ISSUES IN THE I.MPLEMENTA~rION OFPROACTIVE ENVIRONMENTAL STRATEGIES

Sandra Rothenberg andDr James Maxwell, International Motor Vehicles Program,MIT Technology, Business and Environment Programme, MIT, andDr Alfred Marcus, Carlson School of Management

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VOLUME 1, PART 4, WINTER 1992

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ISSUES IN THE IMPLEMEN'TATION OFPROACT1VE E:NVIRONMEN1~ STRATEGIES

Sandra Rothenberg andDr James Maxwell, International Motors Vehicles Program,MIT Technology, Business and Environment Program, MIT, andDr Alfred Marcus, Carlson School of Management

Abstract

Management consultants, environmental groups, and industry trade assodations have all recently offeredguidelines Jor companies to improve environmental performance. I The guidelines suggest ways that

companies can implement strategic change to move beljond compliance with regulation, assume responsibility

for the environmental impacts of their products, and gain public credibility. Much of the advice offered can

be useful to managers who are responding to rapidly changing environmental pressures.

Nevertheless, in1plementation of son1e of the general guittelines could impose undue costs or introdtlce

tlntoward organisational consequences for certain companies. WJ1ile mentioned as an issue in tIre

management literattlre, companies need more systematic adllice on hOIO best to tailor these broad guidelinesfor environmental strategic change to the spedfic needs and capabilities of their con1panies. In addition, as

many companies are comprised of diverse business units that are sometin1es linked together only throtlgh

finandal controls, nzanagers nzust adapt environnzental managenlent progranls to uniqtle 'stlbstrtlctures'

within the firm. These stlbstructtlres can differ dramatically in their environmental performance and their

management capabilities.

Elsewhere we have offered a framezoork for analysing environmental strategies and management programs.2In this paper, we identify some of the implementation issues that confront companies when they introduce

environmental strategic change. We argue that environmental strategies are most effectively implemented

when they are consistent with the organisational characteristics and operating context of the company

involved.

We use Volvo's experience with environmental strategic change to highlight many of the difficulties that

companies may encounter 'Lohen altering their approach to environmental perfornlance. The case illustrateshow a company can modify its o'Lon strategtj and management programs for more effective change. It is an

interesting case to study because of the ,proactive and compreJlC~sive nature of Volllo's environmental

strategy and management programs.

Environmental strategic Change

Strategy formulation and strategy implementation are the two stages of strategic envirol1ffientalchange. Durit1g strategy folmulation, managers must determine the rate and direction of change.Implementation llwolves establishing the management programs necessary to achieve company goals.

The Dimensions of Environmental Strategy

Managers must determine the size of the strategic problem by comparing the organisation's operationsand capabilities with current and future demands. They must then evaluate the costs and benefits ofresponding to these demands, and determine the time horizon that exists for implementation. In theenvironmental arena, strategic forecasting can be problematic because of the large degree of technicaland social complexity surrounding environmental issues.3 The costs of poor environmentalperformance can be extraordinarilyhigh and are often underestimated.4

Managers should consider their company's position with respect to tl1ree dimensions of strategy: thebusiness dimension, the political dimension, and the techlucal dimension. The business dimensioninvolves the use of environmental issues to create a competitive advantage for the company throughcost savings and increased profits. The political dimension involves a company's interaction with

Voltlme 1, Nttmber 4, Winter 1992

Issues in the Implementation of Proactive Emlironmental Strategies

stakeholders, such as regulators, local commuluties, environmental interest groups, customers,investors, and employees. For most companies, a political strategy means building legitimacy forenvironmental activities in the social context in which they operate. The technical dimension shouldbe consistent with the business and political strategies. It guides actual chal1ges in the environmentalperformance of both product and process. Each company has different environmental liabilitiesthroughout the full product life-cycle and different technical capabilities that influence its choice ofa technical focus.

Choices in Management Program

Strategy formulation provides strategic direction for an organisation and indicates how it is to moveforward. Once a strategy has been developed, programs need to be designed to bring to bear thecompetencies needed to implement the strategy.5 The generic programmatic choices available tocompanies are shown in Table 1. They include: structures for environmental policy, mechanisms tomonitor and review environmental performance, incentives and controls to encourage environmentalachievements, methodologies and tools to assist environmental decision making, guidelines forenvironmental investments, and guidelines for communication with stakeholders. Within each of thesecategories, companies have a variety of options from which to choose.

Volvo's Environmental Strategy and Management Programs

HistoryIn 1988, Volvo introduced one of the most comprehensive and proactive envu'onmental strategies inindustry.6 The Volvo Group currently consists of four product companies: Volvo Car Corporation,Volvo Trucks and Busses, Volvo Penta (Marine and Industrial Engines), and Volvo Flygmotor (aircraftand space engines), with Cars, Trucks and Busses as its largest operating sector. At the year end 1991,the Group's sales for all its geographic areas was 77,223 MSEK (approximately $11,583 million).8

Table 1: Programmatic Choices in Environmental Management

Programmatic Categories

A company needs to establish a structure for environmental management to internaliseand meet its regulatory and its more proactive environmental goals. In addition, it needs to

allocate environmental responsibility. specify the flow of internal and external information.and offer guidelines on how to carry out its environmental goals.

