When Are Corp Env Policies a Form of Greenwashing

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BUSINESS 10.1177/0007650305278120 Ramus, Montiel & SOCIETY / CORPORATIONS / DecemberAND 2005 GREENWASHING

When Are Corporate Environmental Policies a Form of Greenwashing? CATHERINE A. RAMUS IVAN MONTIEL University of California, Santa Barbara

Do environmental policy statements accurately represent corporate commitment to environmental sustainability? Because companies are not required by law to publish environmental policy statements or to verify that these statements are true using independent third parties, external stakeholders often wonder when a published commitment to a policy translates into actual policy implementation. The authors analyzed two independent databases to predict the circumstances under which large, leading-edge corporations in industry sectors will commit to and/or implement proactive corporate environmental policies and when it is unlikely they will do so. The authors found that commitment to specific environmental policies does not vary greatly between industry sectors; however, policy implementation does. Keywords:

corporate environmental management; corporate environmental policy; corporate commitment; environment policy implementation; greenwashing

Greenwashing is disinformation disseminated by an organization so as to present an environmentally responsible public image. —10th edition of the Concise Oxford English Dictionary

Environmental policy statements are not required by law. Publishing such statements, which is synonymous to making a public commitment to them, is voluntary. Unlike environmental reports, there is no mechanism of third-party verification to ensure that the organization is implementing AUTHORS’ NOTE: The authors would like to thank John Antonakis, Marius Brulhart, Magali Delmas, John Ehrenfeld, Andrew Hoffman, Annette Killmer, and Andrew King for helpful comments and statistical advice given on earlier drafts of this article. BUSINESS & SOCIETY, Vol. 44 No. 4, December 2005 377-414 DOI: 10.1177/0007650305278120 © 2005 Sage Publications

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the published policy. Winn and Angell (2000) showed that commitment to environmental policies and implementation of environmental policies are two distinct constructs. In many cases, the publication of a policy (i.e., commitment to a policy) represents a serious intention by an organization to implement the policy. However as Winn and Angell showed, one cannot assume that public commitment to a policy necessarily translates into corporate greening activities and the implementation of the policy. In this article, we study this distinction between environmental policy statement commitment and policy implementation across four industry sectors. Corporate environmental policy (CEP) statements are assuming an increasingly important role in businesses. In some cases, CEP statements are part of organizations’environmental reports. In other cases, CEP statements are the only publicly available information about an organization’s environmental policy. These statements are recommended or even required in voluntary industry codes and standards such as ISO 14001 (Graham & Havlick, 1999). Previous studies analyzed the content of environmental and sustainability reports (Kolk, 1999, 2003; Kolk, Walhain, & van der Wateringen, 2001; KPMG, 2002; Morhardt, Baird, & Freeman, 2002). Our research takes a different approach by analyzing CEP statements as a separate but important element of businesses’ environmental programs. Many recent CEP statements emphasize environmentally sustainable business development and openly espouse proactive environmental protection measures that are beyond regulatory compliance (Graham & Havlick, 1999; Ramus, 2002). In this article, we use the terms beyond compliance to refer to any environmental policy that commits to more than regulatory compliance and sustainable development to refer to any policy, such as reduced use of fossil fuels, that is aimed at creating an environmentally sustainable business. Clearly, corporations have an incentive to publish environmental policy statements as the statements can positively influence public perceptions of company commitment to environmental protection and sustainable development, possibly even resulting in increased market share and improved stakeholder relations. And, there is little downside to making a public commitment (independent of intent to implement the policy) because there is no mechanism for verification. But as an ever-increasing number of companies make claims to sustainable development through these policies, skeptics wonder if these policies are just a form of greenwashing. Academics have questioned the ethics of marketing good corporate conduct (Stoll, 2002; Wulfson, 2001), and environmental organizations and consumer groups have criticized companies for false advertising, claiming that corporations use misleading environmental

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claims to create “green” images in the minds of the public (Lowenthal, 2001). Many wonder if there is any way for stakeholders outside the company to know when the published policy commitment results in internal organizational greening activities. There is little empirical research that examines whether companies implement environmental policies they commit to in their public statements. Stead and Stead’s 1995 empirical study looked at environmental strategy implementation but not at environmental policy statement implementation. And a number of researchers have studied corporate environmental policies from different perspectives. Winn and Angell (2000) studied a small number of firms to develop a process model for environmental policy commitment and policy implementation. Hoffman (1997, 2001) analyzed the historical trends in corporate environmental policy development. Brophy (1996), Ramus (2002), Sadgrove (1992), and Shimell (1991) analyzed the content of environmental policy statements. Reinhardt (1999b) identified the circumstances under which individual firms might commit to beyond compliance environmental policies. Ramus and Steger (2000) studied the relationship between employee environmental initiatives and environmental policy statements. Missing in the literature is a systematic analysis of the circumstances under which corporations in particular industry sectors might be expected to implement specific policies and the circumstances where we would expect them to avoid doing so. When does policy commitment correspond to policy implementation? We assume that the answer may differ significantly depending on the industry and its incentives/disincentives for action. (Whereas it would also be interesting to have a method for determining when an individual company will implement a published policy, it is not our purpose to do that here.) We looked at industry trends for four categories of industries (oil and gas, chemical manufacturing, other manufacturing, and services), focusing on large, leading-edge companies within those sectors. We selected these sectors because they represent primary, secondary, and tertiary industries. The starting point for our empirical investigation was the assumption that there are common reasons for companies within industry sectors to commit to and to implement certain environmental policies or not to commit to or implement them. The environmental literature specifies the following drivers for environmental management: regulation, the degree of stakeholder pressure, economic advantage, and mimetic pressures from the institutional environment (Bansal & Roth, 2000; Berry & Rondinelli, 1998; Hoffman, 1997; Lawrence & Morell, 1995). These drivers can be generalized to the industry level. For example, large companies in the

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same industry face the same environmental regulations and the same types of stakeholder pressure, engage in the same type of industrial activity as defined by their products and services, and can easily imitate each others’ practices. For instance, chemical manufacturing companies may behave in a similar fashion to one another vis-à-vis toxic chemical use reduction policies as they are likely to face similar business incentives/disincentives and stakeholder, regulatory, and institutional pressures related to such a policy. Limited data were available to analyze the relationship between commitment and implementation within a set of firms. Due to these data limitations, we have focused on answering our research questions using two independent databases, which we treat separately in data analysis because they are not drawn from an identical sample population. The first database contained the published CEP statements of 188 large companies from 20 countries all over the world compiled in a book by Graham and Havlick (1999). We used the official environmental statements of these companies, but we recognize that additional policies may exist within the organizations that are not captured in their published accounts or in our research. We used this database to determine to which specific environmental policies medium and large companies are making a public commitment. The second database consisted of data from 586 respondents who were nonmanagement employees within 10 large, environmentally proactive firms headquartered in Europe. We introduced an intentional bias into our analysis by only looking at companies that have a stated commitment to beyond compliance environmental policies. Because our starting point was an analysis of industry CEP statements, it was important to survey employees in companies with such published statements. Using their observations from the workplace, these employees were in an excellent position to assess company implementation of proactive environmental policies. We organized the employee data by industry sector to determine which specific environmental policies the four industry sectors appeared to be implementing. In the first section of this article, we review the relevant theories related to corporate social performance and corporate environmental policies. Then we build hypotheses by identifying isomorphic influences on environmental policy commitment and economic influences on beyond compliance environmental policy implementation for different industry sectors. Next, we explain our research methodology, discuss the results, and finally, we conclude by highlighting important findings, limitations of our research, and areas where further research is needed.

