to pollution could never weaken the organization but it contribute to strengthen the competitive position of the firm. The opinions of Jackson and Lombard, (1993) were extensively criticized by the researchers but it changed the views of management and theorists incrementally and positively reinforced the consideration of environmental management practices with the regular operations of the firm.
It has been asserted that both types of environmental management activities including pollution control and pollution prevention hold the significant benefits for the organizations. The prior researchers on the linkage between environmental management practices and firm performance has shown that there is substantial amount of financial reward associated with the consideration of EMP into the business (Vachon and Klassen, 2008; Verboven, 2011). The financial reward could be in the form of minimization of cost in the long run and can help the organizations to reduce liabilities that are associated with harming the environment. Another perspective has been introduced by the researchers which provides that incorporation of environmental management practices enables the firms to efficiently use the resources, which is in line with the resource based view of the firm (Kassinis and Soteriou, 2003; Zhao, 2012). It has been added by the Molina?Azorín et al. (2009) that greater financial benefits associated with the EMP, acts as the motivation for different companies to embark on the incorporation of environmentally friendly behaviour.
The increasing significance of the environmental performance of the firms has initiated the changing scenarios for the companies and heightened the need of incorporating environmental management practices into the business. It has been highlighted by the Corbett and Cutler (2000) that the regulations of government are the key motivators behind adoption of practices that are friendly for the environment. However, a new paradigm was explored by Gonzalez, Sarkis and Adenso-Diaz, (2008) by adding that it is not only the pressure of regulatory authorities but the concern of key stakeholders as well which has driven the urge of encompassing environmental management practices. Similarly, the win-win argument offered by the Thompson et al. (2009) have provided that incorporation of environmental management practices to comply with the governmental standards of environment is the way for the organizations to gain competitive advantage over others. Moreover, it has been added that environmental management practices can offset the cost by bring innovation into the business and it acts as the mean for boosting up innovation thinking of organizations (Khanna and Anton, 2002; Vachon and Klassen, 2008; Buysse and Verbeke, 2003). Undoubtedly, the innovation is the requirements of modern organizations which are performing in constantly changing environment. Therefore, in light of innovation importance the EMP is significant in generating benefits for the organization.
The implementation of the EMP in the organizations has been considered as of significant benefits for the organizations in terms of identification of different methods which can help the organization in saving the cost through effective production (Kassinis and Soteriou, 2003; Kolk and Lenfant, 2010). Likewise, the view was strengthened by the opinion of Delmas and Toffel (2004) that EMP can help the organization in establishing better understanding of the production processes through which company can reduce the emission of contaminants into the environment and can protect the environment with the economic advantage of gaining competitive advantage. Furthermore, the Gonzalez, Sarkis and Adenso-Diaz (2008) have added in the benefits of the EMP for the organization and provided that incorporation of EMP in the operations of the organization is the way of enhancing the positive image of company at public level. It can be due to the fact that when companies understand and consider EMP at production and operational level then they are in the position to freely communicate with transparent reporting and it can generate positive perceptions of the company in the minds of stakeholders. In the light of these potential benefits of EMP for the firms, most of the companies have begun to make goals of waste reduction, pollution control and efficient use of resources and energy.
In terms of benefits of the EMP, a new paradigm has been opened by Christmann, (2000) by asserting that EMP is closely linked with the quality management of the firm. The quality management process requires the contribution of employees throughout the organization and likewise, the notion of EMP can be of greater effectiveness when employees get actively engaged in maintaining EMP. The insights from diverse employees throughout the organization not only contributes to improve the environmental and financial performance of the firm but is also found to be associated with greater harmony among the employees and increase shared sense of team oriented behaviour within organization. In this way, the EMP is associated with long term employee related outcomes which are the core for success of any organization.
