3 The field matures

Multiple conversations that comprise the B&NE field

Any attempt to structure and characterize a research domain is certain to be contentious. There will be many that will disagree with our choices, both for what we have included and what we have left out. Again, we do not propose to be the definitive final word on institutionalizing the field. But, in our attempt at such a task, we hope to stimulate conversation among B&NE scholars to come to greater clarity over who we are and where we are going. In conceptualizing the multiple conversations that comprise the B&NE field, we offer three categories: (1) conceptual models for considering environmental issues within the management literature, (2) considerations for the drivers of corporate environmental action and (3) organizational responses to such pressures. This list can serve as a map or guide for new and junior scholars to consider how to enter and contribute to a field with many sub-specializations.

Conceptual models

Much early B&NE research sought to establish a new paradigm on its own, one that did not draw from existing literatures in mainstream business. However, this began to change in the mid-1990s as noted in a call from Gladwin (1993) to clarify “The meaning of greening.” Not only did this paper issue a “plea” for using organizational theory in analyzing how businesses grapple with environmental issues, it also criticized B&NE research for being too ideologically informed, lacking in precise definitions, providing low-quality empirical findings and not being cumulative or building upon previous work (Gladwin, 1993). With that call, B&NE research began to anchor on existing debates within other disciplines, most notably environmental philosophy, sociology and economics. And, in the ensuing years, the field branched out to engage with rigorous application of multiple theoretical lenses, most predominantly in the disciplines of strategy and organizational theory.

This section will overview early discussions of five mainstream conceptual models – the economics of linking environmental and financial performance, competitive strategy, resource-based view, institutional theory and stakeholder theory. Although there is a continued interest in economic consequences of addressing environmental problems, fewer studies appear to be informed by the resource-based view than by institutional and/or stakeholder theory. This section also highlights research from two domains in which the field still seeks to defy mainstream theorizing attempts: one which places more emphasis on natural ecology and the other is work based on critical theory.

Linking environmental and financial performance

Within B&NE research, the relationship between business success and environmental protection has been subject of much attention. A one-page commentary on the conflict between environmental protection and economic competitiveness in Scientific American (Porter, 1991) challenged conventional economic wisdom regarding this relationship and set a new stream in motion. Prior to that paper, the interests of economic growth and environmental protection had been treated primarily in oppositional, zero-sum terms. Investments in environmental protection were considered unproductive and, therefore, likely to undermine corporate competitiveness. Instead, Porter (1991) argued that this was a false dichotomy based on a static view of competition. Drawing upon the paradigm of dynamic competitiveness developed in the 1980s, he argued that environmental concerns could, if regulations were sufficiently stringent, be turned into a competitive advantage.

This essay led to a great deal of coverage of the question of whether it “pays to be green” in both the scholarly and popular literature. Initially formed as a debate among economists and strategy scholars (Porter and van der Linde, 1995; Walley and Whitehead, 1994), it grew to encompass researchers from other disciplines (Barnett and Salomon, 2006; Boon and Wagner, 2009; King and Lenox, 2001a; Waddock and Graves, 1997; Wood, 1991). And yet, despite well-developed theoretical arguments and numerous studies, the answer to this question continues to be uncertain (Margolis and Walsh, 2003; Orlitzky, Schmidt and Rynes, 2003). Many researchers have therefore suggested that the question needs to be reformulated. Instead of asking “if” it pays to be green, attention should refocus on “how” and “when” it pays to be green (Howard-Grenville and Hoffman, 2003; King and Lenox, 2001a; Margolis and Walsh, 2003; Siegel, 2009).

Today, nearly 30 years later, the question of whether it pays to be green continues to be unresolved (Hoffman and Bansal, 2012: 14). There are, according to Edrikat et al. (2014), several reasons for why this is the case: much of the research lacks a clear theoretical grounding or clear idea of the direction of causality; there are inconsistencies in defining and measuring the constructs of interest because of their multidimensionality; and many of the models are misspecified. Nevertheless, Edrikat et al.’s meta-analytical review of the literature (2014), suggests that the relationship between corporate environmental and financial performance is generally positive, and it is stronger for more proactive approaches to improving environmental performance.

Competitive strategy

Beyond this central strand of discourse, there are two streams within the strategy literature that have drawn significant attention. The older of the two begins with discussion of a shifting paradigm, out of which could emerge new environmental strategies (Gladwin, Kennelly and Krause, 1995); the second is the redefinition of generic strategies, addressing how low-cost, differentiation and niche strategies of firms can influence environmental performance (Reinhardt, 1998; Shrivastava, 1995a). Also in this vein are a number of studies characterizing corporate environmental strategies as ranging from reactive regulatory compliance to proactive corporate behavior (Hunt and Auster, 1990; Post and Altman, 1992; Schmidheiny, 1992) and offering analysis of the determinants of environmental performance (Christmann, 2000; Henriques and Sadorsky, 1996). While much of this research has been conducted during times of relative economic prosperity, more recent research on corporate strategy during times of economic distress – recession – indicate that firms both trim and focus their sustainability programs (i.e. seek to extract more value from existing sustainability activities) while also focusing on the more strategic of these activities at the expense of more tactical initiatives (Barnett et al., 2015).

Resource-based view

One characteristic feature and output of much of the early work on competitive strategy was to direct attention into the processes that take place within the “black box” of a firm to drive it to be “green.” One of the central domains for this inquiry is the resource-based view of the firm, and its variant, the natural resource based view (Hart, 1995). This strand of the corporate strategy literature focused on the ways in which corporate environmental strategies are implemented, and, importantly, how those strategies are configured based on developments in the external environment. In a sense this perspective offered an “outside-in” view of competitive advantage. But with an emphasis on the internal competencies of the firm, it blended this perspective with an “inside-out” view. Competitive advantage was seen as rooted in how a firm links its core competencies to resources in the firm’s external environment. This perspective directs attention to organizational capabilities to leverage key resources.