---~-

Structure for environmental

policy

The potentially severe consequences of poor environmental performance necessitatesaccurate monitoring of environmental achievement. Companies mainly rely 9n twomechanisms for this: direct reporting of environmental activity and environmental auditing.

---

Mechanisms to monitorand review environmental

performance

Incentives and controls to

encourage environmentalachievement

Incentives and controls are important to emphasise the company's commitment toenvironmental performance, and to encourage employees to perform in a manner which is

consistent with this commitment. Incentives recognise and reward environmentalachievements and innovations, and programs to motivate employees. Control mechanisms

assess environmental performance in performance evaluations.

Guidelines and tools forenvironmental investments

Environmental investments frequently do not offer short term financial pay-backs whenbased on traditional accounting procedures. Financial guidelines can suggest howmanagers can consider such benefits as long term financial savings and avoided costswhen making environmental investments. Tools to help evaluate environmental

performance in financial terms can be created.

One of the most difficult tasks of environmental management is to assist employeesmaking decisions about complex environmental issues. To reduce uncertainty inenvironmental decision making, companies can employ tools to help evaluate theenvironmental impacts of product and process decisions, systems to record companyactivities and their related risks, or standard operating procedures to guide employees

when performing environmental related tasks.

Methodologies and tools to

assist environmentaldecision making

To ensure external support of the environmental strategy, managers have to communicatewith company stakeholders. These programs could include participation in environmentaldebates and financial support of environmental activities.

Guidelines forcommunication withstakeholders

Volvo operates in the international aI"ena mainly in Western Europe aI1d North America. In recentyears, through industrial alliances with companies such as Renault, GM, and Mitsubishi, Volvo has

Business Strategtj and the Environment

Issues in the Implementation of Proactive Environmental Strategies

expanded its international presence considerably.

Volvo's corporate culture reflects the larger Swedish culture in which it operates, which is recognisedfor its high level of social concern and its emphasis on negotiation and consensual decision making.9Volvo has also been influenced by the social commitments of its leaders, starting with safety in 1927.Volvo's current chairman, Pehr Gyllenhammar, has expanded the scope of the Group's socialcommitments beyond product safety to include workplace and environmental issues.

Emergence of a New Environmental Strategy

Volvo has a long history of environmental activity,. and was one of the first indushial manufacturingcorporations in the world to adopt a formal environmental policy. 10 Until the mid eighties, the

primary emphasis of Volvo's environmental strategy was compliance with applicable regulations. Ithad some notable achievements in this regard, including the development of the three-way catalyticconverter with Lambda Sond.

During the course of the eighties., a general growth in environmental awareness in Sweden andthroughout the world alerted Volvo managers., including its chairman Pehr Gyllenhammar., to theelevated importance that the environment exerted in business decisions. The magnitude and scope ofenvironmental pressures peaked in 1988., and in October Gyllenhammar called for the formation ofan Environmental Task Force., its members including the top managers of each Volvo Company.Gyllenhammar was sensitive to changing public interests. Remembers one employee., ., and realised that

we have to have our own goals in the future. [It was] a way for [him] to manifest a true convictionthat industry had to show the way and to find a...better image for the company. We were not the onestrying to back off from our responsibilities. We wanted to fix them.t11

The Task Force developed Volvo's new environmental strategy. Building upon its earlier strategy withsafety, Volvo sought to make the environment a 'cornerstone' of the company and develop an uniquecompany environmental profile. As consumer interest grew, Volvo could then use this profile tomarket its products on environmental performance as well as safety. Building a unique and legitimatecompany profile meant staying ahead of legislation and active communication of Volvo'senvironmental activities with company stakeholders}2

If Volvo managers were going to claim that they 'cared' about the environment, however, it wasimportant that they could back up these claims. aile Boethius, Manager of Environmental Affairs atVolvo Car Corporation, explains that environmental profiling is a delicate task, because 'it is not thateasy to build up, but it is very easy to fail.'13 For products, Volvo pledged to develop and market the'most efficient' technologies, allowing for the production of products with superior environmentalperformance but mainly within the constraints of the product. For production processes, Volvopledged to adopt manufacturing processes that have the least possible impact on the environment.Both product and process improvements would take into account financial constraints.

Management Programs

Volvo's Task Force Report also outlined a set of management programs to implement itsenvironmental strategy. The set of programs, as found in Table 2, can be described using the generalcategories discussed above.

Implementing Environmental strategic Change

The implementation of strategic change requires some organisational adaptation. The extent of thisadaptation is partially determined by how far and quickly the company decides to move. With moreradical change, more resistance will be encountered, more resources will be needed to overcome thisresistance, and more uncertainty will be introduced llUO the organisation.

To avoid these problems, executives often pl-efer incremental change;4 which, if done properly, canbe effective. In some situations, however, it can be too slow to resolve a strategic problem}5 Thechallenge for strategic mangers is to choose strategic and pl"Ogrammatic options that will foster change,while being as consistent as possible with the company's existing organisational capabilities and

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Issues in the Implementation of Proactive Environmental Strategies

context. Such consistency is crucial to obtaining desired objectives at minimum cost to theorganisa non.

