Corporate Env Responsibleness Strategies

THE JOURNAL OF APPLIED BEHAVIORAL SCIENCEMarch 1999Sharma et al. / ENVIRONMENTAL RESPONSIVENESS

Corporate EnvironmentalResponsiveness StrategiesThe Importance of Issue Interpretationand Organizational Context

Sanjay SharmaSt. Mary’s University

Amy L. PabloHarrie VredenburgUniversity of Calgary

This article analyzes the environmental responsiveness strategies of seven companies inthe Canadian oil industry over a 15-year period, during which environmental issuesgained increasing public and regulatory attention. These within-industry corporate casecomparisons serve as the basis for developing an understanding of corporate environ-mental responsiveness that centers on the relationships between issue interpretations andstrategic responses as well as the role of antecedent organizational context elements.

Future productivity advances will come from environmental response. Managers arerealizing that this is an area with tremendous potential for generating cost reductions andefficiency improvements. The industry has been extremely sloppy in the area of wastes,spill, and leaks, because no one focused on wastes and the problem of their disposal. Onlywhen the environment became important did firms start to monitor these seriously. A

Sanjay Sharma is an assistant professor of strategy at St. Mary’s University, Halifax, Canada.

Amy L. Pablo is an associate professor of management, and Harrie Vredenburg is professor of marketing atthe University of Calgary, Canada.

THE JOURNAL OF APPLIED BEHAVIORAL SCIENCE, Vol. 35 No. 1, March 1999 87-108© 1999 NTL Institute

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focus on these aspects of our operations, rather than only on increases in production andsales, has opened up a whole new area of profit improvement and process innovation.

—Vice president of operations at a senior Canadian oil company

I care as much as any other person about environmental degradation. I do have ideasabout how I can reduce some of the environmental impacts of this operation. However,these involve investments for which I cannot guarantee results. If these investments affectoutput and profits, I am out of a job. Unless I have some discretionary funds to playaround with, I can’t do anything on my own. The instructions from the top are clear, investonly as much as is necessary to get a clean chit from regulators.

—Manager of refining at a major Canadian oil company

Corporate concern with the preservation of the natural environment is a topic thathas attracted increasing attention among both scholars and managers over the pastquarter of a century (Sethi, 1995). However, as reflected in the preceding quotations,there are widely divergent organizational and managerial perspectives driving corpo-rate strategies in this regard, even among firms that use similar technologies, face com-parable competitive environments, operate under commensurate levels of publicscrutiny, and are subject to a common regulatory regime.

To date, academic literature has made little progress toward providing a theoreticalfoundation for understanding the source and nature of the differences observed inorganizations’ approaches to managing the business–natural environment interface.Although extant research describes and categorizes firms’ orientations toward deal-ing with the natural environment (e.g., Hunt & Auster, 1990; Post & Altman, 1992;Westley & Vredenburg, 1996), it does not provide insights into the individual, organ-izational, or situational particulars that may be associated with the development of anorganization’s strategy for managing its relationship with the natural environment.

Furthermore, although the study of corporate environmental responsiveness is cer-tainly informed by the corporate social responsibility literature, it varies in significantways from the more general study of corporate response to social issues. Specifically,although most social issues have a circumscribed impact on an organization’s ways ofoperating, the natural environment is a social issue that has widespread and far-reaching consequences for the entire range of a business firm’s operations, affectingthe organization through its entire systems cycle (Shrivastava, 1992).

Effective management of the business–natural environment interface requires a fun-damental shift in ways of thinking about doing business (Shrivastava, 1995; Westley &Vredenburg, 1996). This includes consideration of the renewability and sustainabilityof inputs and products, recognition of the need for cyclical systems of production,assessments of the ecological impact of technologies used and scale of operations, anda general reevaluation of the desirability of development through growth. These essen-tial changes in frames of reference within business organizations require changes thatare more widespread and far reaching than the changes that need to be made for deal-ing with most social issues.

Understanding the requisite conditions for environmental responsiveness is notonly an important and legitimate area of inquiry but is also a complex and encompassing

88 THE JOURNAL OF APPLIED BEHAVIORAL SCIENCE March 1999

endeavor that can fruitfully draw upon multiple research paradigms (e.g., corporatesocial responsiveness, strategic issues management) to enhance development of moreexplanatory frameworks of corporate environmental responsiveness. The presentresearch was carried out for the purpose of building such a framework and was specifi-cally designed to gain insight into the dimensions that distinguish various approachesto managing the business–natural environment interface and into factors related to theapproach that is taken. Findings from within-industry comparative case studies arepresented and used to derive a theoretical framework for understanding corporatestrategies of environmental responsiveness and to suggest a set of empirically testablepropositions flowing from that foundation.

METHOD

Research setting. Much of the research on corporate environmental responsivenesshas looked across a wide variety of industries and types of businesses (Hunt & Auster,1990; Post & Altman, 1992; Westley & Vredenburg, 1996). Even when research hasfocused on a single industry (e.g., Logsdon, 1985; Throop, Starik, & Rands, 1993), thefocus of the research has been limited to attempts to develop generic typologies of cor-porate environmental responsiveness.

Because a central goal of this research was to identify the factors associated with anorganization’s responses to environmental issues and the mechanisms through whichthese factors operate, an industry was sought in which environmental issues were amajor domain element for all organizations. The oil and gas industry extracts naturalresources from the environment at a rate faster than that at which they can be replacedand thus, by definition, is a nonsustainable industry. As such, in a world of increasingenvironmental awareness and public demands for institutional control or self-control,this is an industry under considerable social pressure and one in which the ability oforganizations to align themselves with their natural environments will determine thequality and extent of their continued existence.

Furthermore, the study was confined to a single industry to control for as manyexternal influences as possible and to help define limits for generalizing the findings(Eisenhardt, 1989). Due to the geographical concentration of the Canadian oil and gasindustry in one province, individual firms are subject to a lower diversity and range ofexternal influences and variations than a more widely dispersed subset of the industrywould be. Also, the geographical concentration of most oil and gas company offices ina single city allowed for repeated face-to-face interviews and follow-up discussionswith industry executives, industry experts, and regulators.

Company selection. Companies were selected based on theoretically important cri-teria including size, the range of activities in which they were involved, and the numberof firms to be studied. The appendix presents company profiles and provides charac-teristics of the sample according to size and activities. At the request of informants, thecompany names are disguised to assure confidentiality.