But going further, Hart (1995: 986) criticized the resource-based view for one glaring and serious omission: “It systematically ignores the constraints imposed by the biophysical (natural) environment,” which, in his view, rendered the theory incomplete. As an alternative, Hart (1995) suggested a “natural-resource-based view” where a firm’s competitive advantage was seen as rooted in its capabilities to undertake activities that are environmentally sustainable. To this end, Hart argued that there were three stages of proactive environmental strategy, each involving strategic capabilities – pollution prevention, product stewardship and sustainable development – which differ in terms of external driving forces, necessary resources and source of competitive advantage.

With this critical addition, the resource based view has been put to widespread use in numerous analyzes of corporate environmental strategy (Aragón-Correa and Sharma, 2003; Russo and Fouts, 1997; Shrivastava, 1995a). This stream of research paid particular attention to the development of competitively valuable organizational capabilities (Hart, 1995; Sharma and Vredenberg, 1998), absorptive capacity (Delmas, Hoffmann and Kuss, 2011; Lenox and King, 2004) and complementary assets (Christmann, 2000) as key levers for creating competitive advantage through environmental performance. These studies acknowledged that external stakeholders provide an important impetus for change that can improve organizational performance, thus adding to the growing understanding of how the external environment can influence the development of corporate environmental strategies and valuable organizational capabilities (Aragón-Correa and Sharma, 2003; Sharma and Vredenburg, 1998). Further, this work introduced notions of uncertainty, complexity and munificence to a firm’s external environment, which can moderate the competitive value of proactive environmental strategies. In this way, the resource based view offered explanations of why firms with similar resources may perform differently by either developing different environmental strategies and/or obtaining different economic results while relying on similar environmental strategies.

This work has primarily focused on analyzing pollution prevention strategies, and paid less attention to the development and competitive impact of product stewardship and sustainable development strategies (Hart and Dowell, 2011). The latter is thought of in terms of clean technology strategies and “Base of the Pyramid” strategies (Hart, 1997; 2007; London, 2016; Prahalad and Hart, 2002), both of which were heralded as a means for enabling “green” or “sustainable growth.” In light of the growing economic, environmental and social challenges facing business and society, the original argument for recasting the resource-based view of the firm has, according to Hart and Dowell (2011: 1476), “only become stronger and more relevant.”

Institutional theory

Inherent in much of the strategy literature on corporate environmentalism is an efficiency argument: sustained competitive advantage depends on the firms’ strategic choices or the leveraging of its’ capabilities, resources and assets (Hart, 1995; Porter and van der Linde, 1995). However, viewed through the lens of institutional theory, other factors need to be considered. Firms also have to behave in ways that are considered “legitimate” by powerful social actors within their institutional environments.

In the often-cited special issue of Academy of Management Review, Jennings and Zandbergen (1995) were among the first to demonstrate the usefulness of institutional theory in analyzing corporate environmental behavior. They pointed to the processes through which the institutionalization of ecological concerns can take place and to how these processes could influence what “organizational sustainability” might mean. Although the notion of organizational sustainability has since been subject to critique (Banerjee, 2003; 2008; Sterman, 2012; Roome, 2012), Jennings and Zandbergen were one of the early works in what has become a solid stream of B&NE research.

In another early paper, Hoffman (1999) built a framework for understanding the co-evolution of organizational fields, institutions and organizational structure. He theorized organizational fields as forming around key issues – in this case environmental protection – and considered them as arenas for debate, contestation and interpretation. Hoffman demonstrated that corporate environmental strategy is shaped by the field, and not just as a matter of strategic choice, thus, qualifying claims that economic and environmental performance automatically go hand-in-hand.

A central implication of firm behavior being shaped by constituents in the field is that of organizational and institutional isomorphism: as more and more organizations conform with “rationalized myths” as to what is the proper course of action, they come to resemble one another more and the myths become more entrenched or institutionalized. The diffusion of organizational ideas and practices is the key mechanism, and it takes place through the regulatory, normative and/or cognitive pressures that firms face. With this as an orienting structure, B&NE studies focused on how environmental regulation, as a coercive force, has influenced firms to develop clean technologies (Ashford, 1993; Ashford, Ayres and Stone, 1985; Georg, 1994; Kemp, 1993), environmental management systems (Henriques and Sadorsky, 1996) and environmental strategies (Aragon-Corres, 1998; Nehrt, 1998).

In light of the growth of environmental regulation from the 1970s onward, this interest in the regulatory “drivers” is hardly surprising. But with the advent of voluntary approaches and an increase in industry self-regulation in the 1990s and 2000s, the number of studies that focused on normative influences increased, as witnessed by the many studies of industry associations and certification agencies that influence the diffusion of environmental management systems such as ISO 14001 and the European counterpart, EMAS (Bansal and Roth, 2000; Delmas, 2002; King and Lenox, 2000; King, Lenox and Terlaak, 2005). While both the regulatory and normative pressures for environmental change have received quite a bit of attention, cognitive pressures have received comparatively less attention. One of the reasons for this gap is that they are more difficult to identify and isolate empirically; and are at best captured by proxies such as discourse. Also, the three types of pressures are more difficult to disentangle empirically than theoretically.

Although there has been and still is much interest in how widely accepted ideas and practices diffuse across industries, there is a growing interest in explaining why companies within the same field respond differently (Lounsbury, 2001). One stream of this research draws attention to the importance of social movements and occupational groups as inter- and intra-organizational linkages that can filter inputs from the field to the organization (Hoffman, 2001b). Corporate environmentalism in this view is theorized as the result of institutional pressures as well as the organizational structure, communication patterns and culture. Delmas and Toffel (2008) have demonstrated the empirical relevance of Hoffman’s (1999, 2001a) model in their study of how institutional pressures are channeled to different organizational functions and how this influences the ways in which these signals are received.

A second stream of institutional research focused on the ability of firms to defy institutional pressures by acting as “institutional entrepreneurs” (DiMaggio, 1988; Fligstein, 1997; Lawrence, 1999) in shaping the discourse, norms and the structures that guide organizational action (Maguire, Hardy and Lawrence, 2004). This research focused on change as the outcome of concerted and organized action. But strategic deviance can also take the form of stasis, as firms conform symbolically to institutional pressures by decoupling their core activities from the practices and procedures forced upon them from the outside, what is labeled as “greenwashing” (Greer and Bruno, 1996; Lyon and Maxwell, 2011). Signaling in this way that they are doing the “right thing,” the aim is to placate company stakeholders by creating a green ceremonial façade (Jermier and Forbes, 2003).

