Professional Documents
Culture Documents
Boiral 2006
Boiral 2006
Boiral 2006
com
Many managers are at a loss concerning the strategy they should to adopt to deal with
global warming and the requirements enforced by the Kyoto Protocol. This article pro-
poses a global approach to anticipate the possible impacts of global warming on orga-
nisations and to explore policies and measures that managers can implement to cope with
this issue. The frame analysis proposed sheds light on the relevance of proactive or more
wait-and-see responses to global warming while stressing the importance of promoting
environmental intelligence and other preliminary measures before deciding what strategy
to adopt. The article also calls into question monolithic and static views of climate change
strategies and illustrates, through examples, the actions that managers can take to put the
Kyoto Protocol on their agendas.
Ó 2006 Elsevier Ltd. All rights reserved.
Introduction
In March 2006, ST Microelectronics, one of the leading semiconductor manufacturers, announced
a commitment to reduce its US greenhouse gas emissions (GHG) by 50 per cent between 2000 and
2010. A recipient of many environmental awards, especially for efforts to reduce GHG emissions,
ST Microelectronics hopes to become carbon-neutral by 2010 and has already succeeded in reduc-
ing its CO2 emissions by 50 per cent over the past decade. These commitments are fundamental to
company management philosophy and have resulted in many innovative initiatives: integrating en-
vironmental criteria in the performance evaluation of factory directors; encouraging use of public
transportation and car-pooling among employees; implementing reforestation programmes in
Texas, Morocco and Australia to offset the company’s remaining GHG emissions, et al.
Why are some companies like ST Micoelectronics adopting proactive strategies regarding global
warming, and what is the value of such strategies? What might be the impacts of global warming
and Kyoto Protocol issues on organisations, and how can these impacts be anticipated successfully?
0024-6301/$ - see front matter Ó 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.lrp.2006.07.002
What type of policies and actions should managers take to deal with this complex issue? The pur-
pose of this article is to answer these questions by shedding light on strategies and measures that
might be implemented to put the Kyoto Protocol on organisations’ agendas.
Until now, relatively few organisations have implemented a climate change policy. According to
a study conducted in 2004 among managers of the top 500 companies in the world, 80 per cent of
respondents considered that their organisation would be affected by the consequences of global
warming and the ensuing regulations. However, fewer than half of these companies had actually
implemented measures to meet this challenge.1 The asymmetry between the importance of this is-
sue and the relative lack of corporate commitment may be explained in part by the widely-shared
perception that environmental action entails costs that impact productivity. This perception, as well
as the complexity of and uncertainties about climate change, tend to engender resistance to the ris-
ing pressure to reduce GHG. Nevertheless, this resistance cannot be considered a generalised phe-
nomenon. Examples of organisations actively supporting the Kyoto Protocol and having
significantly committed themselves to reducing their GHG, such as ST Microelectronics, BP, Shell
and DuPont, show that organisational responses to climate change are not necessarily passive or
negative. Moreover, the fact that just a few short years ago some of these organisations were
very reluctant to back the Kyoto Protocol illustrates the importance of putting defensive and passive
attitudes into context rather than considering them as static.
This article begins by providing a broad outline of the Kyoto Protocol and possible organisa-
tional implications underlying its implementation. Anticipation of global warming impacts
through the promotion of an environmental intelligence rationale based on economic, political,
social and scientific issues assessment is then proposed. Using examples, the article also examines
the relevance of proactive versus more wait-and-see approaches vis-à-vis global warming. Finally,
the article addresses the implementation of a policy and a set of actions to reduce GHG
emissions.