By explaining the benefits of the EMP, one of the significant view is about improved customer relations, which has been provided by (Darnall, Jolley and Handfield, 2008). Better customer relationships are considered as the soul of any business organization as it can assist in strengthening the customer base and contribute positively in the revenues of the company. The modern day customers have increased awareness about the environmental concerns and they are more demanding about the protection of environment. The organizations that are extensively engaged in protection of environment are considered as one producing the better quality products (Delmas and Toffel, 2004). Therefore, following the EMP, enables the firms to build strong relationship with customers and establishes strong image of the company at public level. In this way, the organizations can achieve competitive advantage over the other firms which have low consideration for environment. The environmental management practices are cost saving and along with this they help the firms in huge market gains which are mainly beneficial for businesses and help them win the race of competitiveness.
The understanding of the linkage between environmental performance and firm performance was made clear by the researchers through introduction of innovation offset (Gil, Jiménez and Lorente, 2001). According to this view, the cost of complying with the environmental management practices is reduced in two distinct ways; the first is to adopt approaches that can help the management to reduce the cost of polluting the environment while the second is to avoid the environmental pollution through adopting of environmental friendly work processes. The view was mainly criticized by the researchers with the view, that it is presenting only one aspect of the environmental management which is environment regulation and more comprehensive approach is needed to incorporate the benefits of environment management into account (Thompson et al., 2009). The critiques have then brought more detailed perspective of the proactive environmental management with an aim of linking the environment performance and firm performance (Handfield et al., 1997). In the light of this view, the proactive attitude of organizations toward protection of environment can bring competitive advantage of cleaner products and processes. Moreover, the voluntary participation to the protection of environment will be of greater assistance in reducing cost and creating image of business rather than seeking for compliance with the government regulations. The notion of proactive environmental management received greater support from other researchers as well (Thompson et al2009). Therefore, this stream of research is laying strong emphasis on the notion that there exists an important association between environmental performance and firm’s performance.
After the research stream on compliance with government regulations on environment and proactive environmental approach, the emerging phenomenon of the EPM included customer oriented approach that has been brought into discussion by (Zhu, Sarkis and Lai, 2008). According to the research on customer oriented approach, the customers value and demand the products and services which are environmentally friendly, which can contribute positively to the firm’s performance. Regardless of providing sound theoretical relevance between environment and firm performance, these studies have lacked in terms of empirical evidences. In order to fill this gap, the Jackson and Lombard, (1993) has carried out a study with an aim of empirical investigation of the notion that there exist a strong linkage between consideration of environmental concerns intro productivity, improvement of manufacturing and environmental performance. This study has aligned the concepts of productivity with environmental protection and provided an evidence of win-win notion laid by (Kassinis and Soteriou, 2003). It has been asserted by Zhu and Sarkis (2004) that practical context is missing in the study of Kassinis and Soteriou (2003) and they later on offered practical evidence of the linkage between environment and firm performance. The authors considered an approach of event investigation in which company was awarded with an award for offering due importance to environmental concerns into the business. They considered two aspects for establishing linkage between environment and financial performance of the firms. The first was market gain and other was cost saving. In terms of market gains the firm. In terms of market gain the company experienced substantiated increase in market shares and margins (Vachon and Klassen, 2008; Buysse and Verbeke, 2003). Whereas, in terms of cost saving the productivity of the firm increased due to reduced consumption of energy and firm has reduced the cost of environmental liabilities. Therefore, it has clearly depicted that the award has served the firm by reducing cost associated with environmental protection and has helped the firm by contributing positively in financial performance of firm.
The need of empirical investigation was also felt and fulfilled by Walker, Sisto and McBain (2008) with massive evidence by collecting data from 243 firms. The study was carried out on the resource based view of the firms and it has provided an evidence that environmental performance contributed to enhance the competitive advantage of the firms. The author has emphasized on the notion that being green is economically beneficial for the businesses. The same has been provided by the meta-analysis of the 52 studies on the corporate social performance and has confirmed the views of preceding authors that the improved environmental performance of the firms contribute to improved overall performance of the firm (Vachon and Klassen, 2008; Buysse and Verbeke, 2003). These aspects highlighted on linkage of environmental and financial performance of the firm are mainly in line with the initial win to win notion of the environmental management practices which provides that being environmentally responsible brings vital benefits for the firms. The review of literature is therefore depicting that the investigation of linkage between environmental and firm performance has improved over time and it has presented that there exists a significant association between these two aspects of the businesses.