A third stream of institutional research drew from the Scandinavian approach to institutionalism (Bergström and Dobers, 2000; Boons and Strannegård, 2000; Czarniawska and Sevón, 1996). Informed by Cyert and March (1992), March (1991), Latour (1987, 1998) and Weick (1995), this approach challenged both the isomorphism and de-coupling arguments. Instead of focusing on the field and/or the institutional pressures, Scandinavian institutionalism focuses on organizational practices, and argues that practices are “translated” every time they are applied in a new context and in this way, processes are changed. This makes it difficult to assess just exactly what is being diffused (Bergström and Dobers, 2000).

More recent research has focused on examining the applicability of institutional theory to an examination of the nature of fields and how they change, particularly in the wake of trigger events that can be framed for change or for stasis (Hoffman and Jennings, 2011). As the issue of climate change manifests itself in more frequent and more severe weather events (i.e. hurricanes, droughts, wildfires and floods), the social discourse and ultimate framing of these events becomes critically important for acknowledging a shift in our notions of the natural world.

Stakeholder theory

The importance of stakeholders was canonized with the publication of Strategic Management: A Stakeholder Approach (Freeman, 1984), which described companies as being situated within a web of relations to others who have legitimate interests – or a stake – in what the company does. Be it the neighbors, employees, investors, insurance companies, government, the press or others, stakeholders can exert pressure, provide important resources and impose costs through protest. Stakeholder management entails deliberate actions to appease stakeholder concerns while simultaneously pursuing company objectives.

In light of the many stakeholders that engage around environmental issues (including regulatory agencies, environmental activists, customers, suppliers, employees and others), it is understandable that a great deal of research attention has been given to characterizing stakeholders as internal or external and primary or secondary (Clarkson, 1995), and to developing typologies to classify them (Mitchell, Agle and Wood, 1997). According to Mitchell, Agle and Wood (1997), stakeholders should be considered in terms of their power to influence the firm as well as their legitimacy and the urgency of their claims. However, due to the limited insights and cognitive barriers managers may have (Bazerman and Hoffman, 1999; Buysse and Verbeke, 2003; Kassinis and Vafeas, 2006), defining “who and what really counts” (Mitchell, Agle and Wood, 1997) is likely to be less straightforward than depicted in the literature. Another complicating factor is that both the “stakes” and the “holders” can change rapidly and unexpectedly.

Much of the work informed by stakeholder theory focused on specific stakeholder groups and analyzed how they influence corporate environmental behavior (Buysse and Verbeke, 2003; Delmas, 2001; Sharma and Henriques, 2005). Work also sought to assess how stakeholders and stakeholder management affects corporate and environmental performance (Berman et al., 1999; Harrison, Bosse and Phillips, 2010; Kassinis and Vafeas, 2006). Analogous to the work on whether it pays to be green, the findings on whether “it pays to do good” have also been inconclusive.

More recent research has focused on examining the applicability of stakeholder theory in sustainability management (Hörisch et al., 2014), and points to three challenges in managing stakeholder relationships for sustainability that warrant further research: the strengthening of stakeholders’ interests in sustainability, creating mutual interests between stakeholders and the company, and finding ways to empower stakeholders in promoting sustainability. Hörisch et al. (2014) point to the importance of education, regulation and sustainability-based value creation for the stakeholders.

Incorporating the natural environment into management

While much of the B&NE literature focused on the economic, strategic and managerial aspects of changing business behavior, it paid limited attention to what happens in the natural environment. One such formative study that began to focus explicitly on the natural environment took place in 1997 when 13 economists, ecologists and geographers conducted an analysis of 17 ecosystem services and determined a value for nature to the human economy estimated at between $16 and $54 trillion per year, with a likely figure of at least $33 trillion (Costanza et al., 1997). Many environmentalists bristled at the idea of placing an economic value on nature, but the researchers used the conclusion to highlight an important point. If one compared the figure to the $18 trillion gross national product (GNP) of the world, it became clear that the services provided by nature exceeded the services provided by the human economy. Protecting nature, they argued, should therefore be given greater importance in relation to our own economic considerations.

Coincident with this study, there were a number of strands of work seeking to forge stronger links between what happens to the natural environment and the social activities taking place in and around companies (Costanza et al., 1997; Crane, Matten and Moon, 2008; Egri and Pinfield, 1996; Starik and Rands, 1995). On a general note, and inspired by the debate about the dominant economic paradigm versus a new ecological paradigm (Catton and Dunlap, 1980), there were calls for a reconceptualization of the organizational environment and a stronger integration between the natural environment and organizational perspectives (Bansal and Roth, 2000; Egri and Pinfield, 1996). This stream pointed to the need for developing eco-centric approaches to business management and recognized that there are limits to growth under existing models (Gladwin, Kennelly and Krause, 1995; Meadows et al., 1972). This critique has been taken a bit further in a broadside critique of capitalism and a call for B&NE research to develop more critical and normative analyses (Gladwin, 2012).

There are, however, some contributions seeking to “re-work” established theories, like stakeholder theory, to bring them into line with environmental realities. Starik (1995), for example, made a case for considering the natural environment – all its living and non-living components – as stakeholders. Crane, Matten and Moon (2008) introduced the notion of ecological citizenship as a means to capture the political dimensions of corporate environmentalism. Others draw on systems thinking to capture the complexity of corporate environmentalism, where business is considered as embedded in myriads of relations, and changes in business behavior are conditioned by multiple feedback loops, time delays and unexpected effects (Egri and Pinfield, 1996; Sterman, 2012; Roome, 2012). Viewed from this perspective, the notion of a single company being sustainable has an oxymoronic ring to it.

