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How do internal organisational dynamics impact the growth of corporate environmental responsibility?

How do internal organisational dynamics impact the growth of corporate environmental responsibility?

The past decade has seen significant growth towards more sustainable and environmentally sound practices, as organisations seek to fulfil legislative requirements, achieve competitive advantage and provide a greater commitment toward the natural environment in order to foster a positive social image. This has become increasingly important for organisations following the establishment of the UN Global Compact, in which principle 8 calls on businesses to undertake initiatives to promote greater environmental responsibility in line with agenda 21 of the 1992 Rio declaration.

“Business gains its legitimacy through meeting the needs of society, and increasingly society is expressing a clear need for more environmentally sustainable practices.”

UN Global Compact, principle 8

As variables an organisation can control, internal dynamics are often regarded as the main driver behind the development and implementation of environmental management strategies and policy that govern an organisations corporate environmental responsibility (CER). In this analysis we take a look at some of the core internal dynamics affecting CER.

 

1. Managerial Attitude

 

As motivational leaders & regulators of change within organisations, management has a discretionary ability to govern the direction and degree to which an organisation develops CER, with the values, perceptions and beliefs of management influencing the potential for change within an organisation. Leadership capabilities such as the effectiveness, entrepreneurial ability and awareness of management each impact the ability for business managers to develop & adopt greater CER. However, the ability for managers to successfully develop and adopt greater CER is subject to a number of external and internal dynamics.

 

2. Organisational Culture

 

Organisational culture is one such example, with the understanding, values and beliefs shared within an organisation acting as a platform for support and learning, while also fostering cultural change. Learning which may occur over time through the testing and implementation of environmental policies and projects can stimulate innovation towards future actions, as well as developing positive shifts in personal behaviors that can lead to a more environmentally responsive organisation.

A 2010 review by the Network for Business Sustainability, examined the way in which sustainability can be embedded in organisational culture, providing several examples of organisations which have successfully fostered a more sustainably focused culture through the adoption of several key practices;

  • Nurturing commitment towards sustainability through support, leverage, recognition, commitment and education;
  • Clarifying expectations through development of policy and the setting of achievable goals;
  • Building momentum for change though the recognition of ‘champions’ within an organisation, increased awareness, collaboration and engagement;
  • Instilling the capacity to achieve this change through systems learning, seeking out opportunities and threats and setting appropriate benchmarks.

Utilising these principles, organisations are able to develop an increased familiarity and understanding of environmental concerns, shaping the environmental responsiveness within an organisation’s cultural belief system.

 

3. Organisational Capabilities and Relationships

 

It may be an expectation that larger organisations have greater access to financial and human resources in order to implement environmental management strategies, as well as a greater ability to manage a wider scale of environmental issues.

It is additionally commented that larger organisations experience greater social and economic pressures in regards to environmental management as a consequence of having a greater environmental and socio-economic impact than small and medium enterprises (SME’s). This occurs as a consequence of greater environmental exposure, increased consumer demand and the presence of wider organisational networks providing greater support for proactive environmental responsiveness.

In the case of SME’s, access to fewer resources, perceived lesser environmental impacts and the perception that environmental management is not cost effective potentially act as a barriers towards more proactive CER. Indeed it has been often noted within literature that in the case of SME’s, the perceived barriers of adopting a more proactive CER may often outweigh the potential benefits. However, notwithstanding these barriers, the entrepreneurial nature of management and the necessity to develop a positive relationship with external stakeholders present key driving forces towards enhanced CER.

 

4. Organisational Structure

 

For some it is considered that the level of centralisation within an organisation is the most critical organisational structural factor influencing CER, due to the potential relationships existing between of the complexity of an organisation and the level of centralisation in environmental decisions. Secondly it is noted that the level of centralisation within an organisation influences the establishment of coordination and control mechanisms within an organisation.

On one hand, increased decentralisation may provide greater flexibility and increased responsiveness allowing for a more collaborative environment as well as greater innovation and efficiencies. On the other hand, proponents for a more centralised approach have identified that strong leadership based on a centralised model of governance is an important element of environmental responsiveness influencing the strategic nature of decision making and allowing for a more rapid and assertive response to environmental concerns and issues.

Ownership structure of an organisation is an additional aspect of organisational structure that has a significant impact on CER. A 2009 study by McKinsey Quarterly identified greater integration of environmental factors in decision making processes within publicly owned companies in comparison to privately owned companies, indicating increased sensitivity within publicly owned companies towards the impact of CER on equity values and corporate earnings. This suggests the potential for financial profitability through the adoption of greater corporate environmental responsiveness as a key motivator for publicly listed companies.

With both employees and consumers increasingly focused on the ethical and environmental performance of organisations, it is evident there are a wide range socio-economic benefits for organisations to grow and develop a strong corporate environment strategy. It is beneficial that by doing so, organisations can create unique opportunities to deliver proactive environmental leadership and achieve a competitive advantage on the marketplace while also fostering a sustainable and positive relationship between businesses and the environment.

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