There has been a significant debate among the researchers about the level of implementation for EMP in organizational settings. In the literature three different suggestions for implementation level of EMP has been found including; operational level, strategic level and tactical level (Ilomäki and Melanen, 2001). Organizations can choose from the three level on the basis of nature and timing of industry in which they are operating. However, it has been asserted by Iraldo, Testa Frey (2009) that it is difficult for the organizations to choose the right level due to lack of clear lines between all of levels. The same notion has been supported in another research study with an assertion that borders between the three levels turn in fluid during the practice and careful examination is needed by the management of the company to establish fine lines between these levels while implementing EMP (Gupta, 1995). In the context of EMP, the operational level could be defined as the routine bases decisions and practices of the firm that are related to scheduling and sequencing (Hofer, Cantor and Dai, 2012). While the strategic decisions revolve around how the firm can create value and tactical decisions include product aggregation and production planning Genovese et al. (2014).
Research on the EMP implementation at the operational level provides that EMP can be applied in the form of reduction of waste, pollution prevention, recycling of waste through recovery of product and reduction of emission through higher employee engagement and application of better manufacturing technologies (Klassen and McLaughlin, 1996; Lai and Wong, 2012). According to the advocates of EMP at operation level, it is the most required and beneficial level for the incorporation of EMP and it offers economic way of reducing pollution through minimum cost. Later on the need was felt by the researchers to stretch the operational level beyond production and Molina?Azorín et al. (2009) have contributed to include the aspects of supply chain within operational level. According to them there is a greater need for the business organizations to eliminate waste from its supply chain and green supply chain can help in increasing the return of company. In this vein, the operational level is an important to start while contributing to reduction of pollution from the environment. Most of the plastic companies are making efforts to convert their waste into raw material again and it is the common practice in UK (Montabon, Sroufe and Narasimhan, 2007). Therefore, it can argued that plastic industry has implemented EMP at operational level. However, it has been asserted by Tsoulfas and Pappis (2006) that just reduction of pollution of reduction of waste is at the earliest stage of progression and there is needed a more sustainable approach towards protection of environment. In the light of their argument, the comprehensive approach of EMP could include the integrated product recovery management system and awareness programs for the employees which can contribute to increase the sense of accountability among employees regarding implementation of EMP.
Moreover, the research on the tactical level of EMP is focusing on life cycle assessment, short term resource acquisition and decision regarding innovation and monitoring (Montabon, Sroufe and Narasimhan, 2007; Khanna and Anton, 2002). The more integrated and comprehensive approach in the tactical theme includes the purchasing and supply chain management. It is note able that supply chain is the common extension in both the operational level and tactical level of EMP. The arguments of the researchers on tactical level of EMP is presenting that small group of practices carried out in isolation are not effective for the organizations and more comprehensive view of process and environmental innovation is needed with an aim of gaining the benefits of tactical practices (Zeng et al., 2010). The research on tactical themes of the EMP seems to lagging in terms of interactions between different tactical factors and their association with effectiveness of EMP.
The strategic perspective of the EMP is more comprehensive and it offers benefits that are greater than both operational and tactical level and has long term effectiveness for the firm. It includes the immediate response of management to the environmental issues and response is in the form of implementation of environmental strategy (Brammer, Hoejmose and Marchant, 2012). Moreover, it has been highlighted by the Claver et al. (2007), that strategic focus of EMP is aimed at enhancing the positive image of the corporation through increasing the social performance and gaining sustainable development of the organization. The Comoglio and Botta (2012) have added more in this view and integrated the EMP with the resource based view of the firm. Similarly, most of the researchers on the strategic view of EMP has agreed on the notion of corporate social performance and has provided that reduction of pollution and protection of environment are the key areas for the firm that can help in gaining greater returns on the equity of firm (Corbett and Cutler, 2000).
