IGS: MSc in Nature, Society and Environmental Policy
Corporate Environmental Management (Hilary Term 2013)
Managing the environment has traditionally been seen as the responsibility of the state, controlling the activities of individuals and organisations through legal frameworks and the action of regulatory bodies. Simply put, business was in the business of making money; government existed to ensure that business didn't unreasonably damage the environment in the process.
This approach is outmoded and unworkable in today's global economy. Corporations act across many jurisdictions, and the largest of them have the economic and political weight of whole nations. Their environmental footprints matter. In 2010 about 30 of the world's 231 countries had a GDP that exceeded Wal-Mart's global sales; of the 100 largest economies, 52 were firms and 48 were countries. Furthermore, some firms see the environment as a potential source of profit if focused upon the reduction of costs, innovation, and the management of risk. In this course we look at the role of the corporation in managing the environment and the costs and benefits of environmental management.
We begin by understanding the firm, presenting issues of ownership and agency by describing the stakeholders of the firm, their influence, and the problems of coordination. The role of stock markets and the impact of environmental liabilities on share market prices are discussed. Having established a model of the firm we then consider the impact of national legal frameworks, particularly those that attribute a value to environmental liabilities and to future environmental risks. By looking at how legal liability has developed in Europe and the USA we consider the impact of changing expectations of managing liabilities for companies' environmental strategies. The responsibility of corporate officers and shareholders for the actions of the firm is considered in a discussion of corporate governance.
We also look at the interlocking management systems within the firm that affect environmental strategies and performance: performance management, risk management, and integrated processes of technological innovation. We also look at the role of audit in ensuring compliance with both internal policies and external standards as well as the difficulties of creating real change in any large organisation.
The course informs students wishing to act as internal or external change agents for driving corporate environmental performance, as well as those wishing to understand the nature of the modern corporation for research purposes. The course is supported by a selection of practical and academic readings and by class discussion of relevant case studies used to illustrate the points of each lecture. There are weekly review sessions led by graduate assistants to review the issues raised in lectures.
In general, we draw argument, examples, and case studies from the developed economies - especially, Europe, the UK and the USA. There are, of course, significant differences between jurisdictions in relation to environmental management as well as basic questions about the effects of globalization on standards of corporate governance and management.
Teaching Plan and Schedule
In this class, we will use a combination of lectures and review sessions, cases and readings to develop our understanding of the relevant issues about environmental management and the modern corporation.
We rely upon case studies (available in the OULS Geography and Environment library) to illustrate the argument and broaden understanding of the significance of our story. For those who are not experienced with case teaching, there are a variety of sources for a better appreciation of the practice and expectations about case teaching. These are listed below. Vital to the success of such a teaching system is prior preparation: the designated material must be read prior to each class. I will assume that all members of the class are prepared starting with Week 1!
Reading on case teaching should include at least one of the below:
- Case Method. University of Virginia. UVA-PHA-0032 (1995)
- Teaching Ethics by the Case Method. KSG (Harvard University). N18-95-1304.0
- Flyvbjerg, B. (2011) Case Study. Chapter 17 in, Denzin, N.K. and Y.S. Lincoln The Sage Handbook of Qualitative Research, 4th Edn. Thousand Oaks CA: Sage, pp. 301-316.
In the Week 0 'session', identified as the Overview, readings provided are about the intellectual and public policy foundations to the course. We do not meet!
|Week 0||Overview||No class|
|Week 1||14 January||Agency & control||Clark|
|Week 2||21 January||Corporate environmental liability||Clark|
|Week 3||28 January||Managing to measure||Clark|
|Week 4||4 February||Responsibility and audit||Clark|
|Week 5||11 February||Integrated management and innovation||Clark|
|Week 6||18 February||Risk management||Clark|
|Week 7||25 February||Change management||Clark|
|Week 8||4 March||Corporate responsibility||Clark, Graduate Assistants and Class|
Topics, Outlines and Readings
Week 0: Overview. No Class
Before or at the conclusion to the course, students should review the material listed below as it provides an overview to the course, emphasising the 'external' market pressures on corporations to abide by environmental regulations as well as the problems of managing large corporations with a 'global' footprint. This is developed with reference to the UK Companies Act (2006) as well as with reference to the dilemmas involved in corporate management.
- Clark, G.L. and Knight, E. (2009) Implications of the UK Companies Act 2006 for Institutional Investors and the Market for Corporate Social Responsibility. University of Pennsylvania Journal of Business Law, 11(2): 259-296.
- Ghoshal, S. (2005) Bad management theories are destroying good management practices. Academy of Management Learning and Education, 4(1): 75-91.
- Schoenberger, E. (1997) The Cultural Crisis of the Firm. Oxford: Blackwell (J. Wiley).
Week 1: Agency & control. Clark
In this presentation, students are introduced to the issue of corporate agency and ownership focusing upon models of modern corporate management and the consequences for understanding how firms manage their environmental responsibilities. The first part of the presentation considers, through the use of the Madison case, traditional views about the value of the environment to the firm and how liability was treated by courts over much of the 20th century. In the second part of the presentation, a European case is used to illustrate the problematic nature of corporate management and the apparent environmental responsibilities of multi-national firms. Contrasts are drawn between so-called "stakeholder" models of the firm as opposed to the more conventional "shareholder" models of the firm.
