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CORP3600 Assignment 2 - Essay

Jos Luis Gramaxo P09299465 Greening Business CORP 3600 Assignment 2 Essay Tutor Dr. Miles Weaver Tutorial: Wednesday 9AM Question 1:
Evaluate how an organisation may develop and implement a range of strategies at different levels of strategic response (e.g. complying with regulations; pro-activity to gain competitive advantage) to address the environmental issues they face. Illustrate your answer with real business examples.

Word Count: 2522 words

Assignment 2 - Essay

CORP3600 Assignment 2 - Essay

This essay will evaluate how can organisations develop and implement a set of strategies to address environmental issues of the present. Two Portuguese organizations will be examined to determine how theyve implemented the environmental issues into their strategy and if being green is making the organization become more profitable, achieve competitive advantage and satisfying for all stakeholders. The main theoretical framework used in this essay will be the four levels of strategy (Banerjee, 2001), enterprise, corporate, business, and functional levels of strategy. The essays arguments are that corporates culture is the determining factor for a company to benefit from being green, in the sense that it is making more profit, is achieving competitive advantage, and also that being green has its advantages for all stakeholders of the company if the right strategy is taken and not an incorrect one. This essay will attempt to conclude that being green is actually profitable and rewarding for an organization if its strategy is well planned and carefully thought of, and that if an organization develops and implements environmental issues on its strategy in an incorrect way then it could suffer severe financial problems and not benefit every stakeholder of the organization. During the last few decades, awareness about issues involving the environment by governments, advocacy groups, business firms, policy makers and the public from all over the world has been increasing. Since environmental disasters such as the Exxon Valdez oil spill (1989) and the Bhopal gas leak disaster (1984), Corporations have been facing mounting external and internal pressure to manage environmental resources and risks effectively. Sinclair-Desgagn (2004) pg.1. This feeling of responsibility for environmental issues is changing the external environment of the market systems. Public concerns for environmental issues, regulatory groups, and lobbying groups are all stakeholders in any organizations and have the power to influence organizations in the strategy they adopt for the future.

Assignment 2 - Essay

CORP3600 Assignment 2 - Essay According to Banerjee (2001), there two main areas of research on the biophysical environment and the organization. The first area of research is prevalent in modules such as economics, sociology and anthropology. Radical and reformist environmentalism are the two opposite social paradigms of infinite natural resources and limitless growth (Egri and Pinfield, 1996). Since the radical environmentalism view is considered utopian and abstract, therefore only the reformist view has been theorized with business environments (Egri and Pinfield, 1996). The reform environmentalism perspective on the business-environment is dominated by the view that an organization is responsible for all its stakeholders and that an organization defines and builds their corporate environmentalism by recognizing their stakeholders interests. According to Freeman (1984), the stakeholders of an organization are all groups who directly and indirectly affect and are affected by organizations; these can include customers, staff or shareholders but also regulatory agencies, environmental agencies or local communities. When an organization recognizes green stakeholders it could have significant influence on its level of corporate environmentalism (Fineman, 1996). The other area of research on the biophysical environment and organizations examines the implications of environmental issues in an organization s strategic planning. This area of research investigates the appearance of several environmental management strategies such as recycling, energy conservation, and pollution prevention and it s main aim is to achieve competitive advantage by implementing environmental issues into an organizations strategy (Porter and van der Linde, 1995; Banerjee, 2001; Aragn-Correa, 2007). A theoretical model that is being increasingly used to gain competitive advantage by implementing environmental issues onto the organizations strategy is the natural-resource based view model (Hart, 1995). The natural resource-based view is A conceptual framework composed of three interconnected strategies: pollution prevention, product stewardship, and sustainable development Hart (1995) pg.991. In the resource-based view of an organization, the organization integrates one of the three different Assignment 2 - Essay 3

