The value of environmental enterprise systems: an environmental dynamic capability approach
Creators: name: HOANG, Giang
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 460999
subject: Information systems not elsewhere classified

description: The environmental impact of human activity is one of the leading global challenges. As a result, tighter environmental regulations and reporting requirements are imposed on business activities. Stringent regulations and the potential strategic value of advancing environmental sustainability motivate businesses to transform their operations and mitigate their environmental footprint. Meeting such goals is challenging without well-functioning environmental enterprise systems (EES). EES provide an enterprise-grade, integrated software platform to automate environmental data and processes and manage resources, footprints and commitments.

Several established enterprise software vendors (e.g. SAP, with its Sustainability Performance Management Software; Oracle, with its Environmental, Health &amp; Safety Management System) and new market entrants (e.g. Envizi and Enablon) are providing EES solutions. The EES market is expected to increase by 12.4% between 2015 and 2021. This rapid growth of the market implies that more organisations are implementing EES. Although EES vendors have reported anecdotal case studies of organisations that have effectively used EES to address environmental sustainability issues, they have not provided sufficient information on how organisations derive benefits from EES. Further, as EES are emerging innovations at the intersection of environmental sustainability and enterprise systems (ES), the benefits that accrue from the use of EES have not been systematically researched and documented in the information systems (IS) literature. Thus, this study set out to address three inter-related research questions: (1) What are the values that organisations harvest from EES? (2) What are the viable mechanisms for generating EES values in organisations? and (3) How do organisations develop these viable mechanisms?

A review of the literature in IS, ES, environmental management systems (EMS) and Green IS was conducted. Based on the findings and an exploratory case study, and drawing from theories on Absorptive Capacity, Dynamic Capability and Ecocentric Dynamic Capability, a conceptual framework was developed. The framework proposes that absorptive capacity influences EES implementation and use, which spurs the development of `environmental dynamic capabilities'. These, in turn, contribute to the environmental performance of organisations. 

The study applied a sequential developmental mixed methods approach. Phase 1 was a qualitative exploratory investigation based on interviews. The findings from Phase 1 were used to develop the conceptual framework and survey instruments. Phase 2 involved a survey of 303 organisations that have implemented EES to test the conceptual framework and hypotheses. The survey data were analysed via two-stage structural equation modelling with SPSS and STATA software.

The results demonstrate that organisations harvest two types of value from EES. The first is process values, which are reflected in the development of EES Competence (ECOM) and EES-enabled Environmental Dynamic Capability (EEDC). ECOM reflects the development of a bundle of distinctive environmental process integration and data analytics resources embedded in EES software and its effective use. EES-enabled Environmental Dynamic Capability is the ability to leverage EES to develop and pursue environmental strategies; sense and seize environmental improvement opportunities; transform environmental processes; and adapt to ever-changing sustainability reporting requirements. The second type of value is organisational value, which refers to an overall improvement in selected environmental performance (EP) indicators. These indicators include reductions in environmental violations and fines; environmental complaints and inquiries; and the building of corporate environmental reputation. Further, the results reveal that these values are created via several mechanisms. First, when organisations leverage and exploit internal and external knowledge, skills and experience related to EES to implement the right EES software and select appropriate EES modules, they create the foundations for developing EES Competence and EES-enabled Environmental Dynamic Capability. Second, the implementation and use of EES can also, at least in the short term, lead to EP. Third, the competence and capability that organisations build continuously is the real source of organisation-level values. These value-creating mechanisms can be facilitated through co-development of EES software as well as leveraging and orchestrating other resources to work with EES. 

The study makes several contributions to IS research and practice. The overall findings indicate that EES represents an IS innovation and provides an integrated platform to modernise organisations¿ ability to alleviate some, if not all, of the insurmountable environmental challenges. In terms of theory, the study contributes an EES values framework to the IS literature. In particular, it provides a new conceptual model linking EES use cases and EES-enabled capabilities with EP, which has not been reported in previous research of which the author is aware. In addition, the study contributes two new research constructs - EES Competence and EES-enabled Environmental Dynamic Capability - as well as a research-ready instrument to operationalise these constructs. Together the framework and instrument may encourage future EES research.

In terms of management implications, the study highlights how organisations can benefit from EES through effective EES use and EES-enabled capabilities. The findings imply that if organisations are interested in enhancing their EP in the short term, they should focus only on how to use EES effectively. However, if their environmental orientation is strategic, they need to invest in further developments of EES-enabled environmental capabilities such as environmental innovativeness capability, sustainability data analytics capability and EES-dependent sustainability strategies.
Some limitations and implications for future research can be noted. First, both the dependent and independent variables were obtained from the same respondents. Although a common method bias analysis employing the confirmatory factor analysis marker technique did not indicate significant issues associated with this approach, a future study using more objective data might be better. Second, as the population of EES users was not available, the method for selecting organisations was not random. Thus, the findings could only reflect the experiences of organisations that share characteristics with the sample used in this research; that is, organisations that have implemented EES software and operate in developed countries.