- Ciba: Attempting to live up to a vision in a crisis situation (A) & (B). IMD. GM 607 (v.04.06.2001) Box 1, Case 5.
- Madison v. Ducktown 83 SW 658 (1904)
- Bansal, P. and Roth, K. (2000) Why companies go green: a model of ecological responsiveness. Academy of Management Journal, 43(4): 717-736.
- Bauer, R., Braun, R. and G.L. Clark. (2008) The emerging market for European corporate governance: the relationship between governance and capital expenditures, 1997–-2005. Journal of Economic Geography, 8(4): 441-469.
- Quattrone, P. and Hopper, T. (2005) A 'time-space odyssey': management control systems in two multinational organisations. Accounting, Organizations and Society, 30(7-8): 735-764.
Week 2: Corporate environmental liability. Clark
In this presentation, our focus is upon corporate environmental legal liabilities illustrated by reference to a US legal case. Historically common law notions of nuisance, liability, and the balance between economic development and the environmental costs of pollution have dominated discussion of environmental 'damage'. In the case, we look at US notions of "strict liability" referencing a case that is representative of a series of cases concerning corporate responsibility for the environmental actions of themselves (in the past and in the future) and others. As the European Union has now demonstrated, this kind of legal regime of environmental liability cannot be easily extinguished; liability must be managed now and in the future in the face of escalating standards of environmental quality and the probable higher costs of management.
- CMC Heartland Partners 966 F.2d 143 (1992)
- Financial Reporting of Contingent and Environmental Liabilities: Disclosure Dilemma. Box 5, Case 19.
- Crusto, M. (2005) Endangered green reports: "Cumulative materiality" in corporate environmental disclosure after Sarbanes-Oxley. Harvard Journal on Legislation, 42: 483-509.
- Geltman, E.A. (1992) Disclosure of contingent environmental liabilities by public companies under the federal securities laws. Harvard Environmental Law Review, 16: 129-174.
- Jacobs, F. (2006) The role of the European Court of Justice in the protection of the environment. Journal of Environmental Law, 18(2): 185-205.
Week 3: Managing to measure. Clark
How does a firm measure its performance? What are the "right" measures of success? And how is environmental performance reported and measured? We look at rival measures of performance, the impact of soft (non-financial) performance measures and "green" indices such as the FTSE4good and consider how the selection of performance measures affects performance. In order to understand how the intention of the organisation, as represented by its vision, strategy or values, translates into action on the ground we look at operational and individual performance measurement and management through key performance indicators. We illustrate this lecture through a case study on the topic.
- UPS and Corporate Sustainability: Proactively Managing Risk. Box 5, Case 15.
- Kaplan, R. and Norton, D.P. (1996) Using the balanced scorecard as a strategic management system. Harvard Business Review, 74(1): 75-85.
- Lowenstein, L. (1996) Financial transparency and corporate governance: you manage what you measure. Columbia Law Review, 96: 1335-1362.
- Rappaport, A. (2005) The economics of short-term performance obsession. Financial Analysts Journal, 61(3): 65-79.
Week 4: Responsibility and audit. Clark
In this presentation, the focus is upon the environmental audit process. Recognising the significance of corporate responsibility and the liability of corporate officers, the lecture deals with the principles and practice of risk audits related to corporate environmental concerns. Audits are also used to assess the internal operations of the modern firm, and it is noted that key issues include the flow and quality of information for corporate managers. Here, it is also noted that these kinds of concerns range in significance from legal and regulatory requirements through to the personal responsibilities of corporate officers. Examples from recent cases are used to illustrate the lecture.
- United States of America v. Hansen et al. 262 F.3d 1217 (2001)
- United States of America v. Hayes International Corporation 786 F.2d 1499 (1986)
- Boiral, O. (2007) Corporate greening through ISO 14001: A rational myth?. Organization Science, 18(1): 127-146.
- Singh, J. (2000) Making business sense of environmental compliance. Sloan Management Review, 41(3): 91-100.
- Waddock, S. and Smith, N. (2000) Corporate responsibility audits: doing well by doing good. Sloan Management Review, 41(2): 75-83.
Week 5: Integrated management and innovation. Clark
In this presentation, we look closely at recent research on integrated management and innovation relevant to corporate environmental management. Based upon a case study, it is suggested that integrated management systems that take account of the environmental costs and benefits at all stages of the production process are vital if the firm is to properly manage their potential and actual environmental risks. This issue is most important for commodity production systems whether in the developed or in the less-developed worlds. It is also argued that regulatory regimes would encourage integrated management and innovation especially if focused upon the long-term relationship between the environmental economic growth. In the end, the issue is really about management of the innovation process as regards increasing environmental standards.
- Dow Chemical: Innovating for Sustainability. Box 5, Case 18.
- Florida, R. and Davison, D. 2001. Gaining from green management: environmental management systems inside and outside the factory. California Management Review, 43(3): 64-84.