Table 2: Volvo's Programmatic Choices

The Task Force Report outlined a new decentralised organisational structure in which thecompanies could set long term and yearly internal goals. These goals cover production,product, training, management, communication, public relations, and other areas,depending on the division involved. All goals are set at the product company level, whichhave a large degree of flexibility with respect to the goals that they establish.

Structure forenvironmental policy

Internal reporting of goal attainment and environmental auditing program are used tomonitor environmental achievements. An internal audit team compares environmentalperformance to potential regulatory trends, as well as the plant and companies' owninternal environmental goals. Environrrlental management, responsibilities, and routines are

also scrutinised.

Mechanisms to monitorand review environmental

performance

Incentives and controls toencourage environmentalachievement

Volvo has relied primarily on environmental training to encourage the institution ofenvironmental improvements. The core training program covers environmental trends andcompany policies. Other programs vary in content and length, becoming more specific asthey are offered at lower in the organisation. To date, the Volvo Group has trained close to

10,000 people.

Environmental investment decisions are supposed to be based on the utilisation of the besttechnology from an environmental viewpoint. Those decisions deviating from this policy

have to be made by top company management.

Guidelines and tools for

environmentalinvestments

Volvo introduced two tools to help employees make decisions that would lead to theintroduction of more environmentally oJmpatible material and to chemical choices with lessenvironmental harm. The first tool, MOTIV, is a computer database which holds informationon approximately 90% of the chemicals used in Volvo. The system gives users detailedinformation on env:ronmental, health and safety risks, in-company chemical uses, andavailable chemical replacements for the chemicals. Since introduced in January 1991, more

than 100 people have been trained on MOTTIV.

Methodologies and tools

to assist environmentaldecision making

Volvo's second tool, EPS, helps designers compare the life-cycle impacts of materialchoices. Taking into account natural resource depletion, raw material extraction, land use,and emissions into air, water, and soil, environmental indices indicate the environmentalimpact for each stage of the product life-cycle. Accounting for quantity used, the designercompares a single 'Environmental Load Unit (ELU)' for each material choice.

Guidelines forcommunication withstakeholders

The Task Force Report outlined broad guidelines for internal and external communication.

While the Volvo Group as a whole is actively communicating with stakeholders,communication at the product companies varies according to each company's own strategic

needs.

To obtain guidance on how to make these changes, managers can look to a growing body of literaturefrom academics, consultants, and participants in industry. The literature suggests which strategic andprogrammatic choices are appl"Opriate for a specific level of environmental performance. Severalsources outline managements systems for different levels of environmental compliance; others focuson appropriate management techniques for a 'proactive' company!6

While this literature is an important resource for environmental managers, it offers too little guidanceon how managers can design strategies and programs to fit with the unique characteristics of theirorganisations. At the extreme, it draws managers away from these considerations by leading them tobelieve that there is 'one best way' to handle environmental issues. Most practitioners recognise rightaway this limitation in the advice they are being offered. It does not mesh with what they know abouttheir company and how it works.

Significant evidence exists that popular business management trends exert a strong influence on thetechniques of corporate management. New concepts successfully implemented in certain organisationsdominate management techniques for a period of time, even when they are inappropriate for specificorganisations!7 DiMaggio and Powell offer three reasons for this phenomoemon!8 Firstly,organisations will submit to both formal and uuormal pressures from other orgalusations upon whichthey depend. In the environmental pollution arena, this can.occur if regulatory bodies require the useof certain organisational struchlres, which spread the use of inappropriate general techniques toorganisations in which they do not fit. American command and control envu'Onmental regulations, for

Business Strategtj and the Environment4

Issues in the Implementation of Proactive Environmental Strategies

example, focus on a single pollutant medium, and they often place confusing, redundant, and evencontradictory requirements on the regulated organisation}9 This type of regulation creates situationsin which companies must devote resources to developing the formalised administrative structures forenvironmental management. These requirements are not universally applicable, resulting in poorenvironmental and organisational performance in certain organisations. Societal pressures forincreasingly detailed environmental disclosul'eS require similar centralisation of authority overenvironmental issues. They place pressures on organisations for uniformity of procedures, even whenthis uniformity may be inappropriate.

A second reason for adapting inappropriate general techniques is that when faced with uncertainty,orgaRisations may model themselves after organisations that have already proven to be successful.This phenomenon may also be occurring in the environmental arena, where certain companies havebecome designated leaders in environmental management, to which others aspire.

Finally, normative pressures that stem primarily from professionalism can cause the adoption of'fashionable' management systems. Universities, professional training institutions, and professionaland trade associations, explain DiMaggio and Powell, are all vehicles to develop normative rules aboutorganisational and professional behaviour. 111 the environmental arena, this trend can be seen in theincreasing number of industrial or trade groups which require members to establish certainenvironmental management practices}O Benchmarking, which is becoming increasingly common inindustry, leads to the adoption of these inappropriate general techniques. Companies are either forced(via regulation) or choose voluntarily to imitate other companies because of their own fear andinsecurity. While in some ways positive and at the core of all progress and innovation, this diffusionmechanism has serious drawbacks when it is done without consideration for particular and uniqueorganisational and contextual elements.

