Essays on Corporate Responsibility Management

 

Case Global Climate Change and BP Amoco

Written on June 19th, 2004

 

This essay is based on the Harvard Business School case of BP Amoco in the beginning of year 2000. The goal of the case answer should be to give managerial recommendation on how the company should approach global climate change. The case does not provide with adequate information to perform a thorough analysis of the problem, so this essay will make some assumptions on the things that are unmentioned in the case.

 

First of all, as a background work for the analysis, the company’s environmental impacts has to be identified and the company’s internal and external environments have to be analysed. First, the company will be divided into four separate businesses. One way of doing this is to divide it by markets, i.e. to oil business, gas business, chemical business and renewable energy businesses. The company divides itself according to its operation; into exploration and production, refining and marketing, chemicals and gas, power and renewable energy business.

Secondly, the background work will include investigating the environmental impacts of BP Amoco. The impacts can be divided into non-operational impacts, and impacts of oil, gas, chemical and renewable energy businesses. All impacts can be separated to impacts on water, land, air and other impacts. The non-operational impacts could be for instance, the employees’ transportation pollution, corporate office supplies consumption etc. The impacts of oil business include oil transportation emissions, oil spills, oil refining emissions, oil power generation emissions and emissions caused by customers while using the oil as petrol or something else. The deepness of investigation can be endless, since the impacts could also include emissions caused by the suppliers, and their suppliers etc. The impacts of gas business are for example emissions from gas refining, aesthetical issues of gas pipes, emissions of gas pipe suppliers, emissions of gas power generation, etc.

The chemical business on the other hand could cause emissions from the production, emissions from transportation of the products, the impacts of the end products as waste, etc. Lastly, the impacts of the renewable energy source business would include emissions of the suppliers of the power equipment, emissions of producing and transporting the equipment, aesthetical issues of the wind turbines and fish problems of hydro energy equipment. It should not be forgotten that the renewable energy sources create positive environmental implications, by their low emission levels and by replacing fossil fuel use. Greenhouse gases can be created in all processes of the company’s operations, but the most significant contributor to them is the oil business, and burning or using the oil as petrol. According to the case text, the greenhouse emissions mainly come from exploration and production and refining and marketing operations. Only 17% of the greenhouse gas emissions come from chemical business.

 

After this, the background work will proceed to the internal environment of BP Amoco. The internal environment includes the company’s employees, equipment, products, current strategy etc. The employees of BP Amoco on average already have a positive attitude towards environmental management for historical reasons. Before the two companies were merged, BP already had strict environmental policies, while Amoco was in lower level in that respect. Additionally, when the president of BP Amoco held a public speech announcing the active climate change policy of the company, the main reaction in the employees of the company, was positive. The employees are also used to a culture of continuous improvement and goal setting, and these are usually achieved by good internal communication practices. BP Amoco’s businesses are very capital intensive, and a lot of capital is in the facilities and equipment.

The company’s main products, oil, gas and chemicals are not considered very environmentally friendly, since they are closely attached to significant environmental problems. Especially oil is seen as a harmful product for the environment. Oil is the biggest single business of BP Amoco, while gas which would be less environmental harmful is not as big part of the company’s business. This fact would favour to drop the strategy of proactive climate change management. The current strategy of the company is to be a pioneer in sustainable development and global climate change prevention. The company logo also gives a slight advantage compared to competitor, to build an environmental pioneer reputation. As a conclusion of the internal environment, the company has very good internal capabilities and history to take a pioneering role in global climate change. This is mainly because of the employee culture and current strategy that is costly to be changed.

 

Next, the external environment of BP Amoco will be analysed. The external environment include regulation, politics, science the customers, competitors, and other stakeholders. The strictness of environmental regulation has been increased during the history, and can be considered strict. In future, there is a high risk that emitting greenhouse will be restricted with some kind of regulatory instrument. This is a heavy reason speaking in favour of a proactive environmental management. The governments are also very interested in the oil business, since it is seen as a strategic resource. The business itself also relies in many cases on the governments under whom the oil resources are. This factor would make environmental pioneering a good strategy, since it could improve the cooperation with governments. Politics is the main factor defining the policies and instruments that will be used to prevent greenhouse gas emissions. The CO2 policies were started in an international meeting in Rio on 1992. The CO2 policies have been imposed to various political problems lately, and there is uncertainty of what will happen next.

Science is also a part of the external environment. Science is playing a central part in the case BP Amoco, because it defines the importance of greenhouse gas emission reductions and affects the regulation. Currently, there is no scientific conclusion of the impacts of greenhouse gases in global climate change. There are arguments for and against the link between them. Science imposes the company’s strategy under uncertainty, whether it decides to be proactive or not regarding the global climate change.

BP Amoco’s customers are surely aware and interested of global climate change and other environmental issues. Despite that, they would probably not be willing to pay a price premium for higher environmental quality of products, according to top manager of BP Amoco. This makes the proactive climate change strategy questionable, since it practically eliminates the possibilities to gain additional revenues by product differentiation. Although the consumers would not be willing to pay a price premium, they have shown that they can boycott a company with bad environmental reputation. This happened in Shell’s Brent Spar case, which also showed that the sympathies of customers are not always with the company that is logically right, but a company that has not a bad reputation for any reason.

The competitors are mainly viewing environmental regulation and global climate change as threats to the business. They are together coordinating activities to lobby decision makers not to start using stricter environmental instruments. The level of environmental performance among all competitors is estimated to be lower than BP Amoco’s. The only exception is Shell that has been suspected to improve the level of their environmental performance after the Brent Spar incident. Operations attached to the proactive environmental strategy, could hurt BP Amoco’s relationship to its competitors. This could lead to the competitors not supporting BP Amoco against officials for solidarity, as has been happened before. The competitors have actually already expressed their disappointment to BP Amoco for certain things, e.g. leaving the Global Climate Coalition.

Other stakeholders are example environmental NGOs, e.g. Greenpeace. Greenpeace has been very active in pointing out any negative considerations in oil companies, including BP Amoco. The existence of such stakeholders would leverage the benefits of a proactive strategy, because the negative comments would then more probably go to competitors. On the other hand such organisations form a great risk to an environmental pioneer company, because they can destroy the reputation if something goes wrong in the company’s environmental management.

 

Next the essay will proceed to analysing the possibilities to get additional revenues or cost savings from environmental performance. Then the corporate strategy will be looked from the environmental strategy point of view. After that the environmental strategy will be recommended by using SWOT analysis. And the essay will finish, with explaining how to bring the profits of the selected strategy.