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THEORETICAL GROUNDING Corporate Social Performance Literature

Environmental issues have not always been on industry’s radar screen—or part of the corporate social responsibility construct (Carroll, 1999). But according to Carroll (1999), by the 1990s, environmental issues were one of the most mentioned social issues in the management field. The corporate social performance literature shows the process by which environmental issues have come to be addressed by industry. Zenisek (1979) predicted that societal demands and expectations for private enterprises would change over time with firms needing to be responsive to greater demands for social responsibility. Building on Carroll’s (1979) work, Wartick and Cochran’s (1985) corporate social performance (CSP) model indicated the dynamic process by which increased responsiveness to social issues occurs within firms. Winn and Angell (2000) used this corporate social performance literature to explain the evolutionary nature of the corporate greening process: beginning “with top management awareness [italics added] of the need for corporate responses to environmental issues, lead[ing] to policy commitment [italics added], and, ideally, end[ing] with implementation [italics added] at the operational level” (p. 1121; Ackerman, 1973; Bauer, 1978; Miles, 1987; Sethi, 1979; Wartick & Cochran, 1985). Note that Winn and Angell demonstrated that this process does not always occur from the top down but that sometimes line management and employees implement change without top management involvement. In our case, we looked at the commitment phase and implementation phase separately, recognizing that these are two distinct phenomena and that one does not necessarily follow the other chronologically. It is important to note that both the corporate social performance and corporate environmental policies literature (see the following) agree that line management and employee involvement are necessary for policy implementation to take place. This is relevant to our research because we test for policy implementation by asking employees if they have observed implementation of specific environmental policies. Corporate Environmental Policies Literature

The International Organization for Standardization (1996) defined a corporate environmental policy as a “statement by the organization of its intentions and principles in relation to its overall environmental performance, which provides a framework for action and for the setting of its

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environmental objectives and targets” (p. 2). Looking at current publications by business groups, one might assume that there is widespread corporate commitment to and implementation of proactive environmental policies aimed at sustainable development. For example, the World Business Council for Sustainable Development (WBCSD) and the Chemical Manufacturers Association both claim that companies are managing environmental impacts in a responsible and environmentally sustainable manner (i.e., they are self-regulating; King & Lenox, 2000), and therefore there is little need for regulatory intervention (Holliday & Pepper, 2001; Holliday, Schmidheiny, & Watts, 2002; Schmidheiny, 1992). Yet for this assertion to be credible, independent third parties need to confirm that action (implementation) follows environmental policy commitment. Howard, Nash, and Ehrenfeld (1999) and King and Lenox (2000), among others, studied the Chemical Manufacturers Association Responsible Care Program. These studies showed that without explicit sanctions, self-regulation is not consistent and that companies in the same industry will commit to different levels of environmental protection. In addition to learning that self-regulation is an inconsistent method of achieving environmental policy commitment and implementation, we also see from Howard et al.’s (1999) and King and Lenox’s (2000) research that one should expect to find different levels of environmental implementation within the chemical industry sector. And Logsdon (1985), Sharma, Pablo, and Vredenburg (1999), and Sharma (2000) presented evidence that individual companies may behave differently in response to environmental issues within the oil and gas industry. This finding that firms behave differently in response to environmental issues is in keeping with Reinhardt’s (1999b) work in which he discussed the economic rationale for some firms’ early commitment to beyond compliance environmental policies. Reinhardt (1999a, 1999b, 2000) discussed how policy commitment can be understood by looking at the market, business risk, organizational, and industry factors affecting each firm. This research theorized that if a firm perceives a potential economic gain from implementing corporate greening policies (or downside from not implementing them) then it will implement the policies. According to Reinhardt, different firms will behave differently based on their different perceptions of potential economic impacts. Furthermore, Sharfman, Shaft, and Tihanyi (2004) theorized that global firms will have different levels of environmental performance dependent on both internal organizational processes and institutional pressures for conformity. Still, the finding that there may be differences in environmental policy commitment and implementation within industry sectors does not negate our assertion that industries come under common

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institutional pressures that provide a common set of incentives and disincentives to commit to and to implement specific environmental policies. Indeed, Sharfman et al.’s recognition that different firms face common institutional pressures supports our argument. As more firms have committed to CEPs, researchers have looked at organizational issues related to these policies. The corporate environmental commitment literature (Friedman, 1992; Polonsky, Zeffane, & Medley, 1992) indicated that a published environmental policy statement is a starting point for organizational commitment but is by no means an indicator of commitment to proactive environmental behavior in the absence of organizational practices and specific policies that reinforce this policy statement. Their research raised the question of whether a written environmental policy statement can be used as a proxy for environmental actions and highlighted the importance of specific subpolicies in addition to the overarching environmental policy statement. Research by Ramus and Steger (2000) showed that a perception of organizational commitment to specific environmental policies had a positive relationship to employee environmental behavior to implement the policies. From this research we know that a general written environmental policy, when employees know about it, is the single most important predictor of environmental initiatives, with specific environmental policies such as adoption of environmental management systems, purchasing policies, and so on providing an important mediating effect between manager and employee behavior. Thus, there can be a link between publishing an environmental policy (and specific subpolicies) and implementation of that policy. Brophy (1996), Graham and Havlick (1999), and Ramus (2002) identified specific environmental policies to which environmentally proactive firms committed. In this article, we base our list of corporate environmental policies on Ramus’s 2002 work as it is the most comprehensive on this topic, reflecting the specific policies found in both Brophy’s and Graham and Havlick’s work (see Table 1 for the list of policies used in our research).

HYPOTHESES What motivates companies to commit to and to implement environmental policies? In the following, we argue that firms in industries will commit to environmental policies because of coercive, normative, and mimetic pressures, and they will implement environmental policies when there is an economic incentive to do so. We build testable hypotheses for

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Table 1 Corporate Environmental Policy Statements The company: 1. Publishes an environmental policy (PUBLISH) 2. Has specific targets for environmental performance (TARGETS) 3. Publishes an annual environmental report (REPORT) 4. Uses an environmental management system (EMS) a 5. Applies environmental considerations to purchasing decisions (PURCHASE) 6. Provides employee environmental training (TRAINING) 7. Makes employees responsible for company environmental performance (EMPLORESP) 8. Has management that understands/addresses issue of sustainable development b (SUSTDEV) 9. Systematically reduces fossil fuel use (FOSSILFUEL) 10. Systematically reduces toxic chemicals use (TOXCHEM) c 11. Systematically reduces consumption of unsustainable product (UNSUSTPROD) 12. Applies the same environmental standards at home and abroad (ABROAD) a. Includes corporate statements related to developing relationships with contractors/suppliers to help improve their environmental performance. b. Includes sustainable development related statements such as “We will apply the principles of sustainable development in the planning, design, operation and decommissioning of our facilities and services” (Graham & Havlick, 1999, p. 34) and “We will support sustainable development by integrating environmental protection goals and economic considerations into planning, at the earliest possible stage” (Graham & Havlick, 1999, p. 351). c. Excludes policies related to helping contractors/suppliers green their processes and includes policies aimed at greening own products and services (including lifecycle inputs and outputs). Policies 9 through 12 related to the natural step’s four system conditions (Robert et al., 2002).

four industry sectors—oil and gas, chemical manufacturing, nonchemical manufacturing, and services—arguing that institutional mechanisms have a greater influence on policy commitment and economic advantage/ disadvantage has a greater influence on policy implementation. Institutional Pressures to Commit to Environmental Policies

Institutional theory explains the dynamics motivating industries to follow similar patterns related to environmental management practice adoption. DiMaggio and Powell (1983) posited that once disparate organizations are structured into a field (in our case, industry), powerful forces emerge that lead them to become similar to one another. The process that drives organizations to resemble other organizations is called isomorphism. Scott (1995) identified the following three pillars that influence institutional isomorphic processes: regulative, normative, and cognitive. Regulative aspects are coercive in nature, using rules, laws, and sanctions to