The general norms in environmental management do not offer the most effective managementapproach for each individual organisation. Instead, the concept of 'fit' needs to be applied. It offersa framework for organisations to consider approaches to organisational change which may be moreeffective.2l It suggests that there is no one 'best' strategy or set of management programs. Instead, eachcompany needs to foster its own approach to environmental management. To do this, managers mustevaluate external factors, such as the demands, constraints and opportunities presented by theorganisational context, and ll1ternal factors such as the organisational sti"ucture, company history andculture, products, manufacturing processes, available resources, and individual employees. It mustmatch external pressures and opportunities with unique internal characteristics. This matching caneither facilitate or interfere with strategy implementation. By evaluating organisational components,managers can identify means to enhance sti"ategy implementation, and identify potential sources offailure that could be avoided.

The same considerations can be made for each of the' substructures' within the organisation. Groupingis a fundamental way to coordinate work in organiSc'ltions, and though groups may be connected bya number of coordinating mechanisms, they often become differentiated in such things as their goals,time perspectives, personal relations, styles of communication, and decision making processes}2 Thesegroupings can be product, functionally, or geographically based. Designing strategies and programswithout consideration of an organisation's subsh-uctul'eS and their respective strengths and weaknessesmay also hinder implementation. The recognition of the different substructures, while decreasinguniformity, may lead to a more effective route to envll"Onmental strategic change. The adjustment ofthe environmental strategy for each product unit can expand strategic opportunities in theenvironmental arena. By adjusting management programs to fit the existing organisational structuresof each division, managers can likewise enhance program implementation.

Tailoring strategic and Programmatic Choices

The Volvo experience illusu"ates how a company can tailor its particular strategic and programmaticchoices to fit with unique components of company organisation. In the followU1g sections we discussthe issues of 'fit' encountered with valious organisational components. We identify how theseorganisational components can differ between substructures, the implementation issues presented bythese differences, and then illustrate these issues with an analysis of Volvo's experiences.

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Issues in the Implementation of Proactive Environmental Strategies

Organisational Context

The social, political and competitive context U1 which an organis.'\tion operates often provides theimpetus for strategic change by presenting constrau1ts and opportunities. These constraints andopportunities vary depending on geographic location and the specific external group being addressed.Gladwin and Walter identify eight ways in which an organis.'\tion's social and political operating canvary in the environmental arena, u1cluding: the economic activities, natural condition, humancondition, character of environmental problems, social preferences, political processes, policyframework, and policy instruments.23 Variations between different geographic locations are particularlyproblematic in the environmental arena, because local regulations can stlungly influence organisationaloperations. Competitive pressures can combu1e with these complex social and political pressures,adding complexity to the process of environmental strategic change.

When developing strategies and progt'ams, managers need to evaluate the regulatory, social andcompetitive arenas within each operation, They have to assess the uniformity of the operation acrossgeographic locations and the speed at which the context is changing. They have to identify the partsof the organisation tl1at are vulnerable to contextual changes, and the available mechanisms forbuffering the organisation from change,

Volvo

For Volvo, government regulations, envirolunental interest groups, and local communities alldemanded a more proactive approach to environmental performance, and Volvo designed strategiesand programmes to address these demands. Some environmentalists even regard Volvo'senvironmental performance as essential to the envil'Onmental movement in Sweden. States Chris Agen,the Swedish Non-government Organisation (NGO) Secretariat on Acid Rain: 'Gyllenhammar has beensome type of leader in the country. He is really the most well known indusuialist in Sweden [and]when he holds up the environmental flag, other business leaders pay attention.'24 Volvo'senvironmental training strengthened its ties to the environmental activist community by directlyincluding them in this activity.

Nevertheless, not all members of the environmental community support all of Volvo's choices. Agrenexplains that although Volvo has defilutely 'been more thorough than other Swedish companies intrying to be green,' he CaI1 still 'see a discrepancy between what they say aI1d what they do.' This ismost evident in the area of fuel economy, and he POU1ts to the new 850's high power engine as anexample of this problem. When he questioned Volvo executives about the 850, they replied that it iswhat the Volvo consumer wants. 'Wl1at they don't say,' he states, 'is that they (Volvo) have a largeinfluence on the consumers'}5

In numerous ways, the Swedish regulatory process fits well with Volvo's environmental programs.The consensual nature of the Swedish society, reflected in the regulatory process, enhances this 'fit'because it allows the flexibility needed to investigate innovative solutions to waste minimisation andconh'ol. At the Torslanda plant, for example, Volvo was given an extension for a ruling on solid wastelimitations in order to investigate possibilities to recycle the waste. Volvo is taking advantage of thisextension to try and develop ways to recycle some of the solid waste, and therefore avoid disposal

altogether.

Volvo, however, does not just operate in Sweden, and the su-ucture of its environmental pro~amsmay not be consistent with l-egulatolY provisions encountered in other countries. In the Uluted States,where the regulatory structure is more hostile and complex thaI1 the Swedish permitting process, theplants may find it more difficult to shift their focus away h-om regulations towards internal goals.

