Evaluating the Environmental Performance of Corporations

One rapidly evolving change in corporate management and strategy in the early 1990s has been the recognition of and response to environmental concerns by corporations. Often called "greening," this response is "a process by which human activity is made compatible with biospheric capacity. " (Gladwin, 1993: 38). Corporations have begun to develop and implement policies, programs, and tools to meet their environmental opportunities and constraints (Brewer, 1992; Cairncross, 1991; Gilbreath, 1984; Epstein, 1996; Kleiner, 1991; Post, 1990; Schmidheiney, 1992; Smart, 1992; Sullivan, 1992). This process has occurred partly in response to a desire to reduce potential liabilities. However, it has also been fueled by opportunity in new markets. It has been spurred on by competitors. Finally, it has been demanded by diverse constituents including the public, shareholders, customers, and employees. Society has become increasingly concerned with the health of the natural environment and the role of corporations in impacting ecosystems and human health. This has led to asking the question, "Which company is greener? " Though no clear or agreed upon definition of "greenness" exists, judgments are frequently made as to which companies are green and which are not. Companies such as Ben & Jerry's, the Body Shop, and Smith & Hawken are commonly pointed to as "green" companies. Other companies such as Exxon and American Cyanamid are considered to be the opposite, or "environmentally unfriendly" companies. These characterizations have implicit within them some evaluation criteria. For example, causing a large oil spill and then responding slowly to public concerns might result in a negative assessment of a company's environmental performance. Buying products grown sustainably in the rainforest, such as cashew nuts, and then using these in one's own product, ice cream, might be considered evidence of a more benign or even positive relationship between a corporation and the environment. There are a number of shortcomings with this evaluation approach in terms of determining an overall rating of corporate greenness. One is that a company might have both elements of "greenness" and "non-greenness. " For example, 3M has had a proactive pollution prevention program since the early 1970s and yet appeared on a list of the top ten polluting corporations in the U.S. in 1989. Dow Chemical has been characterized as having "three faces" (Kleiner, 1992). One is the traditional Dow, based on science. The second is the antagonistic Dow which produced napalm and Agent Orange and fought efforts to tie these chemicals to cancer. The third Dow is the learning Dow which is trying to develop more environmentally friendly ways. Another difficulty of this type of evaluation is that simple estimations of a company's environmental performance, particularly when based on information supplied solely by the company, might differ considerably from actual performance. The Body Shop, for example, was commonly perceived as an environmental leader, but was recently the subject of a more critical assessment of many of its environmental programs (Entine, 1994). This paper seeks to go beyond the simple characterizations of corporate greenness to ask more broadly, "what criteria might be used to define and measure a company's environmental performance and how might these criteria be organized? " First, several organizational effectiveness models - organizational goals, system resources, internal processes and operations, and strategic constituencies - are presented to evaluate the effectiveness of corporations. Next, a broad range of environmental evaluation performance criteria are identified. These criteria are then organized conceptually by examining them within the context of the models of organizational effectiveness. Finally, a corporate green index is proposed as an alternative method to evaluate a corporation's overall performance. EVALUATING CORPORATE ENVIRONMENTAL PERFORMANCE Evaluating and measuring overall corporate performance is a difficult undertaking due to the lack of "consensus regarding the best, or sufficient, set of indicators" (Cameron, 1986: 541). …