Sharma et al. / ENVIRONMENTAL RESPONSIVENESS 89

Firm size was taken into account to accommodate the possibility that firm sizeinfluences environmental responsiveness strategy. The implicit assumption drivinguse of this criterion was that firms with greater resources may have greater organiza-tional slack to adopt voluntary strategies of environmental responsiveness. Firms’range of activities also was used as a selection criterion to ensure that the entire spec-trum of activities in the oil and gas industry was covered. The assumption behind thistheoretical criterion was that firms forced to respond to a wider range of external stake-holders, due to involvement in a wide range of activities, may undertake a broaderspectrum of environmental actions and strategies. Finally, the number of firms studied(seven) was determined when further data collection did not lead to the emergence ofany new significant themes and variables.

Data collection. The research questions emphasized the need to ask what factorsaffect managerial interpretations of environmental issues and how these interpreta-tions affect strategies of corporate environmental responsiveness. Such questions lendthemselves to theory-building techniques of research inquiry where generation of the-ory is more important than the testing of theoretical frameworks (Yin, 1989). A multi-case study was required to explore interfirm differences in response to theenvironment. A single in-depth case study would not have provided the differentialresponse characteristics in which we were interested.

This method facilitated the extraction of variables of theoretical importance whilecontrolling for common industry and contextual variables through the study of indi-vidual firms within the same industry. Open-ended unstructured interviews withrespondents in key positions within firms were used to gather data on these members’interpretations of events and issues, ensuring richness of detail through clarification ofquestions, elaboration of responses, collection of anecdotes, and identification ofsources of corroboratory evidence (Parkhe, 1993).

The interviews started out as very broad and unstructured, asking, “Does the naturalenvironment have any importance in context of your company’s operations?” andgradually became more structured and specific as verification of the themes thatemerged from these interviews was sought in subsequent interviews. Each interviewwas analyzed through comparative analysis with others, and emergent themes wereused as guides for imparting greater structure to subsequent interviews.

Unstructured interviews were conducted with a total of 7 senior executives (CEO orpresident) and 12 middle managers in the seven companies studied. In smaller compa-nies, several functions (including operations and environmental assessment) oftenwere combined into one position, and on average, 2 managers (1 senior executive and 1middle-level manager) were interviewed. In the larger companies, an average of 4managers were interviewed. Leads to other key informants and data sources were iden-tified at each interview. Interviews were taped and subsequently transcribed. Thelength of the interviews ranged from 45 to 120 minutes and totaled 36 hours.

Archival data in the form of corporate public documents (such as annual reports,environmental assessment reports, company newsletters, company policy declara-tions, and newspaper reports on the environmental actions and strategies of the compa-nies) for the period 1985 to 1995 also were analyzed. These data were used primarily


to verify what managers had said during the interviews. In addition, interviews withofficials from the Alberta Energy and Resources Conservation Board (the regulatoryenforcement body), with officers of the Canadian Association of Petroleum Producers(the industry association), and with representatives of Alberta Greens and of Green-peace (two environmental interest groups that scrutinize oil and gas industry practices)also were conducted. This was done to verify and triangulate themes emerging fromthe interviews with industry executives.

Data analysis. Data were content analyzed after each interview to detect emergentthemes, which were compared with similar themes identified in earlier interviewsthrough constant comparison (Yin, 1989). Follow-up interviews were conducted withsome managers to verify themes emerging from subsequent interviews. An interviewsummary form (M. B. Miles & Huberman, 1984) was prepared after each interview tohighlight emergent themes and other issues of interest that would be followed up atsubsequent interviews. Each interview was coded in accordance with these emergingthemes, and sentences relating to each different theme were entered in separate com-puter text files set up for each emergent theme. The number of references and intensityof support for each theme were identified within each file before deciding whichthemes to retain and which to drop as less theoretically significant. Connectionsbetween significant themes were investigated in the data. The sifting process contin-ued in tandem with data collection. Interview data were supplemented with a contentanalysis of archival data. Finally, a literature search was conducted in tandem with datacollection to reinforce emerging theoretical concepts and ground them in extantliterature.

CASE STUDY FINDINGS

To facilitate comparison of the environmental strategies of individual firms, thereconstruction of organizational responses to the environmental issue in the Canadianoil industry was divided into four phases based on increasing intensity of environ-mental concern in the institutional environment. These phases roughly correspond toPost’s (1978) four stages for the evolution of an external public policy issue: gestation,politicization, legislation, and litigation. As issues go through these phases, the zone ofdiscretion (Ackerman, 1975) and the ability to influence the shape of the issuedecreases for businesses.

During the gestation phase (1980-1985), both regulatory intensity and public con-cern over environmental preservation were at low levels. However, environmentalgroups across Canada were agitating to raise societal awareness about the environ-mental damage caused by the oil industry. During the politicization phase(1986-1987), the environment became increasingly important in public policy debatesand political consciousness, and government agencies undertook reviews and recom-mended that environmental regulations be rationalized and escalated. However, publicinterest in environmental preservation remained low. During the legislative phase(1988-1992), the intensity of public concern grew dramatically due to well-publicized


environmental accidents (e.g., the Exxon Valdez oil spill) and increasingly urgentwarnings of environmental destruction. Environmental regulations were rationalized,and companies were required to undertake exhaustive environmental assessments andobtain approvals for new developments through a public consultation process. Duringthe litigation phase (1993 onward), managers were made personally liable for environ-mental accidents and infringement of regulations, whereas environmental regulationswere made more stringent, and the level of public concern remained high.

Phase 1 (1980-1985). During this period, five of the seven companies (Royal,National, U.S. Oil, Farmers, and Northern) did not take actions beyond those mini-mally required to meet specific environmental regulations. According to the produc-tion manager of Royal, “The environment seemed to have little to do with ourbusiness.” As a result, no initiatives were taken in the form of environmental policystatements, environmental assessments or audits, or incorporation of environmentalconsiderations into corporate planning or control systems.

The operating managers of these companies indicated that they did not feel the needto factor environmental preservation into their operating decisions because their com-panies did not require them to do so and few external pressures existed. The productionmanager of Royal explained, “Personally we were beginning to become aware that ourcompany’s operations were polluting nature, but it did not somehow seem as serious asit does now.” Environmental regulations were mainly dealt with by staff legal or publicrelations functions, and information available to operating managers about environ-mental issues was mainly in the form of interpretation of regulations to enable compli-ance. Expansion, new development, and diversification required environmentalapproval from provincial authorities—however this was mainly in the form of alicense obtained by the legal department. The managers saw their companies’ roles asmaximizing shareholders’ wealth while meeting regulations and acting as good corpo-rate citizens through corporate philanthropy.