The systemic aspects of sustainability are also associated with the Gaia hypothesis, which evolved in the beginning of the 1970s (within atmospheric chemistry) as a speculative claim about “a biological cybernetic system able to homeostat the planet for an optimum physical and chemical state appropriate to its current biosphere” (Lovelock, 1972: 579). Over the next two decades it was elaborated into a geobiological worldview that has been picked up within a variety of fields, notably those dedicated to systems thinking (Clark, 2017). Gaia figures – albeit in different ways – in the recent writings of social scientists such as Stengers (2015) and Latour (2013). Both invoke the Gaia hypothesis to warn what is at stake if the issue of climate change is not more radically addressed. For Stengers (2015), climate change is inherently linked to globalization under capitalism and the persistent and irresponsible pursual of economic growth. Latour (2013) mobilizes Gaia to underline that there are limits to what the environment can stand, and emphasizes the need for action. According to Latour, in facing the challenges of climate change:

Latour contributed to the development of political ecology by arguing that, considering the complex entanglements between “the social” and “the natural environment,” nature is not “pure” or untouched by humans and in need of protection (Latour, 1998). With its emphasis on the interrelationships between socio-political and economic factors and environmental issues, political ecology has clear bearing for the analysis of B&NE.

Critical theory

When considering the theories most commonly evoked in the B&NE literature, one can conclude that the apple does not fall far from the tree, given that the theoretical grounding of much of the literature is within the mainstream of organizational and management theory. Although hardly surprising, if one considers the development of a field in terms of extending extant theories to new empirical domains, many are, nevertheless, critical of the way in which B&NE research has developed (Banerjee, 2008; 2012; Gladwin, 2012). Some argue that the field has been “hijacked” (Welford, 1997); that it should have a stronger eco-centric focus (Egri and Pinfield, 1996); that it should look beyond the needs of Northern elites (Gladwin, Newburry, and Reiskin, 1997); that it pays too little attention to the power and politics at play (Latour, 1998; Orsato and Clegg, 2002; Orsato, den Hond and Clegg, 1999; Springett, 2003); and is, by and large, separated and oblivious to the environmental harms that continue to escalate in the natural world (Gladwin, 2012). This may be attributed to B&NE research’s emphasis on business success rather than natural environment stability, but it could also be that mainstream theories are “blind” to certain issues and that we need to develop different lenses through which we can view and assess the relationship between business and the natural environment. In what follows, we point to two such lenses, critical management studies and actor-network theory.

Authors in critical management studies focus on the power, politics and forms of resistance involved in developing corporate sustainability and ensuring sustainable development (Banerjee, 2008; Levy, 1997; Orsato and Clegg, 1999). Rather than assuming that these terms can be easily defined or that they are unproblematic, critical approaches attend to the discursive, material, institutional power plays that confer legitimacy to the ways in which business deals with environmental issues and offers skeptical accounts of business behavior, particularly with regard to how it impacts the lives of more impoverished and marginal stakeholders (Banerjee, 2008).

Authors drawing upon actor network theory, within the realm of Science and Technology Studies, offer another critical lens for analyzing the interrelations between business and the natural environment (Callon, 1986; Latour, 1987; Law, 1992). This literature addresses some of the same overarching research questions as institutional theory and critical management studies (i.e. understanding how certain practices become institutionalized and the power play involved) but it is premised on an assumption that both human and non-human actors must both be considered when explaining how relations arise and are changed. Actor network theory seeks to capture both the material and symbolic aspects of change processes (Czarniawska, 2009) and scholars informed by this approach argue that the relationship between business and the natural environment is an effect and an outcome of the complex entanglements between human and non-human actors through which their possibilities to act are negotiated, transformed and translated (Newton, 2002; Newton and Harte, 1997). Rather than making claims as to the merits or drawbacks of corporate environmentalism (and/or CSR), emphasis is given to how these concepts unfold in practice (Bergström and Diedrich, 2011; Bergström and Dobers, 2000). In other words, it is concerned with how they are enacted. From this perspective, it is important to pay attention to the mundane materials and practices that go into making corporate environmental performance, and in this way actor network theory lends itself to the gerundial shift within organizational theory (Weick, 1979) to studying organizing rather than formal organizations.

Contributions from both critical theory and actor network theory have recently been extended to studies of climate policy and the intricacies of what it takes to create a market for carbon (Callon, 2009; MacKenzie, 2009). Based on the idea that “economics does not describe an existing external ‘economy’, but brings that economy into being: economics performs the economy, creating the phenomena it describes” (MacKenzie and Millo, 2003: 108), these studies document how greenhouse gas emissions permits are framed through economic calculations and become objects that can be bought and sold on the (CO₂) market. Although one can contend that the making of a carbon market is a political project aimed as internalizing pollution costs (externalities), they argue that political decisions are not enough and that formal technical definitions are necessary to clarify which kinds of greenhouse gases have to be made commensurable and made visible in economic terms (MacKenzie, 2009: 447). This perspective points to the important role of professional understandings and instruments needed to make something knowable, valuable and actionable.

Disparate as these theoretically informed conversations may be, they each point to limitations in the mainstream B&NE research. But equally, if not more importantly, they also ask questions that the mainstream B&NE literature does not. Each of these perspectives extends analysis beyond the interests of a single firm or organization and emphasizes the contentiousness in bringing about deep transformative environmental change. By asking us to consider the fundamental structures, the values of our current modes of organizing and how these values are created, they present new and provocative understandings and routes for research, and thus, extend the field in new directions.

Drivers of change

The question of what drives business companies to improve their environmental performance is, not surprisingly, a recurring question in B&NE research’s many guises. Even though there may be almost any number of factors influencing firm behavior, this section focuses on the four drivers that figure prominently in the literature – government regulation, industry self-regulation, consumer pressure and social movements. The order in which these drivers are listed is also indicative of shifts in our understanding of who can bring about environmental change and the politics by which this happens. What was once the sole domain of government has, over time, given rise to new areas of inquiry that encompass other modes of governance.

