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11,2 Seeing ecology and “green”

innovations as a source of
Giovanni Azzone and Giuliano Noci
Department of Economics and Production, Politecnico di Milano, Italy

Managerial complexity and competitive opportunities of

environmental entrepreneurship
Over recent years, a growing number of corporate executives declared
themselves committed environmentalists and integrated environmental issues
in their corporate strategies (Adams, 1992; Bloom and Scott Morton, 1991;
Hutchinson, 1996; Porter and van der Linde, 1995; Shrivastava, 1995; Walley
and Whitehead, 1994; Welford, 1995). Several factors explain such concern for
“green” issues; among the others: the dramatic negative environmental impacts
of the companies’ operations and products; the growing interest of public
opinion, pressure groups and governmental institutions for the “quality” of the
eco-system; and the executives’ appreciation of the (competitive and economic)
benefits derived from the adoption of environmentally conscious programmes.
Faced with these changes in the competitive scenario, executives adopted a
wide set of strategic options (Azzone et al., forthcoming; Royal Swedish
Academy, 1995) which differ in the complexity of the adopted environmental
programmes (from compliance to existing regulations to the anticipation of
future evolution of market expectations). Most initiatives have a great impact
on the company’s economics, the corporate management system and the overall
structure of the industrial system (Sheng et al., 1995; Steger, 1996). Indeed, the
improvement of environmental performance often requires executives to
commit significant financial resources in new “cleaner” technologies (financial
implications) and to redesign business processes and the corporate
organisation (managerial and organisational implications). In particular, the
effectiveness of environmental programmes greatly depends on the executives’
capacity to:
• manage environmental innovations jointly with the other competitive
factors (time, quality, flexibility, cost, etc.), since the “green” issues are
only one of the major challenges faced by companies;
• integrate the actions taken by different corporate departments, since
Journal of Organizational Change
environmental programmes have an inter-functional nature, thus
Management, Vol. 11 No. 2, 1998, requiring the involvement of organisational units characterised by
pp. 94-111, © MCB University
Press, 0953-4814 different competencies;
• develop new relationships with other firms aimed, for instance, at Seeing ecology
solving environmental problems that can not be managed by a single innovations as a
firm, because of its lack in competencies; source of change
• co-operate with public institutions: experiences carried out in different
countries (Denmark, Germany, Sweden) highlight that innovative
environmental policies often require their support.
In the light of these issues and starting from the consideration that the best way
towards environmental management does not exist, the paper has three main
objectives. First, it aims at identifying main patterns of environmental
behaviour adopted by firms. In this respect, the results of an empirical
investigation will be presented. Second, it describes main changes that allow
managers to deal effectively with the environmental dimension; in particular,
major implications on the corporate management system and on the
organisation of supply value chain will be analysed. Third, it attempts to
present the basic triggers which may foster the introduction of effective
environmental entrepreneurship.
The paper is divided into five major sections. The first section clarifies the
research methodology; the second section describes, in the light of the empirical
investigation, how different firms are managing “green” issues from a strategic
viewpoint. The third section suggests an integrated framework highlighting
why the environment might be seen as a significant change driver. The fourth
section tries to identify the key triggers of environmental entrepreneurship. The
final section discusses the expected evolution of environmental management.

The research methodology

The identification of the companies’ basic patterns of environmental behaviour
and of major implications resulting from their implementation have been based
on state-of-the-art literature and on an empirical investigation carried out
within 15 (small and large) corporations (see Table I).
The development of an intensive analysis on a small sample follows from the
need to deal with the complexity of the ecological variable. In this perspective,
we designed a semi-structured questionnaire (see Table II) addressed to the
manager in charge of the environmental department; it has been sent via mail to
allow managers to understand the required information and represented the
basis of the in-depth case study.
The questionnaire aims at identifying:
• the adopted environmental programmes, to check whether they are
consistent with the intended environmental strategy; in this perspective,
initiatives carried out both in the primary and support activities of the
value chain have been considered;
• the changes in the activities of the corporate value chain and in the
supply value chain following from the adopted pattern of environmental
JOCM Number of
11,2 Company Industry employees Sales 1994a

