Consulting Firms: To Green or not to green?

What about the other guys?

It is more obvious for bigger companies that would otherwise have a more significant impact on the environment to be inclined to develop a voluntary environmental program. Coca-cola makes soda. Soda requires water. Coca-cola establishes goal to replenish water consumed in their facilities. The result? Stakeholders are engaged and people continue to purchase coca-cola products. Environmental programs are commonly embedded into Corporate Social Responsibility frameworks/strategies, which companies create to ensure their stakeholders of the commitment to reducing their impact to the environment. The development of these programs are more obvious for larger corporate companies but what about the service based companies, specifically within the consultancy sector? Though their environmental impact is seemingly minor, consider the amount of consulting firms within the service sector. What are the drivers for them to reduce their environmental footprint? Should society be concerned with the collective impact of the many rather than larger impact of the few?

Though they are not directly linked to natural resources, consulting firms collectively emit greenhouse gases and consume resources in their day-to-day operations with use of materials, energy use and travel. A research paper entitled “Environmental Policies for Sustainable Development: An Analysis of the Drivers of Proactive Environmental Strategies in the Service Sector” from the University of Santiago de Compostela sought to determine the factors that would make environmental firms more likely to develop environmental strategies or analyze their impact on the environment. The article refers to this as environmental proactivity.

How was it measured?

Based on previous research, the following factors were stipulated to have a positive effect on proactive environmental strategies. :

Hypothesis 1: Stakeholder pressure perceived by the firm
Hypothesis 2: Positive environmental attitudes and motivations of managers

Hypothesis 3: Positive short-term firm performance expectations Hypothesis 4: Business strategic attitude

Research included gathering data from 143 companies, of which 41 provided valid responses. The article states, “The majority of respondents were companies employing fewer than 10 workers, while only five companies had 50 or more employees. The typical respondent is a male between 25 and 39 years old and graduated from a Spanish university. Data were collected between April and July of 2012.”

What they found may not be as expected…

Similar to the Coca-cola example, one would suggest that stakeholder pressure from consumers, governmental and non-governmental organizations and shareholders is the main driver for any company to promote environmental proactivity. However, what was found was that stakeholder is actually not a good predictor of environmental proactivity in service-sector firms. In Spain, consulting firms aren’t subject to environmental regulations and the environmental impact of these companies aren’t transparent. Though the authors agree that more research is needed, stakeholder groups produce varied responses to environmental practices and can even have divergent views from other stakeholders. Too many varied interests to attend to can potentially lead to little or no action (the consequences are not addressed in the article).

Managers more inclined to be “pro-environment” are more likely to influence proactive environmental strategies. Training, financial incentives and environmental education provided to managers are effective in changing a manager’s attitude toward the environment and to inducing strategic changes such as adopting environmental management standards.

It is noted that addressing environmental issues have the potential to be large investments with the expected return in the long term, not the short term. Companies in a “weak financial position” that do not have the capital are less likely to make investments toward implementing environmental strategies. However, positive short term performance expectations were found to have a positive effect on proactive environmental strategies, which is supported by previous research as well.

Strategic attitude refers to a company being either strategic proactive or strategic reactive. Strategic proactive firms are likely to: (1) develop new markets and products, (2) use more flexible technologies and (3) design well-adapted organizational structures for innovation. Additionally, the need to be more competitive or gain a competitive advantage may trigger environmental proactivity.

Though no hypothesis was made regarding company size, researchers found that it “has a negative influence on environmental proactivity of environmental consulting firms.” This is interesting to note considering common perception indicates that bigger companies with deeper pockets are in the position to be environmentally proactive but it seems the correlation is the opposite for consulting firms.

What are the implications?

The research indicates that the factors that affect the willingness of a company to address environmental impact can be drivers for environmental strategy. For example, companies with pro-environment managers can induce the development of environmental management programs which can encourage emission reduction within company culture. The study also states that economic incentives such as subsidies, fiscal deductions or tax breaks could help companies without the financial capacity to implement pro environmental strategies which consider environmental impact along with business strategy. Most importantly, the environmentally proactive model that works for industry may not fit the model for the service sector so the approach to address environmental impacts should be different as well.

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Valerie Thorsen

Valerie Thorsen

An environmental engineer with a passion in emission reduction and sustainability, particularly in what businesses can do to reduce their impact and provide environmental outreach for their stakeholders.

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