CORP3600 Assignment 2 - Essay environmental strategies in their planning in order to allocate resources effectively and leveraging them in order to gain competitive advantage over rivals (Barney and Zajac, 1994). Schendel and Hofer (1979) identified four different levels of strategy when outlining the strategy of an organization. These four different levels are in hierarchical order, enterprise, corporate, business and functional strategic level, in the sense that the above level will play a vital role in the strategic process of the below (Banerjee, 2001). The highest strategic level in the hierarchy is the enterprise level. The enterprise level of strategy is the role an organization plays in society and what is its main mission (Banerjee, 2001). At this level of strategy very few firms have fully integrated environmental concerns, the most known examples would be The Body Shop and Ben & Jerrys, which are proving to be more fictional that truthful, also one would expect that organizations such as GreenPeace would have environmental concerns implemented into their strategy. The second level of strategy in the hierarchy is the corporate level of strategy. This level of strategy is heavily influenced by the enterprise strategy of an organization, in the sense that the corporate strategy is what the organization has to do in order to meet its enterprise strategy; this might include entering new markets, product-market decisions, technology development decisions, and decisions to the business portfolio. Strategies at this level would include exploring green markets, development of green products, recycling resources, cleaner technologies and the integration of green business portfolios (Banerjee, 2001). The business level of strategy is the next level of strategy in the hierarchy. Integrating environmental issues at a business strategy level is a more proactive strategy than other level and it is aimed at gaining competitive advantage through allocating resources effectively. Competitive advantage is gained in this level through the costs advantages gained from the environmental improvements, which might come from the recycling of raw materials, producing own energy, solar panels. When implementing environmental issues in the business level of strategy the organization is Assignment 2 - Essay 4

CORP3600 Assignment 2 - Essay trying to add the business sustainability, which will eventually, in the longterm, transform into competitive advantage (Banerjee, 2001). The fourth and final level of strategy is functional strategy. This level of strategy is a re-active one, in the sense that its use usually is due to the need to comply with regulations or legislations. Strategies used at this level can include marketing or research and development (Banerjee, 2001). Royal Lankhorst Euronete Group will be the first company to be examined in order to understand how they devised and implemented their strategy to address environmental issues over the past decade and if this is being profitable and rewarding for all stakeholders of the company. Royal Lankhorst Euronete Group is a Portuguese-Dutch, family-owned company with over 200 years of existent, it is a company specialised in products that range from fishing gear to engineered products. Royal Lankhorst Euronete Group is one of Europes market leaders in plastics recycling (Lankhorst, 2012) and therefore an excellent example to be studied to understand how environmental issues can be implemented into the strategy of an organization. Lankhorst Euronete has addressed and recognized the environmental issues at almost all levels of their strategy. At enterprise level the company does not have a strategy that addresses environmental issues, mainly due to its business nature, a business-to-business one. At a corporate level, the C.E.O. and the company share the same culture on environmentalism. It is the companys aim and mission towards society and stakeholder not only to guarantee a quality end product and service but to also to guarantee the practice of sound social, ethical and environmental responsibility to achieve competitive advantage for the companys long-term success (Royal Lankhorst Euronete Group Annual Report, 2010). To meet these objectives, Royal Lankhorst Euronete Group provides a sound social and ethical responsibility towards the environments. Lankhorst Euronete in 1975 created Lankhorst Recycling Plastics, which proved to be a very pro-active strategy at the time. This is Lankhorst Euronetes business level of strategy. Lankhorst Recycling Plastics buys plastic waste for cheap prices and then recycles them and turns Assignment 2 - Essay 5

CORP3600 Assignment 2 - Essay them into several different product such as plastic poles, plastic planks, plastic floating pontoons, plastic sheet pilling, plastic decking amongst others (Lankhorst Recycling Products, 2012). The natural resource-based view theoretical model is present in this product and operation. Lankhorst Recycling Product has through sustainable development, started over three decades ago, achieved competitive advantage in that market by establishing themselves as innovative leaders in the plastic recycling market. For the functional level of strategy, Lankhorst Euronete has also incorporated environmental issues into their strategy by ensuring that products manufactured and operations are safe for the environment by evaluating its environmental impact at every stage; from ...sourcing of raw materials through the products complete lifecycle, and in accordance with the REACH legislation. Lankhorst (2012). Also, Lankhorst Euronete has a legal department, which is in charge of constantly auditing the organizations compliance on industrys and governments environmental legislations and regulations (Royal Lankhorst Euronete Group Annual Report, 2010). Regarding to marketing, the company will ensure that employees are aware of the companys environmental policy and motivated to apply it, also the company demands quality departments to publish term reports on environmental performance and targets (Royal Lankhorst Euronete Group Annual Report, 2010). The second organization is EDP, a private-owned energy provider in Portugal. Through EDP Renewables, EDP is one of the largest players in wind energy worldwide and the third largest in Iberian Peninsula, and the number one company in the Dow Jones Sustainability Index for the second consecutive year (EDP, 2012). At its enterprise level of strategy, EDP plays a very important role in the Portuguese society by promoting several events, which are aimed to create more green awareness amongst the Portuguese population; an example of an event would be Project Twist, which is aimed at educating younger generation on environmental issues of the present (Project Twist EDP, 2010). At the corporate level of strategy, EDP has a very Assignment 2 - Essay 6