The actions taken by the remaining two companies (Buffalo and Sioux), however,revealed very different strategies for dealing with environmental issues during thisperiod. Each of these two companies chose to adopt leadership stances in differentareas of environmental action and institutionalized these positions in corporate mis-sion statements. Sioux declared itself “The Alternative Energy Company” in 1980,whereas Buffalo stated its mission in 1981 was to “Build goodwill among all its neigh-bors through environmental leadership.” Because it was unlikely that, at this stage,environmental considerations were affecting the petroleum purchase decisions of thegeneral public, these messages were not likely to be targeted to consumers. Rather, thepublicly stated environmental positions of both companies appear to reflect the valuesand beliefs of the senior management in these companies.

In addition to taking a clear position on how the company was going to deal with thebusiness–natural environment interface, both Sioux and Buffalo took consistent andsupportive operational and administrative actions. Sioux Oil established a staff-levelenvironmental assessment department and an alternative energy research center in1980. They also bought two ethanol refineries and started selling ethanol-blendedgasoline in 1980. Furthermore, starting in 1981, Sioux pioneered engine oil recycling


in North America and built a recycling plant and a used oil collection network. Theidentification, development, and exploitation of alternative fuel technologies werecoordinated through task forces of research, staff, and line managers, and a separateproject matrix was set up for each product and technology.

Sioux’s managers assessed that their corporate success depended on identificationand exploitation of alternative energy sources that would differentiate them in the mar-ketplace. At the same time, because Sioux was not an upstream company, they did notrecognize a need for a detailed environmental audit of operations. Thus, the managerswho saw their company as an environmental leader “in the marketplace” seemed insu-lated from environmental issues in other aspects of their jobs.

Buffalo Oil created a staff-level environmental assessment department in 1981 thatundertook a detailed audit of the impact of its operations on the natural environment.Furthermore, a board-level committee on environmental strategy and a task force com-prising managers from line and staff units at all levels were established at this time. Theresult of these efforts was an action plan approved by the board in 1984 for reducing theenvironmental impact of the company’s operations. These actions created a tremen-dous level of awareness of the impact of the company’s operations on the natural envi-ronment and also made available to managers a large amount of data. This also was aclear communication by top management that environmental preservation was impor-tant to the company’s image and that consistent employee behavior would be evalu-ated favorably.

Consequent recommendations by the exploration department for the closure ofmarginal wells in ecologically sensitive areas and the practical development of hori-zontal drilling techniques that were less environmentally disruptive were carried outby 1985. Decisions were made to adopt state-of-the-art technology exceeding environ-mental regulations for all new developments. Although these measures added approxi-mately 5% to project costs, Buffalo’s CEO justified this decision as follows:

I could not see then, as now, any hope of reversing environmental degradation. The regulations arebound to increasingly become more stringent, and public pressures for greater environmental stew-ardship by the industry are bound to increase. At that future time we would be better placed as com-pared to our competitors who would have to undertake these investments overnight at several timesthe cost we incurred.

Despite the seeming lack of expectation at this time for action on this issue fromregulators or other stakeholders, the managers of Buffalo and Sioux interpreted atten-tion to environmental issues to be of strategic importance. They recognized a level ofinterdependency with stakeholder groups in their areas of operation and perceived thatbuilding good relationships with these groups would be central to their ability to oper-ate effectively in the future. Management at all levels viewed environmental leader-ship as a valuable intangible asset and as the route to continued corporate success.

Thus, during this phase, clear differences can be seen between the relative apathytoward the natural environmental by the subset of five companies and the emergence ofan organizational stance on the business–natural environment interface by the othertwo.


Phase 2 (1986-1987). Although the level of public concern for environmental pres-ervation remained low at this time, fresh environmental regulations at the federal andprovincial levels were passed in 1986. Detailed environmental assessments for all newprojects, expansions, developments, and diversifications were required, and a publicconsultation process wherein projects and developments would require public/citizenconsent was instituted. During this period, anti-industry environmental groups werenot active in Alberta, and approvals were not actively opposed due to a public attitudethat favored economic growth over environmental preservation.

Nonetheless, managers at Royal, National, U.S. Oil, Farmers, and Northern beganto see environmental issues as potential hurdles and irritants to the smooth running ofbusiness. Extra effort was required in conducting environmental assessments and pub-lic relations exercises to get approvals in public hearings. However, this was seen pri-marily as a function of corporate staff departments. Line managers were not reallyaffected by environmental issues unless their approvals were held up. The explorationmanager of U.S. Oil said, “The need for conducting environmental assessments andobtaining a string of approvals for new developments led to delays and pushed up ourcapital costs and thus affected the viability of new finds.”

Due to the increasing burden placed on corporate staff to meet greater regulatoryenvironmental requirements, Royal, National, and U.S. Oil transferred the environ-mental assessment function from their legal departments to larger departments dealingwith health and safety issues. These departments initiated environmental assessmentsfor all new projects and embarked on public relations activities to manage the approvalprocess. Northern’s and Farmers’ legal departments continued to manage the busi-ness–natural environment interface by interpreting environmental regulations foroperating managers. They also appointed outside consultants for required environ-mental assessments.

Buffalo reaped the benefits of its environmental leadership position with a widevariety of stakeholder groups in getting its developments and projects approved. Thecompany also patented nearly a dozen improvements in its drilling, extraction, andrefining processes that led to lower material and energy consumption and loweramounts of waste. Research on high oxygenated fuels was initiated in Buffalo’sresearch center. Furthermore, in its office operations, recycling operations and energyconservation won the company a civic award. In 1987, Buffalo performed anotherdetailed environmental audit to quantify environmental performance indicators thatwere incorporated into employee performance evaluation systems.

Provided with constantly updated information on the environmental impact ofoperations, Buffalo’s employees became increasingly concerned about the environ-mental impact of their decisions. According to the refinery manager of Buffalo, “Infor-mation availability made a consideration of environmental impact of any investment orprocess change automatic.” Concurrently, initial successes in cost reductions throughprocess modifications and through waste reduction, recycling, and reuse, and thegrowing reputation of Buffalo in the area of environmental leadership, gave operatingmanagers increased confidence in their ability to incorporate environmental preserva-tion into their business decisions.