While some researches on the strategic level of the EMP has focuses on the aggregate approaches to the environmental protection which include sustainability, resource productivity and responsibility towards environment (Montabon, Sroufe and Narasimhan, 2007). According to this view the firms need to incorporate the product stewardship and there is a need to develop clean technologies with an aim of achieving sustainability in environmental protection. Advocates of the EMP in theme of strategic level has focused on their attention on the phenomenon of innovation offsets and have provided that implication of EMP successfully at the strategic level can enhance the ability of the firm to innovate which is the requirement of globalized business environment (Sroufe, Montabon, Narasimhan and Wang, 2002). These views has strengthened the theme of EMP at strategic level and provided that there are number of benefits that can be achieved through enhanced tendency of innovation.
Finally, the research on the trade-off zone view of the EMP has provided that firms need to categorize the environmental issues into three level; operational, tactical and strategic (Agan, Acar and Borodin, 2013). According to this view, the benefits gained from protection of environment are needed to be weighed against the destruction of value that can be caused through EMP. Therefore, the firms can clearly understand that EMP is in the direction of value creation for the firm that can be sustained for long term development of organization.
There exist two approaches that can be taken by the companies with an aim of implementing EMP into their businesses. The first approach is of environmental reactivity that is typically used by the companies with an aim of showing compliance with the regulations laid by environment managing authorities (Perugini, Mastellone and Arena, 2005). These organizations only follow the minimal level of compliance with an aim of avoiding pressure from regulatory authorities and consumers. While on the other hand is the view of environmental proactivity that is adopted by companies with an aim actively participating in environmental protection through voluntary attitude (Rondinelli and Vastag, 2000; Brammer, Hoejmose and Marchant, 2012). These two approaches can be considered as two ends of same continuum and offer benefits for the firm. It has been highlighted by the researchers that in spite of benefits of both approaches of incorporating environmental management practices, most preferable approach is proactive and it shows the commitment of organizations towards natural environment (Vachon and Klassen, 2008). There exist different ways for the company to proactively consider environmental management practices.
The proactivity of environmental management practices is found to be associated with resource based view of the firm and assist the firm in gaining sustainable competitive advantage through inclusion of environmentally oriented resources and capabilities into account. Proactive companies can consider the clean technology phenomenon at earlier stage and they can enhance their knowledge and capabilities (Nikolaou and Evangelinos, 2010). The increased knowledge base can assist such companies to outperform other firms. Moreover, the companies which are aimed at incorporating the EMP at earlier stage are more likely be attractive for the employees with distinctive abilities due to their positive image of protecting environment (Perugini, Mastellone and Arena, 2005). In this way such organizations are in better position to attract the competitive human resources from the industry and it will provide them edge of gaining strong position relative to other companies using reactive approach to environmental management practices. Along with this, the proactive environmental companies are able to enjoy strong reputation at the public level due to their environment friendly policies and practices (Pun et al., 2012; Montabon, Sroufe and Narasimhan, 2007). Their good reputation and positive image helps them to satisfy their key stake holders and they face lower pressure from regulatory authorities. The satisfaction of stake holders help environmentally proactive companies to gain greater benefits in terms of financial performance and environmental performance.
Along with this, the proactive behaviour toward environmental management practices allow the companies to develop the capability of higher order learning (Rondinelli and Vastag, 2000). Therefore, the companies can explore alternatives in an appropriate way and with greater efficiency as compared to reactive companies, which can be of greater assistance for the organizations in gaining competitive advantage. The higher order learning also enables the proactive organizations to develop the potential of continuous innovation (Nikolaou and Evangelinos, 2010). It assists them to gain rich view of the procedures and policies by catalysing the learning process and helps in continuous innovation in terms of products, processes and operations of the organization. Moreover, it has been asserted by Sarkis (1998) that all of these benefits of proactive organizations are associated with higher competitive capabilities of the organization.