The International Emissions Trading (IET) allows The implementation of emissions trading systems such as
signatory countries to trade emission credits between the European GHG trading scheme, in place since January
themselves. Accordingly, a country that fails to 2005, allows firms to buy or sell emissions credits. For
comply with its GHG reduction objectives will, in example, large industrial emitters that have succeeded in
principle, have to buy emission permits on reducing their emissions below quota levels will be able to
international markets. sell such permits and to take advantage of the trading
system. Conversely, large industrial emitters exceeding
their quotas will have to buy GHG emissions permits to
offset their poor environmental performances. The
development of this type of trading system also tends
to result in new regulations targeting GHG reductions.
The Joint Implementation (JI) is a mechanism New market opportunities in industrial countries through
allowing governments or private organisations to investments contributing to reduce GHG emissions. For
generate emissions credits by investing in example, a subsidiary in Spain or Russia can receive green
emission-reduction projects in industrialised investments from its foreign parent company or others
countries that have signed the Kyoto Protocol. investors seeking cost-effective GHG reduction projects.
JI also encourages alliances and collaborations between
companies or facilities in different industrialised countries
in order to develop more efficient ways of reducing GHG
emissions.
The Clean Development Mechanism (CDM) is a New market opportunities in developing countries for
way for governments or private organisations to companies specialised in energy efficiency and green
earn emissions credits by investing in technologies such as solar or wind power stations. This
emission-reduction projects in developing type of projects can be financed by industrial countries or
countries. by organisations seeking to meet their GHG emissions
obligations at a lower cost.
Use of carbon sinks, that is, forests and cultivated The development of reforestations programmes by
land, to absorb carbon, remove it from the organisations can generate emissions credits and improve
atmosphere and offset CO2 emissions. corporate image. For example, large emitters companies
can offset their GHG emissions through tree planting
programmes and could target becoming carbon-neutral.
Forest companies can also obtain emission credits to
offset tree-cutting operations or GHG-emitting industrial
processes through reforestation.
The implementation of a compliance system for This compliance system presupposes a precise
ensuring the effective implementation of the measurement of GHG emissions by organisations,
Kyoto Protocol and attainment of emission targets. more specifically for large industrial emitters. Measuring
and monitoring of GHG emissions often requires R&D
efforts and represent a promising market for
environmental engineering companies.
controversial scientific hypotheses. Most of the studies on this subject are based on a macroeco-
nomic viewpoint or on a prospective analysis of the possible consequences of global warming for
business activities. Thus, after explaining the greenhouse effect and its global impact, Packard
and Reinhardt emphasise the social responsibility of managers and the importance of assessing risks
and opportunities arising from ongoing climate change.2 The authors give examples of the potential
impact of climate change on the insurance, automotive and petroleum industries, among others.
Dunn analyses the economic impact of the Kyoto Protocol and its positive effect on innovation.3
Since the early 1990s, many studies have demonstrated the benefits
arising from green initiatives in organisations
Although the opposition between the win-win and win-lose approaches accurately reflects the
current debate over the implications of the Kyoto Protocol for organisations, this dichotomy re-
mains quite arbitrary and even simplistic. The benefits or costs associated with GHG reduction de-
pend on many factors, such as the sector of activity, distinctions between preventive and palliative
actions, environmental objectives and firm capabilities, which can vary significantly from one case
to another.11 For example, Wagner and Schaltegger have pointed out that the relationship over time
between environmental performance and economic success is not linear and depends on many fac-
tors, including corporate management systems, technologies and processes operated, firm size, in-
dustry market structure, return expectations, et al.12 Understanding these factors is difficult as they
are embedded in a political, social and scientific context that can vary from one sector or one region
to another.