Sioux continued to expand its marketing of alternative energy sources—methanol,ethanol-blended gasoline, recycled engine oils, and compressed natural gas. Photovol-taics research was initiated, and Sioux (like Buffalo) began a program of energy con-servation and waste reduction in its refining and office operations. Sioux’s employeesrecognized that actions leading to the identification and implementation of environ-mentally friendly product technologies that could increase market share would berewarded. The market development manager explained, “The real stars were theemployees who identified ideas for products with a lower environmental impact.”

Phase 3 (1988-1992). Several oil spills around the world (including the Exxon Val-dez), publicity over the reported discovery of a hole in the Earth’s ozone layer, andrecord summer temperatures in Europe and North America (interpreted as signalingglobal warming) were among the factors leading to a galvanization of public concernfor environmental protection. The Canadian government undertook an EnergyOptions initiative to establish a sustainable energy plan for the 21st century, generatinggreat awareness for environmental preservation. The 1992 United Nations Conferenceon Environment and Development, the 1987 Report of the World Commission onEnvironment and Development, the Montreal Protocol on ozone depletion, and otherinternational events focused attention on issues such as biodiversity, climate change,ozone depletion, renewable resources, and habitat protection.

National Oil released a written environmental policy statement and participated in ajoint industry effort to establish environmental action guidelines. It also set up systemsfor recycling and reduction of paper use in its offices. National, Royal, and U.S. Oilconducted detailed corporate environmental assessments and audits. Although thesefirms paid greater attention to public relations efforts directed toward obtainingapprovals for new developments, increased media and environmental group pressureled to many failures in this process. In accordance with regulations, Royal began toclean abandoned wells and retail gas stations and conduct research on soil contamina-tion restoration to avoid large liabilities at abandoned sites. While National and U.S.Oil embarked on similar clean-ups, the smaller of the historically environmentallyinactive companies—Farmers and Northern—pleaded inability to act due to lack ofresources.

Operating managers of these companies experienced a high degree of conflictbetween their growing personal awareness of environmental degradation and the lackof concrete actions by their companies in this direction. They explained that they hadno incentives on the job to do anything other than meet their economic and output tar-gets while meeting environmental regulatory requirements. Even if they were toengage in voluntary environmental actions, they were uncertain both about the effectof such actions on their companies’ environmental impact and also on economic per-formance measures. The companies’ failure to provide information on the relationshipbetween organizational activities and environmental outcomes was central to this feltlack of control. Managers at National described a sense of frustration during thisperiod because the company had just begun to formulate an environmental action planwhen it changed ownership. The new owners, concerned about reversing a decade of


losses and inefficiencies, could not see the economic justification for nonrequiredenvironmental actions.

The managers of these five companies were unanimous in their opinion that themotivation for reducing the risk of environmental accidents was to avoid financial dis-ruption and loss. According to the vice president (environmental assessment) ofNational, “The main issue here is minimization of risk and liability. . . . We can’t affordenvironmental accidents or spills.” The refinery manager of U.S. Oil remarked, “Byminimizing the risk of liabilities, we reduce the possibility of financial disruption andadverse publicity. . . . This leads to a healthy bottom line.”

The experiences of Buffalo and Sioux were markedly different. In 1988, Buffalocarved out a portion of budgeted funds to use for experimentation with changes ininputs, processes, waste treatment, and material specifications at operating managers’discretion. This was done to allow operating managers at all levels to find ways ofreducing the impact on the natural environment of the company’s operations. Sincequantified environmental performance indicators already had been included inemployee performance systems, this action served to match authority with responsi-bility in this area. Business unit heads were provided with their own environmentalassessment officers to enable immediate analysis of the environmental impact ofplanned actions and modifications. The pace of innovations in drilling, production,and refining processes; waste reduction and reuse systems; and energy efficiencyaccelerated, resulting in a stream of innovations and patents during this time period.Buffalo claimed the lowest oil production and refining costs, lowest energy consump-tion per unit of output, and the lowest percentage of waste generation in the industryduring this time while its sales grew at an average of 8% per annum—even in the con-text of a 2% per annum decline in industry sales.

Buffalo’s refinery manager said, “During this period, we achieved a level of com-fort with strategies for dealing with environmental impact due to the continued avail-ability of information and fast feedback on the environmental impact of operations.”The stream of cost reductions and corporate goodwill resulting from past environ-mental preservation actions further reinforced this sense of effectiveness. That exem-plary environmental performance was a central corporate value consistentlycommunicated through supportive evaluation and reward systems.

Sioux’s sales also grew at an average of 8% per year during this time period. Inaddition to general increased environmental awareness, car emission control regula-tions passed in British Columbia led car owners to buy petroleum products with alower impact on the environment, such as the low carbon emission ethanol blends thatSioux produced. Spurred on by this favorable response in the marketplace, Sioux con-tinued to focus on a green marketing strategy while investing to replace outdated andinefficient refinery equipment.

Phase 4 (1993 onward). In 1993, federal and provincial regulations were rational-ized and consolidated, and managers were made personally criminally liable for envi-ronmental accidents and damage caused by their companies’ operations. Companiesand their managers began to be prosecuted for punitive damages for environmentallapses.


The stricter regulatory measures enacted during this period created panic amongthe smaller companies, which did not have independent environmental assessmentfunctions. Farmers and Northern reported having hired environmental consultants in1993 to ensure that their “paper trails” and procedures were in accordance with regula-tions. The CEO of Farmers said, “I won’t make any bones about this. . . . We hire con-sultants to make sure that the paperwork is in order to show that emergency responseprocedures are in place. No one wants to be held criminally liable for negligence.” Thechief operating officer of Northern observed, “The titles alone of the environmentalregulations run into 14 pages. . . . All we can do is cope.”

The larger companies, National, Royal, and U.S. Oil, conducted emergency envi-ronmental audits in 1993 to assess risk of environmental accidents and possible liabil-ity exposure. Identified risks were plugged during 1994, and emergency responseprocedures were instituted to minimize any damage from environmental accidents.Royal released a public environmental report in 1994 based on this environmentalaudit. While Royal and U.S. Oil included an environmental impact statement in theirannual reports from 1989 onwards, National has still made no reference to the naturalenvironment in its reports. Neither the smaller nor the larger of the five companiesmade changes in their planning, budgeting, or control systems and policies to incorpo-rate environmental preservation concerns.

