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Unformatted text preview: Competitive Environmental Strategies: W HEN D OES I T P AY TO BE G REEN ? Renato J. Orsato P rogressive corporations have invested in increasingly ambitious sustainability initiatives. While environmental investments are welcome by society, managers need to identify the circumstances favoring the generation of both public benefits and corporate profits. For some firms, better utilization of resources may pay-off as environment- related investments. For others, obtaining ISO 14001 certification or having some eco-labeled products can eventually be the best way of pursuing competi- tive advantage. This article presents a framework for categorizing generic types of competitive environmental strategies, a classification scheme that can help managers optimize the economic return on environmental investments and transform these investments into sources of competitive advantage. Business and the Environment: Beyond the “ Free Lunch ” Debate The 1990s were marked by a heated debate in the field of Business and the Environment around “whether it pays to be green.” 1 According to the pro- ponents of the “free lunch,” “double dividend,” and “win-win hypothesis,” there are extensive opportunities for business to profit from environmental investments. 2 According to Reinhardt, however, the debate needs to move away from the grand topic of “whether or not” corporations can offset the costs of environmental investments to the question of “when” it is possible to do so. 3 127 CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO.2 WINTER 2006 The author would like to thank the referees for their insights and comments, which greatly improved this article. The feedback of Peter Wells, Chris Ryan, Dexter Dunphy, Jaako Kuisma, and Francesco Zingales, as well as the PhD and Master candidates of the International Institute for Industrial Envi- ronmental Economics (IIIEE), Lund University, Sweden, was also crucial throughout the development of the article. In Reinhardt’s view, “environmental policy, like other aspects of corporate strat- egy, needs to be based in the economic fundamentals of the business: the struc- ture of the industry in which the business operates, its position within that structure, and its organizational capabilities.” 4 Other academics have also con- firmed this proposition. 5 Profit generation from investments in cleaner technol- ogies might make business sense in certain circumstances, but not in all. The identification of such circumstances also relates to the quest for com- petitive advantage. For quite some time, some academics and practitioners have claimed that environment-related investments can become sources of competi- tive advantage....
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This note was uploaded on 08/06/2008 for the course ESM 274 taught by Professor Libecap during the Spring '08 term at UCSB.
- Spring '08