This view was strengthened further by the assertion of Theyel (2000) that proactive environmental management can help the organizations to gain low cost and differentiation advantage. It can be noted that the incorporation of proactive attitude toward environmental management can help in lowering operating cost by exploitation of ecological efficiencies. The reduction of cost can significantly contribute in increasing the level of profitability for the firm. Likewise, the ability of the organization to attract the customers also increase through presentation of green concept of the business (Melnyk, Sroufe and Calantone, 2003; Montabon, Sroufe and Narasimhan, 2007). Therefore, the proactive environmental management is in the favour of organizations and can help to gain benefits in terms of increased and strengthened base of customers.
It has been highlighted by the researchers that although there are immense uses of plastic including packaging and manufacturing of material which has significantly improved the lives of people but the problem of improper wastes management has been linked mainly with the plastic industry (Mensah, 2006; Brammer, Hoejmose and Marchant, 2012). The plastic industry is facing higher pressure from the customers and regulatory authorities to incorporate ISO 14001 into their operations with an aim of contributing towards protection of environment. In UK, 5 million tonnes of waste is utilized each year and the companies are strictly obliged to follow the recycling methods with an aim of reducing pollution from the environment (BFP, n.d).
Figure 1. Waste Framework Hierarchy
The waste hierarchy framework has been presented by the British Plastic Federation with an aim of recycling the 57% of plastics in UK by 2017 (BFP, n.d). According to this framework, there are five key steps which can be used by the plastic industry to follow the environment management practices. These five steps encompass prevention, preparing for re-use, recycling, other recovery and disposal of plastic material in the way which can protect the environment. It has been highlighted by the researchers that organizations who depict active involvement for obtaining the ISO 14001 are perceived to work in the environment friendly manner (BFP, n.d). The attitude of the plastic industry towards adoption of appropriate methods for recycling of plastic material and the usage of less hazardous material enables the plastic firms to incorporate EMP in their system. The incorporation of EMP, would be helpful in showing compliance with the regulations of UK government.
Furthermore, the Plastic Industry Recycling Action Plan (PIRAP) is laying pressure on the plastic industry of UK to incorporate environmental management practise into account. The PIRAP has aligned its operations with the local Government, central authorities, waste management sector, plastic processing sector and obligated businesses to increase the likelihood that all of the plastic companies strictly work for the recycling of the plastic and contribute in protection of environment (BFP, n.d). Therefore, it is evident that plastic companies in UK are facing immense form regulatory authorities to adopt and follow EMP into their businesses with an aim of operating smoothly in the industry.
The section of literature review is comprised of deep investigation of the literature about environmental management practices and it highlighted that organizations performing in the globalized business environment are significantly considering the need of incorporating EMP in their business. The incorporation of EMP is motivated by the regulations of the Government, need for innovation, and demand of the key stake holders, cost reduction capacity of the EMP and to establish the strong image of the business at public level. In the light of these motivators, the EMP is mainly beneficial for the organizations and helps them to reduce pollution with an aim of gaining sustainable growth of the business. Moreover, with an aim of highlighting the tangible benefits of the EMP, the linkage between environmental and financial performance has been underlined in the section of literature review. The evidences from the prior research has depicted that the environmental performance is significantly associated with financial performance of the firm and help in gaining competitive advantage. Likewise, the study has incorporated discussion about proactive environmental behaviour of the firms and their likely benefits for the performance of the organization in long run. Furthermore, the three level approach for implementation of EMP has been considered in the literature review and it has provided many options for the firm to apply EMP including; reduction of emission, reduction of waste through development of clean technologies, cleaner production processes, recycling of waste and adoption of sustainable approaches. According to three level approach the decisions about the EMP needed to be divided into operational, tactical and strategic level. Furthermore, the section has highlighted the specific context of the plastic industry of UK in the light of waste hierarchy framework and regulation of PIRAP. The plastic companies in the UK are facing pressure to implement EMP with an aim of reducing waste, controlling emission of pollutants and increasing the recycling of the plastic material.
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