CORP3600 Assignment 2 - Essay environmental friendly corporate culture and has C.E.O., Antonio Mexia, who is a strong believer in wind-generated energy. According to EDPs environmental policy (2012), the company believes that a proactive environmental management generates competitive advantage and creates value for any social responsibilities the company may have. At a business level of strategy, EDP has a sub-company called EDP Renewables. EDP Renewables is in charge of the production of energy through clean and environmentally friendly sources, mainly wind. According to their latest television commercial released in 2011, EDP claims that more than 60% of its energy come from renewable sources such as windmills. For the functional level of strategy, EDP uses its marketing strategy as the main way to generate green awareness, and to publicise that EDP is one of the most green companies in the world (EDP, 2012). In order to understand how the environmental strategies of both Royal Lankhorst Euronete Group and EDP have influenced and changed the companies position regarding competitive advantage, compliance with regulations and legislations, public perception, and stakeholder satisfaction, a comparison between the two environmental strategies will be made, assessing its internal and external implications. Royal Lankhorst Euronete has achieved competitive advantage through environmental means, by having a very pro-active strategy that included the creation of the above-mentioned sub-company called Lankhorst Recycling Plastics. This sub-company, founded 3 decades ago, has allowed Royal Lankhorst Euronete Group to gain competitive advantage in Europe by leading in the market for green plastics. Also the sourcing of raw materials through the products life-cycle and in compliance with the REACH legislation (Lankhorst Euronete, 2012) has made Royal Lankhorst Euronete Group comply with legislation and regulations and also gain competitive advantage through product stewardship, as examined in the natural resource-based view theoretical model (Hart, 1995). Public perception is not very much influenced by the environmental strategy due to the business-to-business nature of the company, which makes them a very Assignment 2 - Essay 7

CORP3600 Assignment 2 - Essay discrete one. Stakeholder integration is full maximised by the environmental strategy, by buying plastic waste and recycling them into new products Royal Lankhorst Euronete Group created a whole new green supply chain in their business. Concluding the environmental analysis of Royal Lankhorst Euronete Group, the company has successful incorporated environmental issues into their strategy where possible, although there is still evidence of use of virgin raw materials (Lankhorst, 2011). It is very interesting to analyse the implications that the integration of environmental issues into EDPs strategy had on competitive advantage, compliance, public perceptions and stakeholder satisfaction. Before analysing its strategy, it is empirical to say, that EDP operates in Portugal, which is a very small market and until very recently, EDP was owned by the Portuguese Government (Gonalves, 2011). EDP operates as a monopolist (Vinha, 2009), meaning that it doesnt need to achieve competitive advantage over rivals because of its monopolism. So why is EDP being green? Firstly, EDP has to comply with Portuguese and EU legislation and regulations on environmental performance in order to reduce energy waste and become more environmentally efficient. Secondly, it is EDPs corporate strategy to be seen as a green company (EDP, 2012) and they have achieved it by producing 60% of their energy through windmills. So what is the problem with EDPs environmental strategy? Even though EDP is being environmentally friendly by producing 60% of clean energy out of their total energy production, the way they have approached environmental issues can be seen as incorrect. Luis Mira Amaral (2011(1)), a former Portuguese minister, argues that Portugal does not have a strong enough economy to support such a vast wind energy production network like the one it has, because windmills only produce, on average, for 2200 hours of the total 8760 in a year, meaning that only 25% of an years total time can be used for production (Mira Amaral, 2011(2)). Mira Amaral (2011(1)) also argues EDPs profits are increasing at the cost of their customers, the huge costs of producing wind energy resulting in increasing energy prices in Portugal for a population which is increasingly having less Assignment 2 - Essay 8

CORP3600 Assignment 2 - Essay disposable income available and that EDP should opt for nuclear energy, in a partnership with Spain, instead of wind energy. Concluding EDPs environmental strategy analysis, although EDP is reporting profits of more than 300 million euros (EDP, 2012) its debt levels are at 10,7 billion euros, because of its green strategy, and this is the major reason why the Portuguese recently sold the share in EDP to a Chinese investment group (Gonalves, 2011). Concluding this paper, a company can integrate environmental issues into their strategy at four different levels, enterprise, corporate, business, and functional (Banerjee, 2001). Royal Lankhorst Euronete Group and EDP were the companies analysed to see how they had implemented environmental issues into their strategy. As the case of Royal Lankhorst Euronete proved with their sub-company, Lankhorst Recycling Plastics, being green can become profitable, help to achieve competitive advantage over rivals and is also helping the company to achieve long-term success, for instance, in 2008 the company a total turnover of 173.3 million Euros in turnover, there best year ever (Royal Lankhorst Euronete Group Annual Report, 2010) and the implementation of environmental issues into their strategies has helped to achieve this success. On the hand, EDPs case proved that if an organization does not implement environmental issues into their strategy in a correct way, then stakeholders could suffer severely by an increase in prices, electricity in this case.