The managers of these five companies explained that their views about the environ-mental issue changed significantly during this phase. Beyond being seen as an obstacleto be dealt with in the normal course of business, this issue began to be imbued with asense of urgency reflecting the potential for personal loss due to corporate outcomesseen as beyond managers’ control. According to the chief operating officer of North-ern, “We were looking at prison terms and personal penalties for corporate actions.”This issue was now seen as a major risk factor with little or no upside potential and pos-sible downside consequences of significant magnitude. The environmental assess-ment manager of Royal said, “Overemphasis on environmental preservation is goingto make the Canadian oil and gas industry uncompetitive internationally.”

Again, Buffalo and Sioux experienced this phase differently from the other five.Sioux expanded its sales of less environmentally damaging fuels. Even though Buffaloas an extractor of natural resources is engaged in a nonsustainable business, it was rec-ognized by regulators and environmental groups as constantly looking for ways to“tread more lightly on nature.” Thus, although these two companies made no signifi-cant changes in their operations under the new regulatory regime, actions taken duringprevious phases in the development of this issue positioned them well for the currentphase.

Sioux, being a downstream company, has lower risk interfaces with the naturalenvironment, with the dangers being localized around refinery sites and in the trans-portation of petroleum products. Thus, managers’ perceptions were that the risks asso-ciated with environmental issues were relatively low, whereas the level of pride inbeing a market leader in environmental products was high. Buffalo’s managersexpressed a high degree of control and ownership over the company’s environmentalactions. They felt that with 15 years of experience in addressing the environmentalissue through active management of the business–natural environment interface and


the concomitant accumulation of goodwill, their risks from unexpected environmentalaccidents and resultant personal liabilities were low. Rather, they viewed attention tothe environmental issue as a source of potential product, process, and image improve-ments to create competitive advantage.

Furthermore, the managers of these companies expressed positive feelings aboutbeing associated with a caring company, with this “positive glow” (Dutton, 1993)engendering mental processes of creativity and efficiency in problem solving and pro-viding a sense of control through task persistence and motivation. The followingquotes are an expression of these feelings:

Buffalo’s market development manager: I may not find such a rewarding work environmentin another company.

Buffalo’s environmental assessment manager: We can’t always justify our environmentalactions based on numbers and paybacks. . . . We have an environmental consciencetoo. . . . We want our employees to feel good about their jobs. When we leave our offices,we go home to our spouses, children, parents, and friends, we want to be able to hold ourheads up and say that we try to do something more than pay lip service.

Sioux’s regional marketing manager: Many oil marketers accuse us of environmental oppor-tunism. . . . I don’t think it bothers any one. . . . We are sincere in trying to do what we can.When I joined the company, it was just a job. . . . Now I am dedicated to the mission [ofbeing “The Alternative Energy Company”].

A review of our case study findings allowed us to identify the very differentapproaches taken by these organizations in response to the environmental issue. Tospecify the distinguishing features of corporate environmental strategies, we exam-ined the case study data in the context of extant literature relevant to the emergingthemes.

A FRAMEWORK FOR UNDERSTANDING CORPORATEENVIRONMENTAL RESPONSIVENESS

Corporate Environmental Strategies

Although each of the seven companies exhibited a distinct pattern of environmentalresponsiveness actions, a clear dichotomy in environmental responsiveness emergesbetween subsets of the seven organizations studied: a group of five that includes Royal,National, U.S. Oil, Farmers, and Northern, on one hand, and a group of two thatincludes Buffalo and Sioux, on the other. The analysis suggests that the primarydimensions of responsiveness on which these organizations split is in the degree of dis-cretion reflected in the actions taken and in the extent to which firms attempted to takecontrol in their dealings with the environmental issue.

Degree of discretion relates to whether an organization’s response is mandated byeconomic and legal requirements incumbent on the firm or whether the response isdependent on managers as moral actors who make decisions that direct corporatestrategies and actions relative to the issue of concern (Ackerman, 1975; Dutton, 1993;


Wood, 1991). The greater the degree of discretion, the more voluntary the response canbe said to be.

Organizations also vary in the extent to which they attempt to exert control overhow social issues affect the firm (Post, 1978; Sethi, 1979). Passive responses includeavoidance by denying ownership of the issue (Dutton & Dukerich, 1991) or minimalresponse to regulatory and stakeholder demands through adjustment only of those firmstructures, systems, and processes directly affected by increased emphasis on particu-lar elements of the operating domain. More active responses include taking preemp-tive actions to define and act on issues before appropriate responses are prescribedexternally.

Reactive strategies: risk and liability reduction. The group of five essentially abdi-cated decisions about how the organization would handle the environmental issue tocoercive institutional forces (DiMaggio & Powell, 1983), forces that gained momen-tum over time. Actions were not taken until mandated and until the potential domainsof action had become highly circumscribed—that is, there was little discretion or con-trol evidenced by these firms in the evolution of their environmental strategies. Rather,these firms exhibited reactive strategies directed toward compliance with environ-mental regulations and accepted industry practice.

Environmental lapses in the form of spills and leaks result in a variety of negativeoutcomes: damage to corporate reputation, financial loss, and personal liability formanagers for situations over which they have little control. The larger three in thegroup of five (Royal, National, and U.S. Oil) conducted environmental audits to assessareas of risk and the extent of potential liability resulting from ongoing operations. Thesmaller companies (Farmers and Northern) reported hiring consultants to establish anadequate paper trail to show that regulations were being met. Both sets of firmsfocused on damage control through the development of procedures to prevent spills,leaks, and accidents and emergency response procedures to handle such events if andwhen they did occur. These reactive strategies of environmental responsiveness wereviewed by both groups of firms as being in conflict with economic objectives but as anecessary cost of liability reduction against uninsurable contingencies.

Proactive strategies: creation of competitive advantage. The group of two, Buffaloand Sioux, was much more enterprising in its orientation, with the member firms usingboth discretion and control to enact their own interpretations of the evolving environ-mental issue. This proactive strategy was reflected in the early and innovative actionstaken by these organizations not only to manage organizational identity, image, andreputation with key stakeholders but also to gain the prospector’s early-mover advan-tage (R. E. Miles, Snow, Meyer, & Coleman, 1978) by acting to shape industry stan-dards and regulations in an increasingly important strategic domain.