While offering some flexibility in technology choices, the progrlc:,ive nature of Swedish regulationsmay have adverse consequences on other asl-,ects of Volvo's business strategy. Other companies, waryof facing similar low plant level emission levels ll) their own counnies, have been reluctant to besupportive of the aggressive emission reduction schedule in Volvo's Torslanda plant. In fact, Volvoemployees feel that they have even been excluded from some conferences on paint shop technologyfor this reason!6 These lower emission levels also necessitate the use of costly abatement technologies,placing Volvo at a cost disadvantage. For mobile sources, if Volvo chooses to support proposed

Business Strategy) and the Environment6

Issues in the Implementation of Proactive Environmental Strategies

Swedish legislation, it will be put iI1 diI.ect confrontation with the Eul"Opean Community, which viewsthese limits as barriers to trade. Threatened by retaliation from the EC through the use of tradebarriers, Volvo has opted to oppose this Swedish legislation.27

Organisational Structure

Most companies have already established a formal strategy and struchIre for ll1ternalising and meetingregulatory goals. Companies moving fI.om compliance to more proactive goals, however, may needto adapt existing management structures or create entirely new ones. The struchIres that have evolvedfor compliance purposes often do not have the capability or lines of communication necessary forimplementing a proactive strategy.

In designing a new structure for environmental management, it should fit with the company's overallorganisational structure. Changing the structure of an organisation is not easy, as it involves thedifficult task of changing the individual and group relationships within the company. For this reason,it may be more effective to design management programs within the framework of the overallcorporate structure.

When determining the environmental management structure, managers should consider the existingstructure of the organisation and the lines of communication that support this structure. In addition,they should try to identify existing substructures, and how they can be utilised to achieve strategicobjectives. Organisations evolve slowly, and for good reason, as many of their components play subtleroles and accomplish tacit goals which, when tampered with, make the organisation less effective.

Volvo

The Volvo Task Force introduced new environmental management structures, but proceededcautiously. It recommended that each company, through the establishment of environmental boardsand working groups, add a separate management structure to oversee environmental activities andset environmental goals. While a small corporate environmental office was established with someoversight and coordination responsibilities, it'was left up to each product company (e.g. cars, trucks,transport ...) to determine the final structure it would actually adopt. Since each product companyis structured differently, so were the final management structures developed for environmental

performance.

There was also flexibility in the nature of environmental goals. Instead of having environmental goalsset by the Group and Company Environmental Boards, each level of the organisation sets their owngoals, a choice that matches the decentralised nature of Volvo. Members of the Volvo Group, forexample, such as Volvo Transport and Volvo Data, set their own internal goals based on the specificenvironmental problems inh'oduced by their products.

The cost for this flexibility, however, is the potential for inconsistent environmental performance. Thereis already some evidence that management structures valY in their effectiveness across productcompanies. In addition, this lack of consistency can be observed by reviewing the minimum standardsacross companies and divisions, which differ in breadth, specificity, and level of performance. Thesedifferences could be used by senior management it, the centre of the company to produce lower levelunits to raise their level of performance, when appropriate. Thus, a dialectic is set up withdecentralised discretion and variation encouraged, and with sharing of information similarly in place.

Organisational Culture and History

In the environmental arena, some suggest that a drastic change in company culture is necessary foriIraplementing a proactive environmental strategy?8 One drawback with this suggestion, however, isthat company cultures are inherently conservative, and are extremely difficult to change?9 Anotheroption for companies is to match their strategies and programs with the existing company culture. Thisapproach has proven to be an enormously important method of reducing the costs and resistance tostrategic change.30 This may be a more effective metl10d of implementing environmental strategy thanmassive cultural change directed at transforming environmental values.

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Issues in the Implementation of Proactive Environmental Strategies

When designing an environmental strategy, the manager should consider the core values of thecompany, the company's record on envU'onmental performance and the consistency between thecompany's history of envil'Onme11tal performa11ce and its cultural values. Again, all firms havemultiple cultures, which are usually associated with different functional or geographic groupingS.31As Morgan explains: 'In orgalusations thel'e are often ma11Y different and competing value systemsthat create a mosaic of organisational realities rather than a uniform corporate culture.'32 Formultinatiol'\als, these different corporate subcultUl'eS often l'eflect U1e culture of the host country. Toreduce these differences, for example, Japanese compalues such as Toyota and Honda screenemployees in order to transfer the Japanese management culture to other operating contexts.33Managers should consider to what degree cultures differ between substructures. If the culture seemsto be homogeneous, and the company cUltul"e dominates foreign operations, managers should evaluatehow this culture fits the foreign operating context. If the 'fit' does not exist, the foreign operations canencounter significant failures.

Volvo -The Caring Concept

With Volvo, every effort was made to match programs with the company culture. 'To understand thechange at Volvo,' states Boethius, 'you need to consider that as a Swedish company [we] have acertain tradition.' As an organisation which was in the tradition of making a 'safe' car, employeesunderstand the 'caring concept,' which is 40 to 50 years old in the company. Explains Boethius, 'thereis a certain caring attitude in the organisation -its a backbone of the company...[and when it comesto environmental issues], people react -it is easy to CO11l1ect the two.'

As discussed earlier, the flexibility of Volvo's decentralised environmental programmes can only beutilised if there is enough control to enSU1-e that, within theil' own operating constraints, theparticipants live up to the expectations of the Volvo Group, To do this, Volvo relies heavily on theactive participation of the various companies and divisions,. and on more infonnal mechanisms, suchas environmental training and 'tools' for envirolunental decision making, to encourage thisparticipation, Mintzberg notes that, il\ organisations, training and folmalisation are basically substitutesfor one another, 'Depending on the work in question,' he states, 'the orgal\isation can either controlit directly tl\rough its own procedures and l"Ules, or else it can achieve indirect control by,.. dulytrained professionals.'34 By tl\is reasoning, the avoidance of a formal control structure is largely dueto the Volvo culture, which, as described earlier, is more conducive to accepting new environmentalinitiatives via training than by central dictates.