Government regulation

Environmental regulation was introduced in most (Western) industrialized countries at more or less the same time in the 1970s, and these countries have continued to add to these regulatory frameworks ever since. In light of these developments, it is not surprising that there is a large body of B&NE research dedicated to examining effect of this regulation on, notably, the economic performance of companies (Barnett and Salomon, 2006; King and Lenox, 2001a; Waddock and Graves, 1997), the development of clean technology (Kemp, 1993; Schot, 1992), innovation (Ashford, 1993; OECD, 2000) and the introduction of environmental management systems (Dahlmann and Brammer, 2011; Delmas, 2001; Khanna and Anton, 2002). Although some have argued that regulatory policies will work differently depending on industry and company characteristics (i.e. some policies will evoke proactive behavior in some industries/companies and not in others) (Dahlmann and Brammer, 2011; Hunt and Auster, 1990), it appears that even within the same industries there are substantial differences in regulatory response (Prakash and Kellman, 2004). These differences may be attributed to, for instance, differences in managerial perceptions, strategic action, organizational culture, operational imperatives or institutional environments.

For example, a study of US firms participating in the US Dept. of Energy’s Climate Challenge Program (1995–2000), a voluntary agreement with electrical utilities to reduce greenhouse gas emissions, showed that there were substantial differences in the strategies pursued by firms, depending on when they entered the voluntary agreement (Delmas and Montes-Sancho, 2010). Late joiners were more likely to pursue symbolic cooperation whereas early joiners had more substantive cooperative strategies. The differences in these responses is attributed to differences in institutional pressures.

While much of the early research focused on the “dirtiest” industries (i.e. the extraction, oil, chemical and manufacturing industries) (Jänicke, Binder and Mönch, 1997; Sharma and Henriques, 2005) and on the use of mandatory regulations regarding specific environmental targets and/or emission standards, attention eventually shifted both to other industries (i.e. electronics, information technology and tourism) and other regulatory instruments and environmental policy goals. For example, there has been a marked increase in research on the use of voluntary negotiated agreements and market-based instruments such as environmental taxes, and emission trading schemes. The introduction of voluntary negotiated agreements does not imply abandoning the use of mandatory measures. Quite the contrary, in many instances the use of negotiated voluntary agreements is supported by credible threats of a mandatory approach, should the voluntary scheme fail (Georg, 1994; Labatt and Maclaren, 1998; Potoski and Prakash, 2004). The use of negotiated voluntary agreements is, however, more common in Europe than in the United States (Glachant, 1994; OECD, 2003).

Research on market-based instruments has been founded on conventional analyses that consider the economic efficiency of such instruments over “command and control” regulation (Hahn and Stavins, 1991). For example, although the introduction of market-based instruments led to the reduction of sulfur dioxide emissions in the US, the failure of negotiations to institute a carbon trading scheme that works (Carter, Clegg, and Wåhlin, 2011; MacKenzie, 2009) calls the effectiveness and broad applicability of these instruments into question. This prompts a need for further empirical analysis of, for example, the benefits some industries derive from influencing and lobbying regulators to introduce regulatory measures that fit their needs (Perrow, 2010; Reinhardt, 1998; 1999; Vogel, 2005).

Industry self-regulation

Industry self-regulation is an umbrella term for the myriad of activities that industry, notably industry associations, introduce to regulate corporate behavior and competition (i.e. certification schemes such as the ISO14000 series or its European counterpart, EMAS) (Corbett and Kirsch, 2001; Darnall and Sides, 2008; Delmas, 2002). There are two forces driving the introduction of self-regulatory systems – the problems of asymmetric information and market failure (Barnett and King, 2008; King and Lenox, 2000). In the first instance, self-regulated information disclosure can be a means to reduce asymmetries and gain positive reputational benefits. In the second instance, self-regulated compliance programs can entail the development of a collective defense mechanism that can either help forestall and preempt government regulation, or “weed out” poor environmental performers so as to minimize the detrimental reputational effect of the industry as a whole with regulators.

Much of the research on industrial self-regulation focuses on the economic and environmental performance of companies as compared to the absence of such a program, or the implementation of formal regulatory measures (King, Lenox and Terlaak, 2005; Terlaak and King, 2006; Toffel, 2006). Other studies consider the reasons why certification has become so widespread (Delmas, 2002; Delmas and Toffel, 2004), whether self-regulatory actions have the desired effect on recalcitrant companies within the industry (King and Lenox, 2000; Lenox and Nash, 2003; Rivera and de Leon, 2005) and the importance of sanctions for self-regulatory actions to work (Lenox and Nash, 2003).

Much of this work shows that industrial self-regulation often falls short of desired economic and environmental ends (Barnett and King, 2008; Darnall and Sides, 2008). For example, one study of US industries (Short and Toffel, 2010) found that concurrent legal environments for effective enforcement activities of corporate compliance to self-regulatory schemes helped ensure greater success. So, while industry continues to have a strong interest in this particular governance approach, research suggests that self-regulation cannot replace conventional command and control regulation.

Consumer pressure

The role of consumers in environmental performance is an obvious one – they influence company behavior by either buying or not buying company products and services. The extent to which environmental issues are influencing the buying habits of consumers is not clear, despite commonplace references to and calls for “green consumerism.” While much of the research in this area has centered on characterizing green consumers, identifying their values and assessing motivations for their choosing green products (Kilbourne and Beckmann, 1998), it is not clear how widespread a phenomenon green consumerism has become (Pedersen and Neergaard, 2006) and what effect it may be having on company performance (Eriksson, 2004) or marketing practices (Peattie, 2001).

Studies have analyzed the linkages between green products and consumer identification with a company or its strategy (Bhattacharya and Sen, 2003). Others have shown that the environmental awareness of many consumers is relatively low (Fineman and Clarke, 1996) and that they often are skeptical of company claims (Bjørner, Hansen and Russell, 2004). Other studies find that consumers have a tendency to free ride and let others, notably those in developing countries, suffer the environmental costs of consumer goods production. Research also finds that consumers have a tendency to over-discount the future (Wade-Benzoni and Tost, 2009), thereby minimizing the power of consumer behavior in addressing long-term issues like climate change and population growth. These studies highlight the mismatch between the way markets, and notably retail markets, work and the conditions that are ideal for fostering green consumerism (Gershoff and Irwin, 2012).

Much of this literature is focused on the individual end-consumer and explains consumer behavior in terms of behavioral and cognitive theory. There is, however, a growing body of literature on the greening of household consumption that draws upon (social) practice theory (Schatzki, Cetina, and von Savigny, 2001; Shove, 2003; Shove et al., 2008; Shove and Pantzar, 2005; Warde, 2005) to study issues like energy-use (Gram-Hanssen, 2010) and information and communication technologies (Røpke, Christensen, and Jensen, 2010) that attend both to the individual and contextual influences on (household) consumption.