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bring organizations into compliance. Normative aspects are morally governed with organizational actors adopting practices that are in keeping with their view of what is appropriate and what fulfills their social obligations. Cognitive aspects are mimetic in form and take place when organizations strive to fit within the culture and orthodoxy of their institutional setting. All three may drive organizations to commit to the same environmental policies. We build on this institutional framework to explain the relationship of each of these three mechanisms to organizational commitments to CEP statements. Hoffman (1997) showed that, over time, organizations often shift from one cognitive frame to another as they respond to regulative and normative pressures. Following this reasoning, we propose that the first set of institutional pressures that impacted firms’commitment to environmental policies were regulative/coercive, followed by normative, which in some cases were followed by a new cognitive framing of the issues. Hoffman (1997) showed that institutional processes create a contagion effect whereby when a “critical threshold” of adoption of a new practice “is reached, then rapid adoption occurs among a wide range of actors” (p. 158). Thus, after a large enough number of firms commit to a set of environmental policies, institutional theory predicts that other firms will commit to these environmental policies. First, there are a number of regulative/coercive pressures on industries exerted by external organizations (e.g., financial institutions, civil society organizations, customers, trade associations) that influence organizations’ decisions to publish CEP statements. This type of pressure is equivalent to the pressures discussed in stakeholder theory (Mitchell, Agle, & Wood, 1997), which suggests that firms pay attention to those stakeholders with the most influence and urgency and that different industry sectors face different regulatory and consumer pressures. (See appendix for a discussion of some of the different stakeholder influences on the four industry sectors.) Furthermore, the largest and most visible firms in an industry may be under more vigilant watch from environmental and other watchdog groups. Yet, institutional theory would predict convergence of organizations’behaviors over time due to a common institutional environment. For example, stakeholders from the financial markets look at environmental management as a proxy for good management practices (e.g., Dow Jones Sustainability Index, Innovest, KLD Domini), giving a coercive pressure across industry sectors to commit to environmental sustainability to qualify for environmentally focused funds. The Internet makes it easy for interest groups in civil society to quickly identify which firms have environmental policies in place. Those without environmental policies may come under public pressure to commit to protecting the

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natural environment. Customers may prefer to purchase goods and services from firms with reputations for caring about the natural environment, with the outcome that firms may perceive a potential market penalty for not committing to environmental policies. And, trade associations may make it a condition of membership that firms commit to policies aimed at protecting the natural environment (e.g., Chemical Manufacturers Association). It is not necessary to do a thorough analysis of these different regulative/coercive pressures to recognize that in the absence of verification there is little potential downside for most companies from claiming that they are committed to sustainable development policies. Because there is little downside and there is a trend toward external stakeholders, such as investors, community members, potential customers, and so on, to expect large, publicly held companies to publish environmental policy statements, we would expect that over time large, visible firms will commit to environmental policies (Hoffman, 2001; Ramus, 2003). The second set of pressures from the institutional environment is normative. Once a group of visible companies has committed to policies, institutional theory would predict that other firms will follow suit. In the case of normative pressures, firms will look for what others are doing to find out what is appropriate from a “social obligation” perspective (Scott, 1995, p. 35). Because there is a clear “moral” and “social” component to environmental protection, normative pressures to conform will have an important effect on organizations’ decisions to commit to environmental policies. Not only will firms commit to a policy when enough other firms have done so, but also the firms will look at the specific policies of others to copy them. Institutional theory would predict that mimetic pressures would lead firms that are later in adopting policies to look at examples of specific policy statements from earlier adopters. The process by which this occurs in practice is often best practice benchmarking where firms compare their own practices with those of other firms that they respect within their industry. Policy implementation aside, the costs of committing to policies are reduced when a firm can copy policies of earlier adopters. The third mechanism from the institutional environment promoting isomorphic change is cognitive. Hoffman (1997) pointed out that not all firms committing to a new set of practices will go through a substantive evolution supported by a cognitive belief system. Yet from an institutional perspective, “they all look the same” (Hoffman, 1997, p. 158). This is an important point. If not all of the firms that have committed to environmental policies have integrated the underlying values and norms that support them, then we would expect to see differences in levels of implementa-

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tion. (See Tolbert and Zucker’[1983] article for a discussion of how policy mimicry does not always result in organizational change.) We argue in the following that implementation of environmental policies in different industry sectors will be influenced by the economic incentives and disincentives for environmental change. But first, we summarize how the institutional theory framework explains the dynamics underlying environmental policy commitment across industries and across time. Institutional pressures on large firms to commit to environmental policies exist regardless of their industry sectors. Indeed, publication of environmental policy statements is such a widespread practice that it has become a norm for large firms. We expect common levels of commitment in the industry sectors we study, and we expect, due to mimetic behavior, similar environmental policy statements. Hypothesis 1: Companies in the oil and gas, chemical manufacturing, nonchemical manufacturing, and services industry sectors will commit to a similar set of environmental policies (Table 1). Economic Advantage From Environmental Policy Implementation

If, as we have argued, the underlying values and norms (cognitive framework) that support environmental policies are not in place in every organization that commits to environmental policy statements, then we would expect to see different levels of policy implementation. KPMG’s (2002) International Survey of Corporate Sustainability Reporting showed that companies in the top 250 of the global Fortune 500 and top 100 companies in 19 countries embraced sustainability because they believed it could enhance business performance, including • reducing operating costs and improving efficiency, • developing innovative products and services for access to new markets, and • reducing a company’s liabilities through integrated risk management.

We assume that implementation, not just policy commitment, would be necessary to reap these business benefits. Therefore, we expect economic advantage motivations to be related to policy implementation. Based on an extension of the beyond compliance theory (Reinhardt, 1999a, 1999b, 2000), we argue that companies in primary and secondary industry sectors will generally face an incentive to implement environmental policies that lead to cost savings (e.g., from recycling waste, reducing use of raw materials, energy, and water, etc.) and cost avoidance (e.g., compliance to prevent regulatory fines that can occur if a firm finds itself

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out of compliance with laws). Generalizing this economic advantage argument to the four industry sectors, we see obvious differences between the potential positive and negative economic impacts from policy implementation in the chemical and nonchemical manufacturing and oil and gas sectors as compared with the services sector. Building on this argument, manufacturers—including oil and gas companies that often market products—have the possibility of improving their market positions through product differentiation related to environmental features (Neste, 1997; Ramus, 2001). Environmental product differentiation is an interesting case. As one firm sees the opportunity to gain market share from its competitors, it will be motivated to market environmentally differentiated products, which in turn will increase the motivation of competitors to create products that will win back these customers. Taking the manufacturing sector as a whole, this dynamic of competition will create a greater likelihood of environmentally motivated competition than in sectors where environmental product differentiation is perceived as having less economic potential, such as in service-providing industries. Therefore, we would expect companies in the primary and secondary industry sectors to be more likely to implement environmental policies than services sector companies, which are less likely to face these incentives and disincentives given the non–resource intensive, nonhazardous, and less regulated nature of most services businesses. In summary, the primary and secondary industry sectors potentially face cost savings and market advantages from implementing and costs associated with not implementing environmental policies. Hypothesis 2: Companies within the chemical and nonchemical manufacturing and oil and gas industry sectors will be more likely to implement environmental policies than will companies in the services industry sector. Why Might Specific Policies Not Be Implemented by Some Industries?

Whereas we expect equal levels of commitment to the proactive policies across large firms in the different sectors, we also predict that there may be significant differences between industry sector commitment to and implementation of particular policies related to their main areas of business, notably for the oil and gas and the chemical manufacturing sectors. We would not expect companies in the oil and gas industries to commit to or implement a fossil fuel use reduction policy, even if they publish policies that commit them to environmentally sustainable business development. This argument is in keeping with the analytical work of Ketola (1993) related to oil company environmental policies. Neither would we

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expect chemical manufacturers to commit to or implement toxic chemical use reduction policies. We argue that although fossil fuel use reduction and toxic chemical use reduction are necessary actions to increase the environmental sustainability of an organization (see The Natural Step principles of Robert and colleagues, 2002), these two policies are just too close to their businesses of producing and marketing oil and gas, in the case of the fossil fuel use reduction policy, and chemicals, in the case of the toxic chemical use reduction policy. Hypothesis 3a: Companies within the oil and gas industry will not commit to or implement a fossil fuel use reduction policy. Hypothesis 3b: Companies within the chemical manufacturing industry will not commit to or implement a toxic chemical use reduction policy.