ABB Italy Electromechanical 13,312 2,941

Air Liquide Chemicals 2,000 800
BICC Ceat Cavi Tyres 1,303 458
96 Ciba Italy Chemicals 2,800 1,300
Dow Chemical Italy Chemicals and plastics 550 800
Fiat Auto Automotive 120,000 33,000
IBM Semea Electronics 10,500 8,845
Lampia Plastics 112 28
Lares Cozzi Mechanics 267 70
Metalli Preziosi Chemicals 300 260
Pirelli SpA Tyres 10,000 2,500
SGS-Thomson Micro-electronics 13,312 1,231
Solvay SA Italy Chemicals and plastics 2,900 819
Tecnomec Metal and mechanical 100 27
Table I. Zinco Celere Metal and mechanical 600 140
The sample firms Note: aData are expressed in billions of Italian lire

• the key drivers which induced firms to adopt an environmentally

conscious strategic attitude. In this respect, we considered social
pressures resulting from public opinion and public institutions; the
evolution of environmental regulations; competitive factors related to the
possibility of differentiating the product in an ecological sense and/or
saving production costs, because of the growing costs associated to the
use of natural resources.
Accordingly, each firm has been visited twice: in the first meeting, we analysed
the corporate environmental management practices; in the second, we checked
the reliability of the reported information.

The adopted patterns of environmental behaviour: the results of

an empirical investigation
Previously, almost all corporations considered ecological issues as a threat, thus
introducing only the initiatives required by environmental regulations (Azzone
et al., forthcoming; Hoffman and Kellog, 1996; Smart, 1992). In this respect, a
recent survey in 85 US companies showed that 50 per cent of the interviewed
firms were focusing narrowly on compliance (Azzone and Noci, 1996). Such a
business stance towards environmental management can be explained in the
light of the urgent need to respond to other competitive challenges – such as
time and flexibility – and the possibility of using natural resources without
specific limitations.
Major changes in the competitive arena are partially modifying such
managers’ strategic attitude towards “green” issues: our empirical investigation
Seeing ecology
General information
Name of company innovations as a
Turnover source of change
Number of employees
Number of sites
The intended strategy
Who are the most environmentally aware stakeholders?
What are the company’s objectives in environmental management?
Achieve a competitive advantage
Avoid losing market share
Create new needs
Is the ecological dimension more important than the other competitive factors (cost, quality,
time, etc.)?
Major implications of the adopted strategy
Where did you introduce the major changes to implement the intended strategy?
Primary activities
Support activities
Key management processes (planning and control, logistics and product development)
Have you modified your relationships with suppliers and/or customers?
Higher integration
Reduction of the number of suppliers (and/or customers)
Why have you modified your relationships with suppliers and/or customers?
Need to develop new “green” products (with regard to suppliers)
Need to facilitate the take-back process (with regard to customers)
Future programmes
What are the company’s future objectives in the environmental field?
Increase the effort Table II.
The structure of the
Reduce the effort
Lobby stakeholders (regulators and/or customers)