As was the case with Volvo's operating context, its internal organisationalculrure may vary across itsorganisational substrucrures. In Volvo facilities outside of Sweden, for example, the influence of theSwedish culrure may not be as strong. For this reason, envirol1mental tt"aining may not offer enoughmotivation to employees, and these divisions may need to adopt more formal control strucrures toensure compliance with internal goals.

Products and Processes

The products aIld process used by an organiSc'\tion can valY significantly in the amount they contributeto environmental degradation and where in the product life-cycle they present the most danger to theenvironment. Companies must decide whether to maintain, adjust, or replace products and processesto improve environmental performance. Companies aloe limited, however, by product strategies thatmake it difficult to implement their environmental strategies. They fu'\ve to have enough flexibility toalter their products or processes to take advaIltage of evaluations of the life-cycle impacts of theirproducts. In addition, public and consumer demands may focus on less damaging portions of theproduct life-cycle, and run counter to scientifically proven improvements in environmentalperformance. This creates another serious challenge iIl communicating to the public actual risks andcompany decisions based on these life-cycle evaluations.

Managers have to determine if certain products and pl"Ocesses are more environmentally pl"Oblematicthan others, and the ease with which the company could elimu1ate and reduce environmental waste,prevent pollution and improve the envirol1ffiental performance of their products. These considerationsshould also be weighed against the focus within the Pl"Oduct life-cycle of public and consumerdemands for improved environmental performance.

Business Strategtj and tire Environment8

ISSl/l'S in the 1I1lplel1lentation of Proactive Environl1lental Strategies

Volvo

Volvo's strategy and programs targeted all al-eas of the product life-cycle, as can be seen by thebreadth of environmental issues covered in its environmental goals. The new 850, for example, wasdesigned with a 'holistic' view of its envirol1Inental impacts. Designers tried to address a number ofenvironmental problems that occur throughout the life-cycle of the car, including production, use,maintenance, and disposal.

To achieve optimal 'fit', product and process impl'Ovements were designed to be consistent with thedominant environmental concerns of the geographic regions in which vehicles were being sold. Forthe automobile, demands for performance such as ll1creased fuel efficiency, lower emissions, and lowercontribution to post consumer waste have val"ied between geographic areas, as did Volvo's productand process choices for these areas. For the h-uck company, social demands differed, requiring anotherfocus for environmental activities.

Resources

As with any sh'ategy, the ability to invest financial, human, technical, and iluormation resources intoenvironmental activities can dramatically influence implementation. Resource allocation is especiallyproblematic for environmental investments, because they often do not offer short term financialpay-backs when measured by existing accounting procedures. As a result, environmental investmentshave a hard time competing with projects that offer more immediate returns on investment. Thisproblem is compounded by the fact that managers who make environmental investments are notresponsible for the consequences of poor environmental performance when making investments. Toaddress this problem, some organisations are attempting to develop accounting procedures that aresensitive to the long term financial, environmental, and social costs and benefits of investmentdecisions.

Of interest to the manager is the quality, quantity, and the flexibility of these resources.35 Toimplement an environmental strategy, the manager should identify the maImer in which resources areallocated, the criteria used for investment decisions, and the variability in availability and nature ofthe resources.

Volvo

In the mid eighties a low dollar and a high SEK increased Volvo's profits and 'formed a basket ofcurrency' for the company, allowing the pl-ogram to get off to a sh'ong start.36 This ll1cluded large andinnovative production and product changes, such as the new paint factory in Torslanda, which costthe company 1.8 BSEK (approx $270 million), new teclu10logies to reduce solvent emissions as theUmel plant, which cost the Truck Corporation 200 MSEK (approximately $30 million), and the removalof CFCs from the 850, which cost approximately 100 MSEK ($15 million).

This financial trend was reversed in the late eighties and 1990, and while Volvo continues to investits profits from the eighties, financial constraints aloe starting to become an obstacle to programmeimplementation. The flexibility of the management programs at Volvo fu'\S allowed each company toaccommodate its environmental activities in accordance with these new financial constraints. This hasmeant a shift in environmental activity from actual capital ll1vestments to less costly monitoring,planning and preparatory activities designed to create a platform for future environmental

improvements.

Conclusions

The framework that we have outlined suggests that sh'ategy formulation and implementation cannotbe designed in a vacuum. This process requuoes a comprehensive examination of companycharacteristics, includU1g organisational shoucture, culture, history, resources, products, processes, andindividuals, as well as focus on the demands, consh.aints, and opportunities presented by theorganisational context. Although most companies need to adopt new envirolunental managementsystems, they can facilitate the process of change by selecting options which fit with existingorganisational components. This type of guideline should not be foreign to managers. It has been

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Issues in the Implementation of Proactive Environlllental Strategit.'S

offered in the past with respect to other policies and programs. It is generally recognised as animportant component in effective strategic change. 11'\ the environmental at.ena, however, the pressuresfor uniformity, stemming first fl'om l-egulation and then from internal company insecurity andprofessionalism have tended to blunt the proper application of the well kI'\own principle of 'fit.'