In the case of BP Amoco, there are potential for cost savings. Cost savings will be analysed in three parts that are technology, regulatory regime and visibility. These have been partly discussed in the internal and external environment analysis, but the main points and conclusions will be presented here. First, the technology will be analysed. The leadership of BP Amoco made a survey to its managers to find out the possibilities to reduce greenhouse gas emission without significant investments. The result was that two thirds of the emission goal could be achieved with this condition. Also a big company like BP Amoco could find economies of scale to improve its environmental performance. The culture of working in the company is also in favour of improving the performance. These factors indicate that there are probably win-win situation in the technology determinant that can be exploited to bring cost savings. The company’s environmental performance in respect of CO2 emissions is considered to be quite high, but some low-hanging fruits still remain to be taken. One of these could be curtailed flaring instead of collecting gas for distribution and sale. A point against the potential cost savings is that the technology is capital intensive, and the investment cycles are not short.

The regulatory regime includes the regulatory strictness and regulatory instruments. Currently the regulatory strictness is lower than the environmental performance of BP Amoco, and thus suggests that no cost savings can be achieved. The current regulatory instruments do not either suggests cost savings because they do not include economic incentives to improve environmental performance. The potential of costs savings in this determinant lies in the CO2 emission trading system that may become mandatory for the companies. So, the conclusion of this determinant is that there are no possibilities for regulatory cost savings with current regulation, but there is a high potential for them when the trading of emission permits will start.

The last determinant for cost savings is the visibility. The visibility of the business is very high, especially because of the sensitivity of oil and because of the climate change discussion. High visibility enables cost savings for example through marketing advantages, employee recruitment and retention, advantages in relationships to authorities, etc. Visibility is affected by location, size, issue, champions, spillovers, distance, and end product. In BP Amoco’s case, the visibility seems to be very high due to many factors. First of all, the company’s operations are located in areas and countries that are sensitive to environmental issues. In absolute terms and in comparison to competitors, most operations and customers are concentrated in the OECD where the environmental awareness is very high. Additionally, BP Amoco operates in environmentally controversial areas e.g. Alaska.

Secondly, the size of BP Amoco as a global corporation increases its visibility. Many operations carried out by the company are of large scale, which makes the company’s operations more interesting for criticism. Third factor emphasising the visibility determinant, is that the main environmental issue, global warming, affecting the business, is a popular topic and has major scientific uncertainties. Especially BP Amoco’s main business, oil, is one of the most significant contributors to the CO2 emissions in the world through the impacts of its consumption. Also the fact that oil catastrophes are very emotional issues when they happen, increase the visibility of oil business. Same kind of risks may happen in chemical business.

Fourth factor emphasising high visibility is that there are active champions campaigning on the environmental issues of BP Amoco. A good example of this is Greenpeace, who have criticised the company’s Alaskan oil operations and corporate environmental statements. There is also a political champion initiated in Rio de Janeiro earth summit on 1992, which collects the attentions of all governments to the global warming issue. Spillovers of the industry and company history also increase the visibility determinant. The oil and chemical industries have a reputation of polluting, environmentally harmful and risky industries. Spillovers are also possible between the four main business verticals of the company if it differentiates itself as an environmental pioneer in some, but not all, of the verticals.

The distance factor, on the other hand, seems to have a contradictory effect on visibility. Compared to BP Amoco’s competitors, the operations are located close to end users, but my assumption that the production is often still geographically far away from the customers, decreases the visibility. On the other hand, the value chain is not very long and difficult to understand for end users of oil and gas businesses, than it is for chemicals and solar energy equipment businesses’ end users. This gives oil and gas businesses a bit additional visibility. The last factor, end product, increases the negative and positive visibility especially in oil, chemical and solar energy equipment businesses. In oil business negative visibility is caused by, the huge number of end users, and by the fact that private consumption of gasoline is often considered environmentally unsustainable behaviour. Different kinds of chemicals are also considered environmentally unfriendly. On the other hand solar energy equipment is considered to represent sustainable energy sources, thus creating positive visibility for BP Amoco.

 

The second determinant discussed in this essay is willingness to pay. It describes the weight of environmental quality of a product in customers’ purchasing decision. If the customers are highly willing to pay for a company’s products, the environmental profit for the company can be expected to be higher. Willingness to pay stems from three different motivations: ethical, pressure-based and benefit based. Pressure-based motivation reflects the ethical and benefit based motivations in the supply chain. In the case of BP Amoco, I cannot imagine of any significant benefit based motivations to increase the willingness to pay. According to the group vice president, Richard Newton, there is no evidence that retail customers would be willing to pay for the environmental quality of BP Amoco. In his opinion, it is still possible that customers would increasingly be willing to pay for environmental quality in the future. He also stated that the customers may punish low environmental quality firms by boycotting them, as happened in Shell’s Brent Spar case.

My personal guess is that the price elasticity of oil, gas and chemical businesses is quite low which means that the customers may pay for the environmental quality more easily. On the other hand, I would guess that the price elasticity of solar energy business is quite high. In the case of petrol customers, the number of substitutes is high and switching costs low, which decreases the willingness to pay. I also think that males are overrepresented in the gender distribution of gasoline customers. This decreases the willingness to pay, since males tend to have less ethical motivation to pay for environmental quality than women (Uusitalo, 1986). Additionally, one factor increasing the willingness to pay is that BP Amoco’s customers, concentrated in industrialised countries, are more willing to pay for environmental quality, than customers in non-industrial countries (Tanskanen, 1997).

 

Third determinant to be analysed in this essay is benchmarks. This determinant compares the prices and environmental qualities of competing products and companies. If all competitors offer the same environmental quality, no additional revenues can be achieved compared to competitors. Again, if the competitors offer lower environmental quality of products with substantially lower price, the additional revenues are difficult to get. In the case of BP Amoco, I suppose that the cost of competing products is quite similar, but the environmental quality of competitors is lower[i]. These benchmark factors increases the chances to gain additional environmental profit, except in solar equipment business, where I suppose to be many more environmentally differentiated competitors. The competitors lagging behind, may also take an environmental differentiation strategy, and thus eliminate the positive effect of the benchmark determinant. In my view, copying the strategy is possible but it takes many years and is not easy. Since the current willingness to pay is not very high, BP Amoco may gain extra sales by promoting environmental regulation, which increases competitors’ costs, assuming that they have lower environmental quality.

 

The last determinant, discount rate, describes the company’s emphasis on short and long term benefits. To some extent, BP Amoco’s approach to investments seems to be long termed, since the company has a strategy of environmental differentiation. On the other hand, a BP Amoco’s executive said, they don’t do scenario planning, which indicates of short term priorities. The discount rate depends on the company’s owners, slack and risks. Being a publicly listed company, the owners’ main objective is to optimise the economical value of their shares, and due to this the discount rate cannot be very low. Slack refers to resources of a company to implement projects. If the resources are minimal, only the projects with the highest net present value may be implemented and many NPV positive environmental investments may be ignored. BP Amoco is operating in a capital intensive industry and it has high liabilities and debts, which could mean that there are not much economical slack resources. On the other hand the case text gave an impression that work force slack resources exists. In BP Amoco, the big risks involving the oil accidents and oil price may also lower the discount rate.