These two companies differed substantially in size and in the range of their operat-ing activities, yet managers in both companies viewed environmental strategies assources of potential gain resulting from enhanced corporate image and goodwill, prod-uct differentiation, cost reduction due to lower waste production and energy use, andenhanced productivity and innovation due to the reengineering of various aspects of


operations. Buffalo was proactive in the protection and preservation of natural habitatsand heritage sites and in the reduction of process wastes and energy use in operations.Sioux campaigned for reduction in air pollution through cleaner fuels and fuel-burningtechnologies. Both gave considerable emphasis to managing relationships with a widearray of strategically important stakeholders, and both used a longer time horizon forevaluating economic success.

Managerial Interpretations and CorporateEnvironmental Responsiveness

These opposing environmental responsiveness strategies appear to be associatedwith basic differences in the ways managers interpreted the strategic nature of the envi-ronmental issue. These differences are revealed in the interview data in terms of man-agers’ characterizations of what the environmental issue meant for them and theircompanies.

Managers from companies exhibiting reactive environmental strategies clearlyexpected a loss to accrue from issues having to do with the natural environment eitherin terms of some investment required to manage the issue (e.g., pollution controlequipment, environmental audits) or in terms of costs incurred due to undesirable out-comes (e.g., cleanup of spills). Uncertainty and ambiguity relative to cause-and-effectrelations between organizational actions and environmental impact contributed to asense of the issue as highly uncontrollable, and the heightened concern the issueevoked for the organizations’ overall well-being defined this as a negative situation.

On the other hand, managers from companies exhibiting proactive environmentalstrategies attended to information about the gains that could be made from a variety ofinitiatives and looked for ways to build these into their strategic and operationaldecision-making processes. Furthermore, greater certainty about these organizations’willingness and ability to meet this challenge sent signals that this was an issue overwhich some degree of technological and administrative direction could be exercised,contributing to a greater sense of control. Finally, the belief that activities taken tomanage this issue were supportive of accomplishing a central corporate goal gave thisissue a positive tone.

Thus, most fundamentally, the evidence emerging from this study suggests that thereactive and proactive strategies of environmental responsiveness are a reflection ofmanagerial interpretations of environmental issues as threats or opportunities. That is,managers’ characterization of the environmental issue in terms of the three attributedimensions of negative-positive, loss-gain, and uncontrollable-controllable points tothe fact that the threat-opportunity categorization is salient for cognitions and actionsrelevant to this issue (Dutton & Jackson, 1987; Jackson & Dutton, 1988).

Proposition 1: Managerial interpretations of environmental issues as threats are associatedwith reactive strategies of corporate environmental responsiveness; conversely, manage-rial interpretations of environmental issues as opportunities are associated with proactivestrategies of corporate environmental responsiveness.


However, as noted by Dutton and Jackson (1987), “The meaning of a strategic issueis not inherent in the environmental events or developments. Instead, the organiza-tion’s internal environment (ideology or structure) has a major effect on the meaningsthat evolve” (p. 77). That is, organizations play an important role in shaping percep-tions of issues, influencing how managers construct their own versions of reality(Weick, 1979), and driving strategy making and consequent organizational actions.

The Importance of Organizational Context

A number of organizational factors appear to have been central to the interpretationof the environmental issue as a threat or an opportunity, with the resulting impact onenvironmental responsiveness strategies. Differences were observed in the firms’ stra-tegic positioning relative to the emerging issue, in particular in terms of timing ofresponse and legitimation of the issue as part of the firm’s identity. Furthermore, dif-ferences were seen in three elements of organization design between the proactive andreactive firms: information flow, managerial discretion, and control systems.

Timing of response. As issues progress from limited attention by special interestgroups, to widespread public interest, to regulatory prescriptions, the zone of discre-tion available to a company for dealing with an issue successively decreases (Acker-man, 1975). However, early adoption of an issue presents a number of uncertainties fora company and its managers: The urgency and durability of the issue are unclear,acceptable standards of behavior are constantly changing and are difficult to deter-mine, and means of dealing with these issues are unknown and may require the devel-opment of new technologies, expertise, knowledge, and thinking frameworks(Ackerman, 1975). Thus, although early action presents opportunities for strategicflexibility, it also carries with it the potential costs of uncertain developments relativeto an issue.

In this study, the five companies exhibiting reactive environmental responsivenessstrategies believed that early calls for environmental preservation reflected a nondur-able and nonurgent issue, adopting a wait-and-see attitude and following regulationsas they changed. By 1993, these companies were in a very difficult situation, beingfaced with clear external demands but having developed neither adequate organiza-tional routines nor the learning capabilities required to deal with the environmentalissue in an effective way.

The two proactive companies, on the other hand, undertook long-term investmentsearly on, based on a belief in the urgency and durability of environmental preservationas an issue. This early action enabled these companies not only to shape the dimen-sions of the environmental issue and how they would deal with it without external pres-sure but also provided managers with time to gain familiarity with the issue and togenerate knowledge and learning capabilities for dealing with the business–naturalenvironment interface over the long term. For both organizations, the resulting senseof autonomy and control over an important emerging issue was a source of pride thatspurred creative action among managers.


Proposition 2: Managerial interpretations of environmental issues as opportunities are likelyto be associated with an early corporate response in the issue life cycle.

Issue legitimation. According to Noël (1989), top management enacts the strategiccore of an organization by emphasizing activities that are crucial to the survival andgrowth of the firm. By setting personal examples and devoting more time and attentionto certain issues, they indicate the strategic importance of these issues to corporatestrategy and infuse an issue with value beyond the technical requirements of the task athand. Thus, the issue’s purpose is enriched such that corporate identity is altered insome way (Ackerman, 1975; Selznick, 1957), and this influences how members inter-pret and respond to the issue (Dutton & Dukerich, 1991).

Buffalo’s mission of goodwill generation among neighbors through environmentalpreservation and Sioux’s mission as an alternative energy company provided labelsthat drew attention to the environmental issue as a legitimate focus of organization-wide action. This labeling through mission statements was central to corporate iden-tity, providing guiding reference points within which employees frame decisions andactions.

The managers of the five reactive companies, lacking any such guiding referencepoint on environmental actions, continued (and still continue) to treat environmentalissues as regulatory issues to be dealt with by the legal and compliance departmentsand as a risk and liability reduction problem. Although Royal and National issuedenvironmental policy statements in 1989, these statements are not considered by man-agers as an integral part of the corporate mission. U.S. Oil, Farmers, and Northern stillhave not formulated environmental policy statements.

Proposition 3: Managerial interpretations of environmental issues as opportunities are likelyto be associated with legitimation of the issue as part of the corporate identity.