One complication in finding this 'fit' is when there are variations in the components of theorganisational substructures. Companies attempting to implement a proactive environmental strategymay encounter difficulties when individual busit1ess units valY in their envitunmental performance.Their performance can vary because of differences it1 commitments and capabilities. Such variance canundermine a companies credibility with environmental groups and regulatory authorities.Multinational companies confront another problem when social and regulatory trends in their homecountry dominate corporate activities worldwide, makit1g them less responsive to the needs of theoperating context in the host counties. nus has caused problems for managers because they havemisread growing public and regulatory demat1ds in countries that are takit1g environmental initiatives.Alternatively, foreign operations may be dominated by the host country, leading to undesiredinconsistency in company activities. Addl"essing these different substructures is a necessary ingredientin effective implementation.

To handle these variations in culture or operations, Mintzberg suggests that companies might createmanagement systems that accommodate these differences. 'Disparities in the environment encouragethe organisation to differentiate its sh-ucture, to create pockets to deal with different aspects of theenvironment ...Each [substructure] is given the power over the decisions required in its sub-

environments.'37

To foster successful enVironmental performance U1 these 'sub-environments,' organisations shoulddesign around what Gareth Morgan refers to as 'the principle of mu1imum specification,' in whichmanagers and organisational designers should plimarily adopt a facilitating or orchestrating role andcreate 'enabling conditions' that allow a system to find its own form. This offers a great deal ofinternal flexibility needed for operating in a rapidly changing world.38 Morgan suggests that if one isto adopt an organisational structure which is based on tlus principle, direction and coherence mustcome from the group members themselves as they set a11d honour the shared values and nonns thatevolve along with the changing cu"cumstances.39 Shared values and nonns, adapted to uniqueconditions then become central operating and control devices.

An organisation's culhlre, as our research shows at Volvo, can be used to shape the design andimplementation of environmental programs. Volvo was able to build upon a preestablished cultureof addressing social concen1s, especially 5<, fe ty. Its leadership's comIriitment to envirorunentalimprovement, moreover, was widely shared by its employees and the communities in which itoperated. As a result, its programs could rely on few formal conh.ol structures. This does not mean,however, that a strong corporate cultUl"e is neceS5<'\lY for effective sh.ategy implementation. It is moreimportant, as Kotter and Heskett suggest, that the culture fit with othel; orgalusational components.They state: 'strong cultures with practices that do not fit a company's context can actually leadintelligent people to behave iI1 ways that are desh"llctive -that systematically undermine anorganisation's ability to survive and prosper.'40

It is important to recognise that 'fit' is not a static concept, and that besides managu1g larger shifts inorganisational strategy, the task of leadership is to shive continually to maximise this fit bymaintairiing alignments among the various organis.'\tional components. For this reason, environmentalmanagement systems should be designed so that they aloe easily adaptable to changing conditions. Thistheory is sup po lied by Kotter and James' research on col-porate culture. They report: 'our researchshows that even contextually or strategically appropriate ~ultures will not promote excellentperformance over long periods unless they contain norms and values that Cat1 help firms adapt to achanging envu.onment.'41 The same findings have been found by Mintzberg for company structure,where the more dynamic tl1e environment, the more organic the StruCtul"e, whel"e an organic structureis one which is adapted to unstable conditions.-I1

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Issues in the Implell/entation of Proactive Environmental Strategies~

Notes

1. Little, A.D., (1991) Prism: Managing for the Environment, (Thu'd Quarter); Responsible Care: A PublicCommitment: A Summary Description (April, 1991), David F. Sand and E. Ariane van Buren,'Environmental Disclosure and Performance: The Benefits of Standardisation', Cardozo Lalo Review,(1991) No.12, p.1352.

2. James Maxwell, Sandra Rothenberg, and Alfred Marcus, 'Draft -A Framework for the For thefonnulation and Implementation of Environmental Strategy' (MIT: Cambridge, 1992).

3. See Dr Nigel Roome, 'Developing Environmental Management Strategies', Business Strategy and tlteEnvironment, Vol.l, Part 1, Spring, 1992, pp.11-24.

4. The consequences of the Bhopal disaster of Union Carbide illustrate the magnitude of the costs ofpoor environmental perfOl"n1ance. Faced with millions of dollars of potential labilities for theaccident, Union Carbide stock price fell, il1viting a hostile takeover attempt. To forestall a takeover,Carbide was forced to divest itself of major business assets. (Cornelius C. Smith, Vice President,Health, Safety and Environmental Protection, Union Carbide Corporation, Interview with JamesMaxwell, Cambridge, MA, 19th April 1990); Christopher B. Hunt and Ellen R. Auster, 'ProactiveEnvironmental Management: Avoiding the Toxic Trap', Sloan Management Revietv (Wmter, 1990),

p.16.5. James Maxwell, Sandra Rothenberg, and Alfl-ed Marcus, ibid. .6. Cornelius C. Smith, Jr, Vice President Safety a11d Environmental Protection, Union Carbide

Corporation, 'Proactive Corporate Environmental Managemelu', Pl-esented at the InternationalConference: Environment: Another Challenge for Industry, Rome, Italy, April 5th, 1990.