and state-of-the-art literature highlight that a minority of firms now consider

the improvement of the environmental performance as a source of competitive
advantage (Hutchinson, 1996; Illinitch and Schaltegger, 1995). Such a situation
is, in our opinion, the result of three main factors:
(1) the growing market demand for a lower impact of the industrial system;
in Scandinavia, for instance “green” customers represent a significant
market share and look for products characterised by a limited impact on
the eco-system (Royal Swedish Academy, 1995);
(2) the introduction in many countries of binding “green” regulations
leading firms with low (product and/or process) environmental
performance to bear high taxation costs; a recent German law which
forces firms to pay one deutschmark (DM) for each kg of (non-
hazardous) material sent for disposal represents a meaningful example;
(3) the design of “green” products represents, in some industries, the only
way to develop differentiation-based business strategies. Bicc Ceat Cavi,
JOCM for instance, a company producing cables, is trying to eliminate
11,2 antimony from its products, since executives believe that this is the only
solution to differentiate itself from competitors.
However, even faced with these clear changes in the competitive scenario
implying significant opportunities for the industrial system, corporations
adopted very different patterns of environmental behaviour depending on the
98 available (financial, technological and infrastructural) resources and “green”
competencies. In particular, according to our empirical investigation, we can
identify three distinct environmental strategies.
A significant number of sample firms (Lares Cozzi, Lampia, Metalli Preziosi,
Tecnomec and Zinco Celere) still adopt a re-active environmental strategy,
mainly involving reactions to external stimuli emerging from “green”
movements, governments, regulators or other firms. In particular, within our
sample, such pattern of environmental behaviour has been privileged by small
firms operating in the industrial market which receive only weak signals on the
expected environmental requirements of the end market; in this perspective an
empirical investigation carried out in northern Italy shows that firms find it
more difficult to understand whether and how final customers are including the
ecological variable in their purchasing decisions (Noci and Verganti, 1997).
Furthermore, the introduction of a re-active strategy also represents a feasible
environmental management solution in industries where the environmental
impact of the operations and/or products is low and, hence, the evolution of the
stakeholders’ environmental requirements is still limited. It is not surprising
that no chemical company of the sample decided to implement a re-active
“green” strategy; indeed, owing to the complexity of the programmes that are
necessary to respond to environmental regulations, the adoption of a re-active
approach may lead the firm to face significant economic and competitive
Some large corporations (ABB-Italy, Air Liquide, Bicc Ceat Cavi, Ciba-Italy
and Pirelli) – characterised by a significant availability of financial resources
and good “green” competencies – adopted anticipatory “green” strategies,
usually implying that the “timing” of environmental initiatives is considered a
primary source of future competitive advantage; in this perspective, the
implemented programmes anticipate a likely evolution of the stakeholders’
ecological requirements. Such a strategy tends to be introduced when early
acquisition and/or development of new “green” technologies or the modification
of existing products in an environmental sense are thought to offer competitive
advantage deriving from savings in terms of previous costs and benefits of
early movers. This result is also confirmed by other empirical investigations: for
instance, Du Pont developed an environmental policy based on the anticipation
of the expected evolution of the external context, by means of a 60 per cent
reduction in the emission of toxic gas by 1994; a 90 per cent reduction in
carcinogenic substances by 2000; and the elimination of solid wastes sent for
disposal (Porter and van der Linde, 1995).
Finally, some multi-national corporations (Dow Chemicals, Fiat, IBM, Seeing ecology
SGS-Thomson and Solvay-Italy) adopted an innovation-based “green” strategy, innovations as a
whereby the environmental variable is seen as the most important competitive source of change
priority and innovation-based solutions are sought involving the introduction of
new technologies that radically improve the environmental performance of
current technologies or the creation of new market needs as a consequence of
“green” products. It must be noted that, owing to the complexity of (product 99
and/or process) environmental innovations (see the following section), the multi-
national nature of the company represents nowadays an important determinant
of the feasibility of innovation-based patterns of environmental behaviour;
however, it is not only the quality of the available resources which explained
their attention for “green” innovations, but also the possibility to discern
signals – i.e. the behaviour of leading actors, the evolution of ecological
prescriptions, etc.) – from the most environmentally aware markets that are
weak for national companies.
These strategies differ in the type of programmes following their adoption. It
must be noted that the deployment of a reactive strategy does not entail a
manager’s entrepreneurial attitude towards environmental management.
Within an anticipatory strategy, executives try to exploit resources to achieve a
competitive advantage, even if they limit the corporate risk since they act
according to a clear – but not certain – framework on the expected evolution of
the stakeholders’ “green” requirements. In contrast, the pursuit of an
innovation-based strategy depends on the executives’ creativity and their
capacity to identify the opportunity resulting from the growing importance of
the ecological variable.