 

The conclusion of the potential of environmental profit is positive for cost savings but negative for additional revenues. There are potential cost savings technology and visibility determinants, and also in regulatory regime if the CO2 permits’ trading will be established. There are no significant potential additional revenues although the visibility determinant would support that. This is because the willingness to pay is low. Discount rate does not give any significant special restrictions or additions to the environmental profit.

The company has to consider also which markets it wants to operate in. Purely business strategic analysis for this will not be presented here, rather the suggested results for them. The oil and gas businesses which bring the most of the company’s profits are the core of the company’s operations and are also supported by the core competencies of the company. Chemical business is also close to the company’s core competencies, but leaving the chemical markets is a possibility if there are strategic reasons for that. Since only one sevenths of the company’s CO2 emissions come from the chemical business, the climate change policy does not require leaving the business. There are no other significant enough reasons to leave the chemical markets related to environmental strategy. The solar energy equipment business is of great help in an environmental pioneering strategy. It also creates possibilities to reduce CO2 emissions to the atmosphere, and create better image of the company, known to be in an industry with bad reputation. The renewable energies are also a growing market, when oil can be seen a shrinking market. For these reasons BP Amoco should concentrate in growing its solar business, and to extend it to other renewable energy businesses, such as wind and hydro energy.

Next, SWOT analysis will be used to determine whether to recommend an environmental pioneering strategy or not. Many strengths and weaknesses have been pointed out in the internal environment analysis, and many opportunities and threats are pointed out in the external environment analysis. This SWOT analysis will pinpoint the most significant points affecting the recommended strategy. The strengths of BP Amoco choosing a pioneering strategy in global climate change are firstly the history. This means that the level of environmental management is already high, and proactive announcements have already been made in public, and the company has resigned from the Climate Coalition. The strategy should not be selected on this basis but it is a factor in favour with the proactive strategy. Another strength is the culture of continuous improvement and the possibilities for technology cost-saving. The employees and leadership is also very happy with having high environmental standards in the company’s policy. BP Amoco also owns the biggest solar energy equipment company of the world, which makes it easier to implement the strategy. Lastly, the company has strength of concentrating into OECD countries, where the environmental issues are more respected than in non-OECD.

Next, the weaknesses will be summarised. One of the major weaknesses is that the company is an oil-intensive firm, which is in contradiction with the pioneering strategy. Also lack of slack time creates challenges for implementing the strategy. The opportunities created by the strategy is that if the role of environmental awareness increases significantly, the company will be able to benefit from it more than its customers. This is also linked to the opportunity created if willingness to pay of the customers increases. One opportunity with this strategy is that if BP Amoco would in the future merge with ARCO, it would create more benefits through reducing the oil-intensity of the company. Another significant opportunity would be that the strictness of regulation would drastically increase. In this case BP Amoco would be one the winning side compared to its competitors. If the company select, the environmental strategy, it can promote its renewable energy business by lobbying for stricter regulation. Lastly, an environmental accident among the competitors would create more positive visibility to the company if it would have an environmental pioneer strategy.

Lastly, the threats of the strategy will be summarised. Perhaps the most significant threat is that the strictness of regulation does not grow in the expected way, and the CO2 emission permit trading does not start. Another threat is an environmental accident, which would destroy the positive environmental reputation when this strategy is selected. Thirdly, if a competitor decides to take the same strategy, the benefits of the strategy are not as big as if the competitors continue with their current strategies. One could see a threat in BP Amoco lobbying for stricter environmental regulation, which can cause the death of its oil business. Last threat to be mentioned is that since it is expected that the developing countries’ role in the business is increasing, the average environmental awareness of the company’s stakeholders may be reduced, because the awareness is smaller in developing countries.

 

Based on the SWOT analysis and on the result that there are potential cost savings, this essay recommends the company to take a pioneering environmental strategy in the global climate change policy. This means that the company has to select a strategy how to bring the environmental profits from this strategy. There are five basic strategies for this. The first one is to reduce costs and the second one is to bring additional benefits from product differentiation. The third one is to increase the cost of competitors and the fourth one is to reduce risk. The last strategy is to redefine the product or service to the customer. The strategies can be combined with each other with the exception that the second and third strategy can not. Since all of the rest of these two strategies are possible for the company, these will be recommended. From the differentiation and competitor cost strategy, the latter will be selected. This is because according to the analysis above there is no significant potential for additional revenues. That is caused by the lack of willingness to pay of the customers.

So, the strategy will be to bring cost savings from own operations, to reduce risks and, redefine the product concept and to add the competitors’ costs. Bringing cost savings have been discussed earlier in this essay. The redefinition of product concept in this case means that the customer does not have to buy traditional energy forms, but rather move to renewable energy sources, i.e. at least solar, wind and hydro energy. Significant innovativeness to implement this is required. One example of redefining the fuel customers’ need, is e.g. to sell them hydro fuel, or to promote public transportation and provide services for it. The strategy of increasing the competitors’ costs is done by lobbying the decision-makers to create more strict environmental regulation. This way the competitors that do not have the same strategy get additional costs of compliance that BP Amoco would not get. The competitors may have to move that cost to its customers, which enables BP Amoco to increase its prices too, or to gain additional market share. After the strategy has been decided, it has to be implemented well, but that is out of the scope of this essay.

 

 

 

Is BP Amoco Able to Gain Additional Revenues with its Environmental Differentiation Strategy?

Written on April 10th, 2004

 

BP Amoco is one of the largest energy companies in the world with revenues of 84 billion USD (1998) including its joint ventures[i]. BP Amoco’s main areas are production and refining of oil, gas and chemicals. It has also been strongly involved with solar energy systems business. Lately, BP Amoco has taken a role of an environmental pioneer in its industry[ii].

To tell whether BP Amoco is able to gain additional revenues with environmental differentiation, is a very complicated question and it is difficult to find a single answer for that. There are numerous different approaches to analyse this question, and I will use the determinants of environmental profit developed by Leena Lankoski to discuss the question in this essay. According to the determinants framework, six determinants together determine the environmental profit of a firm. Two of them create value through cost reductions, and two of them through added revenues. The remaining two determinants contribute both ways.[iii] In this essay, I will use the four determinants affecting the revenue side, to discuss the case BP Amoco in the year 2001. The four determinants are visibility, willingness to pay, benchmarks and discount rate. The three first determinants have to be in favour of the company in order to achieve additional revenues with environmental differentiation. The fourth determinant, discount rate, does not create or block revenues, but defines the time period relevant for analysis.[iv] The determinants should be analysed separately for each BP Amoco’s business area. To simplify the analysis, I will not discuss each factor of every determinant separately for each business area, but I will pinpoint the most relevant topics from each determinant.