References Aragn-Correa, J. (2007). Proactive Corporate Environmental Strategies: Myths and Misunderstandings. Long Range Planning. 40 (5), pg. 357-381. Assignment 2 - Essay 9

CORP3600 Assignment 2 - Essay Banerjee, B. (2001). Managerial Perceptions of Corporate Environmentalism: Interpretations from industry and strategic implications for organizations. Journal of Management Studies. 38 (4), pg.489-524. Barney, J. and Zajac, J. (1994). Competitive organizational behaviour: toward an organizationally-based theory of competitive advantage. Strategic Management Journal, 15, pg-5-9 EDP. (2010). Projecto Twist EDP (Project Twist EDP). Available: http://www.twist.edp.pt/wpcontent/uploads/2011/07/Cliping_Projecto_Twist.pdf. Last accessed 9th March 2012. EDP. (2012). Environmental Policy. Available: http://www.edp.pt/en/aedp/sobreaedp/principiosepoliticas/Pages/PoliticaAmbi ente.aspx. Last accessed 9th March 2012. EDP. (2012). About EDP. Available: http://www.edp.pt/pt/aedp/sobreaedp/Pages/aEDP.aspx. Last accessed 8th March 2012. Egri, C. P. and Pinfield, L.T. (1996). Organizations and the biosphere: ecologies and environments. In Clegg, S.R., Hardy, C. and Nord, W. R. (Eds). Handbook of Organization Studies. London: Sage Fineman, S. and Clarke, K, (1996). Green Stakeholders: industry interpretations and response. Journal of Management Studies, 33(6), pg. 715730 Freeman, R.E. (1984). Strategic Management: A Stakeholder Approach. Marshfield: Pitman Gonalves, A. (2011). Chineses vencem corrida para comprar 21% a EDP (Chinese win race to buy 21% of EDP). Available: http://economico.sapo.pt/noticias/chineses-vencem-corrida-para-comprar-21da-edp_134364.html. Last accessed 10th March 2012. Hart, S. (1995). A Natural-Resource-Based View of the Firm. Academy of Management Review. 20 (4), pg. 986-1014. Lankhorst Euronete. (2012). About Us. Available: http://www.lankhorst.nl/about.php. Last accessed 7th March 2012. Lankhorst Recycling. (2012). About Us. Available: http://www.lankhorstrecycling.nl/hst/l18a10n/lankhorst.nsf/Main/LH%20EN~Home~Durable%20pro ducts%20made%20from%20recycled%20plastics%5EEN? Last accessed 10th March 2012. Mira Amaral, L. (2011(1)). EDP "gaba-se e lucros histricos" custa dos consumidores, diz Mira Amaral (Mira Amaral: EDP celebrates record profits at the cost of its consumers). Available: http://www1.ionline.pt/conteudo/122935edp-gaba-se-e-lucros-historicos--custa-dos-consumidores-diz-mira-amaral. Last accessed 10th March 2012. Mira Amaral, L. (2011(2)). A factura da electricidade e a sustentabilidade econmica de Portugal (The price of electricity and the economic sustainability of Portugal). Available: http://economia.publico.pt/Opiniao/Detalhe/a-factura-da-electricidade-e-asustentabilidade-economica-de-portugal_1477930. Last accessed 10th March 2012. Porter, M.E. and van der Linder, C. (1995) Green and competitive: ending the stalemate. Harvard Business Review. 73(5), pg.120-34 Assignment 2 - Essay 10

CORP3600 Assignment 2 - Essay Royal Lankhorst Euronete Group BV, 2011. Annual Report, Porto: Euronete. Schendel, D. and Hofer, C. (1979). Strategic Management: A New View of Business Policy and Planning. Boston: Little, Borwn and Co. Sinclair-Desgagn, B. (2004). Corporate Strategies to Managing Environmental Risk. The International Library of Environmental Economics and Policy. 20 (1), pg.1-25. Vinha, N.. (2009). Rivais da EDP esperam que tarifa permita mercado mais concorrencial (EDP's rivals hope for a more fair tarif to increase market competiveness) . Available: http://www.jn.pt/PaginaInicial/Economia/Interior.aspx?content_id=1389420. Last accessed 10th March 2012.

Assignment 2 - Essay