Strategic implications of the ecological dimension: shifting from

the corporate value chain to a “fuzzy supply value chain”
The previous empirical evidence highlights that the possibility that the
development of re-active “green” strategies may not represent a sustainable
business policy for environmental management in the long run. In particular,
two main elements explain, in our opinion, the failure of such strategic option.
First, stakeholders’ environmental requirements have turned “greening” into
a moving target – what was green two years ago may not be green now and
what is green now may not be green in the future. As a consequence, firms are
required to define a continuous process of improving environmental
performance, but such a process cannot be developed only by means of
continuous incremental changes, since it may lead a company to design
technological and management systems which are not feasible in the long run.
Indeed, in many cases, owing to design constraints resulting from the
characteristics of the existing system, the introduction of marginal
modifications may hinder the firm’s possibility to break through current
environmental performance.
Second, the growing complexity of the regulators’ ecological formula
requires both a significant reduction of the companies’ impact on the
JOCM eco-system and the introduction of networks among firms aimed at recycling
11,2 product packaging (this is the case, for instance, in Germany) and such a
regulative trend is expected to become stronger in the short term. In this
perspective, firms are and/or will be forced to introduce new “green”
technologies and to build recycling capacity; in both cases, the resulting
programmes take a long time to be implemented and are often underestimated
100 by firms. Consequently, a sufficiently long schedule has to be allowed for the
development of integrated technologies and, this, in turn, requires development
work to start at an early stage, i.e. when a significant number of weak signals
(leading customers decide to include the environmental variable in their
purchasing decisions) appears and not simply when the relevant legislation has
been passed (Steger, 1996).
In the light of these issues, it is the authors’ opinion that a growing number
of firms will consider the need and/or the opportunity to modify their business
policies for environmental management and, specifically, to introduce
anticipatory or innovation-based “green” strategies. Starting from this
consideration, in the following, our analysis will focus on discussing major
changes of such a renewal of environmental management. In particular, we will
discuss the key implications of an innovation-based “green” strategy, since it
entails the introduction of an entrepreneurial approach and, hence, presents
more significant effects on the corporate system than the anticipatory pattern
of environmental behaviour.
More precisely, it requires executives to introduce systemic changes, in order
to redesign the corporate system at its roots. Specifically, it requires them to
think in terms of an extended product life cycle concept – i.e. a “cradle to cradle”
approach – to exploit feasible solutions for re-using, recycling or regenerating
end of life materials/products (Dewhurst, 1989; Linnanen, 1995; Sheng et al.,
1995); and to manage the key processes according to an extended value chain
logic. Indeed, most environmental innovations can only be performed to a
limited degree within the corporate value chain, while requiring intensive links
with external stakeholders (Crame and Schot, 1993; Starik and Rands, 1995).
Accordingly, three major classes of changes are necessary for the
development of innovative environmental programmes:
(1) changes in the activities of the corporate value chain;
(2) changes in the management processes, i.e. the level of integration of
different internal activities;
(3) modification of a company’s relationships with its stakeholders
(suppliers, customers, public institutions), to achieve a higher

Effects on the activities of the value chain

Modifications that must be introduced at this level relate to both primary and
support activities of a company’s value chain.
Regarding primary activities, major changes concern: Seeing ecology
• Operations management: in operating terms, the introduction of simple innovations as a
operating principles, highlighting the need to minimise energy source of change
consumption and wastes under a continuous improvement perspective is
required (Gupta, 1995). In this respect, it must be noted that conflicts of
objective between “lean manufacturing” and “green manufacturing”
may arise, for example, when “outsourcing” creates more traffic and
therefore more pollution; hence, it is critical for firms to define a new
“lean concept” which establishes a satisfactory mix between new
production requirements and environmental protection.
• Marketing: more precisely, two change trajectories can be identified in
marketing management in the light of environmental entrepreneurship:
first, its instruments should be applied to the environmental question to
communicate to the market the product’s environmental characteristics
and/or the low impact on the eco-system resulting from the company’s
production process. Second, the marketing managers’ role is important in
educating customers on “green” issues.
In relation to support activities, the adoption of innovation-based
environmental programmes entails:
• Different logic of human resource management. In this respect, the
introduction of training courses aimed at increasing the employees’
environmental awareness and programmes specifically addressed to the
development of new technical and management competencies has a
basic importance for fostering environmental innovations (Hart, 1995).
• A change in the information system, in order to integrate environmental
data in the overall process of data collection. This represents a crucial
step for the introduction of effective pro-active environmental
management practices: indeed, the managerial complexity of innovation-
based environmental programmes make the evaluation of different
alternatives and the control of results critical for a company’s
competitiveness (Azzone and Noci, 1996).
• The integration of ecological issues in the procurement activity, since
environmental performance of the supplied components/materials have
a significant importance in determining a product’s environmental
characteristics (Crame and Schot, 1993; Noci, forthcoming). This is a
major problem for both small and large firms apart from the level of
internationalisation of their activities. Our empirical investigation
highlights that only three sample firms (ABB, Ciba-Italy and IBM) have
systematically included in their vendor rating systems the
environmental dimension; nevertheless, the interviewed managers aim at
modifying them in the short term and assigning to the suppliers’
environmental performance a significant importance: for instance, the
corporate environmental manager of SGS-Thomson plans to assign to
JOCM “green” issues a 30 per cent weight of the supplier’s total score, i.e. that is
11,2 a significant relevance with respect to variables such quality, time and
costs of the purchased raw materials/components.
• Specific characteristics of a company’s overall organisation. In this
perspective, our empirical investigation highlights the importance of the
design of an organisational structure allowing learning processes to take
102 place: indeed, the novelty of the environmental variable also requires
firms to develop environment-related competencies by means of new
programmes. In particular, flat hierarchies, decentralised decision
making and open communication structures are important
preconditions for such learning processes to occur.