Information flow. Early in the evolution of the environmental issue, there were con-siderable uncertainties and ambiguities regarding the final dimensions of this issue interms of the relationship between organizational actions and environmental outcomes,standards of enforcement, and public expectations. The managers of all companies inthis study indicated that during this stage, even if they knew the right questions to askregarding the business–natural environment interface, the information and knowledgenecessary to answer these questions was hard to come by. Without this information,the financial and technical implications of a decision were difficult to assess.

The proactive companies undertook detailed environmental audits and made thisinformation available to all employees. Although the staff environmental assessmentdepartment was responsible for initial generation of information on the business–natu-ral environment interface, subsequent knowledge generation also involved line man-agers at all levels, sparking an even faster pace of learning. Thereafter, line managersbecame recognized as primary sources of knowledge for dealing with environmentalissues and for formulation of environmental strategies, while information supportfrom the staff departments and from research activities was continued.

The reactive companies, on the other hand, set about environmental assessment andaudit actions to a limited extent only when environmental issues were perceived as


regulatory in nature (in 1988) and in earnest after regulatory escalation (in 1993) whenenvironmental issues became sources of major risk and liabilities. At all times, envi-ronmental issues were primarily dealt with by staff legal, public relations, and environ-mental assessment departments. These companies’ line managers were not involved inbuilding an understanding of the business–natural environment interface and how tomanage it; rather, their focus was on how to avoid accidents and minimize difficultieswith the approval process. For these managers, environmental issues presented risksand liabilities and regulatory hurdles that would have to be overcome through assis-tance by the staff functions.

Because line managers tend to emphasize economic and operational targets, whilestaff managers tend to emphasize issue interpretation and analysis, it is important tostrike a balance of influence between line and staff units in formulating external affairsstrategies (R. H. Miles, 1987). The reactive companies did not achieve this balance, asthey kept environmental issues within the domain of staff units and thus failed to gatherinformation on how these issues could be operationally addressed and on the econom-ics of doing so. The proactive companies, on the other hand, achieved this balancethrough the use of such integrative devices as board-level committees, task forces, androtation of staff officers from environmental assessment departments to the businessunits. This balancing of responsibilities for information support sparked processes oflearning and knowledge generation on alternative strategies for reducing the environ-mental impact of the companies’ operations. For managers of the proactive compa-nies, this alleviated the informational ambiguity that is an important determinant ofthreat perceptions of strategic issues (Jackson & Dutton, 1988).

Proposition 4: Managerial interpretations of environmental issues as opportunities are likelyto be accompanied by a balance of influence between line and staff functions in buildinginformation on the business–natural environment interface.

Managerial discretion. The creation of an organizational context that facilitatesexperimentation and provides discretion to managers (Hambrick & Finkelstein, 1987;Wood, 1991) is essential to the development of new frames of reference, as becomesnecessary during the evolution of new strategic issues (Shrivastava & Mitroff, 1982).The proactive companies provided this context by altering patterns of authority,responsibility, and control to allow operating managers discretion in the use of budg-eted funds to experiment with changes in material specifications, process modifica-tions, waste-handling systems, operating policies, and new product development. Notonly was environmental impact ameliorated, but cost benefits and patentable innova-tions were realized as well. The reactive companies did not provide any such discretionto their managers in dealing with the environmental impact of their operations. Conse-quently, the only major innovation that could be documented among these five compa-nies is contaminated soil restoration technologies emerging from Royal’s researchlaboratory.

This is consistent with Govindarajan’s (1986, 1988) findings that linked budgetaryflexibility to improved managerial performance in high-uncertainty situations. Thediscretion provided to managers of the proactive companies apparently increased their


sense of control in dealing with the environmental issue, alleviating the perception ofissue uncontrollability associated with threat interpretations.

Proposition 5: Managerial interpretations of environmental issues as opportunities are likelyto be accompanied by discretion to take actions at the business–natural environmentinterface.

Control systems. During the second phase in the evolution of the environmentalissue, Buffalo altered its employee performance evaluation systems to include specificand quantifiable environmental performance indicators. Under this system, equalweighting was given to environmental and economic performance indicators, consis-tent with the corporate mission of environmental leadership. Sioux, in addition tousing economic performance criteria, incorporated measures of performance reflect-ing activity directed toward market-oriented environmental responsiveness.

Although some of the reactive companies also included environmental perform-ance indicators in their evaluation systems, the managers of these companies stressedthat these indicators were quite subjective in nature and were given very little impor-tance. Economic performance targets were the preeminent measures of employee per-formance, and managers were left uncertain about exactly what was expected fromthem in terms of environmental behaviors or outcomes.

The incorporation of quantified environmental performance indicators in controlsystems removes the subjectivity and uncertainty associated with taking actions onissues whose dimensions are not clear. This explicit valuing of environmental per-formance eases the pressure on economic performance criteria, reducing the potentialthreat of loss for managers who are uncertain about the impact of environmentalactions on the organization’s economic performance.

Proposition 6: Managerial interpretations of environmental issues as opportunities are likelyto be accompanied by a balance between the use of quantifiable environmental perform-ance criteria and economic performance criteria in control systems.

Summary. Organizational influences on environmental issue interpretation areintertwined. One factor alone is not sufficient to create a particular issue interpretation,culminating in a specific environmental responsiveness strategy. Changed employeeperformance evaluation systems motivate managers to act, whereas information sup-port and the availability of managerial discretion makes actions and decisions possibleon emerging and uncertain issues. A line-staff balance is necessary to maintain theright amount of focus on both economic and environmental performance. Earlyresponse provides a nonthreatening time frame during which managers achieve com-fort and familiarity with the business–natural environment interface, while issue legiti-mation provides the overall guiding frame of reference within which managers makedecisions and take actions. Finally, outcomes of organizational strategies providefeedback to reinforce managerial interpretations.


CONCLUSION

Our study makes explicit the key dimensions differentiating organizational strate-gies for dealing with environmental issues and, in the process, highlights the need to gobeyond mere description and categorization to development of a theoretical frame-work to explain the occurrence of these strategies. By isolating key variables related tomanagerial interpretations of the environmental issue and by revealing the organiza-tional features accompanying their operation, our framework suggests whereresearchers should focus in trying to explain various environmental responsivenessapproaches.