METHODOLOGY We analyzed two independent databases to test these hypotheses. Each database was used for a different purpose. We created the CEP database from a compilation made by Graham and Havlick (1999) of publicly available corporate environmental policy statements from companies worldwide. We used the CEP database to determine which trends existed concerning CEP commitment in different industry sectors in an international sample. We created the second database from survey data on employee perceptions of the implementation of specific environmental policies in different industry sectors. The sample population for the employee database is drawn from large environmentally proactive corporations headquartered in Europe, many with operations worldwide. Because our research was concerned with studying policy implementation, we sampled employees in companies that had most or all of the 12 environmental policy statements in Table 1. Neither of the databases contained sufficient companies and respondents from specific countries to control for national culture in the analysis. We did not compare these two databases because they are from different sample populations. Next, we give details about the databases, the measures, and the methods we used. CEP Database

Starting with Graham and Havlick’s (1999) compilation of 236 corporate environmental policies from the period 1993 to 1998, we categorized each statement into the subset of policies mentioned in the statements. We assigned a value of 1 if the company mentioned the specific policy in its written environmental policy statement and a 0 if it did not. The

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information available did not permit a more refined use of the data than this binary coding. Additional columns were added to distinguish the industry sector to which the company belonged based on the North American Industry Classification System (NAICS is a cooperative effort among Canada, Mexico, and the United States to replace the Standard Industrial Classification system.) We classified the firms and their policies into the following four industry sectors: a. primary industry—oil, which included oil, gas extraction, and mining firms; b. secondary industry—chemical, which included the chemical product manufacturing firms; c. secondary industry—manufacturing, which included all manufacturing companies except chemical manufacturing; and d. tertiary industry—services, which included companies belonging to wholesale trade; retail trade; transportation and warehousing; information; finance and insurance; professional, scientific, and technical services; administrative and support; waste management and remediation services; and accommodation and food services.

Note that we separated chemical from nonchemical manufacturing because we wanted to test whether these companies in the two groupings behaved differently vis-à-vis environmental policies. We thought there might be differences because chemical companies have been the focus of more public scrutiny from pressure groups than other types of manufacturing companies. We did not consider the utilities sector in our study because we did not have data on implementation for this sector. We also did not include companies that were classified in more than one of the four industry sectors. Thus, we used a sample of 188 companies’ environmental policy statements for our analysis. Figure 1 shows the number of firms by industry. The CEP database includes leading companies from 20 countries: 41.5% with headquarters in the United States, 33.9% with European headquarters, 12.7% from Canada, 9.7% from Asia (most of them with headquarters in Japan), and the remaining 1.2% from South America, Africa, or Australia. Companies represented in the CEP database come from dozens of different industries and range from medium to large in size (Graham & Havlick, 1999). We controlled for year of policy publication and found no significant differences.

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79 42.0%

Number of companies

80 70 60 47 25%

50

41 21.8%

40 21 11.1%

30 20 10 0 Ma

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Industry sectors

Figure 1. Corporate Environmental Policy Database by Industry Sectors

Employee Database

The second database included the results of an employee survey conducted in 10 leading-edge European companies between 1997 and 1999. The companies had national and international operations in the four industry sectors that we studied. We chose companies mentioned in environmental strategy journals such as Business Strategy and the Environment, Environmental Excellence, Environmental Quality Management, Greener Management International, and Tomorrow. These companies were listed by national ranking organizations as in the top 200 companies in its country in terms of sales. The companies in our sample were selected because they had all or most all the environmental policies listed in Table 1. We sent the survey to 1,995 mid- and low-level employees working in these 10 companies. Employees were randomly selected from diverse workforce units representing different functions and divisions. We assured the respondents of the confidentiality of their responses. They returned the completed surveys directly to us for processing. We received

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250

218 37.2%

Number of employees

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169 28.9%

150

119 20.3%

80 13.6%

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Industry sectors

Figure 2. Employee Database by Industry Sectors Note: *Manufacturing: electronics, packaging, tobacco, and transport. **Services: retail, insurance, food, and transport.

586 responses, which represented a 29.4% response rate. The employees who responded to the survey were based in 15 countries, namely, Austria, Belgium, Canada, Finland, France, Germany, Hungary, Italy, the Netherlands, Norway, Portugal, Spain, Switzerland, the United Kingdom, and the United States. We grouped employees based on the industry sectors where they worked (refer to Figure 2). Table 1 includes a complete list of the policies included in the survey. We created the list of policy statements in the survey by reviewing the environmental literature (Ramus, 2002). The first question on the survey asked the employee about his or her perception of the company’s commitment to implementing a general published environmental policy, and the rest of the questions asked about the 11 subpolicies. We used a 5-level scale to collect employee perceptions of each of the 12 environmental policies. The scale included two agreement options (strongly and partially agree), two disagreement options (strongly and partially disagree) and a “don’t know” option. We believe that asking employees in firms about the implementation of policies is a good proxy for understanding policy implementation.

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Whereas managers in the company might have a vested interest in asserting that policies are being implemented, employees might be expected to respond with a less biased view as long as they trust that their responses will be kept confidential. But, one potential limitation of measuring implementation using employee surveys is that one cannot always be sure that the employees working at different levels in the company have a complete view of policy implementation as they may not be aware of practices elsewhere in the facility. That said, we believe that most employees in the companies were in excellent positions to observe environmental policy implementation. Our employee sample was positively biased toward companies with proactive environmental management programs and published statements committing to environmental policies. By surveying employees in firms with proactive environmental policies we were able to examine employee perception of environmental policy implementation. In our sample we would expect a higher level of employee perception of policy implementation than if we had surveyed employees from the population of all companies. We acknowledge the possibility of response bias. People who are more interested in environmental issues were probably more likely to respond to this survey. The influence of this possible response bias can cut both directions in the results. For instance, people who value environmental protection may be proud of their company for having these policies, and as a result their responses may represent an inflated belief in the company’s commitment to the implementation of these policies. On the other hand, people who value environmental protection may be highly critical of their company’s efforts, resulting in a relative deflation in their assessment of company commitment to implementation efforts. We included six control questions (e.g., “What is your general opinion of management in your company?”) and found that the responses of those respondents who were relatively negative concerning the company and its management did not vary significantly from the rest of the sample. Statistical Procedures for Analyzing the Two Databases

We wanted to answer two questions. The first was whether or not there was a statistically significant difference between industry sector commitments to the 12 listed environmental policies. The second was whether or not there was a statistically significant difference in the perceptions of employees across these four industry sectors concerning implementation of these 12 policies.

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We did separate analyses for the two databases. First we performed a global test of the CEP data to find out whether there were differences between the specific policies committed to in industry sectors and a global test of the employee data to find out whether there were differences between the specific policies implemented in industry sectors. The global test we ran for each data set was a likelihood ratio test comparing an unrestricted model and a restricted model where we forced all the parameters to be equal. Then we used logit analyses with the dependent variables of specific policy commitment for the CEP database and specific policy implementation for the employee database. In a post hoc analysis, we performed likelihood ratio tests on the logit coefficients to determine when there were statistical differences between the four industry sectors. The likelihood ratio test used a chi-square distribution. Because we performed multiple hypothesis tests on the same set of data, the probability of making a Type I error increased from the conventional .05. Therefore, we used the Bonferroni adjustment that makes it more difficult for the test to be statistically significant. Note that because the two databases were substantially different populations of respondents—the CEP database is international and the employee database is European with some employees based in North America—we did not compare the two databases.