The redesign of the basic management processes according to an

environmentally conscious perspective
The development of programmes aimed at modifying the integration of
different functional activities allows firms to achieve radical improvements of
their environmental performance and, hence, to exploit the economical and
competitive opportunities resulting from the growing importance of the
environmental challenge. However, the success of such programmes also
requires major changes in the product development process, the planning and
control process and the logistic process.
The product development process. Integrating environmental criteria into the
product development process requires managerial, technical and operating
changes for organising a “green product design” (Kruwet et al., 1995).
In management terms, two main elements have a basic importance to
transform the ecological challenge into a competitive dimension:
(1) the involvement of suppliers into product design. According to the
innovative sample firms’ experience (ABB-Italy, Ciba-Italy, Dow
Chemical, Fiat, IBM, SGS), the introduction of co-design relationships
with suppliers allows companies to anticipate constraints and to identify
a wider set of options at the design phase. Indeed, the product
environmental characteristics are often greatly influenced by the mix of
raw materials apart from their quality; for instance, product recycling is
impossible if one material is not compatible with the others (Noci, 1995).
(2) A deeper consideration of complementary products which generate
environmental consequences. For instance, in the case of a washing
machine manufacturer, the company should see itself not just as a
manufacturer and supplier of machines, but rather accept that washing
machines are part of a process which enables people to have clean
From a technical viewpoint, executives should encourage product managers to
consider environmentally friendly design techniques as strategic tools in the
development of new products (Azzone and Noci, forthcoming; Dewhurst, 1989).
Indeed, starting from consideration that “green” issues may represent a Seeing ecology
significant driver of product differentiation, the introduction and/or a higher innovations as a
attention towards the implementation of design for recycling, design for source of change
dismantling and design for disassembling techniques allow the product
manager to identify the best trade-off between a product’s eco-compatibility and
its contribution to profitability.
As regards operating criteria to be considered in the definition of the product 103
specifications, product managers need to introduce significant changes in the
design logic. Specifically, such guidelines can be grouped into four classes
(Kruwet et al., 1995):
(1) Product structure. In this perspective, it is necessary to: minimise the
variety of materials; reduce the number of items in the bill of materials;
and make valuable and hazardous materials easily accessible.
(2) Individual components. To avoid materials that are incompatible with
standard recycling processes.
(3) Disassembly operations. Specifically, product designers are required to:
use joining elements that can be easily disassembled; reduce the number
of fasteners; and reduce the need for destructive disassembly techniques.
(4) Logistics issues. In particular, the design team must consider the
possibility of marking the material with a number indicating its nature
and whether it can be recycled; it might provide all the necessary
information to make the recycling process easier; and it should design
the product on the assumption that it could be transported after usage.
The planning and control process. The growing importance of the ecological
question leads planners to modify partially the process of strategy formation
and capital budgeting activities.
In general terms, the integration of the ecological dimension in the process of
strategy formation often forces executives to rethink the overall business
strategies and, in particular, to:
• Modify its cost-based strategies, since the reduction of the company’s
environmental performance usually requires the acquisition and/or
internal development of new technologies, thus affecting the corporate
economic results in terms of cash outlays for new investments.
• Change its differentiation-based strategies. In particular, the opportunity
to achieve a good market share or to enter into new market niches could
favour the re-definition of the product design specifications in favour of
a higher product eco-compatibility, whereas in the past the main
elements of differentiation were mainly related to quality or time.
• Modify its policies of upstream or downstream integration. Programmes
aimed at improving the key-product environmental performance could