- Nentjes, A., de Vries, F.P. and Wiersma, D. (2007) Technology-forcing through environmental regulation. European Journal of Political Economy, 23(4): 903-16.
- Porter, M. and van der Linde, C. (1995) Towards a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9: 94-118.
Week 6: Risk management. Clark
In this presentation, we present a comprehensive framework for understanding risk-management within the modern corporation. The principles and practice of total risk-management are developed, with reference to the issue of decision-making under risk and uncertainty. Relying upon research in large multinational corporations it is argued that total risk management requires at the very least a cultural change within the firm. Barriers to internal implementation of total risk management are identified, and comments made about the incentives of corporate managers in relation to wider corporate objectives that may be difficult to quantify in accordance with corporate compensation systems. These issues are illustrated by reference to a case study on enterprise risk management.
- Enterprise Risk Management at Hydro One: Risk Management. Box 5, Case 16.
- Klassen, R.D. and McLaughlin, C.P. (1999) The Impact of Environmental Management on Firm Performance. Management Science, 42(8): 1199-1214.
- Orlitzky, M., Schmidt, F.L. and Rynes, S.L. (2003) Corporate social and environmental performance: a meta-analysis. Organisation Studies, 24: 403-441.
Week 7: Change management. Clark
Even the most efficient performance measurement system can only tell us what has happened in the past. In this lecture we look at the challenge of creating a sustainable change in behaviour in modern enterprise. How do leaders create clarity about what needs to change and why? How do they communicate that and how do they get the multitudes of individual employees, often scattered in diffuse operations across several jurisdictions, to actually make different decisions, to act differently? The principles and practice of change management are introduced to the class, with an emphasis on a humanistic approach, requiring the motivation and engagement of the individual. We use a case study of the introduction of a code of practice for an agricultural industry.
- A Voluntary Environmental Accord for the Dairy Industry (NZ). Box 5, Case 17.
- Friedman, M. (1970) The social responsibility of business is to increase its profits. The New York Times Magazine, (September 13, 1970).
- Hirschhorn, L. (2002) Campaigning for change. Harvard Business Review, 82(7): 98-104.
- Kotter, J.P. (2007) Leading change: Why transformation efforts fail. Harvard Business Review (January Issue), 96-103.
Week 8: Corporate responsibility. Clark, teaching assistants, students
In this session, we look more closely at the 'problem' of corporate environmental management on a global scale where the corporation must manage subsidiaries according to a mix of internal standards, the standards of their domiciled headquarters, and the standards operative (or not) in the jurisdictions in which they operate. This issue has garnered the attention of academics and management consultants alike and is part and parcel of the public debate over globalisation. To conclude, we look at an instance of corporate failure and draw lessons for environmental management (summarising the arguments made through the entire course).
- National Commission Report BP Deepwater Horizon Oil Spill (2011)
- The Report of the BP U.S. Refineries Independent Safety Review Panel
- Angel, D.P. and Rock, M.T. (2005) Global standards and the environmental performance of industry. Environment and Planning, A, 37: 1903-1918.
- Dooley, R.S. and Fryxell, G.E. (1999) Are conglomerates less environmentally responsible? Journal of Business Ethics, 21(1): 1-14.
- Epstein, M.J. and Roy, M-J. (2007) Implementing a corporate environmental strategy: establishing coordination and control within multinational companies. Business Strategy and the Environment, 16(6): 389-403.
Additional readings (if needed)
- Arrow, K.J. (2007) Global climate change: a challenge to policy. Economists' Voice, June 2007: 1-5.
- Jensen, M. (1993) The modern industrial revolution, exit, and the failure of internal control systems. Journal of Finance, 48(3): 831-880.
- Roberts, S. (ed.) (2010) The Oil Crunch: A Wake-up Call for the UK Economy. London: Industry Task Force on Peak Oil and Energy Security.
- Robertson, D. and S. Wright (2006) Dividends, total cashflow to shareholders, and predictive return regressions Review of Economics and Statistics, 88(1): 91-99.
- Sharfman, M.P., Shaft, T.M. and Tihanyi, L. (2004) A model of global and institutional antecedents of high-level corporate environmental performance. Business and Society, 43: 6-36.
- Shefrin, H. and Cervellati, E.M. (2011) BP's Failure to Debias: Underscoring the Importance of Behavioral Corporate Finance.
Week X: Harm, litigation and corporate strategy. Clark
A company with a 'trailing' environmental footprint may seek, notwithstanding its apparent liabilities, to use its resources and those available through litigation to discount those liabilities. In this session, we look more closely at the available 'strategies' including reference to the ways in which the corporation may be 're-made' for the benefit of managers and stakeholders if not the public and the environment.
- Burlington No. and Santa Fe R. Co. v. United States. 129 S.Ct. 1870 (2009)
- Easterbrook, F.H and Fischel, D.R. (1985) Limited liability and the corporation. The University of Chicago Law Review, 52(1): 89-117.
- Evans, R.K. (2010) Burlington Northern and Sante Fe Railway Co. v. United States. Harvard Environmental Law Review, 34: 311-20.
- Thompson, R.B. (1991) Piercing the corporate veil: An empirical study. Cornell Law Review, 76: 1036-1074.