RESULTS AND DISCUSSION In this section we present the results from our analysis of the two databases and then discuss these findings. First, our analysis of the CEP database confirms Hypothesis 1, showing a trend toward companies across the four industry sectors to commit to a similar set of environmental policies. Second, we show how an analysis of the employee database supports Hypothesis 2 that companies in the services sectors appear to be less likely to implement the set of environmental policies than those in the manufacturing, chemical manufacturing, and oil and gas industry sectors. The CEP and employee database analyses also confirm Hypothesis 3a related to fossil fuel policy commitment and implementation in the oil and gas industry sector, namely, that this sector is less likely to commit or implement to a fossil fuel reduction policy than other industry sectors in the study. But surprisingly, our analysis of the two databases does not confirm Hypothesis 3b related to the toxics use reduction policy in the chemical manufacturing sector. Rather, we find that chemical companies in the CEP sample were just as likely to commit to a toxics use reduction policy as others in that database, but employees working for chemical manufacturing companies in the employee sample perceived that their companies

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Table 2 Hypotheses and Results Hypothesis 1. Companies in the oil and gas, chemical manufacturing, nonchemical manufacturing, and services industry sectors will commit to a similar set of environmental policies (Table 1). 2. Companies within the chemical and nonchemical manufacturing and oil and gas industry sectors will be more likely to implement environmental policies than will companies in the services industry sector. 3a. Companies within the oil and gas industry will not commit to or implement a fossil fuel use reduction policy. 3b. Companies within the chemical manufacturing industry will not commit to or implement a toxic chemical use reduction policy.

Results Confirmed

Confirmed

Confirmed Not confirmed

were less likely to implement such a policy as compared to employees working in other industry sectors. Table 2 summarizes our hypotheses and the results of these analyses. Environmental Policy Commitment

We asserted in Hypothesis 1 that we would expect similar commitment rates across the set of environmentally proactive policies listed in Table 1 for the four industry sectors of nonchemical manufacturing, oil and gas, chemical manufacturing, and services. We tested Hypothesis 1 using the data from the CEP database of international companies with published environmental policy statements. Tables 3, 4, and 5 show the descriptive statistics and the results of the logit regressions and likelihood ratio tests for the CEP database. The global likelihood ratio test indicated that only in the case of 3 of the policies—employee responsibility, sustainable development, and reduced use and production of unsustainable products—were there statistically significant differences between the unrestricted and restricted model. In keeping with this result, when we compare the means in Table 3 we find relatively similar trends in commitment across the 12 environmental policies but relatively large variances (most fall between .22 to .53). So, commitment to specific policies appears to be similar across industry sectors, but companies within the industry subsamples have some differences in the policies they publish/to which they commit. (text continues on p. 399)

396 1 0.29 0.44 0.39 0.39 0.54 0.51 0.44 0.07 0.27 0.46 0.10

41 0 0.46 0.50 0.49 0.49 0.50 0.51 0.50 0.26 0.45 0.50 0.30

SD

1 0.19 0.43 0.33 0.52 0.62 0.48 0.33 0 0.04 0.28 0.05

M 21

Oil

0 0.40 0.50 0.48 0.51 0.50 0.51 0.48 0 0.22 0.46 0.22

SD

1 0.24 0.25 0.25 0.37 0.49 0.30 0.28 0.10 0.17 0.33 0.08

M 79 0 0.43 0.44 0.44 0.49 0.50 0.46 0.45 0.30 0.38 0.47 0.28

SD

Manufacturing

1 0.22 0.34 0.21 0.45 0.43 0.28 0.60 0.09 0.23 0.11 0.02

M 47

0 0.41 0.48 0.41 0.50 0.50 0.45 0.50 0.28 0.43 0.31 0.14

SD

Services

1 0.23 0.33 0.28 0.41 0.50 0.36 0.39 0.07 0.19 0.29 0.06

M 188

SD

0 0.42 0.47 0.45 0.49 0.50 0.48 0.49 0.27 0.40 0.45 0.25

Total

Note: All 188 companies in the sample had a written environmental policy statement. Scale: We assigned a 1 if the company committed to the specific policy and a 0 if they did not. For full definitions of policies 1 through 12, see Table 1.

Number of companies P1: PUBLISH P2: TARGETS P3: REPORT P4: EMS P5: PURCHASE P6: TRAINING P7: EMPLORESP P8: SUSTDEV P9: FOSSILFUEL P10: TOXCHEM P11: UNSUSTPROD P12: ABROAD

M

Chemical

Table 3 Corporate Environmental Policy Database Means and Standard Deviations

397

–1.138*** –1.079*** –1.075*** –0.546* –0.031 –0.829** –0.944*** –2.169*** –1.521*** –0.703** –2.317***

0.263 0.258 0.258 0.233 0.225 0.245 0.251 0.373 0.295 0.236 0.396

Note: For full definitions of policies 1 through 12, see Table 1. a. Zero companies in this sector recognize the policy. *p < .05. **p < .01. ***p < .001.

TARGETS REPORT EMS PURCHASE TRAINING EMPLORESP SUSTDEV FOSSILFUEL TOXCHEM UNSUSTPROD ABROAD

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

–0.837* –0.215 –0.396 –0.436 0.161 0.093 –0.264 –2.490*** –0.962** –0.072 –2.171***

0.344 0.315 0.322 0.320 0.314 0.314 0.315 0.600 0.353 0.317 0.527

SE

Coefficient

SE

Coefficient

Policy

Chemical (N = 41)

Manufacturing (N = 79)

Table 4 Corporate Environmental Policy Database Logit Regressions

–1.410* –0.243 –0.652 0.121 0.487 –0.058 –0.656 a — –2.957** –0.887 –2.950**

Coefficient

SE 0.557 0.443 0.464 0.438 0.449 0.438 0.464 — 1.025 0.483 1.025

Oil (N = 21)

–1.280*** –0.652* –1.293*** –0.195 –0.307 –0.965** 0.399* –2.231*** –1.154** –2.125*** –3.789***

Coefficient

0.357 0.308 0.356 0.294 0.295 0.326 0.297 0.523 0.345 0.473 1.011

SE

Services (N = 47)

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Table 5 Corporate Environmental Policy Database Likelihood Ratio Test for Coefficients Policy P2: TARGETS Manufacturing Services Oil Chemical P3: REPORT Manufacturing Services Oil Chemical P4: EMS Manufacturing Services Oil Chemical P5: PURCHASE Manufacturing Services Oil Chemical P6: TRAINING Manufacturing Services Oil Chemical P7: EMPLORESP Manufacturing Services Oil Chemical P8: SUSTDEV Manufacturing Services Oil Chemical P9: FOSSILFUEL Manufacturing Services Oil Chemical

Manufacturing

Services

Oil

0.10 0.20 0.48

0.04 0.78

0.80

1.12 2.55 4.48

0.57 0.95

0.00

0.25 0.61 2.68

1.18 3.48

0.21

0.87 1.78 0.08

0.36 0.30

1.06

0.55 1.06 0.25

2.23 1.14

0.36

0.11 2.29 5.41

2.75 5.42

0.08

3.84 2.27

0.49

— 0.04

—

12.44*** 0.29 2.84

0.06 — 0.21

(continued)

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Table 5 (continued) Policy P10: TOXCHEM Manufacturing Services Oil Chemical P11: UNSUSTPROD Manufacturing Services Oil Chemical P12: ABROAD Manufacturing Services Oil Chemical

Manufacturing

0.64 2.57 1.45

8.71*** 0.12 2.52

2.52 0.38 0.05

Services

4.13 0.15

3.34 15.22***

0.33 2.53

Oil

5.19

2.08

0.52

Note: For full definitions of policies 1 through 12, see Table 1. Likelihood ratio statistics dis2 tributed as χ q. Significant comparisons after Bonferroni adjustment (**p < .01, ***p < .001).

