Environmental management in the Dutch food and beverage industry : a longitudinal study into the joint impact of business network and firm characteristics on the adoption of environmental management capabilities

The present study aims for a deeper understanding of the internal and external factors, such as firm strategy and pressure from the business network (government, buyers, suppliers, local inhabitants, etc.), that have an impact on the adoption of environmental management capabilities in firms in the Dutch food and beverage industry. A recent investigation by the Arthur D. Little Innovation High Ground Survey among 40 multinationals (Sony, Procter & Gamble, Vodafone, etc.) showed that managers in general expect that sustainability-driven innovation, such as environmentally product (re)design, has a growing potential to deliver value to business. However, only 5% indicated to pay attention to environmental issues in their strategic planning and decision-making. These figures would probably look even worse if small- and medium-sized firms were included. This thesis focuses on the commitment to the environment in terms of the adoption of environmental management capabilities. These comprise different environmental management items, such as an environmental action program, regular environmental auditing to evaluate strategic environmental targets, and an environmental database to keep record of environmental performance. In short, they reflect the capacity of the firm to take care of the environment on a structural basis. The study design integrates the outside-in and the inside-out perspective. According to the outside-in perspective, the firm’s competitiveness depends on industrial forces, such as rivalry among competitors and entrance of new market parties. External factors measured in this study are the different stakeholder influences from the business network, including government and societal groups as well as other chain and network actors, such as buyers, suppliers, consumers and bank and insurance firms. The inside-out perspective states that the firm’s competitiveness depends on acquiring valuable resources, competences, and (dynamic) capabilities to deal with the external influences. Internal factors measured in this study are firm characteristics, including firm strategy and enabling capabilities, such as internal communication on environmental issues. The central research question is formulated as follows: What is the joint impact of the business network (government, buyers, suppliers, customers, etc.) and firm characteristics on the adoption of environmental management capabilities in Dutch food and beverage firms? Semi-structured interviews are held with 13 environmental managers of different firms, while also two large-scale surveys are carried out in 2002 and 2005 in the Dutch food and beverage industry. The interviews are carried out to get more insight into environmental management practices. The aim of the survey questionnaires was to measure the business network influences on the attention for the environment, which formed the longitudinal backbone of the present study. However, the survey of 2002 concentrated on the relationship with government, as well. In total, 492 questionnaires could be used for the analyses, of which 386 originated from micro and small (5-50 employees) and 106 from medium-sized and large firms (50 or more employees). In 2005, special attention was paid to firm strategy and enabling capabilities. The survey included medium-sized and large firms only to get a more homogenous sample. In total, 100 questionnaires could be used. Differences between micro, small, medium-sized and large firms hare analyzed using t-tests. Furthermore, correlation and regression analyses are carried out. A cluster analysis is performed to get more insight in different firm profiles with respect to the joint impact of the business network and firm characteristics. A longitudinal analysis is carried out to get insight in changes with respect to business network impacts on the adoption of environmental management capabilities between 2002 and 2005. An increased impact of the business network is measured from 2002 to 2005. Interestingly, banks and insurance firms appeared to be important as well as chain actors and competitors. This might implicate that the attention for environmental issues in the business networks has extended from government and environmental organizations to include stakeholders that are of primary interest to attain commercial business goals. The perceived impact of environmental organizations was stronger in 2005 compared to 2002, which might reflect growing environmental concerns of society and also increased success of these organizations to get media attention for environmental issues. However, the results demonstrate also that government is (still) a dominant environmental stakeholder. Concerning the public-private relationship, public-private voluntary environmental agreements (or environmental covenants) and the contact intensity with (lower) government appeared to be important. Furthermore, the results demonstrate that firms with an innovative business strategy (i.e. prospector strategy) adopted more cradle-to-cradle environmental management capabilities, including attention for environmentally friendly product (re)design. Regarding the research question, a cluster analysis indicates that four different environmental taxonomies can be distinguished with respect to business network and firm characteristics. In conclusion, the present study shows that for micro and small firms, strong ties with government through frequent contacts with local governmental agencies are essential to stay informed about environmental regulations. Such regular contacts have as a side-effect that the understanding and consequently the appreciation of public environmental policy improves. Governmental agencies are therefore recommended to provide micro and small firms environmental information (e.g. through e-mails or news letters) and, more importantly, maintain frequency of visits even if no direct monitoring or control reasons exist. The micro and small firms typically lack expertise to fundamentally change their environmental behavior. Environmental training and education programs could therefore be organized to increase the expertise to deal with environmental measures. Furthermore, cooperative pilot projects on the implementation of clean technologies can serve as a platform for knowledge exchange. Intermediaries, such as branch-organizations, are important to be involved in these initiatives, since they can take care of the administrative consequences. In the medium-sized and large firms with a defensive environmental strategy, the adoption of environmental management capabilities is most likely provoked by command-and-control regulations, while voluntary public-private environmental initiatives can be used to support proactive firms. Environmental covenants can put a strong focus on innovation addressing environmental targets at the product level (e.g. percentage of recycled components or re-usable parts) and at the chain level (e.g. chain level energy reduction targets). Large firms in particular are able to stimulate their chain partners to be included in environmental initiatives, which is essential for environmentally friendly product (re)design and to achieve chain-oriented environmental targets.