 

The first determinant, visibility, means how visible to relevant stakeholders, the company’s environmental performance and the changes in it is. When considering the revenues, the visibility for customers is the key factor because the customers make the choice whether to buy or not. Visibility is affected by location, size, issue, champions, spillovers, distance, and end product.[v] In BP Amoco’s case, the visibility seems to be very high due to many factors. First of all, the company’s operations are located in areas and countries that are sensitive to environmental issues. In absolute terms and in comparison to competitors, most operations and customers are concentrated in the OECD where the environmental awareness is very high. Additionally, BP Amoco operates in environmentally controversial areas e.g. Alaska. [vi]

Secondly, the size of BP Amoco as a global corporation increases its visibility. Many operations carried out by the company are of large scale, which makes the company’s operations more interesting for criticism. Third factor emphasising the visibility determinant, is that the main environmental issue, global warming, affecting the business, is a popular topic and has major scientific uncertainties. [vii] Especially BP Amoco’s main business, oil, is one of the most significant contributors to the CO2 emissions in the world through the impacts of its consumption. Also the fact that oil catastrophes are very emotional issues when they happen, increase the visibility of oil business. Same kind of risks may happen in chemical business.

Fourth factor emphasising high visibility is that there are active champions campaigning on the environmental issues of BP Amoco. A good example of this is Greenpeace, who have criticised the company’s Alaskan oil operations and corporate environmental statements. There is also a political champion initiated in Rio de Janeiro earth summit on 1992, which collects the attentions of all governments to the global warming issue. Spillovers of the industry and company history also increase the visibility determinant. The oil and chemical industries have a reputation of polluting, environmentally harmful and risky industries.[viii] Spillovers are also possible between the four main business verticals of the company if it differentiates itself as an environmental pioneer in some, but not all, of the verticals.

The distance factor, on the other hand, seems to have a contradictory effect on visibility. Compared to BP Amoco’s competitors, the operations are located close to end users, but my assumption that the production is often still geographically far away from the customers, decreases the visibility. [ix] On the other hand, the value chain is not very long and difficult to understand for end users of oil and gas businesses, than it is for chemicals and solar energy equipment businesses’ end users. This gives oil and gas businesses a bit additional visibility. The last factor, end product, increases the negative and positive visibility especially in oil, chemical and solar energy equipment businesses. In oil business negative visibility is caused by, the huge number of end users, and by the fact that private consumption of gasoline is often considered environmentally unsustainable behaviour. Different kinds of chemicals are also considered environmentally unfriendly. On the other hand solar energy equipment is considered to represent sustainable energy sources, thus creating positive visibility for BP Amoco.

 

The second determinant discussed in this essay is willingness to pay. It describes the weight of environmental quality of a product in customers’ purchasing decision. If the customers are highly willing to pay for a company’s products, the environmental profit for the company can be expected to be higher. Willingness to pay stems from three different motivations: ethical, pressure-based and benefit based.[x] Pressure-based motivation reflects the ethical and benefit based motivations in the supply chain. In the case of BP Amoco, I cannot imagine of any significant benefit based motivations to increase the willingness to pay. According to the group vice president, Richard Newton, there is no evidence that retail customers would be willing to pay for the environmental quality of BP Amoco. In his opinion, it is still possible that customers would increasingly be willing to pay for environmental quality in the future. He also stated that the customers may punish low environmental quality firms by boycotting them, as happened in Shell’s Brent Spar case.

My personal guess is that the price elasticity of oil, gas and chemical businesses is quite low which means that the customers may pay for the environmental quality more easily. On the other hand, I would guess that the price elasticity of solar energy business is quite high. In the case of petrol customers, the number of substitutes is high and switching costs low, which decreases the willingness to pay. I also think that males are overrepresented in the gender distribution of gasoline customers. This decreases the willingness to pay, since males tend to have less ethical motivation to pay for environmental quality than women (Uusitalo, 1986). Additionally, one factor increasing the willingness to pay is that BP Amoco’s customers, concentrated in industrialised countries, are more willing to pay for environmental quality, than customers in non-industrial countries (Tanskanen, 1997).

 

Third determinant to be analysed in this essay is benchmarks. This determinant compares the prices and environmental qualities of competing products and companies. If all competitors offer the same environmental quality, no additional revenues can be achieved compared to competitors. Again, if the competitors offer lower environmental quality of products with substantially lower price, the additional revenues are difficult to get.[xi] In the case of BP Amoco, I suppose that the cost of competing products is quite similar, but the environmental quality of competitors is lower[xii]. These benchmark factors increases the chances to gain additional environmental profit, except in solar equipment business, where I suppose to be many more environmentally differentiated competitors. The competitors lagging behind, may also take an environmental differentiation strategy, and thus eliminate the positive effect of the benchmark determinant. In my view, copying the strategy is possible but it takes many years and is not easy. Since the current willingness to pay is not very high, BP Amoco may gain extra sales by promoting environmental regulation, which increases competitors’ costs, assuming that they have lower environmental quality[xiii].

 

The last determinant, discount rate, describes the company’s emphasis on short and long term benefits. To some extent, BP Amoco’s approach to investments seems to be long termed, since the company has a strategy of environmental differentiation. On the other hand, a BP Amoco’s executive said, they don’t do scenario planning, which indicates of short term priorities. The discount rate depends on the company’s owners, slack and risks[xiv]. Being a publicly listed company, the owners’ main objective is to optimise the economical value of their shares, and due to this the discount rate cannot be very low. Slack refers to resources of a company to implement projects[xv]. If the resources are minimal, only the projects with the highest net present value may be implemented and many NPV positive environmental investments may be ignored. BP Amoco is operating in a capital intensive industry and it has high liabilities and debts[xvi], which could mean that there are not much economical slack resources. On the other hand the case text gave an impression that work force slack resources exists. In BP Amoco, the big risks involving the oil accidents and oil price may also lower the discount rate.

 

The determinants are summarised in Table 1. The visibility factor is exceptionally high, especially in oil and chemical businesses. The benchmarks determinant would also enable additional revenues, with the competitors having lower environmental quality, except in the solar energy equipment business. On the other hand, if the current weak willingness to pay remains the same in the future, the additional revenues are small or marginal, since all the three enabling determinants are required to create additional revenues. The discount rate seems to magnify the revenues in the oil business, but gives a limited time scope for the growth of customers’ willingness to pay, in respect of additional revenues’ net present value. Clearly, the most potential business vertical of BT Amoco for additional revenues is the oil business. The answer to the question in the title is that, in order for BP Amoco to gain environmental revenues, the willingness to pay has to increase from current level. One has to keep in mind also that although there would not be significant additional revenues, there may still be significant environmental profit through cost savings.

 

Table 1, Summary of determinants in BP Amoco

References:

[1] BP Amoco’s annual Report for 1998

[1], vi, vii, viii, ix, xii, xvi All information of BP Amoco in this essay is from the Harvard Business School, case text, “Global Climate Change and BP Amoco”, 9-700-106, Revision February 28, 2001.