To confirm these results we can turn to the post hoc test shown in Table 5. The post hoc test shows that there is little difference between the coefficients from the Table 4 logit regressions. After applying the Bonferroni adjustment, of the 66 comparisons there are only 3 that are statistically significantly different. Chemical and manufacturing companies are more likely to commit to reduce the use of unsustainable products than service companies. This makes sense as services companies do not produce products. On the other hand, service companies in the sample were more likely to commit to act according to the sustainable development policy than manufacturing companies. Note that the negative coefficients in Table 4 indicate when the majority of companies in the subsample did not commit to the specific policy, which is the majority of the cases. We have argued that in keeping with institutional theory (DiMaggio & Powell, 1983; Scott, 1995), coercive pressures from stakeholder groups, normative pressures to fulfill social obligations, and the ease of copying each other have motivated firms across industry sectors to commit to similar environmental policies. Our results support this argument. Whereas individual differences exist between companies within an industry sector, there are similar commitment rates to most of the specific environmental policies across the four industry sectors. There is no clear evidence that one of the four industry sectors is more likely to commit to specific policies.

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But although similar trends exist in policy commitment across industry sectors, our analysis shows that there is an important tendency across industry sectors not to commit to specific environmental policies. All of the companies in the database had a general environmental policy, but the negative coefficients in Table 4 show that voluntary commitment to an environmental policy statement does not always extend to making a commitment to specific policies that would aid in the implementation of the overarching environmental policy. Indeed, the majority of companies voluntarily publishing a statement do not commit to most of the specific policies. Friedman (1992) and Polonsky et al. (1992) indicated that a published environmental policy statement in the absence of specific policies by no means demonstrates organizational commitment to implementing the environmental policy. Some policies are clearly more popular than others, for example, environmental reporting, environmental training, and commitment to sustainable development. However, never do more than 50% of the sample commit to even these “popular” policies. Environmental Policy Implementation

We asserted in Hypothesis 2 that we would expect oil and gas and chemical and nonchemical manufacturing to be more likely to implement policies listed in Table 1 than companies in the services sector. Tables 6, 7, and 8 show the descriptive statistics and the results of the logit regressions and post hoc likelihood ratio tests for the employee database. The global likelihood ratio tests indicated that there were statistically significant differences in industry sector policy implementation for 9 of the 12 policies. The policies where the global test showed no significant differences were for environmental purchasing, employee responsibility, and sustainable development. Studying the means in Table 6 and the coefficients in Table 7, we can see that there are differences between the industry sectors with regards to employee perceptions of specific environmental policy implementation. The post hoc analysis in Table 8 allowed us to identify where these differences between industry sectors were significant. After the Bonferroni adjustment, in around 45% (32 out of 72 comparisons) of the triangular heuristic results in Table 8 there is a statistically significant difference in policy implementation. Next, we discuss some of these differences in more detail. Services sector. Looking at Table 7 we can see that the services sector has consistently smaller coefficients than do the other three industry sectors, indicating that implementation is less likely to occur. (Purchasing and fossil fuel reduction policies are the two exceptions, and the

401

1.59 1.53 1.03 1.31 0.47 0.86 1.04 0.55 –0.38 0.27 –0.11 0.62

119 0.70 0.56 1.09 0.86 1.02 1.22 1.06 1.03 1.19 1.25 1.14 1.17

SD

1.75 1.26 1.23 0.74 0.55 0.48 0.52 0.71 –1 0.88 0.41 0.96

M 80

Oil

0.54 0.72 0.9 0.87 0.98 1.14 1.19 0.91 1.31 1.1 1.03 1

SD

1.61 1.72 1.26 1.47 1.06 1.19 1.42 1.1 0.49 1.23 0.73 1.19

M 218 0.68 0.54 0.94 0.77 0.94 1.03 1 0.9 0.9 0.91 0.97 1

SD

Manufacturing

1.34 1.24 0.57 0.93 0.93 0.1 0.47 0.56 0.23 0.54 0.24 0.39

M 169

Services

0.89 0.81 1.09 0.96 1.02 1.28 1.34 1.03 1.08 0.91 0.95 1.07

SD

586 1.55 1.48 1.01 1.18 0.83 0.71 0.94 0.78 0.0309 0.79 0.37 0.8

M

Total

0.75 0.69 1.05 0.9 1.01 1.24 1.2 1 1.19 1.08 1.06 1.1

SD

Note: For full definitions of policies 1 through 12, see Table 1. Scale: strongly agree (2), partially agree (1), don’t know (0), partially disagree (–1), strongly disagree (–2).

Number of employees P1: PUBLISH P2: TARGETS P3: REPORT P4: EMS P5: PURCHASE P6: TRAINING P7: EMPLORESP P8: SUSTDEV P9: FOSSILFUEL P10: TOXCHEM P11: UNSUSTPROD P12: ABROAD

M

Chemical

Table 6 Employee Database Means and Standard Deviations

402 2.084*** 3.030*** 1.008*** 1.615*** 0.700*** 1.129*** 1.909*** 1.008*** 0.194 1.080*** –0.028 0.871***

0.216 0.324 0.153 0.182 0.144 0.158 0.202 0.153 0.136 0.156 0.135 0.149

Note: For full definitions of policies 1 through 12, see Table 1. *p < .05. **p < .01. ***p < .001.

PUBLISH TARGETS REPORT EMS PURCHASE TRAINING EMPLORESP SUSTDEV FOSSILFUEL TOXCHEM UNSUSTPROD ABROAD

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

2.188*** 3.359*** 1.132*** 1.599*** 0.050 1.087*** 1.429*** 0.219 –0.322 –0.117 –0.916*** 0.533**

0.304 0.509 0.213 0.245 0.183 0.211 0.232 0.184 0.186 0.183 0.203 0.189

SE

Coefficient

SE

Coefficient

Policy

Chemical (N = 119)

Manufacturing (N = 217)

Table 7 Employee Database Logit Regressions

3.664*** 2.344*** 1.836*** 0.353 0.405 0.511* 0.619** 0.731** –0.619** 1.099*** 0.150 1.099***

Coefficient

SE 0.716 0.396 0.324 0.227 0.228 0.231 0.234 0.239 0.234 0.258 0.224 0.258

Oil (N = 80)

1.609*** 1.609*** 0.048 0.666*** 0.858*** –0.119 0.460** 0.215 0.361* –0.119 –0.536** –0.119

Coefficient

0.207 0.207 0.154 0.163 0.169 0.154 0.004 0.155 0.157 0.154 0.160 0.154

SE

Services (N = 168)

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Table 8 Employee Database Likelihood Ratio Tests of Coefficients Policy P1: PUBLISH Manufacturing Services Oil Chemical P2: TARGETS Manufacturing Services Oil Chemical P3: REPORT Manufacturing Services Oil Chemical P4: EMS Manufacturing Services Oil Chemical P5: PURCHASE Manufacturing Services Oil Chemical P6: TRAINING Manufacturing Services Oil Chemical P7: EMPLORESP Manufacturing Services Oil Chemical P8: SUSTDEV Manufacturing Services Oil Chemical

Manufacturing

Services

Oil

2.53 6.67** 0.08

12.86*** 2.60

4.80

15.64*** 1.71 0.31

3.01 14.30***

2.60

19.97*** 5.97 0.22

31.27*** 18.05***

3.49

15.48*** 18.54*** 0.00

1.25 10.81***

0.51 1.18 7.78***

2.53 10.66***

1.48

33.34*** 4.79 0.03

5.25 22.78***

3.40

34.59*** 17.08*** 2.40

0.32 12.73***

6.08

13.41*** 0.94 10.84***

3.36 0.00

14.46***

2.93 (continued)

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Table 8 (continued) Policy P9: FOSSILFUEL Manufacturing Services Oil Chemical P10: TOXCHEM Manufacturing Services Oil Chemical P11: UNSUSTPROD Manufacturing Services Oil Chemical P12: ABROAD Manufacturing Services Oil Chemical