Social movements

Tree lovers, citizens against genetically modified organisms (GMOs), anti-nuke activists and many kinds of NIMBY’ists (not-in-my-back-yard activists) have at least one thing in common – they are concerned with the ways in which production and consumption patterns are affecting the natural environment. While many of these groups are acting on the behalf of others – animals, trees, the planet and future generations – and link to broader concerns such as “the treadmill of production” (Schnaiberg, 1980) and environmental injustice and social emancipation (Banerjee, 2008), there are myriad environmental concerns driving citizens to take action in multiple organized ways (Georg, 1999). Much of this work begins with a notion that collective interests and concerns are not “given” or pre-existing, but are generally considered to be socially constructed (Coglianese, 2001; Jennings and Zandbergen, 1995; Macnaghten and Urry, 1998; Yearley, 1992). In many cases, science is used to help stake their claims and confer legitimacy to their concerns in social and political debates (Yearly, 1992).

Research on how environmentally concerned groups affect business emphasizes three approaches: (1) lobbying for changes in government regulation and polices, (i.e. NGO protests that prompted an EU moratorium on GMOs in food) (Ansell and Vogel, 2006; Doh and Guay, 2006); (2) more adversarial tactics such as the issuing of lawsuits, extensive media exposure and boycotting (King, 2008); and (3) more collaborative approaches where environmental groups work with business to develop new products or services, such as environmental groups assisting in the development of renewable energy technology markets (Sine and Lee, 2009), citizen groups collaborating with construction firms to build eco-villages (Georg and Irwin, 2002) and the creation of certification and auditing schemes to help business change behavior, notably in connection with agricultural production in developing countries (Arts, 2002). This activity takes place on multiple scales from the local to the international (Wapner, 1995). While there is a rather substantial body of literature focusing on how environmental groups can influence business, there is less research on the influence that business can have on the environmental organizations and on how the two organizations co-evolve.

Organizational response

There is a large body of research dedicated to understanding how companies respond to environmental issues, and the context in which those responses occur. In this section, we will cover four organizational domains for analyzing business response – organization and culture, framing and discourse, individual and managerial perception, and disclosure and reporting – and four broader domains in which these responses take place – multi-national corporate context, clean-tech and entrepreneurship, supply chain management and industrial ecology.

Organization and culture

One of the vexing questions in B&NE research is why firms have such varied responses to environmental issues. Although some attribute this to organizational capabilities (Aragón-Correa and Sharma, 2003; Sharma and Vredenbrug, 1998) or to field level developments (Aguilera et al., 2007; Bansal, 2003; Delmas and Toffel, 2008), many researchers seek to “open the black box” of the firm by attending to organizational culture (Forbes and Jermier, 2002; Howard-Grenville, 2006). This work addresses how organizational cultures and subcultures, and the relations between them are keys to understanding how and why firms respond differentially to environmental demands. This work emphasizes how the success of environmental initiatives is hinged on the support of senior management (Bansal, 2003; Dixon and Clifford, 2007; Ramus and Steger, 2000), the importance of environmental champions as both role models and ambassadors (Andersson and Bateman, 2000; Bansal, 2003; Markusson, 2010), and the enabling influence of environmental management systems, policies and incentive schemes that affect employee behavior (Douglas, 2007; Ramus and Steger, 2000; Smith and Brown, 2003). However, less attention has been given to how managers integrate social, environmental and economic consideration into their day-to-day management decisions and how they deal with competing demands regarding social, environmental and economic performance (Epstein et al., 2015).

Framing and discourse

The meaning given to environmental concerns is, to a large extent, dependent upon how they are framed through the discourse that constitutes these concerns as legitimate and worthy of attention. Discourse can be established within an organization as a particular way of seeing, understanding and interpreting environmental issues, thus having much in common with perspectives that consider culture as a “web of meaning” (Geertz, 1973), but they are most often associated with group processing and societal debate (Drysek, 1997; Hajer, 1997).

Research within this area focuses on how companies seek to influence environmental discourses, ranging from discourses regarding the company itself (Bansal and Clelland, 2004) to broader environmental discourse on climate change, exemplified by the heated debates between climate skeptics and large parts of the scientific communities within the natural sciences (Hoffman, 2011a; 2011b; 2015). Whilst the first-mentioned line of research addresses some of the same issues as research on company disclosure, the second issue pertains to issues of institutional change, particularly to how “language games” can help to support, re-orient or completely de-institutionalize and reconstitute existing institutions (Evans and Kay, 2008; Garud, Gehman and Karnøe, 2010; Maquire and Hardy, 2009).This research relates to work being done on the rhetorical strategies of institutional entrepreneurs (Lawrence and Philips, 2004; Suddaby and Greenwood, 2005) and the path creation that leads to new markets for clean technologies (Karnøe and Garud, 2012).

Individual and managerial perceptions

While broad cultural considerations are important for understanding environmental change, much research also attends to the individual-level processes that can be considered as the micro-foundations of organizational response (Reverdy, 2006). Corporate environmental response in B&NE literature has considered the role of individual and managerial perception, particularly how these processes inform decision-making and action, at multiple organizational levels. Some of this work draws on behavioral theory, which sees individuals as attempting to act rationally but as bounded by cognitive limitations regarding their self-interests and the interests of others, both now and in the future (Bazerman and Hoffman, 1999). Others explore the issue more inductively by attending to the ways that managerial interpretations effect company choice of environmental strategies (Banerjee, 2001; Henriques and Sadorsky, 1999; Sharma, 2000). These and other studies highlight the role of experience (Ramus and Steger, 2000; Walls and Hoffman, 2012), emotions (Fineman, 1997), individual values (Bansal, 2003), network position (Bertels, Hoffman and DeJordy, 2014) and organizational context (Sharma, 2000) in providing managers with views as to possible strategies (Egri and Herman, 2000).