Companies, especially those exposed to strong environmental pressures, should make provisions
for environmental intelligence or the appointment of specialists to anticipate the impacts of global
warming and assess how to capitalise on opportunities that arise as a result. Such services or spe-
cialists would contribute to monitoring the economic, political, social and scientific or technical
issues that could affect an organisation’s activities, as well as keeping a watching brief on related
opportunities and threats (see Figure 1). These issues are interdependent and require an interdis-
ciplinary approach integrating a wide variety of information. The complexity of this type of infor-
mation has led some organisations to co-operate in sharing environmental intelligence. For
example, in 2001, the electronics industry created EIATRACK, an environmental intelligence service
devoted to tracking product requirements and regulatory information around the world.13 This en-
vironmental intelligence tool provides information and resources related to new environmental pol-
icies concerning electrical and electronic equipments, energy efficiency requirements, chemical
restrictions, transportations controls, regional recycling regulations, product comparisons, regula-
tory alerts, etc. This information is crucial to adapting product design and distribution to growing
environmental regulations, especially in Europe, where the ecological impacts and end-of-life man-
agement of electronic and electrical equipment is increasingly controlled. EIATRACK has also
Social
Issues
- External pressures
- Image and legitimacy
- Employees motivation
- etc.
helped companies such as Sony and Matsushita to track and implement the best innovative prac-
tices regarding design-for-environment efforts in the electronic industry.
The same type of environmental intelligence tool can be implemented to track economic, polit-
ical, regulatory, social and scientific or technical issues of global warming for one or several orga-
nisations, or even a sector of activity as in the case of the EIATRACK service (see Figure 1):
Economic issues should include: monitoring of new market opportunities related to green prod-
ucts or technologies; financing of Clean Development Mechanism (CDM) or Joint Implementa-
tion (JI) projects; following the price of GHG emissions trading on international markets;
analysis of the best practices for reducing GHG emissions within a specific industry; potential
savings resulting from energy efficiency investments; possible impacts of GHG reduction endeav-
ours on financial markets; monitoring of competitors’ positions on this issue.
Political and regulatory issues should involve: following international negotiations and resolu-
tions on global warming; changes in environmental policies of states; anticipation of regulations
in different regions; governments efforts to reduce GHG emissions through subsidies; carbon
taxes and tax policies acknowledging the benefits of alternative fuels; incentives for innovation,
research and development support; low-interest or preferential loans for GHG reduction invest-
ments; accelerated depreciation rates for environmental technology investments.
Social issues should address: the assessment of global warming issue impacts on corporate image
and reputation; the social legitimacy of adopting a more passive or defensive position regarding
the Kyoto Protocol; the threat of pressures from environmental groups; changes in consumer
perceptions and behaviour regarding this issue; the promotion of social responsibility through
reforestation programmes or local green energy projects; the possible consequences of GHG re-
duction policy on employee motivation.
Scientific and technical issues should include: continuous monitoring of research, publications
and new evidence concerning global warming; the identification of new technologies for reduc-
ing or measuring GHG; opportunities to launch new research and development programmes;
impacts of the renewal cycle on environmental investments for production facilities; compiling
and updating information and statistics on company and competitor environmental perfor-
mances; follow-up of new standards for measuring GHG emissions.
Many companies tend to maintain the status quo and not react as
long as they are not obliged to do so
As an example, some companies fear that early efforts to cut GHG will not be fully recognised at
a later stage if they have to make more investments. In regions such as Canada, where the GHG trad-
ing system is not already in place, the wait-and-see attitude seems understandable. In this case, com-
panies delaying their environmental investments can reasonably expect to take better advantage of
their GHG reduction once such a market is in place. In the same vein, companies that have reduced
their GHG before the implementation of a GHG trading system or other programmes favouring such
reductions could be at a disadvantage, compared with the wait-and-see companies. This type of
dilemma has been fuelling the debate between the Canadian government and provinces such as
Québec, which considers that the federal plan to comply with the Kyoto Protocol must consider in-
vestments that have been made over the last few years, in particular by the aluminium industry.
Scientific uncertainties concerning the contribution of human activities to global warming have
reinforced this wait-and-see attitude and fuelled opposition to the adoption of new regulations.