Manufacturing

Services

0.65 9.32*** 5.07

12.55*** 8.01***

31.03*** 0.00 25.33***

17.89*** 0.00

5.95 0.46 13.91***

21.87*** 0.59 1.95

6.26 2.19

17.89*** 7.23***

Oil

0.97

15.84***

12.77***

3.20

Note: For full definitions of policies 1 through 12, see Table 1. Likelihood ratio statistics dis2 tributed as χ q. Significant comparisons after Bonferroni adjustment (**p < .01, ***p < .001).

likelihood ratio tests show that purchasing policy implementation is not statistically significantly different from the other three and that fossil fuel use reduction is not different from manufacturing.) When comparing the logit coefficients for the services sector with those for manufacturing, 8 out of 12 are statistically significantly different, with services less likely to implement these policies than manufacturing. When comparing the logit coefficients for the services sector with those for oil and gas, 5 out of 12 are statistically significantly different, with services less likely to implement 4 of these policies (and more likely to implement fossil fuel use reduction) than the oil and gas sector. When comparing the logit coefficients for the services sector with those for chemical manufacturing, 8 out of 12 are statistically significantly different, with services less likely to implement 6 of these policies (and more likely to implement green purchasing and fossil fuel use reduction) than the chemical manufacturing sector. Thus, there is evidence that in the half of the cases (18 out of 36)

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services sector companies are less likely to implement specific environmental policies than are the other three sectors. In summary, we have argued that companies in manufacturing (chemical and nonchemical) and oil and gas industries will be more likely to implement the environmental policies than the services industry because policy implementation is more likely to enhance business performance in these industries. This is in keeping with Reinhardt’s (1999a, 1999b, 2000) beyond compliance theory, which indicated that economic incentives/ disincentives would influence firm decision making. It appears that the services sector incentives/disincentives are consistently different from those in the other sectors. Even in the case of one of the exceptions to the trend of services being less likely to implement specific policies than other sectors, services companies are more likely to commit to a fossil fuel reduction policy because it is easier for them to do so than for oil or chemical companies that are far more dependent on fossil fuel in their line of business. And even though the means are consistently positive in Table 6 for services, showing some tendency to implement the policies, they are consistently lower than for the other groups. Overall, the service sector employees in the sample do not believe as strongly that their companies were implementing the list of proactive environmental policies as employees in the other sectors. Manufacturing sector. The means and logit coefficients in Tables 6 and 7 for the manufacturing sector are consistently larger (and positive in all but one case) than for the other three sectors. Here, 8 out of 12 coefficients are statistically significantly different and positive as compared to services, indicating stronger employee perceptions of policy implementation. Also, 4 out of 12 are statistically significantly different from oil and gas, with 3 (environmental management system, employee responsibility, and reducing the use of fossil fuel) as more likely to be implemented and 1 (publishing a policy) as less likely to be implemented. Next, 4 out of 12 coefficients are statistically significantly from the chemical manufacturing sample, with green purchasing, sustainable development, toxic chemical use reduction, and reduced use/production of unsustainable products all more likely to be implemented by manufacturing companies than chemical companies in the sample. Thus, whereas manufacturing sector companies show a greater propensity to implement environmental policies than services sector companies, this sector is less different from the chemical and oil and gas sector companies. This is in keeping with our argument that all three of these sectors have industrial operations, can benefit from greater resource effi-

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ciency, and face similar potential penalties due to more stringent legal requirements. Oil and gas sector. In Hypothesis 3a, we asserted that oil and gas sector companies would be less likely to commit to or implement fossil fuel use reduction policies because these policies are too close to their main line of business. Of the 21 oil and gas companies in the CEP database, none of them committed to a fossil fuel use reduction policy. In the employee database, the mean response of the 80 employees working in this sector was –1, corresponding to an average response of partially disagree that the company is committed to a policy of fossil fuel use reduction. In Table 7, we see that the logit coefficient corresponding to fossil fuel use reduction policy in this sector is both negative and statistically different from zero (p < .01) and that both services (p < .001) and manufacturing (p < .01) sectors are more likely to implement this policy. Thus, we believe there is evidence from the first database that oil and gas companies are avoiding committing to a fossil fuel use reduction policy and evidence in the employee database that oil and gas companies are not implementing a fossil fuel use reduction policy. From the CEP database results we can see that oil and gas companies in the CEP sample are committing to other policies related to sustainable development; they are just not embracing the fossil fuel use reduction policy. We argue that this is because fossil fuel use reduction is too close to their main businesses. Hypothesis 3a is confirmed by the results from these two databases. Chemical manufacturing sector. In Hypothesis 3b, we asserted that chemical manufacturing sector companies would be less likely to commit to or implement toxic chemical use reduction policies because this policy was too close to their main lines of businesses. In Table 3, the chemical manufacturing companies have a mean of 0.27, which is larger than the average total mean of 0.19. This indicates the 27% of the 41 chemical companies in the sample committed to this policy. This was an unexpected result! In terms of implementation, chemical companies in the employee database appear far less likely to implement a toxic chemical use reduction policy than other sectors, with a mean in Table 6 of 0.47 compared to a total average mean of 0.61. And, the likelihood ratio tests in Table 7 show that chemical companies in the employee sample were much less likely to implement such a policy than would oil and gas (p < .001) or manufacturing (p < .001) sector companies in the sample. Thus, we have a very interesting result. Contrary to Hypothesis 3b, chemical companies in the CEP sample seem to be as willing to commit to

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toxic chemical use reduction as companies in other sectors. But when looking at the employee database, there is less evidence that such a policy is implemented. Because the two databases include different companies, we do not want to overgeneralize our results to the entire industry. However, one possible explanation is that chemical manufacturing companies come under stakeholder pressure to adopt toxic use reduction policies (for reasons argued in the appendix), but in some cases they do not actually implement the policy once they make the public commitment. Another possible explanation is that no matter how much chemical companies reduce the use of toxic chemicals (which leads to cost savings and positive competitive advantage vis-à-vis competitors), their employees will never perceive that the company is implementing such a policy while it remains in the business of producing and selling chemicals. This might be a case of employees grappling with cognitive dissonance (see Festinger, 1957). Limitations and Opportunities for Future Research

This research opens questions for future work. We used two independent databases where it would have been ideal to have a single database that mapped employee responses to company policy commitment data in a large number of companies. (We were limited to 10 companies in our employee sample.) We used two separate databases because of the difficulty in finding companies that were willing to share such sensitive information about the implementation of their environmental policy commitments. Furthermore, we have only looked at a subset of businesses, focusing on large companies in four industry sectors in the developed world that claim to have environmental policy commitment. To address these limitations, future research might look at a random sample of firms across industry sectors and across the world to see if the same trends appear in a sample without this proactive environmental bias. We would expect a more random sample to find fewer companies committing to specific policies and even fewer yet implementing them, however it would be worth testing. Such an analysis could include additional control variables such as location, size, and ownership of the companies. Work studying the descriptive language used in communicating environmental policies in actual company documents would be another excellent refinement.