induce managers to modify their choices of upstream integration: with
regard to recycling-based programmes, product design and engineering
JOCM might oblige the company to realise internally components that were
11,2 previously provided by external suppliers. Conversely, the growing
concern to reduce the quantity of waste sent for disposal should induce
managers to re-examine past choices of downstream integration. In this
respect, some firms include the distribution channels within the
corporate value chain to facilitate the take back of end of life products.
104 Such programmes of downstream integration have assumed a crucial
role for German companies that are forced by the Töepfer law to recover
product packages at the end of their life.
In terms of capital budgeting, it must be noted that the feasibility of innovation-
based “green” strategies strongly depends on the adopted decision-making tool.
In particular, consideration of the specific effects resulting from the
implementation of the available environmental initiatives has a fundamental
importance, since they are not considered, for instance, by the traditional
discounted cash flow approaches (net present value). In this respect, our
investigation reveals that the less complex solution concerns the introduction of
the model of the “environmental costs” (Azzone and Manzini, 1994) which has
been specifically designed for the assessment of “green” initiatives. It classifies
a company’s economical efforts in the environmental field into five classes:
(1) prevention;
(2) environmental sales;
(3) operating environmental costs;
(4) external costs for product disposal and related to extended producer
(5) conversion costs following from the adaptation of the plants to more
limiting standards.
In operating terms, within this framework, the available alternatives can be
compared by means of modified DCF techniques, whereby net cash flows of
each period are calculated according to the change in environmental costs
resulting from each option.
The logistics process. In the light of the growing importance of the
environmental dimension, the complexity of logistics is further increased. In
particular, the shift from a traditional view of the product life cycle to a “cradle
to grave” approach requires the introduction of an “integrated eco-logistics”
According to this paradigm, two classes of changes seem to be necessary for
the successful implementation of anticipatory or innovation-based
environmental strategies:
(1) the integration of the logistics team at the product development phase.
Indeed, the feasibility of most product innovations greatly depends on
the possibility to manage effectively the physical flows of goods (Starik
and Rands, 1995; Steger, 1996). In this perspective, people in charge of
the logistics process can evaluate, for instance, whether the designed Seeing ecology
“green” product can be easily recovered to be used in other industries; innovations as a
(2) the adoption of a circular value chain concept, whereby the logistics source of change
team aims at minimising the material input, sustaining the desired
performance and reducing the output from the system. Our empirical
investigation highlights that great attention must be paid to the take-
back system, thus integrating inbound and outbound logistics; indeed, 105
owing to the need to reduce material consumption, it is expected in the
short term a wider diffusion of product recycling practices forcing
companies to recover part or all the end of life components (Noci, 1995).
In this respect, the process is simpler when the products must be re-used
in the same or similar processes – such re-use systems are emerging
today in the area of auxiliary and factory operating supplies (Gupta,
1995) – since the company only needs to organise the take-back process
to ensure a continuous flow of material into its plants. In contrast, when
end-of-life products have to be sent to other industries, the logistics
process is more complex, since managers often need to define new
relationships with firms operating in other fields that were seldom
established before. Among the sample firms, the experience of the Fiat
group well describes such complexity. Indeed, product managers and the
logistics team once decided to launch a new model of car to be recycled
as a whole; had to organise the take-back of end-of-life products; define
possible second usage of reclining seats and glasses of cars; and
establish effective relationships with companies operating in the
identified fields. More precisely, Fiat’s executives defined a network
involving a great part of Italian shredders, in order to make the collection
of end-of-life cars easier and established co-operative relationships with
firms producing coloured bottles and furniture.