In this study, we identify fundamental aspects of issue interpretation that are centralto managerial cognitions and actions directed toward dealing with a domain dimen-sion that until the very recent past has been considered an “externality” to the organiza-tion (Shrivastava, 1995). Identification of managers’ focus on the negative-positive,loss-gain, and uncontrollable-controllable dimensions of dealing with the environ-mental issue suggests mechanisms by which interpretations central to cognitions andactions relevant to this issue develop. Specifically, managers’ categorization of theenvironmental issue as a threat or an opportunity results in environmental responsive-ness strategies consistent with those interpretations.

Furthermore, the study adds to our understanding of organizations as interpretativesystems by shedding light on a number of questions raised by Dutton and Jackson(1987) in their initial work on strategic issue diagnosis. The research reported heresuggests that issue classifications endure over time and are strongly influenced byvarious aspects of the decision maker’s context. In this work, examination of the con-text within which these interpretations develop reveals a number of organizational fac-tors accompanying the threat-opportunity labeling. Foundational among these werethe firm’s strategic positioning on the issue reflecting both the timing of its response tothe issue as it evolves (assessments of urgency) and the extent to which the issue ismade central to the firm’s identity (assessments of criticality). Supporting contextualfeatures were organization design decisions consistent with this strategic direction.Specifically, these reflected moves facilitating the flow of pertinent informationthroughout the organization, decentralizing decision making to place authority andresponsibility at the most appropriate level, and fine-tuning control systems to ensurethat targets and mechanisms were focusing attention and efforts in the intended direc-tion. The recognition of these important elements highlights the relevance of theoreti-cal paradigms focusing on adaptation through strategic issues management (e.g., Daft& Weick, 1984; Dutton & Dukerich, 1991) and structural reorientation (e.g., Miller &Friesen, 1980; Tushman & Romanelli, 1985). Thus, this research productively buildson existing theories of management and organizations to suggest elements of organi-zation–natural environment alignment and begins to answer Shrivastava’s (1995) callfor research considering the implications of ecocentrism for management theory.

It should be noted that this study was limited to the Canadian oil industry, and thus,findings might be context specific to some extent. However, there are few reasons to


suggest that the same industry in other national settings would adopt a widely differentrange of environmental responsiveness strategies. Although the specifics of differentindustry situations may change, the factors influencing issue interpretations andstrategies are organizational and thus widely applicable.

It is likely that the factors influencing corporate environmental responsivenessstrategies discussed in this article are not exhaustive. Further studies in different indus-try contexts and in different regulatory regimes are bound to add to the understandingdeveloped here. However, this framework provides a useful guide for further researchas well as for practitioners seeking to make organizational changes and adaptations tomore proactive environmental responsiveness strategies.

Organizations that create a context within which their employees are influenced toembrace environmental issues as opportunities stand to reap significant benefits froma number of sources—lower costs of input materials, higher process efficiencies,lower energy use, waste reuse and recycling, differentiated products, and higher levelsof corporate reputation and goodwill. Although it is too early to draw firm conclusionson the overall economic performance outcomes of proactive strategies of environ-mental responsiveness, it certainly can be argued that proactive strategies do notdetract from competitiveness.

This study focuses attention on a critical area of corporate responsibility with sys-temwide implications. The introduction of such ecocentric perspectives on organiza-tions should allow us to begin to include preservation of the natural environment indefinitions of organizational effectiveness.

APPENDIXCompany Profiles (company names have been disguised)

Royal Petroleum, classified as a major,a is one of the largest integratedb oil companies in Can-ada with annual sales revenues of around Can$10 billion and more than 10,000 employees. It isthe subsidiary of a U.S. multinational company, one of the largest oil companies in the world.Royal started operations in the late 19th century, initially by procuring and marketing oil, andsoon integrated backward into transportation and upstream activities. Even though Royal under-takes some environmental actions that may not be required by regulations, the primary motiva-tion is to reduce risk.

U.S. Oil, classified as a senior in the industry, is an upstream company with annual sales reve-nues of around Can$4 billion and more than 3,000 employees. It was founded during the early20th century and is the subsidiary of an integrated U.S. multinational. This company has had aseries of major oil spills and pipeline leaks over the past decade. As a result, it has undertaken anexhaustive environmental risk and liability assessment. Similar to Royal, this company’s moti-vation is to avoid huge public liability payments as well as adverse media publicity.

National Petroleum was set up in the 1970s as a government-owned company. Until its priva-tization in 1990, it had accumulated huge losses due to high levels of inefficiency. During thisphase, it undertook a leadership stance on establishing environmental assessment guidelines forthe oil industry. Since privatization, the top management views any environmental actions not


required by regulations as wasteful. This has caused frustration among managers from the previ-ous regime who retain values of environmental protection. National is a major and has integratedoperations with annual sales revenues of around Can$6 billion and more than 7,000 employees.

Buffalo Oil, classified as a senior, has integrated operations with annual sales revenues ofaround Can$1 billion and 1,500 employees. It was set up during the 1950s as an oil explorationcompany and soon integrated forward into transportation, refining, and marketing operations. In1981, Buffalo adopted a mission statement of “generating goodwill among its neighbors.” Dur-ing the early 1980s, it became an industry leader in undertaking environmental audits, emissionsreduction, waste recovery, and so on, long before the rest of the industry considered environ-mental protection an important issue.

Sioux Oil, classified as an intermediate, is a downstream company with annual sales reve-nues of around Can$500 million and more than 1,000 employees. It was set up during the 1950sand has been an innovative marketer. In the late 1970s, it invested substantially in research facili-ties in tune with the new mission statement of becoming an alternative energy company. In 1980,Sioux became the first marketer of ethanol-blended gas in Canada. In 1981, it set up the firstcommercial North American plant to recycle used engine oil. It also established a network tocollect used engine oil from gas stations and private garages. Sioux has invested in research intorenewable energy sources.

Farmers, classified as an intermediate, is an upstream company with annual sales revenuesof around Can$300 million and more than 700 employees. Farmers began oil exploration duringthe early 1980s.

Northern Resources, classified as a junior, is an upstream company with annual sales reve-nues of around Can$100 million and 400 employees. It began operations in the 1980s. Itsfounder and current president expresses belief in unhindered free enterprise and minimum gov-ernment regulation. He emphasizes good corporate citizenship that involves contributions tocharities and the arts.

a. Company classifications within the industry are based on size in terms of a mix of sales and assets.b. Integrated companies are involved in the full range of industry activities, including exploration, produc-tion, refining, and marketing. Upstream companies engage exclusively in exploration and production,whereas downstream companies engage exclusively in refining and marketing activities.

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