7. Because of changes in exchange rates, the numbers given in US dollars are approximate, and arebased on an exchange rate of I SEK = $0.15.

8. Volvo Annual Report 19919. Robert Rehder and Howard Finston, 'How is Detroit Responding to Japanese and Swedish

Organisation and Management Systems?' Industrial Management, ijanuary /February, 1991), p.18.10. Sten Langenius, Welcoming Address in Managing and Developing Environmental Auditing Programmes

in European Industries: Seminar at Volvo, Gothenburg, Slveden, 27th November, 1991.11. Inge Horkeby, Manager, Environmental Protection, Volvo Technical Development Department,

Interview with Sandra Rothenberg, Gothenburg, Sweden, 15th January 1992.12. Olle Boethius, Envuunmental Affairs, Interview with Sandra Rothenberg, Gothenburg, Sweden,

20 January 1992.13. ibid.14. Graham T. Allison, Essence of Dedsion (Glen view, Illinois: Scott, Foresman and Company, 1971),

p.76.15. James Brian Quinn, (1989) 'Strategic Change: Logical Incrementalism', Sloan Management Review,

Summer, pp.56-57.16. Christopher B. Hunt and Ellen R. Auster, (1990) 'Proactive Environmental Management: Avoiding

the Toxic Trap', Sloan Management Revielo, Wintel~ pp.7-18; Arthur D. Little, (1991) Prism: Managingfor the Environment, Thil.d Quarter; Dr Nigel Roome, (1992) 'Developing EnvironmentalManagement Strategies', Business Strategtj and the Environment, Vol.1, Part 1, Spring, pp.11-24; DavidT. Buzzelli, (1991) 'Tlffie to Structure an Envuul1ffiental Policy Sh.ategy', The Journal of BusinessStrategtj, March/April, pp.17-20; 01emical Manufacturers Association, (1991) Product StetvardshipCode of Management Practices, Draft, 4th November.

17. Henry Mintzberg, (1979) The Structuring of Organisations, Englewood Cliffs, NJ.: Prentice-Hall,

p.293.18. Paul J. DiMaggio and Walter W. Powell, (1983) 'The hUl1 Cage Revisited: Institutional Isomorphism

al1d Collective Rational U1 Orgal1isatiol1al Fields', American Sodological Retlietv, 48, April, pp.147-160.19. Manik Roy, (1988) HOIV We are Learning to Pollute Less: Pollution Control, Organisational Ctllttlre, and

Sodallearning, Cambridge: Harvard Univ~rsity, October 1988, p.239.20. See, for example, Chemical Manufacturers Associatiol1, (1991) Prodtlct Stetvardship Code of

Management Practices, Draft 4th November.21. Raymond E. Miles and Charles C. Snow, (1989) 'Fit, Failure, and the Hall of Fame', in Michael L.

Tushman, Charles O'Reilly, a11d David A. Nadler (eds) (1989), The Management of Organisations,New York: Harper and Row, p.l08.

22. Henry Mintzberg, ibid, p.l07.23. Thomas N. Gladwin and Ingo Waltel~ (1980) Multinational Under Fire, Johl1 Wuey & Sons: New

York, pp.426-427.

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Issues in the Implementation of Proactive Environ/l/ental Strategies

24. Goran Varmby, Varmby Consultants, Telephone Convers.,tion with Sandra Rothenberg, 6th March1992.

25. Christer Agren, Interview with s.,ndra Rothenberg, Gothenburg, Sweden, 27th January 1992.26. lnge Horkeby, 15th January 1992.27. Rune Landin, 15th JaI1uary 1992.28. Denis Smith, (1992) 'Strategic Management and the Business Environment: What Lies Beyond the

Rhetoric of Greening', Business Strategtj and tlU! Environment, Vol.l, Part 1, Spring, p.7.29. Studies indicate that the single most important factor which conhibutes to successful cultural

change is strong leadership from top management. ijohn P. Kotter and James L. Heskett, CorporateCulture and Performance, New York: The Free Press, 1992), p.84.)

30. Edgar H. Scheu1, (1984) 'Comu1g to a New Awareness of Organisational Culture'. SloanManagement Review, Wmter, p.14.

31. John P. Kotter and James L. Heskett, (1992) Corporate Culture and Perfonnance, New York: The FreePress, p.5.

32. Gareth Morgan, (1986) Images of Organ is at ions, Newbury Park: Sage Publications, p.127.33. Patrick J. Smith, (1990) 'How to Pl'esent Your Firm to the World', Journal of Btlsiness Strategy,

January /February, pp.32-36.34. Henry Mintzberg, p.101.35. David A. Nadler and Michael L. Tushman, (1989) 'A Model for Diagnosing Organisational

Behaviour: Applying a Congruence Perspective', in Michael L. Tushman, Charles O'Reilly, andDavid A. Nadler (eds), The Management of Organisations, New York: Harper and Row, p.95.

36. Rune Landin, 15th January 1992.37. Henry Mintzberg, p.283.38. Gareth Morgan, p.102.39. ibid.40. John P. Kotter and James L. Heskett, p.142.41. ibid.42. Henry Mintzberg, p.27.

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