[1], iv, v, x, xi, xiii, xiv, xv All information of the determinants of environmental profit are from the following source: Lankoski, L. 2000. Determinants of environmental profit. An analysis of the firm-level relationship between environmental performance and economic performance. Helsinki University of Technology, Institute of Strategy and International Business, Doctoral dissertations 2000/1.

 

 

 

Two Levels of Environmental Management

Written on March 19th, 2004
In response to Dr. Allenby’s article

In his article, Dr. Allenby explained through concrete examples that most environmental management (EM) is not strategic. To some extent, I agree with his conclusion, but want to point out something that Dr. Allenby ignored in his article. This is the distinction between strategic and operational EM. Additionally, Dr. Allenby did not discuss the differences between the industries and the size of company affecting the strategic nature of EM.

Operational effectiveness is not strategic, but choosing what activities to do, and how they should be done, is strategic management (Porter 1996). EM can be seen as a twofold company function, i.e. managing the operational effectiveness, and secondly, choosing what to do and what not to do. Like in the example of marketing, you create a marketing strategy to follow the business strategy of a company. After that, the company has to implement the marketing strategy. The nature of the implementation can then be described as tactical or operational, but not as strategic. The same pattern applies to EM. A company creates a strategy to its EM, which is called strategic environmental management. This includes analysis on external and internal environments, economical benefits and produces the environmental strategy for the company. The implementation part of EM can similarly be called operational environmental management.

To answer the question of whether EM is strategic or not, one has to consider the industry and the company size also. In many cases there is no strategic EM, but only operational EM. In some cases both exists or neither one of them exist. Usually those companies where both EM levels exist operate in industries where environmental quality is important for customers or other stakeholders. The significance of the environmental quality has grown over the time, and usually also depend on how close to the consumer interface the company operates. Often, the company size also plays role in the game. Global companies can seldom afford not to have both aspects of EM, while very small companies seldom have a function that could be described as strategic EM. So the answer to the question of whether the nature of EM is strategic or not, is both yes and no, depending strongly on the company context.

If the company operates in an industry where the customers are sensitive to environmental quality, the strategic nature of EM becomes an important issue. This is because the company has to maximize shareholder value by creating an optimal approach to environmental issues i.e. an environmental strategy, in order to best achieve the economical benefits. In some cases, a superior environmental strategy can lead to competitive advantage. The environmental strategy of a company can also be to ignore the stakeholder preferences of better environmental quality, and to concentrate on something else, in order to gain competitive advantage. In this case, the company might still have performed strategic EM.

Another aspect to the nature of EM is whether the environmental strategy has been created consciously or not. If the environmental strategy is created consciously and does not include operational implementation, it can be called strategic. On the other hand if it has been created unconsciously, it is difficult to be described as strategic. On the other hand, there are some strategic management schools that claim that unconscious choice can also be a strategic choice.

In his article, Dr. Allenby wrote in the context of EM and strategy, that “important” and “strategic” are often confused with each other. I agree with this, and it would always be good to ask “important for what?” The process of defining the approach to EM management is mainly important in the strategic sense. On the other hand managing environmental effectiveness is important for operations. The example of EMSs, used by Dr. Allenby is a good example of an EM issue that is important for operational EM. On the other hand, the decision to have a certain level of environmental quality, and deciding on how to leverage the benefits of the EM, is important for strategic decision making. Dr. Allenby also referred EM as compliance. This is not always the only driver behind EM. As mentioned above, the motivation behind EM can also be to directly or indirectly exploit the economical benefits of over compliance, or other reasons, such as fulfilling shareholders’ non-economical objectives. Some investors may not want only to maximize the economical shareholder value, but also environmental (or social) shareholder value.

Dr. Allenby also wrote that “environmental management is at best an overhead function, relatively independent of the strategic missions of the firm”. If a company keeps EM strictly as an overhead function, it will not be able to conduct the strategic EM as well as it could do. Strategic EM should be carried out in the top management together with environmental manager(s). This is because strategic EM is even more complicated than other strategic management, due to its requirement of broad expertise. If EM is performed efficiently, it should not be seen as a separate function dealing solely environmental issues in a company. EM is broad in the way that it requires understanding of all parts of the company. Another reason for carrying strategic EM out in the top management could be that successful EM requires top management commitment from the beginning. Strategic EM should also be aligned with the general business strategy of a company. If a company positions itself strategically as a high end producer or service provider, it would not be strategically fit to position itself as a low-end environmental quality company in its environmental strategy.

The article also referred to strategic issues that have environmental dimensions. These issues are a part of the strategic EM, since they represent main approach of the company to environmental issues. Additionally, Dr. Allenby mentioned CSR issues, which are in the same way strategic or operational as EM. Both CSR and EM are often managed together with economical responsibility. They altogether form an even more significant aspect in strategic decision making, called corporate sustainability, corporate responsibility or corporate philanthropy in the USA. Strategic decision making of corporate responsibility is often done in one whole, and after that the environmental, social and economical strategies are created.

The transition of firms from facilities-based to net-centric structure with new work practices was discussed in Dr. Allenby’s article. These kinds of decisions are not only affected by the company’s business strategy, but also by the company’s environmental strategy, which is derived from the business strategy. A company might decide to start using teleworking based on its environmental strategy, although it would not decide so only based on its business strategy, or visa versa. One should not forget that the strategic EM, in those companies that have it, is conscious choice on the main direction that affects those decisions that include an environmental dimension.

In the end of his article, Dr. Allenby wrote that the examples in his article are far more complex than the environmental aspect in them, and that environmental input may sometimes be relevant. One should keep in mind that these examples are also in their nature, a part of EM, and that the purpose of strategic EM is to find the best business solution from the complex problem sets. For that reason only “giving environmental input” is not the best expression. Allenby also mentions that when environmental input is needed, it is not usually compliance and remediation knowledge but broader management expertise. I totally agree that strategic EM requires mostly broad management expertise, while operational EM is more about compliance and remediation knowledge.

 

 

 

How can Companies Utilise their Superior Environmental Performance

Written on April 23rd, 2004

The benefits of a company’s superior environmental performance can be roughly divided into four parts: production benefits, market benefits, regulatory benefits and other benefits. Together, all these benefits can lead to reduced costs, additional revenues and reduced risk level, thus increasing shareholder value. In this essay I will use Kesko Oy as an example on how to leverage these benefits.

First, I will discuss the production benefits. According to Michael E. Porter, the environmental performance can be improved causing cost reduction or improved quality. This argument is based on that the pollution and waste created by company’s processes is attributed to process inefficiencies and wasted resource use. Thus, improving processes’ environmental performance by process change, removing unnecessary process steps and simplifying the design, Kesko could achieve several benefits e.g. in manufacturing their Pirkka products. These benefits could include fewer inputs that need to be purchased, reduced packaging costs, reduced rejected products through improved quality management, etc. The construction and heating of the store buildings is also a good example where Kesko can save energy and material costs.