In keeping with some of the research on stakeholders, some point to the importance of internal and external constituencies in shaping corporate environmental perceptions and response (Andersson and Bateman, 2000; Banerjee, 2001). Others have focused on how the scope, scale and speed of organizational response is linked to the intertwining of individual perceptions and organizational values that can lead to competing agendas, mixed motives and mixed results (Bansal, 2003; Hoffman and Ocasio, 2001). For example, a study by Epstein et al. (2015) documented the paradoxical situations of conflicting demands for managers when they favor financial performance in contexts where there is a conflict with environmental and social performance, while also publicizing ways that promote (corporate) sustainability.

Disclosure and reporting

Accounting for companies’ social and environmental impacts is a growing area of practice and research, in terms of both what is reported and how it is reported. In line with the accounting truism that if something “doesn’t get measured then it doesn’t get managed,” there is a body of research that focuses on accounting techniques, and in particular, the more technical aspects of how to account for activities not traditionally included within financial accounting, such as numerical disclosures of emission data that can be made commensurate with other emissions data so as to render this information intelligible to the presumed readers (Kolk, Levy and Pinkse, 2008) and narratives of key stakeholders (Bennett and James, 1998; Ditz, Ranganathan and Banks, 1995; Gray, Bebbington, Walters and Thomson, 1995).

While much of the accounting literature is less instrumental, more analytical, and more critical of what environmental reporting can achieve (Deegan, 2002), reporting does provide some degree of visibility regarding the issues that are important to key external constituents (i.e. government, environmental activists, employees and financial markets). As such, there has been both a move to extend reporting to include issues such as climate change impacts (i.e. through the Carbon Disclosure Project), with particular emphasis given to the link between carbon disclosures and corporate strategies (Reid and Toffel, 2009) and to link such outputs to mandatory financial statement disclosure through “integrated reporting” as the next evolution beyond stand-alone environmental or sustainability reports (Eccles and Saltzman, 2011; Gray, 1992; Gray, Kouhy, and Lavers. 1995).

Given the propensity to gear reports towards basic communications objectives, some B&NE research seeks to explore whether disclosures are seeking to provide the readers with a particular picture of firm performance that may be at variance with reality. Viewed from this perspective, environmental reporting, accounting and disclosure is considered variously as a means for increasing legitimacy by managing stakeholder impressions (Neu, Warsame and Pedwell, 1998) or as a matter of “greenwash” (Jermier and Forbes, 2003; Lyon and Maxwell, 2011). There are numerous studies of how thematic content, narrative structures and language use (Cho, Roberts and Patten, 2010) can help “veil” the firm, providing one view to the readers while shielding the inner workings from external scrutiny (Hopwood, 2009).

While much of this research examines environmental reporting from an external perspective, with emphasis on the intended effect on external stakeholders, others focus on disclosure and reporting as auto-communication that enhances employee and managerial workplace identification (Morsing, 2006) or as a productive organizational device that contributes to forming rather than just informing management decisions (Georg and Justesen, 2017; Justesen and Mourtisen, 2009). According to this performative approach, accounting is not merely a means to an end (although it can be). Rather accounting produces ends that prompt action.

So, while much of the environmental accounting research is firmly grounded on a model of accounting as information production where the environment is framed as lifeless inputs and outputs that need to be managed efficiently (Russell et al., 2017), there is a growing body of work seeking to conceptualize environmental accounting differently. Analogous to the notion that it is a “machine not a camera” (MacKenzie, 2006), accounting research that treats the domain as a locale for action is growing. For example, developments within global climate policy, particularly the creation of markets in carbon emissions, provides a vibrant arena in which the performative approach to accounting and environmental concerns are closely intertwined (Callon, 2009; Hopwood, 2009; MacKenzie, 2009).

Managing in a multi-national corporate context

The role of multi-national corporations (MNCs) in the economy is controversial in both the economic (Korten, 1995), and the environment domains (Gladwin and Welles, 1976). Historically there have been four main strands of research in this research. The first is that of “eco-imperialism” associated with MNCs through trade liberalization (Gonzalez, 2001; Paterson, Humphreys and Pettiford, 2003). The second is that of MNC “double standards” (Castleman, 1987) in which they operate with older technologies or less stringent standards of care and compensation abroad than at home. The Bhopal catastrophe is one such tragic example (Gladwin and Welles, 1976; Shrivastava, 1987). The third is the flight of MNCs to “pollution havens” in developing countries and emerging economies (Clapp, 2002; Utting, 2005). Such studies have been largely inconclusive, presumably because there are many more important factors shaping MNCs location decision than just environmental standards (Eskeland and Harrison, 2003; Javorcik and Wei, 2005).

The fourth, and most prominent area of B&NE research on MNCs, has been their positive effects in introducing uniform standards, technology transfer and the “greening” of supply chains across global operations (Christmann and Taylor, 2001). Studies of the introduction of uniform standards have focused on the difficulties of navigating among diverse institutional environments (Hunter and Bansal, 2006; Kostova, Roth and Dacin, 2008; Kostova and Zaheer, 1999), the cost reduction and efficiency gains to be made by streamlining organizational procedures (Corbett and Kirsch, 2001; Dowell, Hart and Yeung, 2000; Sharfman, Shaft and Tihanyi, 2004) and the benefits of technology transfer and growth opportunities (Hart and Milstein, 1999; Hettige et al., 1996) from the “greening” of the supply chain (Koplin, Seuring and Mesterham, 2007; Zhu and Sarkis, 2004). Much less attention is given to the negative effect that MNCs have on the environment and indigenous peoples (Banerjee, 2008), local industries (Jeppesen and Hansen, 2004) and environmental legislation nationally and internationally (Perrow, 2010).

Clean-tech and entrepreneurship

The so-called IPAT formula describing the relationship between environmental impact, population, affluence and technological development has – albeit in relatively simplistic terms – cemented the importance of technological development (Ehrlich and Ehrlich, 1991; Gladwin, 1993). As the world’s population continues to grow and there is a growing demand for increased affluence, the only way in which it will be possible to minimize the overall environmental burden of these developments is through technological development. Technology is, however, often considered as having an ambivalent role when it comes to the natural environment. Some technologies are seen as being at the root of a number of environmental problems while others are considered potential “solutions,” whether at the “end of pipe” or “clean(er) technologies” (Dean and McMullen, 2007; Sine, Haveman and Tolbert, 2005).