They also have encouraged support for the political campaign of candidates who are overly con-
cerned about environmental issues, financing of research that downplays the effects of GHG emis-
sions on global warming or emphasises the costs of the Kyoto Protocol. ExxonMobil is probably the
most significant example of this lobbying strategy, displaying a fierce and open opposition to the
Kyoto Protocol from its beginnings in 1997 and promoting actions to undermine the credibility
of social pressures regarding global warming. During the summer of 2005, ExxonMobil launched
a vast advertising campaign claiming that the company had made the largest investment ever in
‘‘independent’’ global warming research. Contrary to other large petroleum companies, and in spite
of the accumulation of scientific evidence, the managers of ExxonMobil are still denying the
also helps to measure environmental performance, which is a requirement if companies are to par-
ticipate in the GHG trading system. To ensure the credibility and reliability of these measurements,
organisations can use the new ISO 14064 standard for GHG accounting and verification. Launched
in 2006, this standard was developed by 175 experts from 45 countries to provide a set of reliable
and verifiable specifications for quantification, reporting and verification of GHG emission reduc-
tion efforts. Another standard, ISO 14065, is expected to be launched in 2007 and will specify re-
quirements to recognise bodies in charge of GHG verification through ISO 14064.
Third, organisations should determine what options would be the most efficient in reducing
GHG emissions, based on different objectives, regulations and environmental intelligence informa-
tion. Investments in clean technologies are not the only option. Managers can also buy emission
permits on international CO2 markets or launch reforestation programmes to offset company emis-
sions. These programmes can easily be subcontracted to other organisations. Some companies, such
as Future Forest, specialise in this kind of activity and offer services to organisations to assess car-
bon emissions and compensate for them through the funding of forestry projects.
These preliminary measures should guide managers in determining what type of approach and
actions their organisation should contemplate: being proactive or adopting a wait-and-see ap-
proach (See Figure 2). The approach and measures to be prioritised will depend on the inventory
of GHG emission sources, the most efficient options to reduce these emissions and the emerging
issues on global warming, including new regulations and social pressures. The trade-off between
proactive and wait-and-see approaches is an ongoing process that must be reassessed continuously,
based on economic opportunities, the price of CO2 emissions on the GHG trading market,
anticipation of future regulations, emergence of new technologies, the inventory of GHG, and
environmental project proposals from employees. In this perspective, the adoption of one approach
or a set of actions is first and foremost a question of timing, anticipation and opportunity.
for environmental technologies. By applying these pressures, managers tend to become institutional
entrepreneurs who influence policies and external factors in order to increase the benefits and de-
crease the costs of GHG reduction endeavours. In all likelihood, the role of the institutional entre-
preneur will continue developing significantly as a growing number of organisations implement
a climate change policy and as public programmes tackling global warming multiply. Institutional
measures are also used to turn an organisation’s green commitment into a trademark intended to
improve its external image and promote corporate social responsibility. For example, British Petro-
leum has changed its name to Beyond Petroleum and has implemented a vast campaign focused on
its efforts in GHG reduction. This kind of image campaign has also been implemented by the Body
Shop: its corporate commitment to social and environmental issues constitutes its main distinctive
characteristic and it does not hesitate to display its activism. Body Shop has been quite involved in
the Stop ExxonMobil campaign and posters calling for a boycott of the oil company were posted on
its delivery trucks.
Conclusion
The main contribution of this paper is to answer three essential questions facing more and more
organisations. What could be the impacts of global warming and Kyoto Protocol issues on
References
1. V. Houlder, Swiss Re changes the climate, Financial Times (April 27, 2004).
2. K. Packard and F. Reinhardt, What Every Executive Needs To Know About Global Warming, Harvard
Business Review, 125 78(4), 128e135, (2000) JulyeAugust.
3. S. Dunn, Down to Business on Climate Change, Greener Management International 39, 27e41 (2002).
4. A. Kolk and J. Pinkse, Market Strategies for Climate Change, European Management Journal 22(3),
304e314 (2004); A. Kolk and J. Pinkse, Business Responses to Climate Change: Identifying Emergent
Strategies, California Management Review 47(3), 6e20 (2005).