CONCLUSIONS The starting point for this research was the belief that proof of environmental commitment does not come from publication of an environmental

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policy statement but from the implementation of changes that improve the environmental performance of a company. In this article, we have analyzed policy commitment and policy implementation as two separate phenomena using two separate databases. Our research shows that companies in the four industry sectors follow similar patterns related to committing to a set of environmental policies. This is in keeping with institutional theory (DiMaggio & Powell, 1983; Scott, 1995), which we argued would predict similar policy commitment trends due to isomorphic processes that result in conformance. Still, our analysis shows low rates of adoption for specific environmental policies. Academics have argued that specific environmental subpolicies are necessary for policy implementation to take place (Friedman, 1992; Polonsky et al., 1992). The second part of our analysis studied employee perceptions of environmental policy implementation. We predicted in Hypothesis 2 that services companies will have fewer economic incentives and disincentives to implement environmental change and that companies in this industry sector would therefore be less likely to implement environmental policies. Our results showed that services companies were just as likely to commit to policies as other sectors but were less likely to implement most of the specific environmental policies. Manufacturing, although similar to chemical manufacturing and oil and gas sector companies, was the most likely to implement the policies. And oil and gas companies, although just as likely to commit to specific policies of sustainable development as the other sectors, were not at all likely to commit to or implement a fossil fuel use reduction policy. Finally, chemical manufacturing companies were just as likely to commit to a toxic use reduction policy as companies in the other sectors, however the employee database showed that employees in a sample of chemical companies did not believe the companies were implementing such a policy. Specific policy implementation is a key to corporate greening. And we can see from this study that there are interesting differences in policy implementation for different types of businesses and that the differences dovetail with our argument that economic incentives and disincentives for environmental change will govern environmental policy implementation. How can our research help guide the expectations of outside stakeholders regarding corporate environmental policy implementation? We have argued that coercive, normative, and mimetic pressures from the institutional environment may motivate companies to commit to policies but that economic advantage is the most probable motivator for companies to implement specific environmental policies. Our findings indicate that an outside stakeholder should look with a skeptical eye at any company that commits to a policy if that company does not have an economic

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motivation for implementing it. Services sector companies do not benefit from the same economic incentives, and neither do they face the same potential costs from environmental policy implementation. Therefore, it is possible that companies in this sector are jumping on the bandwagon of policy commitment without creating new practices to implement specific policies. And in the cases of oil and gas and chemical manufacturing, there may be quite a lot of companies in these sectors that claim they want to be sustainable but that may not implement fossil fuel use reduction policies (in the case of oil and gas) or toxic chemical use reduction policies (in the case of chemical companies). The Natural Step principle would argue that no company is moving toward sustainable development without fossil fuel use reduction and toxic chemical use reduction policies being implemented (Robert et al., 2002). Third-party audits and verification may be the only method of assuring the public that environmental policy commitment indeed leads to policy implementation. In conclusion, we have argued that because environmental policy statements are easy to make, stakeholders want companies to make them, and it is hard to control whether they are implemented, companies may be committing to them without a serious intent to implement the policies. In the absence of regulation and without a business rationale for implementation, it is unlikely that even those companies that claim to be committed to sustainable development will move closer to this illusive goal. One only needs to look at the relative lack of commitment to environmental subpolicies necessary to implement environmental change to see that environmental policy commitment may often be a form of greenwashing.

APPENDIX Stakeholder Pressures on Industry Sectors Some stakeholder pressures result from the geographical location of business operations and sales (local regulators, local communities, and local consumer preferences), however it is also possible to identify some trends in stakeholder pressures on industry sectors. This analysis looks at these general trends in stakeholder pressures that are recognizable for large companies in each sector as it does business in the developed world. (Space does not allow an in-depth analysis of regional differences.) Chemical Industry Of the four sectors we are studying, chemical manufacturing has historically faced the greatest regulatory and consumer pressure. Beginning with Rachel

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Carson’s (1962) Silent Spring and continuing today with the endocrine-disruptor horror stories of Our Stolen Future (Colburn, Dumanoski, & Myers, 1996), chemical manufacturers face regulatory pressure to minimize the presence of toxic chemicals in the environment and public ambivalence about their products. Chemical producers (and users) have been singled out from other industry sectors by regulations like EPA’s Toxic Release Inventory in the United States or the European Commission’s (2001) white paper on chemicals strategy, which make chemical release information available to the public. The availability of this information coupled with public concern raised by industrial accidents has reinforced the image of chemicals as dangerous for both the environment and human health and safety (Hoffman, 2001). Indeed, there is widespread public awareness of potentially negative health and environmental effects from chemical manufacturing processes and products. Consumer preferences are increasingly being shaped by fear of chemicals. For example, fear of toxic chemicals in baby food and toys has led to rapid regulatory action, and fear of pesticides and herbicides has led to increased consumer preferences for organically grown food. Companies entering the organic food market in the United States have doubled sales in 5 years, from $3.9 billion in 1989 to $7.6 billion in 1994 (Hoffman, 2001). Also, reports of buying natural health and beauty aids, natural household cleansers, bottled water, organic produce, natural or holistic medicines, and natural cosmetics have increased over time (Kaufman, 1999). Oil and Gas Sector The oil and gas sector also faces a high level of regulatory and public pressure to control their environmental impacts. At the same time, fossil fuel products are seen by most in the public as the fuel for a growing economy, providing employment, affordable transportation, and heating. Whereas the public is aware of the potential harms caused by carbon dioxide and other by-products of fossil fuel production and use—notably their contribution to global warming and poor air quality in cities—few consumers are willing to stop buying and burning fossil fuel. Indeed, many consumers recognize some culpability for environmental degradation as purchasers/users of oil and gas products. Furthermore, risks and unintended side effects from oil and gas sector are at a larger distance from the consumers’ life (e.g., problems in Nigeria for Shell Corporate) than from chemical products (e.g., chemicals in baby food or cosmetic products). Manufacturing Sector Nonchemical manufacturers face some regulatory pressure to minimize waste—especially use and disposal of toxic chemicals—and environmental degradation and to look after products at the end of their useful life (e.g., through the European packaging initiative and recycling laws) (Sarkis, 2001). However, although regulatory pressure on consumer goods and the companies that manufacture them exists, there are often economic benefits associated with waste and

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toxics use reduction and natural resource conservation that dovetail with the stakeholder pressures (e.g., using less tonnage of chemical or natural resource inputs to produce the same volume of products benefits both the manufacturer and the consumer as it leads to cost reductions that can be reflected in both company profits and the purchase price). Furthermore, consumer pressure related to manufactured goods is minimal. Organizational purchasing has become an exception to this rule, with many corporate consumers beginning to demand “greener” operations and products from their suppliers (Russel, 1998). Generally speaking, people are happy to have access to cheap consumer products. Most consumers have little ambivalence about purchasing whatever manufactured goods they can afford, with a small percentage being happier buying what they perceive to be an environmentally superior product—thus producing the opportunity for economic gain from product differentiation within the nonservice industry sectors. Services Sector Of the four sectors in our study, the services sector clearly faces the fewest regulatory and consumer pressures. Services companies seldom use heavily regulated inputs when creating their services. But any large-sized company in the developed world faces some environmental regulatory pressure, even if it is only to reduce energy consumption, recycle wastepaper, and so on. On the other hand, consumers seldom associate environmental harm with service providers such as insurers, banks, software producers, and so on. According to Henriques and Sadorsky (1996), “Firms in the natural resource sector are more likely to formulate environmental plans while firms in the services sector are less likely to have plans” (p. 381), due to differences in pressure related to the environmental impacts from their activities.

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Catherine A. Ramus is an assistant professor of organizational behavior at the Donald Bren School of Environmental Science and Management, University of California, Santa Barbara. Her research interests in the field of corporate environmental management include how organizations can support employee-led environmental problem solving and value creation and how organizations can attract and retain employees through commitment to socially and environmentally sustainable practices. She has a doctorate from HEC at the University of Lausanne, a master’s degree from Harvard’s Kennedy School of Government in public administration, and an undergraduate degree in economics and political science from the University of California at Berkeley. She can be reached at [email protected]. Ivan Montiel is a Ph.D. candidate at the Donald Bren School of Environmental Science and Management at the University of California, Santa Barbara. Prior to joining the Ph.D. program, he worked as an environmental consultant in Barcelona. His research focuses on corporate environmental management. In particular, he studies the diffusion and performance implications of environmental voluntary mechanisms such as the international standard ISO 14001. He earned his B.S. in environmental sciences at University Autonomous of Barcelona and has a master’s degree in corporate environmental management from the University Pompeu Fabra in Barcelona. He can be reached at [email protected].