Additionally, superior environmental performance of processes enables reducing end-of-pipe pollution abatement or clean-up costs. Utilising the waste from the production process can also lead to additional incomes and reduced waste handling costs, through selling the recyclable waste materials. In addition, with replacing hazardous materials, Kesko can reduce its purchase and handling costs. Logistics is one of the most significant operations in Kesko, and improving its efficiency has significant potentials for cost savings. This can be leveraged by planning of the transport routes, transporting full loads, designing packaging to fit in transport space, using eco-efficient transport equipment etc.

The second set of benefits is the market benefits. For Kesko, as a company close to the consumers, the superior environmental performance could lead to improved brand value, thus creating better customer loyalty and attracting environmentally conscious customers. These differentiation benefits assume that the customers are willing to pay for environmental quality, the environmental issues are visible and the competitors’ environmental performance is lower than Kesko’s.  These benefits can be utilised better if the environmental performance can enable Kesko to receive certificates for its performance, e.g. listing itself in the DJSI or receiving diplomas from governmental or non-governmental organisations. Another way to attract attention to its environmental differentiation is that Kesko can keep better environmental quality products in its shelves compared to competitors.

A superior environmental performance can be leveraged also by pushing the legislation forward in order to increase competitors’ costs, creating better market share and price for own products. In Kesko’s case, this might not be beneficial since it would reduce the Kesko’s attractiveness compared to its competitors after they improve the level of their environmental management, eliminating most of the market benefits. In Kesko’s case, a couple of percent of customers are willing to pay for environmental quality. Which strategy is better for leveraging the benefits, depends on Kesko’s estimate on how strongly this percentage will grow. If it is expected to grow rapidly, then the differentiation benefits are recommendable leveraging Kesko’s first mover advantages.

The regulatory benefits can be divided into reduced regulatory costs and impacts of future regulation. A superior environmental performance can create cost savings through emission trading markets, less money and time spent on litigation due to compliance issues, reduced liability costs, etc. The second way to achieve regulatory benefits is by better anticipating future regulation and influencing it. A good example of this, in Kesko’s case, is that when the Finnish parliament is preparing an environmental law, usually there are both Kesko’s and Nokia’s representatives there to give their comments on the preparations. Kesko can also influence the coming regulations with participating in different legislative preparatory groups in the EU. This way, Kesko can also start preparing their operations well in advance to comply with the coming regulations, thus avoiding costs compared to competitors.

The last group of benefits discussed in this essay comes from different markets, such as capital markets, insurance markets and labour markets. Kesko’s superior environmental performance can lead to improved stock price and reduced volatility of the stock price because of investors who prefer environmentally sustainable companies. Getting Kesko listed in sustainability indexes increases the chances of the capital market benefits. Kesko has also potential to get funding more easily compared to its competitors through the reduced risks caused by the environmental performance.

Another market where Kesko can utilise the benefits of its strategy, is the insurance market. For Kesko, negotiating less costly insurances for their operations and real estate should be easier than for competitors because of its high risk preventive standards. In addition to lower insurance premium, reduced risk is beneficial directly by reducing the risk management costs. Thirdly, Kesko can achieve benefits from the labour markets. This is because many environmentally conscious workers prefer a company with good environmental performance. The good performance can also lead to improved worker loyalty and morale.

This essay is not suppose to cover the whole variety of potential benefits and the numerous details and implementation issues that can be found in Kesko, but rather highlighting some of the most significant benefit areas. Examples of unmentioned benefits are improved relationships with the authorities and the local community, and the innovation of new product or service concepts, etc.

References:

The essay is based on wide literacy of environmental management, having the following main sources:

Lankoski, L. 2000. Determinants of environmental profit. An analysis of the firm-level relationship between environmental performance and economic performance. Helsinki University of Technology, Institute of Strategy and International Business, Doctoral dissertations 2000/1.

Porter, M. E. 1991. America’s green strategy. Scientific America, volume 264, 4. Page 96.

Porter, M. E. & Van der Linde, C, 1995a. Green and Competitive, Ending the Stalemate, Harvard Business Review, September-October. Pages 120-134.

Porter, M. E. & van der Linde, C. 1995b. Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, volume 9. 4. Pages 97-118.

Van der Linde, C. 1993. The micro-economic implications of environmental regulation: a preliminary framework. In: Environmental policies and industrial competitiveness. Paris, Organisation for Economic Cooperation and Development. Pages 69-77.

 

 

 

What does a Company have to do in order to be Successful in its Strategic Environmental Management?

Written on April 29th, 2004

1.      Analyse your internal environment, including employees, facilities, equipment, products and current strategy.

The goal of the environmental strategy is to create maximum value for the company, including creating environmental profit. The potential of environmental profit depend on several things. These are for example, management history, physical history, plant location, plant size, end product, owners and availability of slack resources. (Lankoski, 2000)

2.      Analyse your external environment, including regulation, customers, competitors and other stakeholders.

In order to maximise the environmental profit for the company, the external factors has to be taken into account. Factors affecting the environmental profit of a company include government strictness, government instruments, distance to willingness to pay, nature of the environmental issues, visibility champions, ethical willingness to pay, pressure-based willingness to pay, benefit-based willingness to pay, competitors’ environmental performance and competitors’ prices. (Lankoski, 2000)

3.      Analyse the environmental issues caused by every business vertical of the company

Environmental strategy analysis must include the effects that a company has on the environment, and the effects that the environment has on the company. The effects of the company must be separated into sub effects because the different effects differ from each other in the nature of their significance for the business. These differences include the severities of the impacts, cost of reducing the impacts, regulation concerning the impacts, the interest of different stakeholders for the impacts and the emotions raised by the impacts on the customers. (Lankoski, 2000)

4.      Analyse the potential for environmental differentiation revenues by looking at the visibility, willingness to pay and benchmarks.

According to Michael E. Porter, strategy rests on unique activities. A company can position itself with respect to price and differentiation. By being the industry leader in environmental performance, a company can achieve strategic differentiation.

The environmental profit through environmental differentiation is higher if the mentioned factors support the differentiation. The visibility factor includes how people perceive the environmental issues, the existence of visibility spillovers, the plant location and size etc. The Willingness to pay factor includes the ethical willingness to pay, the willingness to pay streamed down to supply chain and the willingness to pay through other benefits attached with the environmental quality of products. (Lankoski, 2000)

5.      Analyse the potential for environmental cost savings by looking at the technology, regulation and communication.

Gaining cost savings is the other part of the way to contribute to the environmental profit. The cost savings are more likely to occur if process changes to prevent pollution is possible and the strictness of regulation is low. The cost savings are also more likely if the government has included economic incentives to promote environmental performance. Additionally, the cost savings are more probable if the investment cycles are short and the production technology is not capital-intensive. (Lankoski, 2000)

6.      Create your corporate environmental strategy together with the corporate strategy process

Corporate environmental strategy includes deciding what markets the company is going to operate in and what strategic approach a company is going to take. Some markets can also suffer from their bad environmental reputation. Because these corporate environmental strategy aspects overlap significantly with the rest of the corporate strategy, they should both be performed together, and the environmental management expertise should be available in the process.