5. A. J. Hoffman, Examining the Rhetoric: The Strategic Implications of Climate Change Policy, Corporate
Environmental Strategy 9(4), 329e337 (2002); A. J. Hoffman, Climate Change Strategy: The Business
Logic behind Voluntary Greenhouse Gas Reductions, California Management Review 47(3), 21e46 (2005).
6. C. E. Coon, Why President Bush Is Right to Abandon The Kyoto Protocol? The Heritage Foundation 1437,
(May 11, 2001); M. Thorning, A US Perspective on the Economic Impact of Climate Change Policy,
Special Report of the American Council for Capital Formation, December(2000).
7. A. J. Hoffman (Op. cit. at Ref 5).
8. F. Krause, S. J. Decanio, J. A. Hoener and P. Baer, Cutting Carbon Emissions at a Profit (Part I): Oppor-
tunities for the US, Contemporary Economic Policy 20(4), 339e365 (2002); M. Whittaker, Global Climate
Change: Uncovering Hidden Investment Risk and Opportunity, The Geneva Papers on Risk and Insurance
25(4), 619e628 (2000); G. Boyd and J. D. McClelland, The Impact of Environmental Constraints on Pro-
ductivity Improvement in Integrated Paper Plants, Journal of Environmental Economics and Management
38, 121e142 (1999).
9. P. Shrivastava, The Role of Corporations in Achieving Ecological Sustainability, Academy of Management
Review 20(4), 936e960 (1995); M. A. Berry and D. A. Rondinelli, Proactive Corporate Environmental
Management: A New Industrial Revolution, The Academy of Management Executive 12(2), 38e50
(1998); M. Russo and P. Fouts, A Resource-Based Perspective on Corporate Environmental Performance
and Profitability, Academy of Management Journal 40(3), 534e559 (1997); G. Azzone and U. Bertèle,
Exploring Green Strategies for Competitive Advantage, Long Range Planning 27(6), 69e81 (1994);
N. Amara, N. Traoré, R. Landry and R. Romain, Technical Efficiency and Farmers’; Attitudes toward
Technological Innovation: The Case of the Potato Farmers in Quebec, Canadian Journal of Agricul-
tural Economics 47, 31e43 (1999).
10. M. E. Porter, The Competitive Advantage of Nations, Free Press, New York, (1990) 855 pp. M. E. Porter and
C. Van Der Linde, Green and Competitive: Ending the Stalemate, Harvard Business Review 9(4), 120e134
(1995).
11. M. J. Roy, O. Boiral and D. Lagacé, Environmental commitment and manufacturing excellence: A com-
parative study within Canadian industry, Business Strategy and the Environment 10(5), 257e268 (2001);
M. Wagner, S. Schaltegger and W. Wehrmeyer, The Relationship between the Environmental and Eco-
nomic Performance of Firms: What Does Theory Propose and What Does Empirical Evidence Tell Us?
Greener Management International 34, 95e108 (2002); P. Christmann, Effects of ‘best practices’ of envi-
ronmental management on cost advantage: The role of complementary assets, Academy of Management
Journal 43(4), 663e680 (2000).
12. M. Wagnerand and S. Schaltegger, How Does Sustainability Performance Relate to Business Competitive-
ness? Greener Management International 44, 5e16 (2004)..
Biography
Olivier Boiral is a professor at the Faculty of Business Administration at Université Laval in Quebec, Canada,
where he teaches environmental management and international affairs. He earned a Ph.D. from the École des HÉC
in Montréal in 1996. Most of his research centres on environmental management and international standardisation.
He is the author of some 50 articles and scientific papers. In January 2005, he was appointed Director of the Canada
Research Chair in International Management Standards and Environmental Affairs. Olivier.Boiral@mng.ulaval.ca