Although the market for “green” technologies is growing internationally (Jänicke and Jacob, 2004), much of the research in this area attends to the determinants on the decision to develop and/or adopt “green” technologies. Research finds that they may be strategic considerations regarding competitive advantage (Reinhardt, 1998; Shrivastava, 1995b), path dependency and the economic incentives for developing and adopting “green” technologies (Kemp and Soete, 1992; Klassen and Whybark, 1999), environmental entrepreneurship (Sine and Lee, 2009) and product recovery management (Thierry et al., 1995). Much of this work also focuses on the institutional context in which entrepreneurs and firms are embedded, and does so by mobilizing quite different theoretical domains. Some draw on institutional theory (Sine and Lee, 2009), while others draw on evolutionary economics (Geels, 2004; Kemp Schot and Hoogma, 1998; Schot, 1992), or practice theory (Shove and Walker, 2010). Others emphasize the ways in which entrepreneurs frame or qualify technologies as green, mobilize the interests of others throughout the supply chain (Sarkis, 2003; Vachon and Klassen, 2006) and enroll them in endorsing the technology (Callon, 1986; Doganova and Karnøe, 2014; Karnøe and Garud, 2012).

Supply chain management

Research in the “greening of the supply chain” has developed in the wake of industry out-sourcing to suppliers located in countries with poorer social and environmental standards. With increased media and activist scrutiny, a growing number of suppliers are being pressured to improve their environmental performance to meet purchaser requirements (Qinghua and Sarkis, 2004; Walton, Handfield and Melnyk, 1998). Research within this field focuses on three prime issue areas: (1) the strategic implications and advantages that greening the supply chain can have for companies (Corbett and De Croix, 2001; King and Lenox, 2001b; Sarkis, 2003; Vachon and Klassen, 2006; Walker, Sisto and McBain, 2008), (2) the tools that companies need in order to green their operations and assess their suppliers (Beamon, 1999; Fleischmann et al., 2001; Lenzen, 2000; Min and Galle, 1997; van Hoek, 1999; Zsidisin and Siferd, 2001), and (3) the challenges of new business opportunities associated with working with one’s suppliers and with closing production loops (Bowen et al., 2001; Srivastava, 2007). These domains call for attention to both socio-economic considerations by nurturing inter-organizational relationships, developing trust (Vachon and Klassen, 2006) and technical considerations, such as through recycling and reusing of wastes or re-manufacturing these wastes into new products (Thierry et al., 1995; Geyer, van Wassenhove and Atasu, 2007).

Critics of research on sustainable supply chain management charge that it is relatively a-theoretical (Touboulic and Walker, 2015). Yet, research attention to this issue has grown substantially, particularly, in the area of the circular economy (Bocken et al., 2017; Webster, 2015). Moving away from linear models in which items are created, used and disposed of once they reach their end of serviceable life, circular models close this loop and emphasize system-wide innovation to redefine products and services in ways that their environmental performance is improved. Items are created, used and then either restored or reprocessed to recover energy or materials that can be used again. But more important, the circular economy challenges companies to design their products with the full life cycle in mind from the start, re-designing the entire production system to prioritize real social and environmental needs (versus created marketing needs), continually upcycle materials to eliminate waste and rethink the role of business in “designing for abundance” not just reducing unsustainability.

Industrial ecology

The beginning of industrial ecology as a research field is often associated with the publication of a seminal 1989 article by Frosch and Gallopolous, which posits an analogy between industrial ecosystems and biological ecosystems. This area of B&NE research is grounded on a systemic understanding of what firms can do to improve their environmental performance (Boons and Wagner, 2009; Whiteman and Cooper, 2000). Rather than focus on individual firms, this research attends to how resource use can be optimized within systems of firms (Ehrenfeld and Gertler, 1997; Erkman, 1997; Frosch and Gallopouos; 1989). Research within this domain seeks to identify and quantify the material and energy flows within and across industries, supply chains and cities (Ahi and Searcy, 2013; Lewandowski, 2016; McDonough and Braungart, 2013). Although there is a strong emphasis on the more technical aspects of measuring and analyzing these flows and on increasing resource efficiency by closing loops (Ayres, 1997; Wernick and Ausubel; 1995), there is a considerable amount of research that examines how regional industrial eco-systems work, notably the exemplar cases in the Danish town Kalundborg (Chertow, 2007; Ehrenfeld and Gertler, 1997; Jacobsen, 2006) and other parts of the world (Baas and Boons, 2007; Zhu et al., 2007).

Another key area of this research deals with the organizational aspects of industrial ecology, such as the strategic interests of those involved and the coordination, collaboration and governance issues necessary to align those interests (Boons and Baas, 1997; Esty and Porter, 1998; Lifset, 2008). Other topics addressed within the field include how life-cycle analysis, life-cycle management and life-cycle costing can be used to promote resource efficiency, and the use of reverse and forward logistics to improve operations management. Hitherto, the main thrust of this research emphasis has been on how to change production patterns, but there is a budding interest for changing consumption patterns as well (Hertwich, 2005).

The lay of the land in B&NE research?

As this chapter shows, there is a wide landscape of research within the B&NE field. The diversity of topics, empirical areas and theoretical frameworks denote a vibrant research landscape that examines the B&NE topic from a multitude of angles. Although there is a detected waning of interest in strictly business and the natural environment topics (as evidenced by a drop in research papers labeled with those topics, as shown in figures 2.4 and 2.5), there is a strong interest in the further development of some of the sub-level issues that comprise the field, such as circular economy, disclosure and reporting, supply chain management and many others. Theoretically focused work, as in institutional and stakeholder theory, continues its development and these conceptual models are being put to widespread use in a number of empirical domains pertaining to corporate social and environmental performance. As the B&NE field has evolved, issues of theoretical and conceptual grounding as well as methods used have come to figure more prominently, which is a development that mirrors that in organization and management research more generally. In the next chapter, we will assess the directions in which this B&NE research domain may be going.