7.      Make a conscious choice of your level of environmental performance for each business vertical – environmental issue pair

The decision of environmental performance should be done separately for each business vertical – environmental issue pair (Lankoski, 2004). Making a conscious choice, for the environmental strategy may also ensure better value for the company than an unconscious choice, which may fail to recognise some important factors relevant to the strategy. A conscious choice also enables building strategic fit of the company, that is the core element of the strategy according to Porter.

8.      Select your strategy on how to bring value for the company through the selected level of environmental performance

The reason for environmental management in companies is to bring value for the company, and therefore this point is crucial. Value can be created for the company through cost savings, additional revenues and reduced risk. Additional revenues can be created through differentiation or through increasing the costs for competitors. Fifth option for bringing the value to the company is redefining the product concept. This may be the most difficult strategy since it requires a change in way of thinking and structural changes. The strategy can also consist of the combination of these three strategies. (Reinhardt, 2000)

9.      Make a thorough action plan in order to ensure successful operational environmental management, including information gathering, organising, education, incentives and communication.

This is the key phase in order to ensure that the environmental strategy gets successfully implemented and could also be separated into several independent advices. Especially managing the five themes is essential to implement the strategy (Reinhardt, 2000).

For example communications is perhaps the most important of these because it is a very difficult process. Environmental communications is difficult because of six main reasons. Firstly, the environmental topics are emotional, and the argumentation chains are long. Secondly, the environmental trends change quickly and the number of stakeholders is high. Thirdly, the environmental information given by a company is often not considered reliable, and environmental crisis can destroy the whole environmental reputation at once. (Linnanen et. al, 1997)

10.  Collect feedback and start again from step one in order to enable changing the strategy whenever necessary

Because the internal and external environments change continuously, the strategic analysis has to be redone regularly. If the environment of the company changes, it has to be taken into account in the company’s environmental strategy in order to maximise environmental profit. Otherwise the strategy will not be able to leverage the value potentials for the company in the future. Timely analysis is important, because the analysis has to look at the time of implementation, rather than to the current situation.

References:

The essay is based on wide literacy of environmental management, having the following main sources:

Lankoski, L. 2000. Determinants of environmental profit. An analysis of the firm-level relationship between environmental performance and economic performance. Helsinki University of Technology, Institute of Strategy and International Business, Doctoral dissertations 2000/1.

Lankoski, L. 2004, Strateginen ympäristöjohtaminen, Taloustieteen laitos, Monistesarja nro 23, Ympäristöekonomia, Helsinki 2004.

Linnanen, Markkanen, Ilmola, 1997: Ympäristöosaaminen. Kestävän kehityksen haste yritysjohdolle. Otaniemi Consulting Group Oy.

Porter, M. E. 1991. America’s green strategy. Scientific America, volume 264, 4. Page 96.

 

 

 

Ympäristöjohtaminen ja yrityksen taloudellinen menestyminen

Kirjoitettu 30.3.2004

Yritysten ympäristöjohtamisen kannattavuus herättää monenlaisia mielipiteitä. Toiset väittävät, että se on yritykselle lähinnä kuluerä, kun taas toiset väittävät, että ympäristöasioiden hyvä hoito parantaa kilpailukykyä. Lisäksi viimeaikoina on keskusteltu päästökaupan vaikutuksesta suomalaisten yritysten menestykseen.

Keskustelu on alunperin käynnistynyt jo 90-luvun alussa, jolloin yksi yritystrategian merkittävimmistä uranuurtajista, Micheal E. Porter, haastoi perinteisen näkemyksen ympäristöjohtamisen haitoista yrityksen arvoon. Monien muiden yhdyttyä Porterin näkökantoihin, syntyi positiiviseksi kutsuttu ympäristöjohtamisen koulukunta. Porter ja hänen kannattajansa väittivät mm, että päästöt ovat merkki tehottomista prosesseista yrityksissä. Tämän ajattelutavan mukaan, yritys voi saavuttaa kustannussäästöjä ja kilpailuetua parantamalla omia prosessejaan (Porter & van der Linde, 1995).

Usein negatiiviseksi kutsutun, perinteisen johtamiskäsityksen mukaan ympäristöjohtaminen on pääasiassa lisäarvoa tuottamaton kustannuserä liiketoiminnassa. Tämän käsityksen mukaan ympäristöjohtaminen yleensä laskee tuotantotehokkuutta, sitoo pääomaa, huonontaa laatua, jne. (Walley & Whitehead, 1994). Perusteluina ympäristöjohtamisen negatiivisille vaikutuksille pidetään mm. sitä, että ympäristöjohtaminen rajoittaa yrityksen tuotantotekijöiden saatavuutta, mikä näkyy esimerkiksi raaka-aineiden hintojen nousuna (Siebert et. al, 1980). Tämä laskee yrityksen tuottavuutta, nostaa tuotteiden hintoja ja siten myös vähentää tuotteiden myyntiä.

Molempien koulukuntien näkökulmissa on puutteita. Negatiivisen koulukunnan ajattelutavassa ei oteta kattavasti huomioon ympäristöjohtamisen mahdollistamia hyötyjä, kuten esimerkiksi differoinnin tuomaa kilpailuetua. Lisäksi negatiivinen koulukunta ei yleensä ota huomioon yrityksen nykyhetkeen mennessä saavutettuja hyötyjä. Positiivisen koulukunnan näkemykset voivat taas olla epätäsmällisesti perusteltuja teoreettisella tasolla. Lisäksi positiivisen koulukunnan näkemykset perustuvat usein oletukselle, jonka mukaan ympäristölaadun kysyntä kasvaa tulevaisuudessa ja että taloudellisten hyötyjen määrä tulevaisuudessa voidaan ennustaa historian perusteella. (Lankoski, 2000)

Eri koulukuntien näkemyksiä on pyritty osoittamaan oikeaksi monenlaisilla empiirisillä tutkimuksilla. Tämä ei ole kuitenkaan ratkaissut näkemyseroja, koska empiiristä evidenssiä on saatu sekä positiivisen että negatiivisen koulukunna tueksi. Nykyään monet ympäristöjohtamisen ja yritystrategian ammattilaiset ajattelevatkin, että sekä positiivisen että negatiivisen koulukunnan käsitykset pitävät paikkansa, riippuen yrityksen tilanteesta. Tämän ”It depends” -näkemyksen mukaan yhtä kattavaa vastausta ympäristöjohtamisen taloudellisiin vaikutuksiin yrityksille ei ole olemassa (Reichardt, 1999).