External changes
The impossibility of having a direct control over the whole product life cycle
and the multi-dimensional nature of the “green” competencies induce an
innovative firm to define co-operative relationships with external stakeholders
and consider communications a basic element for the amplification of the
achieved environmental results.
From an operating viewpoint, executives should be engaged with the
introduction of vertical co-operation along the supply value chain (suppliers
and customers). Specifically, in the case of suppliers, it is often a matter of:
• exchanging information frequently with them to better evaluate the
environmental properties of the supplied materials and to identify how
they affect the overall environmental performance of the end product. In
the light of this issue, it is clear that a significant change in the suppliers’
attitude towards customers is required, since they must be available,
with the aim to achieve a supply value chain advantage, to disclose all
JOCM the necessary information, even if it may imply some disadvantages in
11,2 the short term;
• Providing them with a significant support for the improvement of their
environmental management system. In this respect, within our empirical
investigation, a significant share of the (large) sample firms (ABB-Italy,
Ciba-Italy, Dow Chemical, Fiat, IBM, SGS) declared themselves
106 committed in the development of new management solutions specifically
addressed towards suppliers who do not have enough competencies and
resources to organise effectively their environmental management
Regarding customers, two basic elements must be carefully considered for the
successful implementation of innovative environmental programmes. It is
important to identify the innovation-oriented and trend-setting customers with
whom new solutions to the problem of environmental protection can be tested;
they usually represent the major source of weak signals which have led
corporate managers to develop the “green” innovation. Second, companies need
to define, with customers, new relationships aimed at taking back end-of-life
products, thus facilitating the development of recycling-based initiatives. Such
a change in the customer-supplier relationships has a basic importance, since it
is expected that in few years new regulations, forcing the industrial system to
take back their goods, will be introduced; the Töepfer German law is a
meaningful example: when it was promulgated, in 1993, it had dramatic
implications on those firms that did not modify their management systems and
relationships with supply value chain partners to recover their product
Again, in terms of co-operative relationships, it must be noted that the
complexity of the “green” challenge (impact on a wide set of technologies and
radical modification/s of the corporate management processes) often requires
executives to introduce and/or modify their relationships with non-traditional
stakeholders, i.e. competitors and research centres involved in the
environmental field. Specifically, horizontal co-operation with competitors
becomes important when environmental protection cannot be viewed as a
market advantage, but when a uniform course of action is required to avoid
competitive disadvantages, resulting, for instance, from the perceived
environmental risk associated to the operations of firms operating in a specific
field – this is the case in the “Responsible Care”, an industry-wide programme-.
However, joint projects with external research institute/s (private and public
research centres which have accumulated knowledge in relation to specific
environmental problems) are fundamental to deal with the development of:
• new “green” products. Indeed, it is very unlikely, even in large and multi-
national firms, that all the competencies to launch a product innovation
are available in a single company. Within our empirical investigation, for
instance, the Fiat group – the biggest Italian car manufacturer –
developed a research project, jointly with external research centres, to
eliminate polyurethane from car bumpers, thus making the recycling Seeing ecology
process feasible; innovations as a
• new “cleaner” technologies, permitting a significant breakthrough in the source of change
company’s impact on the eco-system. Within our sample firms, SGS-
Thomson invested significant financial resources to develop a research
project jointly with an Italian university and aimed at reducing the
quantity of PFCs emitted from its sites. 107
Regarding communications, two types of changes appear important for the
successful implementation of innovation-based environmental strategies. Their
adoption requires corporations first to view some stakeholders from a new
perspective; specifically, in determining which environmental themes achieve
political relevance, the media are important amplifiers, not selectors. Hence,
they are simultaneously a major instrument of, and a target group for,
environment-related communication activities: companies operating in
industries characterised by a high environmental risk of their operations (for
example, chemicals) experimented with pro-active media strategies in a
continuous manner with some success, thus reducing conflicts with local
communities and public institutions.
Second, executives need to modify the tools they adopt to communicate to
external stakeholders the achieved environmental results and the intended
“green” strategies. In this respect, the environmental reporting practice must
change, ensuring a complete disclosure of information, as well as better
reliability of the collected data. Indeed, one of the major problems which did not
allow companies to establish an effective dialogue with external stakeholders
(governments, regulators, local and financial communities) was the
impossibility for the reader to understand precisely how a company’s
operations and products affected the state of natural resources and to trust the
reported information. Many studies have been suggested to support executives
with new frameworks for external communication on environmental issues
(Adams, 1992; Forum of Environmental Reporting, 1995; Gray and Stone, 1994);
most of them highlight the importance of introducing both:
(1) qualitative information characterising the adopted environmental
policies and the developed environmental management system; and
(2) quantitative data describing specific impacts on the eco-system resulting
from the corporate activities.
In light of the above issues, it is clear that the traditional boundaries of
corporations no longer apply, since product stewardship requires a view of and
control over the whole life cycle of the product. In particular, it is the authors’
opinion that the growing importance of the ecological dimension, both in
competitive and economic terms, implies a change from a company’s value
chain concept to a fuzzy supply value chain logic. This means that the success
of an innovation-based “green” strategy does not only depend on the
executives’ capacity to manage the corporate activities, but also on their ability
JOCM to integrate the company’s value chain with activities of the other supply value
11,2 chain partners (Steger, 1996). Hence, within this view, all activities along the
fil ière must represent the reference system for managers who aim at
introducing successful environmental (product and process) innovations; thus,
the boundaries of the corporate value chain become fuzzy.

108 Triggers and obstacles for the introduction of environmental

As with every complex innovation, the introduction of environment-related
changes may result in objective and subjective resistance within the corporate
system. This requires the commitment of top management in such a change
process (Post and Altman, 1994); indeed, it is the authors’ opinion that the
systemic impact of the “green” variable can be managed effectively only if
employees look at CEOs and other executives as the main drivers of the overall
Nevertheless, the managers’ involvement is not enough to ensure the success
of innovation-based “green” strategies, indeed, it is also important to identify
the other factors which may foster the introduction of pro-active patterns of
environmental behaviour and allow executives to design the best policy which
exceeds the corporate inertia.
In this respect, our empirical investigation indicates that there are both
internal and external triggers. Specifically, in relation to major problems
associated with the corporate management system, two aspects have a
fundamental importance:
(1) decisional processes which support managers in the identification of the
real benefits and disadvantages associated with the implementation of
radical “green” innovations. It is the authors’ opinion that the executives’
decision to privileged re-active environmental management practices is
in many cases the result of an incorrect identification of the effects
following from their adoption. As discussed above, it is in fact necessary
for the development of new investment appraisal methods which allow
decision makers to take into account both traditional financial and
intangible effects resulting from an innovation-based environmental
(2) employees’ environmental culture. In this respect, it must be noted that a
complex change process, such as the introduction of new environmental
management practices, often triggers a struggle between “reformers”
and “safeguarders”; hence, it is important that top managers encourage
learning processes which take place starting from the recognition of the
growing stakeholders’ demand for the environmental performance of the
industrial system.
In terms of the new characteristics of the external context leading corporations
to privilege the introduction of innovative solutions in the ecological field, three
drivers may represent the key triggers of a significant strategic change within Seeing ecology
firms. We refer to: innovations as a
(1) The role of governments. In particular, public institutions are required to source of change
develop new campaigns aimed at increasing the level of the market
environmental awareness. Indeed, the significant financial efforts needed
to develop and implement innovative environmental solutions can be 109
justified only if new environmentally aware market segments arise.
(2) Regulations. More precisely, a significant modification is necessary of the
current regulators’ actions that are characterised by a considerable level
of uncertainty and numerous delays, owing to the divergent national
interests (for instance within the European Union (EU)) and ponderous
decision making processes. In this respect, it must be noted that an
effective regulative process, fostering firms to adopt innovation-based
patterns of environmental behaviour, must (Porter and van der Linde,
• use market incentives, to draw the managers’ attention towards
resource inefficiencies;
• require industry participation in setting standards, thus creating a
climate of trust between regulators and corporation;
• minimise the uncertainty concerning the time necessary for the
introduction of new environmental standards; and
• focus on outcomes, since most US regulations which addressed the
companies’ efforts towards the introduction of specific clean
technologies proved to be unsuccessful, discouraging innovation.
(3) The most recent schemes leading firms to adopt environmental
certification practices. ISO 14001, for instance, requires firms which
decide to comply with this scheme to focus on prevention, thus
representing an important trigger for the introduction of pro-active
environmental management practices.

The growing importance of the ecological variable requires executives to
modify their business strategies. The above discussion highlighted that over the
last few years three options were available to managers (a re-active, an
anticipatory and an innovation-based pattern of environmental behaviour) to
deal with “green” issues; but, it also demonstrated the importance for firms to
anticipate the expected evolution of the external context, because of the
continual renewal of the stakeholders’ environment related requirements.
Unfortunately, only a limited number of firms consider the environment as
an important factor of strategic change; hence, the question is: “what is the
future of the ecological dimension?”. In this respect, two different scenarios can
be identified:
JOCM (1) Ecology is one of the announced revolutions. Like quality, time, flexibility,
11,2 with the risk that employees are not motivated to change their mind-set.
The case of ABB, within our sample, effectively clarifies such a situation:
when different Italian sites achieved environmental certification
according to the EMAS scheme, employees did not any pay attention to
“green” issues, thus overlooking the certification itself.
110 (2) The need to improve a company’s environmental performance is seen as
a major source of change, leading significant modifications of the reward
systems and of the corporate relationships with external stakeholders.
This is the case in the Fiat group which, to introduce a recyclable car,
modified its relationships with supply value chain partners (suppliers
and shredders) to make the return and the recycling of end-of-life
components possible.
Of course, the latter business stance towards environmental management is
preferable for two main reasons:
(1) in ecological terms, because of the growing scarcity of natural resources;
(2) in competitive terms, since the speed of change in the stakeholders’
environmental requirements will be so high in the short term that only
those firms which have implemented early programmes will be
competitive in the long run.

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