Ympäristöjohtamisen vaikutuksia on pyritty mm. etsimään analysoimalla tilinpäätöslukuja joidenkin merkittävien yritysten ympäristötapahtumien jälkeen (esim. Russo & Fouts, 1997). Lisäksi vaikutuksia on tutkittu analysoimalla ympäristölaadun ja yrityksen osakekurssin välistä suhdetta (esim. Lanoie et al. 1998). Case-tutkimusten ja erilaisten muiden kvantitatiivisten tutkimusten pohjalta on myös pyritty tutkimaan ympäristöjohtamisen vaikutuksia yrityksen taloudelliseen menestymiseen (esim. Christmann 2000). Kaikkiin tutkimuksiin on kuitenkin kohdistettu runsaasti kritiikkiä, joihin en keskity tässä esseessä. Tieteellisesti merkittäviä geneerisiä johtopäätöksiä vaikutuksista yritysten taloudelliseen menestymiseen ei voida tutkimusten mukaan vetää.

Viimeaikojen ristiriitaisia näkökantoja on jälleen tullut esille päästökauppakeskustelun muodossa. Akatemiatutkija Matti Liski Helsingin kauppakorkeakoulusta on esimerkiksi sitä mieltä, että ”päästökauppa on oikein toteutettuna ideaali järjestelmä”[i]. Vastaavaan päästökauppamyönteiseen näkökulmaan yhtyvät monet ympäristöjärjestöt ja vihreän puolueen edustajat. Toisaalta monet suomalaiset yritysjohtajat vastustavat päästökaupan käyttöönottoa. Mm. UPM-Kymmenen strategiajohtaja, Heikki Sara kertoi energiapäivillä, että EU ja erityisesti Suomi joutuvat päästökaupan takia suuriin vaikeuksiin[ii].

On huomattava, että päästökauppakeskustelua käydään monella tasolla. Argumentaatio voi olla globaalilla tasolla, EU:n tasolla, kansallisella tasolla, jonkin tietyn teollisuudenalan tasolla, tietyn yrityksen tasolla tai yksilön tasolla. Lisäksi eri tahot korostavat eri tavoilla taloudellisia ja ympäristöllisiä arvoja argumenteissaan ja tarkastelevat asioita hyvin eripituisilla aikaväleillä. Hyvä esimerkki tietystä tarkastelutasosta on se, että Sara perustelee päästökaupan haitallisuutta sillä, että Suomen kansantalous joutuu ostamaan päästöoikeuksia 200-300 miljoonalla eurolla vuodessa. Erilaiset näkemykset johtuvat siis mielestäni pääsääntöisesti siitä, että eri mielipiteiden takana on erilaiset arvot, joita tuodaan esiin eri näkökulmista.

Mielestäni on selvää, että päästökauppa aiheuttaa keskimäärin suomalaisille yrityksille kuluja. Lisäksi henkilökohtainen mielipiteeni on, että suomalaisten yritysten edustajat liioittelevat päästökaupan aiheuttamien kustannusten taloudellisia seuraamuksia pystyäkseen vaikuttamaan päättäjiin tehokkaammin omilla näkemyksillään. Kun päästökaupan tuoma kustannus yritykselle suhteutetaan sen liikevaihtoon, huomataan että kyse on hyvin marginaalisesta kustannuserästä, ja ratkaisevaa yrityksen menestymiselle ovat mielestäni pitkälti muut liiketoiminnalliset seikat. Kun vielä otetaan huomioon päästökaupan tuomat mahdolliset taloudelliset hyödyt, voi kokonaisvaikutus olla entistä pienempi. Päästökaupan taloudellisia hyötyjä on vaikea osoittaa mittaamalla, mutta on mielestäni tärkeä muistaa että päästökauppa voi myös tuoda kilpailuetua suomalaisille yrityksille globaaleilla markkinoilla parantuneen ympäristöosaamisen ja differoinnin myötä.

Päästökauppakeskustelu liittyy aiempaan ympäristöjohtamisen taloudellisten vaikutusten keskusteluun, ja myös sen yhteydessä käytyyn keskusteluun siitä, minkälaista ympäristöregulaation pitäisi parhaimmillaan olla. Porterin mukaan oikeanlaisella ympäristöregulaatiolla voidaan kannustaa yrityksiä kehittämään prosessiensa tehokkuutta ja kilpailukykyä. Tällainen oikeanlainen regulaatio ei määrää tiettyjä menetelmiä pakollisiksi yrityksille ympäristövaikutusten pienentämiseksi, vaan antaa yrityksille vapauden itse valita menetelmät, joilla ympäristövaikutuksia pienennetään. (Porter & van der Linde, 1995)

Päästökauppa näyttää täyttävän tällaisen ympäristöregulaation tunnusmerkit, vaikkakin koko päästökauppaprosessia Kioton pöytäkirjasta lähtien on kritisoitu voimakkaasti sen vastustajien piirissä. Mielestäni kaikenlaisen ympäristöregulaation vaikutus yritysten taloudelliseen menestymiseen riippuu yrityksestä. Regulaation aiheuttama taloudellinen kustannus on esimerkiksi yleensä pienempi sellaisilla yrityksillä, joiden ympäristöstrategiana on sijoittua korkean ympäristölaadun markkinoille ja joilla ympäristölaatu on jo kehittyneempää kuin kilpailijoilla. Samoin uskon myös, että regulaatiolla saavutettu ympäristövoitto on suurempi ympäristölaatuun panostaneilla yrityksillä.

Lähteet:

[i] Suomen Luonnonsuojeluliiton tiedotteet, URL: <http://www.sll.fi/tiedotus/tiedotteet/liitto/2004/sl_paastokauppa>, katsottu 30.3.2004

[ii] Energia-lehden artikkeli, URL: <http://www.energialehti.fi>, katsottu 30.3.2004

Porter, M. E. & Van der Linde, C, 1995a. Green and Competitive, Ending the Stalemate, Harvard Business Review, September-October. Pages 120-134.

Walley, N, Whitehead, B. 1994. It’s Not Easy Being Green, Harward Business Review, May-June.

Siebert, H, Eichberger, J, Gronych, R, Pethig, R, 1980, Trade and Environment, A theoretical Enquiry, Amsterdam, Elsevier Scientific Publishing Company

Lankoski, L. 2000. Determinants of environmental profit. An analysis of the firm-level relationship between environmental performance and economic performance. Helsinki University of Technology, Institute of Strategy and International Business, Doctoral dissertations 2000/1.

Reichardt, F. L. 1999b. Down to earth: applying business principles to environmental management. Boston, Harvard Business School Press. 291 pages.

 

jonas.alam (a) gmail.com | Last updated 26/4/2008